India continues to attract foreign investors who bet heavily on the country’s growing population, rising consumer market, and a young and dynamic labour force. Slated to be the world’s third largest economy by 2030, India has attracted foreign companies and investments across various industries. With this cross-border trade, disputes are inevitable. Several leading surveys show that arbitration, rather than litigation, is the preferred method for resolving cross-border disputes.

One of the key reasons businesses around the world chose arbitration to resolve cross-border disputes is the prospect of a streamlined and predictable enforcement process if the losing party does not comply with the arbitral award. Without enforcement, an arbitral award may seem like a pyrrhic victory. Under the Convention on the Enforcement and Recognition of Arbitral Awards, known colloquially as the New York Convention and now signed by more than 170 countries, including India, arbitral awards are presumed to be enforceable, with limited grounds for challenge.

Notably, the International Chamber of Commerce (ICC) prepared the first draft of what became the Convention and played a vital role in its adoption. An increasing number of arbitral awards, however, are now being challenged, resulting in protracted enforcement proceedings. It is therefore essential for the parties, their counsel, and the arbitrators to focus on enforcement right from the start ~ from the drafting of the arbitration clause, through the arbitral proceeding that leads to the arbitral award and during the enforcement proceedings. Below are some of the key elements to keep in mind to ensure that arbitral awards are enforceable.

The drafting stage: When drafting the arbitration clause and selecting the seat of arbitration, it is important to select a seat in a country that is a signatory to the New York Convention or otherwise be aware of the statutory framework or alternative methods for enforcement. Although most countries have now acceded to the New York Convention, a few countries in Africa and the Middle East have not. When enforcement of a foreign arbitral award is required in India, courts in India will only enforce an arbitration award under the New York Convention, if the jurisdiction from where the award originates has been notified in India’s official gazette.

It is therefore important to confirm that the seat of arbitration has been notified. During the arbitration and drafting of the arbitral award: While the grounds for challenging awards are limited, an arbitration award can be set aside if, among other reasons, proper notice of the arbitration is lacking; the arbitral award dealt with disputes not contemplated by or not falling within the terms of the submission to arbitration; or the tribunal was not constituted in accordance with the arbitration agreement or applicable law. Given that one of the features of arbitration is the ability to select your arbitrator, it is crucial to ensure that the arbitrator appointed is well versed with the requirements of the law, submissions made by the parties and can render legally binding rulings.

One of the hallmarks of ICC arbitration is the scrutiny of awards as a means of ensuring enforceability. This extremely organized process under the ICC Arbitration Rules ~ of reviewing awards originating from various parts of the world ~ provides members of the ICC International Court of Arbitration and its Secretariat a unique perspective and experience of revie – wing awards to identify issues. Some of the issues that frequently arise during the scrutiny process are

(1) missing information such as details of the parties; absence of procedural history among others,

(2) not exercising caution in case of nonparticipating entity and recording opportunity provided to be heard;

(3) not addressing dissent of a third arbitrator in cases of three member tribunals,

(4) not being able to address all claims or keep track of claims made or withdrawn,

(5) not paying attention to interest sought and clarifying factors such as interest on all amounts awarded, including arbitration costs, or only on certain amounts, the start and end dates for the calculation of interest, the applicable rate, whether interest should be simple or compound. More details can be found at Ten Tips on How to Make an Arbitration Award Work: Lessons from the ICC Scrutiny Process published in ICC Dispute Resolution Bulletin 2022 No. 2 – 2022 – No. 2.

Where and what to enforce against?: If a party obtains a favourable award but the losing party does not comply, the next questions to consider are where should the award be enforced, and against which assets? The answers depend on three factors: first, the location, nature, and extent of the assets of the losing party; second, whether the state where the assets are located is a signatory to the New York Convention; and third, the local courts itself. As the grounds for non-enforcement or setting aside an award are limited, the losing party may try to re-litigate issues decided during the arbitration and the outcome and efficiency of the enforcement process will be dependent on the attitude of the local courts, their arbitration stance and track record.

Assets that may be attached during the enforcement stage range from shares, real property, bank balances, tangible assets like ships or airplanes, or intellectual property rights. It is recommended to engage local counsel to advise on local law nuances and professionals that can assist in asset tracing, which becomes relevant at this stage. Enforcement is the ultimate endgame in any arbitration. To avoid a lengthy and expensive enforcement process, parties entering into cross-border contracts should think ahead and plan for enforcement should the losing party not comply.

Arbitration is gaining in popularity in India, but it will not achieve its true purpose of an efficient, fair, and impartial resolution of disputes outside the traditional court system if the enforcement process is ineffective. Cautious counsel, well drafted awards and a court system that recognises the importance of not interfering in the merits of an arbitral award are strong pillars of success in achieving this outcome.

(The writer is Regional Director for the International Chamber of Commerce’s (ICC) dispute resolution services, based in Singapore)