Freedom to choose seats of arbitration is essential to party autonomy in international commercial arbitration. In Arif Azim Company Limited v Micromax Informatics FZE, the Supreme Court first upheld the parties’ rights to choose arbitral seats. It then applied the Shashoua principle to recognise a designated venue as the seat of arbitration, if a supranational set of rules accompanied it and there was no contrary indication.
Arif Azim Company, the petitioner, an Afghanistan-based company, and Micromax Informatics FZE, the respondent, a UAE-based entity, entered into a consumer distributorship agreement. The agreement designated Dubai as the venue for arbitration and the governing law as that of the UAE. It granted Dubai courts non-exclusive jurisdiction. Following disputes, the petitioner invoked arbitration under the Arbitration and Conciliation Act, 1996, applying for the appointment of an arbitrator under section 11(6).
The petitioner argued that Indian courts had jurisdiction because Dubai was the venue rather than the seat. Dubai courts only had non-exclusive jurisdiction and there were connections to India, including performance there.
Applying its decision in BALCO v Kaiser Aluminium Technical Services, the court held that designating a venue did not automatically give Indian courts jurisdiction, particularly when the governing law and jurisdiction clauses contained a foreign element. In the absence of a contrary indication, the designation of Dubai as the venue, the application of UAE laws and the non-exclusive jurisdiction of Dubai courts implied that Dubai was intended to be the seat. Indian courts had no jurisdiction to appoint an arbitrator.
The case shows international agreements must include clearly drafted contractual terms designating seat and venue. It confirms that the choice of a foreign seat means Indian courts have no jurisdiction. The court traced this principle from National Thermal Power Corporation v Singer Company, establishing that courts under the law of the place of arbitration and under the law of the court have concurrent jurisdiction over procedural matters. Bhatia International v Bulk Trading SA held that part I of the act applied to both domestic and international arbitrations unless expressly excluded. BALCO v Kaiser Aluminium Technical Services then overturned the application of concurrent jurisdiction, holding that only the seat determined procedural law.
The court adopted the Shashoua principle from Roger Shashoua v Mukesh Sharma that when a venue is expressly designated but no seat is named, the venue will be the seat of arbitration unless there is a significant contrary indication. Applying this principle, the court held that because the parties had agreed Dubai was the venue of arbitration, the governing law of the agreement was UAE law and there was nothing to the contrary, Dubai was the seat of arbitration.
Relying on Indus Mobile Distribution Private Limited v Datawind Innovations Private Limited and Swastik Gases Private Limited v Indian Oil Corporation Limited, the court held that designating Dubai as the seat was equivalent to an exclusive jurisdiction clause. The non-exclusive jurisdiction of the Dubai courts term in the agreement should not be taken out of context to confer jurisdiction on Indian courts. According to BALCO, because India was neither the seat nor provided the applicable law, its courts lacked jurisdiction.
The court considered the closest connection test, which applies when neither the venue nor the choice of law is specified. Even if India’s courts could claim jurisdiction, they should decline because the parties had explicitly chosen the Dubai courts. This would conform with the doctrine of forum non conveniens, allowing a court to dismiss a case when another forum is more appropriate.
Arif Azim shows India’s alignment with the global preference for seat-centric arbitration. Even in domestic arbitration, Indian courts have upheld party autonomy in designating the seat of arbitration. The Arbitration and Conciliation (Amendment) Bill, 2024, proposed aligning with BALCO by substituting the place for seat in section 20 of the act.
However, it is for the parties to define clearly the seat, governing law and process law in their arbitration clauses to avoid protracted litigation battles.
Vaishnavi Rao is a managing associate and Romi Kumari is an associate at Bharucha & Partners.
