Delhi High Court: Indian parties free to choose foreign law to govern arbitration between them

Dec 9, 2020

Recently, in the case of Dholi Spintex Pvt Ltd v. Louis Dreyfus Company India Pvt Ltd, the Delhi High Court (DHC) held that two Indian parties can agree to a foreign law governing the arbitration. In this case, the DHC relied on GMR Energy Limited vs. Doosan Power System India Ltd. & Ors. and Reliance Industries & Anr. vs. Union of India, and held that as there was a foreign element involved, three sets of law could apply to the arbitration, i.e., (i) the proper law of the contract (substantive law); (ii) the proper law of the arbitration agreement (law governing the agreement); and (iii) the proper law of the conduct of arbitration or curial law (the law governing the conduct of the arbitration). The DHC held that as the arbitration agreement is an independent agreement, it may be governed by a proper law of its own, which need not be the same as the substantive law. Here, the two Indian parties had agreed to an international commercial arbitration governed by English law as there was a foreign element involved in the contract, i.e., the parties had contractually agreed to pass on the property in goods from the Defendant to the Plaintiff in a place beyond the territorial waters of India.

Indian courts permitting Indian parties to arbitrate under a foreign law seems a positive step.

About the Author

Neerav Merchant Author Majmudar & PartnersNeerav Merchant, Partner at Majmudar & Partners has over 22 years of experience in dispute resolution, arbitration, litigation, enforcement of foreign judgments and awards, asset recovery, technology and telecommunication, intellectual property, employment, anti-corruption, and real property matters.

He regularly speaks at several international forums, including seminars and conferences hosted by Asian Legal Business, International Bar Association, and Law Society of England and Wales. He is on the panel of arbitrators of Mumbai Centre for International Arbitration.

Read more about him here.

More Insights

Are home buyers financial creditors under the IBC?

Download .pdf Recently, in the case of Vishal Chelani & Ors. v. Debashis Nanda (Civil Appeal No. 3806 of 2023), India’s Supreme Court (SC) ruled on the interface of the Insolvency and Bankruptcy Code, 2016 (IBC) with the Real Estate (Regulation and Development)...

read more

Angel tax valuation rules notified

By its notification dated September 25, 2023, the Central Board of Direct Taxes (CBDT) has amended Rule 11UA of the Income-tax Rules, 1962 which provides the manner of computing the fair market value of unlisted equity shares and compulsorily convertible preference shares under Section 56(2)(viib) of the Income-tax Act, 1961.

read more

AI in Indian courts – a slow start

Download .pdf Generative Artificial Intelligence (“AI”) technologies, such as ChatGPT, are often celebrated as transformative forces across various sectors, and are often even perceived to challenge the necessity of human involvement in such sectors.  Nevertheless,...

read more

How a clerical error led to substantial tax litigation

In a recent ruling, the Gujarat High Court dismissed the Indian tax department’s appeal allowing the taxpayer to rely on a beneficial double taxation avoidance agreement provision previously denied due to a mere clerical error in Forms 15CA and 15CB.

read more
Share This