“The difficulties of a litigant in India begin when
he has obtained a decree.”
The Role of Seat in Enforcement and Execution of Awards
The seat of arbitration is a foundational legal concept determining the procedural law (lex arbitri) – the legal framework governing the arbitration process – and the supervisory jurisdiction governing an arbitration. The significance of the seat extends to several critical aspects, such as the law governing the validity of the arbitration agreement, the arbitrability of disputes, the tribunal’s powers, procedural rules, and the grounds for challenging awards in court.
Most importantly, the seat determines whether an award is classified as domestic or foreign, directly influencing its enforcement mechanism. This article explores potential reforms that could strengthen India’s position as a global arbitration hub, with a particular focus on enforcing foreign arbitral awards. It examines India’s enforcement and execution framework, highlighting challenges in executing awards arising from International Treaty Arbitration [“ITA”] compared to International Commercial Arbitration [“ICA”]. Additionally, it discusses common hurdles during enforcement, addressing the ground of sovereign immunity. Finally, the article proposes solutions to streamline the enforcement procedure and position India as a preferred seat of arbitration globally.
Enforcement & Execution of Foreign Arbitral Awards
In international arbitration, enforcement and execution represent two interconnected but distinct processes. Enforcement refers to the legal process of having an arbitral award recognised by a court, thereby granting it binding authority within the relevant jurisdiction.[i] Execution, on the other hand, involves the practical measures needed to realise the award, such as the attachment of assets or the sale of property. In essence, enforcement grants legal recognition, while execution ensures the collection of such recognised dues.
A foreign award is enforced under Part II of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”] – which may fall under (1) Sections 44 to 52, which pertain to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 [“New York Convention”], or (2) Sections 53 to 60, which deal with the Convention on the Execution of Foreign Arbitral Awards 1927 [“Geneva Convention”]. Among these, the New York Convention is the more widely followed mechanism for enforcing foreign awards.
To enforce a foreign award in India, an application can be filed in any Indian court where the judgement-debtor’s assets are located. As clarified by the Supreme Court in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2001) [Pg. 12], the enforcement involves two steps that need not be undertaken in separate proceedings. First, the court verifies whether the award meets the statutory requirements under Section 48. The party seeking enforcement must submit the original award, the arbitration agreement, and other necessary documents as required under Section 47. Thereafter, if the court finds the award enforceable under Section 49, it is executed – treating the award as a decree without re-examining the merits of the case, as affirmed by the Apex Court in Shri Lal Mahal Ltd. v. Progetto Grano Spa. (2011).
Applicability of the Arbitration Act to Treaty Arbitrations
While India’s framework for enforcing ICA awards is relatively settled, ITA enforcement remains complex.[ii] Treaty arbitrations, which involve disputes arising from treaty obligations, are generally governed by the International Centre for Settlement of Investment Disputes [“ICSID”] Convention. Although ICSID awards operate under self-contained rules and appellate mechanisms, minimising local court involvement; India’s non-signatory status to the ICSID Convention complicates their direct enforcement as a decree of the court.
The ambiguity concerning the applicability of the Arbitration Act to the enforcement of ITA persists. Indian courts have adopted differing views on this issue. In Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures (2014), the Calcutta High Court proceeded on the assumption that the Arbitration Act applies to treaty arbitrations, although sub silentio. In contrast, the Delhi High Court in Union of India v. Vodafone Group PLC United Kingdom (2018), while expressly noting the assumptive and sub silentio nature of the Calcutta High Court’s decision, distinguished ITA from commercial disputes [¶92]. It held that ITA “is grounded on State guarantees and assurances,” and is primarily governed by public international law and BIT provisions, rather than the Arbitration act [¶¶ 89, 91].
Similarly, in Union of India v. Khaitan Holdings (Mauritius) Ltd. (2019), the Delhi High Court, while addressing the ‘commercial relationship reservation’ under the New York Convention and adopted in Section 44 of the Arbitration Act, excluded BIT arbitrations from the ‘commercial’ ambit. The Court reasoned that BIT disputes involve sovereign states rather than private contracts and do not qualify as “commercial” under Indian law [¶¶ 29, 35, 36, 48].
Furthermore [¶¶ 64, 65], such awards cannot be enforced as foreign judgements under Section 44A of the CPC, as Explanation 2 to the section explicitly bars its application to arbitration awards. The rationale is that awards do not qualify as ‘judgments’ under Section 13 of the CPC, given they are not ‘delivered by a court.’
As a result of these uncertainties, parties often seek enforcement in foreign jurisdictions, as seen in cases like Vodafone International Holdings BV v. Government of India and Cairn Energy v. The Republic of India, where investors attempted to attach India’s assets abroad.
These interpretive gaps under Indian law have created significant enforcement hurdles. This challenge is further compounded by an additional layer of complexity when state immunity from jurisdiction or execution is invoked. The following section delves into how the doctrine of sovereign immunity has evolved and its implications on the enforcement of arbitration awards.
Sovereign Immunity: Commercial Acts v. Sovereign Acts
“Once a Foreign State opts to wear the hat of a commercial entity, it would be bound by the rules of the commercial legal ecosystem and cannot be permitted to seek any immunity, which is otherwise available to it only when it is acting in its sovereign capacity.”
The doctrine of sovereign immunity, rooted within public international law, protects states and their entities from being sued in foreign courts, including proceedings concerning the enforcement of arbitral awards.[iii] However, in the absence of a comprehensive multilateral framework on sovereign immunity, the doctrine has primarily evolved through domestic legislation and judicial decisions.
Historically, sovereign immunity was absolute, protecting states from any form of legal action. However, with states increasingly participating in global commerce, the principle of restrictive immunity emerged. This principle limits immunity to sovereign acts (jure imperii), excluding commercial activities (jure gestionis). The widely recognised “commercial purposes test” helps distinguish when a state acts in a commercial capacity – thereby forfeiting its immunity – and when it acts as a sovereign, retaining protection. When acting in a commercial capacity, a state gives up its immunity and is treated as any other private party.
A key hurdle in execution arises from interpreting this test, which requires that the particular asset be “solely” and “currently” used for commercial purposes. For instance, the UK Supreme Court in SerVaas Inc. v. Rafidain Bank (2012) held that monies in a bank account representing a debt owed to another country could not be attached because they were not ‘currently’ used for a commercial purpose [¶17].
The United Nations Convention on Jurisdictional Immunities of States and Their Property, 2004 [“UNCSI”] represents a significant step toward establishing a global framework for sovereign immunity. Although the convention has not yet entered into force, it is frequently used to interpret the doctrine. Article 19 of the UNCSI establishes immunity from execution as a general rule but allows exceptions in cases of (i) consent, (ii) earmarking, and (iii) for property in use or intended for use other than government non-commercial purposes. While interpreting Article 19, the ICJ emphasised that enforcement against state assets is permissible only when the assets are “in use for an activity not pursuing government noncommercial purposes.” [¶118]
In India, Section 86 of the CPC requires the consent of the Central Government before initiating legal action against a foreign state. However, in KLA Const. Technologies v. The Embassy of Afghanistan (2021) [“KLA Const.”], the Delhi High Court sought clarification from the Central Government on whether this provision applies to executing arbitral awards. The Central Government clarified that the execution of an award does not qualify as a ‘suit’ under Indian law and, therefore, Section 86 does not apply to such proceedings. [¶18]
Indian courts embraced the principle of restrictive immunity as early as 1982 in Uttam Singh Duggal & Co. Pvt. Ltd. v. United States of America, Agency for International Development (1982) [“Uttam Singh”]. In this case, the Delhi High Court recognised that foreign states engaged in commercial activities could be subject to legal action [¶¶ 6, 10, 11]. Similarly, in Ethiopian Airlines v. Ganesh Narain Saboo (2011), the Supreme Court reaffirmed that sovereign immunity does not apply when a state engages in commercial activities, aligning with global practices that treat states as private entities in commercial matters [¶¶ 70, 71, 72].
Despite these judicial developments, successful enforcement against state assets remains rare. Most state-owned assets are held by central banks, which generally enjoy absolute immunity, or are registered under separate legal entities, such as state-owned enterprises [“SOEs”] or sovereign wealth funds [“SWFs”]. This legal separation complicates enforcement, even when the assets are of a commercial nature.[iv] Moreover, issues related to the privity of contracts may arise when award creditors seek to enforce an award by attempting to attach the assets of SOEs that, although not themselves signatories to the arbitration agreement, are affiliated with the state.
Notably, the question of whether an arbitration clause constitutes a waiver of sovereign immunity has been answered by the Indian courts. Traditionally, the Delhi High Court, in the Uttam Singh case, held that the presence of an arbitration clause does not automatically waive sovereign immunity from executing awards [¶22]. However, recent developments indicate a shift toward recognising waivers in commercial agreements. In KLA Const. case, the Delhi High Court ruled that when a state enters into a commercial contract containing an arbitration clause, it effectively waives sovereign immunity in enforcement proceedings [¶47]. This decision approved the ‘double waiver doctrine,’ wherein states waive immunity from jurisdiction and enforcement proceedings. At the same time, the ruling acknowledges that certain assets, like those intended for diplomatic or governmental purposes, remain protected [¶¶ 40, 42].
Lastly, recent decisions by Australian and Canadian courts further highlight the divergent approaches to sovereign immunity in enforcement proceedings involving India. In Republic of India v. CCDM Holdings LLC (2025), the Federal Court of Australia refused to enforce a BIT award against India, upholding sovereign immunity. The Court held that the dispute did not arise from a “commercial relationship” under India’s reservation to the New York Convention and, therefore, did not meet the exceptions under Australia’s Foreign States Immunities Act [¶¶ 24, 26, 71, 72, 75, 77, 79, 81]. Conversely, in CC/Devas (Mauritius) Ltd. v. Republic of India (2024), the Québec Court of Appeal in Canada held that India had waived immunity by consenting to arbitration under a BIT and ratifying the New York Convention [¶81]. The Court permitted enforcement proceedings and even allowed interim measures against state-linked assets. These contrasting interpretations demonstrate that the meaning of ‘commercial’ varies across jurisdictions, reiterating the need for statutory clarity to effectively balance sovereign immunity with the enforceability of arbitral awards.
Conclusion and the Way Forward
India’s aspiration to position itself as a global arbitration hub requires targeted reforms that address existing gaps in its arbitration framework.
In the context of ITA, one critical reform that remains unaddressed in the Draft Arbitration and Conciliation (Amendment) Bill, 2024, is the amendment of Section 44 of the Arbitration Act to expand the definition of ‘foreign awards’ to include treaty arbitration awards. Currently, the term ‘commercial’ is interpreted to exclude investment arbitration awards from its scope. While India is a signatory to the New York Convention, it has not enacted specific national legislation interpreting the Convention’s scope – particularly the meaning of ‘commercial’ under Article I(1). In the absence of such legislation, instruments such as the Commercial Courts Act 2015, the UNCITRAL Model Law, India’s Model BIT (2015), and the recently signed India-UAE BIT (2024) provide valuable guidance to align the current interpretation with international standards and local definitions.
Section 2(1)(c) of the Commercial Courts Act, 2015 explicitly states that disputes involving a state party can still qualify as commercial. The Indian judiciary has repeatedly relied on the UNCITRAL Model Law to interpret different sections. Notably, the UNCITRAL Model Law includes ‘investments’ within the scope of the term ‘commercial’. Further, Article 27 of India’s Model BIT (2015) and Article 28 of India–UAE BIT (2024) expressly consider treaty-based disputes as ‘commercial’ and enforceable under the New York Convention. This would provide much-needed consistency with the global interpretation of ‘commercial’ under the New York Convention.
Another critical reform would be reconsidering India’s non-signatory status to the ICSID Convention. While India’s reluctance stems from the ICSID system’s limitation of domestic court involvement and lack of appeal mechanisms, ratifying the Convention would significantly enhance investor confidence and attract foreign investments. A balanced approach that mitigates these concerns while leveraging the benefits of ICSID membership is essential.
India’s stance on sovereign immunity has evolved significantly over time, as seen in cases such as KLA Const., where the principle that a state cannot invoke sovereign immunity in commercial contracts aligns with international practice. However, India has yet to statutorily define principles surrounding sovereign immunity, as seen in other jurisdictions like the United States and the United Kingdom, which have enacted the Foreign Sovereign Immunities Act of 1976 and the State Immunity Act of 1978, respectively.
Indian courts [¶12] have implicitly adopted a dual approach – using the ‘nature test’ and the ‘purpose test’ – to determine whether a foreign state’s actions are commercial or sovereign. While the ‘nature test’ assesses whether a foreign state’s actions are commercial or sovereign, the ‘purpose test’ examines whether the assets to be attached serve a commercial purpose. However, the purpose test has limitations, as it narrows down the scope of enforcement by focusing solely on the current or past use of the asset. In contrast, the U.S. Foreign Sovereign Immunities Act (Section 1610) and the U.K. State Immunity Act (Sections 13 & 14) emphasise the use or intended use of assets rather than solely their current purpose. This distinction allows for more flexible enforcement mechanisms, particularly in cases where the underlying transaction is commercial but the asset’s immediate use is non-commercial.
India could benefit from codifying a similar framework that integrates the ‘nature test’ with the ‘intended use’ test. This would allow courts to consider the commercial nature of the underlying transaction, even if the current use of the asset is non-commercial. This approach would prevent overly restrictive interpretations while safeguarding assets serving sovereign or diplomatic functions. Additionally, the issue of privity of contract, particularly whether the assets of state-owned entities can be attached to satisfy an award against the state, remains unresolved and requires statutory clarification.
In conclusion, while India’s arbitration framework has made remarkable progress, targeted reforms are necessary to address the gaps. Expanding the definition of ‘foreign awards’, statutorily adopting a balanced approach to sovereign immunity, and reconsidering India’s stance on the ICSID Convention are pivotal steps forward. These reforms can solidify India’s position as a leading arbitration hub and reinforce the principle of pacta sunt servanda—the sanctity of honouring agreements.
[i] Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (7th edn, Oxford University Press 2021) [11.21].
[ii] Prabhas Ranjan and others, ‘The Enigma of Enforceability of Investment Treaty Arbitration Awards in India’ (Asian Journal of Comparative Law: Vol. 6: Iss. 1, Article 5., 2011) <https://www.cambridge.org/the-enigma-of-enforceability-of-investment-treaty-arbitration-awards-in-india-div.pdf> accessed 24 March 2025.
[iii] Rosalyn Higgins, ‘Equality of States and Immunity from Suit: A Complex Relationship’ (2012) Netherlands Yearbook of International Law, 43.
[iv] Katherine Reece Thomas, ‘Enforcing Against State Assets: The Case for Restricting Private Creditor Enforcement and How Judges in England Have Used “Context” When Applying the “Commercial Purposes” Test’ (2015) Journal of International and Comparative Law 2:1 JICL 115–140.
Author(s)
Aryan Soni
Student at GNLU, Gandhinagar