Answer: It has been recently held by Hon’ble Supreme Court that parties to a contract who are Indian nationals or Companies incorporated in India can choose a forum for arbitration outside India.
Nothing stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals”- Supreme court observed
This decision came in the case PASL Wind Solutions Private Limited Vs. GE Power Conversion India Private Limited.
In this case a contract was entered between two companies both incorporated in India under the Companies Act 1956. Clause 6 (the arbitration clause) provided that dispute between them shall be referred to and finally resolved by arbitration and in Zurich in accordance with the Rules Of Conciliation And Arbitration Of International Chamber Of Commerce as the dispute eventually arose between the companies it was referred to arbitration before International Chamber Of Commerce. One of the parties filed a preliminary application challenging the jurisdiction of the arbitrator on the ground that two Indian parties could not have chosen a foreign seat for arbitration. This objection was rejected by the arbitrator who continued the proceedings and passed final award. The successful party filed enforcement proceedings under section 47 and 49 of the Arbitration Act before the High Court of Gujarat.
The Supreme Court, finally puts to rest the much-debated question as to whether two Indian parties can arbitrate outside India. Answering the question in the affirmative, the Supreme Court gave due weight to party autonomy and held that there is no clear and undeniable harm caused to the public in permitting Indian parties/entities from designating a foreign seat of arbitration.
The court also recognised the rights of such parties to seek interim relief from Indian courts, where necessary.