Can the Seat of Arbitration be Changed?

The ‘Seat’ of arbitration has not specifically been defined under the Arbitration and Conciliation Act, 1996 (“Act”). On the contrary, there is no mention of this word in the entire Act. However, as defined by various judgements, the seat of arbitration determines the procedural or curial law that shall govern the entire legal proceedings.

The importance of deeming a location as a seat of arbitration is that the Courts of law of that specific area shall then be granted the right to oversee any case arising out of the said arbitration.

In the case of Indus Mobile Distribution vs. Datawind Innovations, the Supreme Court held that ‘seat’ refers to a concept that allows parties to mutually agree on a neutral venue for the arbitration clause of a contract. This neutral venue might not have jurisdiction, which means that no part of the cause of action may have been initiated at the neutral venue. In addition, no provisions of Section 16 to 21 of the Code of Civil Procedure (CPC) shall be attached to the case.

In the matter of Bhartiya Aluminum Co. vs. Kaiser Aluminum Technical Services Inc. (BALCO), the apex Court viewed that the seat of arbitration can also be considered the center of gravity in arbitration cases. Furthermore, in the case of Enercon (India) vs Enercon GMBH, it deemed that the location of the seat shall decide which Courts will have exclusive jurisdiction to oversee the arbitration proceedings.

The place of arbitration is mentioned in Section 20 of the Act. Although the terms ‘venue’ and ‘seat’ have not been mentioned in Section 20, in the case of BGS SGS SOMA JV vs. NHPC Ltd., after reviewing BALCO, restated that Section 20(3) talks about ‘venue’, while the location stated in Section 20(1) and 20(2) refers to ‘jurisdictional seat’.

• The Court further reviewed that in an arbitration clause, any place of arbitration that has been termed as ‘venue’ of the arbitration proceedings, shall actually be referring to the ‘seat’ of arbitral proceedings, as the term ‘arbitration proceedings’ does not include one or two hearings but refers to the entire arbitration proceeding as a whole.
• All parties consenting to a ‘seat’ must challenge any interim or final awards in the Courts of the place deemed as ‘seat of arbitration’. To put it simply, choosing a place as ‘seat of arbitration’ is basically parties deciding upon a place to go to for remedies in case of disputes.

BGS SGS SOMA defined the following test to determine the jurisdictional seat of arbitration in cases where no exclusive statement is made in the arbitration clause:

Wherever ‘venue’ has been exclusively defined but there is no mention of any alternative location as the ‘seat of arbitration’, the inexorable conclusion is that the venue stated therein is actually the juridical seat of the arbitral proceedings.

It is a common misconception that supervisory powers of arbitration are granted to Courts where any arbitration proceedings are taking place. In the case of BBR vs. SP Singla, the Supreme Court discussed this aspect as mentioned below:

• Any secondary contention to back a specific plea on grounds that the Courts where arbitration proceedings are taking place should be given extra supervisory powers, after in-depth consideration, should be rejected when comparing the unacceptable practicable consequences that arise.
• Usage of supervisory jurisdiction by Courts where arbitration proceedings are being conducted is a genuine consideration but not a determining or finalizing factor, when the venue is not the ‘seat’.
• The ‘seat’ governs the jurisdiction of Courts.
• There can be instances where the venue of arbitration as per Section 20 (3) would be different from the ‘seat’ and it is very much possible that the majority of hearing may end up taking place at the ‘venue’ which is actually different from the ‘seat’ of arbitration.
• In the case of choosing the apt forum, priority should be given to places similar to the Courts where the arbitration proceedings were conducted.

The idea of ‘seat’ is even more significant when it comes to International Commercial Arbitrations. It would be the determining factor to indicate whether provisions of Part I of the Act would be applicable to the arbitration or not.

Vital provisions related to arbitrator’s appointment, the conduct of the proceedings, guidelines for interim reliefs, etc. are stated in Part I of the Act.

Part I of the Act would only be applicable if the agreement can be understood to provide for the ‘seat’ of arbitration in India.

If the agreement provides for the ‘seat’ to be outside India, Part I of the Act would not be applicable to the extent inconsistent with the arbitration law of the seat, even if the agreement seems to state that the arbitration proceedings will be governed by the Act.

As a result, it would mean that involved parties have contractually imported only certain provisions from the Act that are related to the internal conduct of the arbitration and not in-hand with the mandatory regulations of the Curial law.

Conclusion

The latest Supreme Court judgment in 2022, in the case of BBR (India) Pvt Ltd. vs. S.P. Singla Constructions Pvt. Ltd. states that once the jurisdictional ‘seat’ of arbitration has been fixed, then without the express mutual consent of the parties to the arbitration, the seat cannot be changed.

This can be read with the 2021 Supreme Court judgment on Inox Renewables Ltd. vs. Jayesh Electricals that parties may change the seat of arbitration by mutual agreement which is recorded by the arbitrator in their award, and which is not challenged by any of the parties.

So, yes, the seat of arbitration can be changed under certain conditions.

But, in conclusion, we must remember that generally if there is a change in the place of arbitration, it should be treated as a ‘venue’ where arbitration proceedings are held and not as a ‘seat.’