SC ruling in Balco case to decide fate of foreign arbitration awards

A Constitution Bench headed by Chief Justice of India S H Kapadia is scheduled to pronounce its judgment on Thursday in the Bharat Aluminium Company (Balco) versus Kaiser Aluminium Technical, in which it is expected to interpret the judgment of a three-Judge Bench in another case.

What makes the keenly-awaited judgment important is the fact that the Supreme Court could decide in unambiguous terms if foreign arbitration awards involving Indian firms and their foreign partners will be open to challenge in Indian courts if the arbitration has taken place in another country.

Currently, foreign companies find it extremely difficult to get foreign arbitration awards against their Indian partners enforced through courts in the country as they invariably stay the arbitration award on the ground that they have jurisdiction to do so.

If the Supreme Court Bench rules that foreign arbitration awards cannot be challenged in Indian courts, it could be the biggest-ever push for foreign investment in the country, that has been starved of investment in recent years.

One of the biggest negatives against India when it comes to destination to do business as per the World Bank’s annual ease of doing business surveys is the issue of lengthy and costly court battles resulting from legal stand-offs.

In 2010, the Union law ministry had proposed an amendment aimed at ensuring that foreign companies could do business in the country would face minimum judicial interference.