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, 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.