1. ' AJMAL MIAN, CJ.---By this common judgment, we intend to dispose of the above appeals, which were filed with the leave of this Court against a common judgment dated 29-6-1994 passed by a learned Single Judge of the Lahore High Court in Civil Revisions Nos.34 and 83 of 1994 filed by respondent No,1 against the order dated 22-12-1993 of the learned Senior Civil Judge, Sheikhupura, dismissing above respondent No,1 's application under sections 14 to 17 of the Arbitration Act, 1940 (hereinafter referred to as the Act), challenging the first award dated 28-5-1993 and the supplementary award dated 13-7-1993 rendered by Arbitral Tribunal at London, comprising respondents Nos.2 to 4 and for a direction to file the above awards or signed' copies thereof with all depositions and documents in the aforesaid Court and application under sections 5 to 12 of the Act for removal of Arbitral Tribunal, allowing the same by setting aside the above order and remanding the case to the learned Civil Judge for proceeding with the above application in the following terms:-- "103. In conclusion, therefore, it is held that as in the present case, the cause of action had arisen in Sheikhupura; the proceedings under the Arbitration Act could validly be commenced before that Court in view of section 2(c) sections 30,33,41 and 47 of the Arbitration Act read with section 20 of the Code of Civil Procedure; that the jurisdiction of the Courts in Pakistan could only be taken away by another Statute of that country and not by any principles of any other law; that the awards were domestic awards made on arbitration agreement governed by Pakistani law and, therefore, the Arbitration (Protocol and Convention) Act, 1937 was not applicable, that the awards were domestic in nature for the same reason that even under the principles of Private International Law the jurisdiction of the Courts in Pakistan do not stand excluded, the trial Court was, therefore, not correct in holding that it has no jurisdiction to proceed with the two applications filed by the petitioner."
2. ' The brief facts are that respondent No,1, which is a company incorporated under the Companies Ordinance, 1984, in Pakistan, having its registered office at LI, Chundrigar Road, Karachi, under an agreement dated 30-5-1985 (hereinafter referred to as the agreement), agreed to purchase from appellant No,1 Hitachi Limited (which is a company incorporated and registered in Japan) and the appellant No,2, Mitsui & Company Deutschland (which is a company incorporated under the laws of Germany and having its offices at 40215 Dusseldorf-1, Konigsallee 63-65, Germany), plant, equipment, material, engineering know-how and supervisory services for erection, construction, installation and commissioning of a plant for production of ordinary chips of Polyester for filament yarn for apparel use with a daily production capacity of 80 metric tons against the price of Japanese Yen 2,262,500,000. Article 16.7 and Article 13 of the agreement read as follows:-- "16.7 CONTRACT shall be governed and construed by the Pakistan law.
3. 13.1 In case any dispute; controversy or difference arises out of or in connection with Contract, the parties shall firstly endeavour to settle such dispute, controversy or difference amicably.
4. 13.2. If both parties fail to reach such amicable settlement, all disputes, controversies or differences shall be finally settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the Rules.
5. ' The arbitration shall be conducted in English language. If the defendant in such dispute is buyer, the arbitration shall take place in Karachi and in case that the defendant is seller, the arbitration shall take place in London.
6. 13.3. The awards thereof shall be final and binding upon both parties hereto."
2. It seems that a dispute arose between respondent No,1 and the appellants inasmuch as the former alleged that the plant and equipment supplied by the latter were defective, not of the requisite standard and not in conformity with the specification. It was further alleged that on account of the appellants' wrongful and wilful acts and negligence respondent No,1 suffered huge losses. Thereupon, on 8-3-1990 respondent No,1 invoked Article 13 of the agreement inasmuch as under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, they appointed respondent No,3, Rt. Hon, Sir Michael Kerr and the appellants appointed respondent No,4, Prof.John Uff, Q.C. As their arbitrators; whereas respondent No,2, Dr. Nael G. Bunni was appointed as the Chairman by the International Court of Arbitration under I.C.C. Rules. It appears that on 10-5- 1991 the Terms of Reference of arbitration were settled by the Arbitral Tribunal and the parties. After that hearing started. It seems that the appellants raised preliminary point as to the limit of their liability under Article 8.4.1 of the agreement. The Arbitral Tribunal rendered its interim award on 28- 5-1993 holding that the appellants' liability was limited in terms of above Article of the agreement.
7. It was followed by a supplementary award dated 13-7-1993. Thereupon, respondent No,1 filed on 2- 8-1993 aforementioned application under sections 14 to 17 of the Act in the Court of learned Senior Civil Judge, Sheikhupura, which was registered as Suit No, 61 of 1993. The above application was resisted by the appellants inasmuch as they filed objections to the following effect:--
(i) That the Court had no jurisdiction under the Act;
(ii) That since neither the appellants were the residents of Pakistan nor they were carrying on any business, the suit was incompetent; and
(iii) That the I.C.C. Rules were applicable.
8. ' It appears that respondent No,1 moved another application on 31-8-1993 under sections 5, 11 and 12 of the Act for the removal of Arbitral Tribunal and for declaration that the arbitration agreement in respect of the differences referred to in the application ceased to have effect. The learned Senior Civil Judge by his aforesaid judgment dated 22-12-1993 disposed of the above application in the aforestated terms. Against this judgment respondent No,1 filed aforesaid two Civil Revisions in the Lahore High Court, which were allowed by the learned Judge in Chambers through the judgment under appeal and the case was remanded for hearing of respondent No,1 's aforesaid applications.
9. Against the above judgment, the appellants filed two petitions for leave to appeal in this Court, which were granted to consider the following two points:-- "(i) What is the effect of the factum that the petitioners and respondents Nos.2 to 4 do not reside and are not located within Pakistan?
(ii) Whether procedural law/curial law is deemed to be lex arbitri or lex fori i.e, the law of England, under which the English Courts alone have jurisdiction in respect of proceedings for arbitration conducted in that country?"
3. Before proceeding any further, it may be observed that before the learned Judge in Chambers the then learned senior counsel for the appellants, Mr. Khalid Anwar, had candidly conceded that Arbitration (Protocol and Convention) Act, 1937 (hereinafter referred to as Act VI of 1937), would not apply to the two awards in question. He also did not contest the position that because of the abovequoted Article 16.7 of the agreement, the proper law of the contract was the Pakistani law nor he disputed that the proper law of arbitration agreement in the present case would be the law of contract, that is the law of Pakistan (please refer to pages 64, 67 and 73 of the paper book of Civil Appeal No,958 of 1994), ' The learned counsel for the parties have argued that above appeals in detail very ably and dealt with the controversy from different angles. However, in our view, the parties are at variance on a very limited issue. It is the case of the appellants that since curial law (procedural law) is lex arbitri or lex fori and as the Arbitration's venue is London, the English Courts alone have jurisdiction in respect of proceedings for arbitration conducted in that country under I.C.C. Rules and the resultant awards therefrom. Whereas the case of respondent No,1 is that English and Pakistani Courts have concurrent jurisdiction and, therefore, respondent No,1's above applications under the Act are competent.
10. ' In support of the above appeals Mr. Umar Ata Bandial, learned counsel appearing for the appellants, has submitted that in the instant case there were three stages, namely:--
(i) Before the commencement of the arbitration proceedings in terms of the I . C . C . Rules;
(ii) after the commencement of the arbitration proceedings; and
(iii) after rendering of the award and its enforcement.
11. ' According to him, respondent No,1 could file an application under section 33 of the Act challenging the existence or validity of the arbitration agreement in the Court of learned Senior Civil Judge, Sheikhupra, before the commencement of the aforementioned arbitration proceedings, but they could not have filed any application under the Act in the above Court in Pakistan after the commencement of the arbitration proceedings. Whereas Mr. S.M. Zafar, learned counsel for respondent No,1, urged that the respondent No,1 's above applications are competent as there is concurrent jurisdiction vested in English and Pakistani Courts.
4. Before taking up the main submission, we may now refer to other submissions made by Mr. Bandial, learned...Counsel for the appellants, to reinforce his above main submission. His first submission was that the provisions of the Act cannot be invoked in the present case and, therefore, the awards cannot be challenged in a Pakistani Court. In support of the aforesaid submissions he has drawn our attention to the following cases):
(i) Yangtze (London) Ltd. v. Barlas Brothers (Karachi) (PLD 1961 SC 573);
(ii) Viswa nathan v. Abdul Wajid (AIR 1963 SC 1 relevant at page 15);
(iii) Serajuddin & Co. v. Michael Golodetz and others (AIR 1960 Calcutta 47, paras. 31, 42, 43, 44, 46 and 48);
(iv) Badat & Co. v. East India Trading Co. (AIR 1964 SC 538, para. 35);
(v) M.A. Choudhury v. Mitsui C.S.K. Lines Ltd. And others (PLD 1970 SC 373);
(vi) Builders Association Ltd. v. The Federation of Pakistan and others (PLD 1986 Lahore 171);
(vii) Avari Hotel Ltd. v. Hilton International Company (PLD 1985 Karachi 425, relevant at page 460); (viii)Meincke Food Processing Equipment v. Danish Butter Cookies (Pvt.) (1992 CLC 1132);
(ix) Eckhardt & Co. v. Muhammad Hanif (PLD 1993 SC 42);
(x) Swindells & Son v. Muhammad Abdullah (PLD 1957 (W.P.) Karachi 933);
(xi) Ghulam Ahmad v. Dr. Sarosh Rattanji Wadia (PLD 1959 (W.P.) Karachi 624);
(xii) Petrocon (Pvt.) Ltd. v. Hyderabad Development Authority, Hyderabad (1990 MLD 1675); (xiii)Imperial Tobacco Co. Of India Ltd. v. Commissioner of Income-tax (PLD 1958 SC (Pak.) 125);
(xiv) The Hanover Fire Insurance Company v Muralidhar Banechand (PLD 1958 SC (Pak.) 138);
(xv) Nan Fung Textiles Ltd. v. Sadiq Traders Ltd. (PLD 1982 Karachi 619);
(xvi) G.M. Pfaff A.G. v. Sartaj Engineering Co. Ltd. (PLD 1970 Lahore 184);
(xvii) Hassanali & Co. Cotton (Private) Limited v. Poly Cotton S.A., 2 RUE, Andrian Vallin 1201 Geneva, Switzerland and others (PLD 1996 Karachi 416).
12. ' According to Mr. Bandial the impugned awards have attained finality for the reason that under Article 24 of the International Chamber of Commerce Rules, respondent No,1 agreed not to challenge the award given by the Arbitral Tribunal. To reinforce the above submission, he has referred the cases of Arab African Energy Corpn. Ltd. v. Qlieprodukten Nederland B.V. (1983) 2 Lloyd's Law Reports 419), Marine Contractors Inc.- v. Shell Petroleum Development Co. Of Nigeria Ltd. (1984)
13. 2 Lloyd's Law Reports 77, and Union National Des Cooperatives Agricoles De Cereales v. Robert Catterall & Co. Ltd. (1959) 2 Queen's Bench 44.
14. ' On the other hand, Mr. S.M. Zafar, learned counsel for respondent No,1, has urged that the application of the international Chambers of Commerce (I.C.C.) Rules would not oust the jurisdiction of the Pakistani Courts. According to him, as under the agreement the contract is to be governed and construed by Pakistani law, Pakistani Courts have jurisdiction. He also submitted that since Act VI of 1937 which covers foreign awards is not applicable in view of section 9(b) thereof, which provides that nothing in this Act shall be applied to any award made of an arbitration agreement governed by the law of Pakistan. According to him, as a corollary it must follow that the provisions of the Act (i.e, Arbitration Act, 1940) would be applicable to the arbitration proceedings and to the resultant awards. He pointed out that Mr. Bandial has not relied upon any Pakistan law on the subject as, according to him, Act VI of 1937 as well as the Act are not applicable, and hence common law would be attracted. To reinforce his above submission, he has relied upon the cases of A.M. Qureshi v. Union of Soviet Socialist Republics (PLD 1981 SC 377), Eckhardi & Co. v. Muhammad Hanif (PLD 1993 SC 42) (supra) and Uzin Export & Import Enterprises for Foreign Trade v. M. Iftikhar & Company Limited (1993 SCMR 866, relevant at page 876).
15. ' In the above first case the facts were that M/s. Uzin Export & Import Enterprises were awarded contract for construction/completion and successful operation of a cement plant. It seems that under clauses 2, 4 and 26 of the contract, the contractor was authorised to employ sub- contractors to carry out work subject to approval of Attock Cement Company. M/s. Uzin Export & Import Enterprises, who were the appellants in that case, appointed respondents M/s. M. Iftikhar & Company as the sub-contractor. The dispute arose as the respondents wanted to remove the constructional plant/machinery/vehicles to some other place/work. The appellants filed Suit No,559 of 1983 against the respondents claiming relief of injunction. The respondents filed their written statement and also made counterclaim. The appellants filed an application under section 34 of the Act (i.e, Arbitration Act, 1940), on the ground that there was a clause in the agreement for international arbitration under the auspices of International Chambers of Commerce in Paris.
16. However, the above application was declined by the learned Single Judge of the High Court of Sindh, on the ground that the appellants by filing the aforesaid suit had abandoned their right of invoking the arbitration clause. The appeal filed against the above judgment was also dismissed by a learned Division Bench of the said Court. Against the above judgment an appeal with the leave of this Court was filed, which was allowed and inter alia it was held that the provision for arbitration of the International Chambers of Commerce in Paris did not oust the jurisdiction of the Courts of this country. The suit was stayed but it was ordered that the venue of the arbitration proceedings for the reasons recorded in the order shall be Karachi and not Paris. It will be advantageous to reproduce para. 18 of the above judgment which reads as under:-- "18. In this case on account of peculiar facts and circumstances as stated above, we are of the view that stay should have been granted to allow the parties to have their dispute as mentioned in the counterclaim decided by the forum of arbitration. It appears that appellants filed suit for injunction which was dire need for the reason that they did not want the machinery to be removed and execution of work to be hampered. Such relief could not be granted in arbitration proceedings.
17. After filing of counterclaim appellants made efforts for compromise and withdrew their suit and asked for stay of suit proceedings in the counterclaim on the ground that dispute was covered by arbitration clause. For facts and reasons mentioned above we stay suit proceedings. In this case in the contract there was provision for arbitration of International Chamber of Commerce in Paris.
18. This provision does not oust the jurisdiction of Courts in this country and this clause is to be treated at par with provision for arbitration within the country. In this case the main contract is between Attock Cement Company of Pakistan and appellants for construction and completion and successful operation of cement plant which provides for appointment of sub-contractors.
19. Resultantly, respondents entered into contract as sub-contractors with appellants. Contract from which present proceedings arise was executed in this country and the works had also to be executed here. In the circumstances arbitration proceedings cannot be allowed to be taken to Paris which would be inconvenient to the parties and also would prove to be expensive. We, therefore, allow stay of suit proceedings and leave the parties to take steps for having their dispute decided through arbitration proceedings with venue at Karachi. With regard to the mode and other incidental matters, steps can be taken as contemplated under the Arbitration Act. There will be no order as to costs."
20. ' In the above report reliance was placed on the above two cases. In the first case a suit was filed by a Pakistani national against the Trade Commissioner of the USSR. In defence, he claimed diplomatic immunity. It was held by this Court that none of the statutes, conventions, doctrines treaty or diplomatic certificate bestowed immunity from jurisdiction of the municipal Courts in a commercial and trade transaction entered into between a Pakistani citizen and the USSR and its trade representative. Whereas in the above second case the question for consideration before this Court was, whether a suit could be stayed under section 34 of the Act in presence of a foreign arbitration clause in the contract. Agreement was executed between a foreign company (with the registered office in Hamburg) through an agent situated at Karachi and a Pakistani buyer. The above agreement contained a foreign arbitration clause. It was held that the above application was competent.
21. ' It appears that some of the cases cited by Mr. Bandial referred to hereinabove in para. 4 support to certain extent his above submission. We intend to deal with some of them hereinafter. However, it may be pointed out that in view of the above clear pronouncement by this Court in the case of M/s. Echardi & Company, Marine GmbH v. Muhammad Hanif (supra) and M/s. Uzin Export and Import Enterprises (supra), it cannot be urged that simpliciter the fact that the agreement is subject to arbitration under the I.C.C. Rules will divest the jurisdiction of the Pakistani Courts if otherwise it is vested in them. It may again be pointed out that it was conceded by the appellants before the learned Judge in Chambers that the proper law applicable to the agreement was the Pakistani law. Since the arbitration agreement is embedded in the main agreement, in the absence of any contrary express agreement, the proper law of arbitration agreement will be the same, which is applicable to the main agreement, namely, Pakistani law, which was not disputed by the learned counsel for the appellants. As pointed out hereinabove, the only controversy between the parties is, whether the Pakistani Courts can entertain above applications under the Act though the curial law/procedural law applicable is English law because of the fact that the arbitration proceedings are conducted in London and there is no express provision contrary to the above.
22. 5.(a) Then it was urged by Mr. Bandial that neither the appellants are the residents of Pakistan nor they have been carrying on business in Pakistan nor have submitted to the jurisdiction of Pakistani Courts, hence they being foreigners, the Pakistani Courts have no jurisdiction to grant any decree against them in personam. Reliance was placed by him on the case of Sirdar Gurdyal Singh v. The Rajah of Faridkote (1894) 21 Indian Appeals 171). In the above case the facts were that the respondent was the Rajah and the ruler of Faridkote Princely State in Punjab. He appointed the appellant as the Treasurer of the State. After the appellant left the service, the respondent filed two suits in Faridkote State Court, though the appellant was not residing at the relevant time in the above State. The aforesaid suits were not contested by the appellant in spite of the service of notice. Consequently. They were decreed ex parte in 1879 and 1880 for a total amount of Rs,76,474 11a and 3p. And costs by the Court in Faridkote. The Rajah filed proceedings for the execution of the above decrees before the Assistant Commissioner, Lahore, but the same were dismissed on the ground that the judgments, which were pronounced by the Faridkote Court were without jurisdiction against the appellant. On appeal to the Additional Commissioner, Lahore, the above orders of the Assistant Commissioner were upheld. Thereupon, the Rajah appealed to the Chief Court of Punjab, which differed with the Courts below and upheld the jurisdiction of the Faridkote Court. The matter was brought before the Privy Council, which reversed the judgment of the Chief Court of Punjab on the ground that the decree pronounced in absentia by a foreign Court was a nullity in law and restored the judgments/orders of the two Courts below. It may be advantageous to reproduce the following extract from the above judgment:-- "In a personal action, to which none of these causes of jurisdiction apply, a decree pronounced by a foreign Court, to the jurisdiction of which, the defendant has not in any way submitted himself, is by international law an absolute nullity. He is under no obligation of any kind to obey it; and it must be regarded as a mere nullity by the Courts of every nation except (when authorised by special local legislation) in the country of the forum by which it was pronounced."
23. ' The above judgment in fact is the basis of some of the reports cited by Mr. Bandial.
(b) However, it may be pointed out that with the passage of time, the concept of action in personam has undergone material change inasmuch as service of the process/summons on a foreigner is considered sufficient if cause of action arises within the limits of a municipal Court concerned. In this regard reference may be made to the case of Annamalai Chetty v. Murugass Chetty (ILR (1903) Madras 26, at page 544). In the above case the facts were that a suit was brought to recover the sum of money due on a decree of the French Court at Pondicherry in a British Court in India (i.e, in a District Court in Madras Province). The aforesaid suit was resisted by the defendant. On the basis of pleadings of the parties the following six issues were framed:-- "(1) Is this Court prevented from entertaining the suit by reason of the cause of action not having arisen, and defendant not being resident or carrying on business within its jurisdiction?
(2) Did or did not the defendant reside or carry on business within the jurisdiction of this Court on the date when the cause of action arose?
(3) Was the French judgment, on which the suit has been brought, according to French law null and void on the date of suit, and is the present claim based on the French judgment, therefore, not sustainable in this Court?
(4) Is it open to the defendant to raise the contention in this suit that the promissory note, on which the French judgment was passed, was obtained from the defendant by the plaintiff fraudulently?
(5) And, if so, was the promissory note obtained by the plaintiff from the defendant fraudulently?
(6) What is the relief, if any, that the plaintiff is entitled to?"
24. ' On above Issues Nos.1 and 2 the District Court held that the defendant was carrying on business at Cuddalore within the meaning of section 17 of the Civil Procedure Code, 1882, at the date of the suit and was, therefore, subject to the jurisdiction of the Court in which the suit had been filed. On Issue No,3, he returned the finding to the effect that at the date of the suit the French judgment was not null and void. Whereas on Issues Nos.4 and 5, he held that he was not competent to go behind the French judgment and investigate the questions involved in those issues. Consequently, he decreed the suit. Against the above judgment the defendant filed an appeal, which was upheld by a Division Bench of the Madras High Court. Against the above judgment of the High Court, an appeal was brought before the Privy Council, which in its opinion approved the case of Girdhar Damodar v.
25. Kassigar Hiragar (1893) I.L.R:Bombay 662) by observing as under:- "Their Lordship see no reason for doubting the correctness of the decision of the case of Girdhar Damodar v. Kassigar Hiragar where the defendant was a native of Cutch and the cause of action arose within the local limits of the jurisdiction of the British Indian Court in which the action was brought. But that case does not cover the present one."
26. ' But on merits, it was held that the District Judge fell into error of treating Kandasami Chetty as the agent of the defendant, which mistake was also highlighted by the High Court in its judgment.
27. Consequently, the appeal was dismissed. Above report indicates that a legal action can be maintained if a cause of action arises within the jurisdiction of a municipal Court concerned.
(c) Reference may also be made to the following cases:--
(i) V.E. Smith v. Indian Textile Company (AIR 1927 Allahabad 413);
(ii) Neelakanda Pillai v. K.A. Kunju Pillai (AIR 1935 Madras 545);
(iii) Swaminathan Chettiar v. Somasundaran Chettiar and another (AIR 1938 Madras 731);
(iv) Brajmohan Bose Benimadhav v. Kishorilal Kishanlal (AIR 1955 M.B. 1);
(v) Suresh Narain Sinha v. Akhauri Balbhadra Prasad (AIR 1957 Patna 256);
(vi) Viswa nathan v. Abdul Majid (AIR 1963 SC 1).
28. ' In the above cases the Court proceeded on the assumption that an action can be entertained against a defendant even if he is not a resident and does not submit to the jurisdiction provided the cause of action arises in terms of section 20, C.P.C. Reference may be made to the relevant portion of para. 18 of the case of Viswanathan v. Abdul Majid (AIR 1963 SC 1) (supra), which reads as follows:-- "(18) An action in personam lies normally where the defendant is personally within the jurisdiction or submits to the jurisdiction or though outside the jurisdiction may be reached by an order of the Court, By section 20 of the Mysore Code of Civil Procedure a general jurisdiction (subject to sections 16 to 19 which deal with suits relating to immovable property and movable property under distraint and certain incidental matters) was conferred on Courts in respect of suits instituted within the local limits of whose jurisdiction."
(d) It may be pertinent to reproduce section 20 of the Civil Procedure Code, 1908, which reads as under:-- "20. Other suits to be instituted where defendants reside or cause of action arises.- --Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction--
(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, aforesaid acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises.
29. Explanation I. --Where a person has a permanent dwelling at one place and also a temporary residence at another place, he shall be deemed to reside at both places in respect of any cause of action arising at the place where he has such temporary residence.
30. Explanation II. ---A corporation shall be deemed to carry on business at its sole or principal office in Pakistan or, in respect of any cause of action arising at any place where it has also a subordinate office at such place.
ILLUSTRATIONS
(a) A is tradesman in Lohore, B carries on business in Karachi. B by his agent in Lahore, buys goods of A and requests A to deliver them to the Pakistan International Airways. A delivers the goods accordingly in Lahore. A may sue B for the price of the goods either in Lahore where the cause of action has arisen, or Karachi, where B carries on business.
(b) A resides at Murree, B at Lahore and at Karachi, A, B and C being together at Bahawalpur. B and C make a joint promissory note payable on demand, and deliver it to A. A may sue B and C at Bahawalpur, where the cause of action arose. He may also sue them at Lahore, where B resides, or at Karachi where C resides; but in each of these cases, if the non-resident defendant objects, the suit cannot proceed without the leave of the Court."
31. By virtue of clause of abovequoted section 20, C.P.C. An action can be maintained when a cause of action wholly or in part arises within the jurisdiction of a municipal Court concerned.
(e) We may also refer to the case of Dennis Burnham v. Superior Court of California, Country of Marin (110 S.Ct. 2105 (1990), in which the U.S. Supreme Court dilated upon the concept of judgment in personam in the following words:-- "Historically the jurisdiction of Courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence his presence within the territorial jurisdiction of a Court was prerequisite to its rendition of a judgment personally binding on him. Pennoyer v. Neff 95 U.S. 714, 733. But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ' traditional notions of fairplay and substantial justice.' 326 U.S., at 316, 86 S Ct. At 158 (citation omitted)."
32. ' It has been pointed out in the above report of the USA Supreme Court that the capias ad respondendum (a writ granted against the defendant's person when he neglected to appear upon the former process of attachment or was obliged to give special bail, subjecting to his person to imprisonment) has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum.
(f) In the case of LULU B. MGEE v. International Life Insurance Company (2 Led 2nd 233), the US Supreme Court has highlighted as to how the due process clause of the 14th Amendment, which places some limit on the power of the State Courts to enter binding judgments against persons not served with the process within their boundaries, has undergone change as under:-- "Since Pennoyer v. Neff, 95 US 714, 24 Led 565, this Court has held that the Due Process Clause of the Fourteenth Amendment places some limit on the power of State Courts to enter binding judgments against persons not served with process within their boundaries. But just where this line of limitation falls has been the subject of prolific controversy, particularly with respect to foreign corporations. In a continuing process of evolution this Court accepted and then abandoned "consent", "doing business", and "presence" as the standard for measuring the extent of State judicial power over such corporations. See Henderson, The Position of Foreign Corporations in American Constitutional Law, Ch. V. More recently in International Shoe Co. v. Washington, 326 US 310, 90 L ed 95, 66 S Ct. 154, 161 ALR 1057, the Court decided that "due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fairplay and substantial justice'. Id. 336 US at 316."
(g) Reference may also be made to the following extracts from the treatise titled "Conflict of Laws", Second Edition by Eugene F. Scoles and Peter Hay:- "However, Holmes' famous dictum, the foundation of jurisdiction is physical power' has proven both too narrow and too broad. At times, justice is not adequately served when only that Court with physical power over the parties is deemed competent to adjudicate their controversy because considerations of justice may point to a more appropriate forum for trial than that in which the parties are physically present. Nonetheless, while Constitutionally approved limits for exercising judicial jurisdiction have expanded beyond mere presence, presence of "transient jurisdiction" has been affirmed by the Supreme Court...........
33. ' Even though early legislation providing for personal jurisdiction over a non-resident as to matters arising out of business transactions within the State met with conflicting adjudications as to their validity, it is clear today that such jurisdiction may be exercised.
34. ' The second situation centres around the McGee fact pattern. Under Mc Gee, it is fairly clear that, should a large business organization directly solicit a contract from an individual in the State, a single transaction is sufficient to require the business organization to respond to litigation arising out of that transaction in the State. However, the converse is not so clear."
(h) We may also refer to the dictum of Lord Esher M.R. In the case of Companhia De Mocambigue v.
35. British South Africa Company (1892) 2 Q.B. 358), to the effect that the question, whether the Courts of a nation will or will not entertain jurisdiction of any dispute, is to be determined exclusively by the nation itself--i.e, by its municipal law. It would be advantageous to reproduce the above dictum which reads as follows:-- ' The question, whether the Courts of a nation will or will not entertain jurisdiction of any dispute, is to be determined exclusively by the nation itself--i.e, by its municipal law. If by express legislation the Courts are directed to exercise jurisdiction, the Courts must obey. If there is a proper inference to the same effect, the result is the same."
36. It appears that by now it cannot be urged that a municipal Court can entertain an action against a foreigner only when he either permanently or temporarily resides within the limits of a municipal Court or he submits to its jurisdiction in view of the above development in the jurisprudence on the above aspect.
6. As regards the finality of the impugned awards in terms of Article 24 of the I.C.C. Rules, it may be observed that in the above reports of the foreign jurisdiction relied upon by Mr. Bandial, referred to hereinabove in para. 4, it has been held so. However, it may be pointed out that if the awards in question are to be filed in Pakistani Court, the question as to whether they have attained the finality either on account of above Article 24 of the I.C.C. Rules or for any other reason, is to be determined by the Court concerned. In our view, it is not necessary at this stage to record any finding on the question, whether factually the above awards have attained the finality or not as the same is not germane to the controversy at issue.
7. We may now refer to the second point on which leave was granted, namely, "whether procedural law/curial law is deemed to be lex arbitri or lex fori i.e, the law of England, under which English Courts alone have jurisdiction in respect of the proceedings for arbitration conducted in that country. In this regard, it may be pertinent to observe that the I.C.C.. Rules of Conciliation and Arbitration contained an elaborate mechanism for conducting conciliation and arbitration under its auspices, inasmuch as, it contains 10 Articles (Articles 1 to 10) covering the Rules of optional conciliation in order to facilitate amicable settlements of disputes. It may further be stated that there is a separate chapter containing 26 Articles i.e, Articles 1 to 26, which provide for, constitution of International Court of Arbitration (Article 1), the constitution of Arbitral Tribunal (Article 2), Request for Arbitration (Article 3), Answer to the Request for Arbitration (Article 4), Counterclaim (Article 5), Pleadings and written statements, notification or communications (Article 6), Absence of agreement to arbitrate (Article 7), Effect of the agreement to arbitrate Article 8), Advance deposit to cover costs of arbitration (Article 9), Transmission of the file to the arbitrator (Article 10), Rules governing the proceedings, settlement of terms of reference, regulating arbitration proceedings, award by 3 arbitrators (Article 11), Place of arbitration (Article 12), Terms of Reference (Article 13), The arbitral proceedings (Article 14), Arbitration proceedings' notice to the parties to appear (Article 15), Lodging of new claim and counterclaim (Article 16), Award by consent (Article 17), Time limit for award (Article 18), Award by three arbitrators (Article 19), Decision as to costs of arbitration (Article 20), Scrutiny of award by the Court' (Article 21), Making of award (Article 22), Notification of award to parties (Article 23), Finality and enforceability of award (Article 24), Deposit of award (Article 25) and General rule. It also contained Appendices Ito III.
37. ' It will not be out of context to mention that International Court of Arbitration referred to in the above Article 1 is not a Court which is understood in the general parlance. It is not the creature of any statute, but is founded on the I.C.C. Rules. It will be advantageous to reproduce Article 1 of the above Rules, which provides its constitution and function and which reads as under:-- "Article I. International Court of Arbitration.--1. The International Court of Arbitration of the International Chamber of Commerce is the arbitration body attached to the International Chamber of Commerce, Members of the Court are appointed by the Council of the International Chamber of Commerce. The function of the Court is to provide for the settlement by arbitration of business disputes of an international character in accordance with these Rules.
2. In principle, the Court meets once a month. If draws up its own internal regulations.
3. The Chairman of the International Court of Arbitration or his deputy shall have power to 'take urgent decisions on behalf of the Court, provided that any such decision shall be reported to the Court at its next session.
4. The Court may, in the manner provided for in its internal regulations, delegate to one or more groups of its members the power to take certain decisions provided that any such decision shall be reported to the Court at its next session.
5. The Secretariat of the International Court of Arbitration shall be at the Headquarters of the International Chamber of Commerce."
38. The above I.C.C. Rules have been recognised by the superior Courts, inter alia, in Pakistan. This Court in the cases of Eckhardt & Co. v. Muhammad Hanif (PLD 1993 SC 42) (supra) and M/s. Uzin Export and Import Enterprises v. M. Iftikhar & Company Ltd. (1993 SCMR 866) has dilated upon certain I.C.C. Rules. It may be pertinent to point out that in some of the judgments of the High Courts of Pakistan, it has been held that if the I.C.C. Rules are applicable, the provisions of the Act (i.e, The Arbitration Act, 1940) would not be applicable. In this regard, reference may to made to the case of Avari Hotels Ltd. v. Hilton International Company (PLD 1985 Karachi 445) (in which it was held that section 34 of the Arbitration Act was not applicable as the arbitration clause provided for the arbitration under the I.C.C. Rules in a foreign country) and to the case of Meincke Food Processing Equipment v. Danish Butter Cookies (Pvt.) 1992 CLC 1132 (in which it has been held that the application of the defendant under section 34 of the Arbitration Act was misconceived as the I.C.C. Rules were applicable).
39. ' Inter alia the above High Court's judgments to some extent run counter to the judgments of this Court in the above two cases of Eckhardt and Uzin. The legal position obtaining in Pakistan is that the I.C.C. Rules are recognised but they cannot divest the Courts of the jurisdiction vested in them under the law. In England the English Courts recognise the I.C.C. Rules and they decline to exercise discretionary jurisdiction under the English Arbitration Act in derogation to the I.C.C. Rules not because of lack of jurisdiction but to ensure that the parties should adhere to their contractual commitment. It may be pointed out that it has also been consistently held by the English Courts that they have the power to pass appropriate order in a fit case notwithstanding the application of I.C.C. Rules. In this regard, reference may be made to a recent judgment in the case of Coppee- Lavalin v. Ken-Ren Chemicals Ltd. (1994) 2 All England Law Reports 449), in which the House of Lords directed for the deposit of costs of arbitration for the respondent though the I.C.C. Rules were applicable but the venue of arbitration was England. In this respect reference may be made to the following observation of Lord Mustill-- "The fact that the parties have chosen I.C.C. Arbitration does, as I shall suggest, have something important to say about the way in which the parties want their disputes to be resolved and hence about the spirit in which the national Courts should approach a request for the exercise of powers created by the local law. But it is quite another matter to suggest that the mere presence of the Rules dictates a policy of total non-intervention. At least so far as concerns the English Court, the tenor of the discussion in Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. (1993) 1 All ER 664, (1993) AC 384 shows that no such policy exists."
40. We may again observe that in view of section 9(b) of Act VI of 1937, which provides that an award arising out of the contract which is subject to Pakistani' law, is not a foreign award for the purpose of the above Act. In this view of the matter, the awards in question cannot be treated as the foreign awards because of the fact that under Article 16.7 of the agreement, it has been provided that the contract shall be governed and construed by the Pakistani law.
41. ' According to Mr. Bandial since the Act (i.e, The Arbitration Act, 1940) and Act VI of 1937 are not applicable, the principles of common law or principles of equity and good conscience can be invoked. To reinforce the above submission, he has referred to the case of Badat & Co. v. East India Trading Co. (AIR 1964 SC 538), in which a suit for the enforcement of an award pronounced in New York was filed in the High Court of Bombay, which was dismissed by a learned Single Judge but was decreed by a Division Bench upon appeal. The matter was taken to the Indian Supreme Court, which set aside the above appellate judgment of the High Court and dismissed the suit for the following reason:-- "44. No doubt, an award can furnish a fresh cause of action. But the award must be final. If the law of the country in which it was made gives finality to a judgment based upon an award and not to the award itself, the award can furnish no cause of action for a suit in India. In these circumstances we hold that though the High Court of Bombay has jurisdiction to enforce a final award made in a foreign country in pursuance of a submission made within the limits of its original jurisdiction, the awards in question being not final, cannot furnish a valid cause of action for the suit. Upon this view we allow the appeal and dismiss the suit with costs throughout. The normal rule as to costs must apply because the choice of forum made by the plaintiffs was deliberate and with the knowledge that they were taking a risk in not seeking out the defendants at the place where they reside or carry on business."
42. ' In the minority view of Subba Rao, J. Reference has been made to ' Russel On Arbitration', 16th Edition at page 282 in para. 7 and commented upon as under:- "The learned author places the following two propositions in juxtaposition: (1) An award made by foreign arbitrators, which requires an enforcement order to render it enforceable by the local law. Is not a judgment of a foreign Tribunal which can be enforced by action in English Court's. (2) 'But an award which is complete and could be enforced in the country where it was made is enforceable in England at common law, quite apart from any rights given by Part H of the Act' ."
43. ' In Halsbury's Laws of England, Vol. 11, 3rd Edn., the following note is given at page 52: "A foreign arbitration award which is complete and enforceable in the country in which it was made is enforceable in England at common law.
44. ' In Indo-Pak, under the Letters Patent under which High Courts were created, inter alia provided that the High Courts were competent to apply inter alia the principles of equity and rule of good conscience (as an example, reference may be made to clauses 12 and 13 of the Letters Patent High Court Judicature Lahore). We may also refer to the cases of Azim Khan v. State of Pakistan and another (PLD 1957 (W.P.) Karachi 892), Nizam Khan v. Additional District Judge, Lyallpur (PLD 1976 Lahore 930), and A.M. Qureshi v. Union of Soviet Socialist Republics (PLD 1981 SC 377). In the first case it was contended by the counsel for the State that common law principles prevalent in England and equally applicable in Pakistan permitted a lessor to eject his lessee by use of minimum force necessary for the purpose. Reliance was placed on Halsbury's Laws of England, Third Edition, Volume 20, page 280. The above contention was repelled by observing as under:- "The basis of this para. Appears to be that if a tenant is ejected by force, no civil remedy is available to him for getting redressed. That may be the position in England but is not so in Pakistan. Section 9 of the Specific Relief Act provides a remedy in such cases."
45. ' In the second case, Muhammad Afzal Zullah, J. (as his Lordship then was) held that it was not permissible for Courts in Pakistan to apply and import any Rules of English law relating to equity, justice and good conscience but the Courts could invoke the Rules of equity, justice, good conscience and public policy as contained in the Muslim Jurisprudence. In the third case, Muhammad Afzal Zullah, as a Judge of this Court (as his Lordship then was), reiterated his above Lahore view that for filling gap where law is not available, the principles of justice, equity and good conscience as given in Islamic Jurisprudence and as enunciated in the fundamental principles and judicial norms of Islam are to be pressed into service and not English common law or principles of equity and good conscience.
46. The principles of common law or equity and good conscience cannot confer jurisdiction on the Courts in Pakistan which has not been vested in them by law. In this regard reference may be made to clause (2) of Article 175 of the Constitution of Pakistan, which provides that no Court shall have any jurisdiction save as is or may be conferred on it by the Constitution or by or under any law. The High Courts derive their jurisdiction under the Constitution and the statutes. In view of the above Constitutional provision and the case-law the principles of English common law or equity or good conscience cannot be ressed into service in Pakistan as having statutory force. But a Court may adopt j a procedure, which is not prohibited by any law if the dictates of justice so demand.
47. We may observe that under Article 187(1) of the Constitution of Pakistan this Court has been empowered to issue such directions, orders or decrees as may be necessary for doing complete justice in any case or matter pending before it, including an order for the purpose of securing the attendance of any person or the discovery or production of any document. It may be pointed out that the above provision is an enabling provision, which can be invoked in aid in a matter which is competently filed before this Court. While granting a relief the Court can dispense with the technicalities and may would the relief according to the requirement, if the dictates of justice so demand. In this behalf reference may be made to the case of Zulfiquar All Babu v. Government of Punjab (PLD 1997 SC 11).
8. The further question which requires consideration is, as to whether the awards in question can be treated as Pakistani awards, in order to apply the provisions of the Act. According to Mr. Bandial the awards are foreign awards as they arise out of an international arbitration agreement, the arbitrators were foreigners and the venue of the arbitration was also a foreign country. To reinforce the above submission he has referred to the cases of Yangtze (London) Ltd v. Barlas Brothers (Karachi) (PLD 1961 SC 573), Viswa nathan v. Abdul Majid (AIR 1963 SC 1), and Sarajuddin & Co. v.
48. Michael Golodetz and others (AIR 1960 Cal. 47). In the above first case the facts were that the appellant was a company registered in England under the English Companies Act and carrying on business in London, entered into various contracts during the years 1948 to 1950 with the respondent firm, .Which was carrying on business at Karachi for purchase of sheep casings. In relation to six of these contracts differences and disputes arose between the parties. The appellant in terms of the arbitration clause contained in each of the said printed contract forms referred the disputes relating to all the aforesaid six contracts to the arbitration of the London Court of Arbitration on 12-4-1951. The arbitration commenced but the respondent remained ex parte in spite of service notice. Consequently, an ex parte award was made against the respondent on 18-4-1952 for Pounds 11417-13-7d with costs assessed at Pounds 378. The appellant sought the enforcement of the above award as a foreign award in the then Sindh Chief Court under the provisions of the Arbitration (Protocol and Convention) Act, 1937 (Act VI of 1937) in terms of section 5 thereof. The above application was resisted by the respondent inter alia on the grounds' that the Act VI of 1937 was not applicable to Pakistan and that in any event the award was not a foreign award within the meaning of the aforesaid Act. The learned Single Judge took view that the award was enforceable under Act VI of 1937 as a foreign award in Pakistan. However, upon appeal a Division Bench of the erstwhile High Court of West Pakistan reversed the above decision on the ground that after the establishment of Pakistan no fresh notification as required under section 2 of the above Act was issued. The matter was brought before this Court as a certificated appeal but the same was dismissed for the following reasons:- "In this connection it might also be pointed out that for determining if the conditions mentioned in section 2 of the Act have been fulfilled it is neither necessary nor proper for the national Courts to enter upon any investigation as to whether reciprocal provisions have in fact been made in the country where the award sought to be filed was made for the enforcement of awards in Pakistan. In matters pertaining to international arrangements the Courts should act in aid of the executive authority and should neither say nor do anything which might cause embarrassment to that authority in the conduct of its international relations. Thus if tbe notification contemplated under the Act had been issued the national Courts would have been bound to hold that the conditions prescribed for treating an award as a foreign award had been fulfilled and would not have been entitled to go behind the notification and investigate whether reciprocal provisions did in fact also exist in the notified country.
49. ' In this view of the matter it is not necessary for us, in the present case, to go into the question as to whether reciprocal provisions have in fact been made in England for the enforcement of awards made in Pakistan or whether Pakistan considers herself to have adhered to the Protocol or become a signatory to the Convention. It is sufficient for us to say that in the absence of any notification by the Central Government of Pakistan declaring England to be a party to the Convention and her territories to be territories to which the said convention applies the award in question cannot be held to be a "foreign award" within the meaning of section 2 of the Arbitration (Protocol and Convention) Act, 1937 and cannot, therefore, be allowed to be filed in any Court in Pakistan or enforced like an award made in an arbitration proceeding in Pakistan."
50. ' As regards the remedy available to the appellant, the following observations were made:-- "This does not, however, mean that the appellant has no remedy open to it, for, awards made by foreign arbitrators could, even before the Arbitration (Protocol and Convention) Act, 1937 was enacted, be enforced by action on the award provided the agreement to submit the differences to arbitration was made within the jurisdiction of the local Courts."
51. ' In the above first case the Court proceeded on the premises that the award was a foreign award.
52. The question involved was, whether the same could be enforced as such under Act VI of 1937 which was based on Geneva Convention? The present controversty was not directly involved.
53. ' In the above second case a Court of Bangalore, which was a part of the Princely State of Mysore, passed certain decrees in respect of Immovable properties of one Ramalingam Mudaliar, which included the immovable properties in the towns of Madras, Hyderabad and Bellary. In that context the question arose, whether the above foreign judgments were executable in a Court of the British India. It was held that a Court of foreign country has jurisdiction to deliver a judgment in rem which may be enforced and recognised in an Indian Court provided that the subject-matter of the action is property whether movable or immovable within the foreign country, but a foreign country has no jurisdiction to deliver a judgment capable of enforcement or recognition in another country in any proceedings the subject-matter of which is title to an immovable property outside that country.
54. The case apparently does not touch upon the point in issue though it deals, with the question of territorial jurisdiction.
55. ' In the above third case the facts were that an appeal was filed by the plaintiff/appellant against an order of a learned Single Judge of the Calcutta High Court passed under section 34 of the Arbitration Act staying the suit. The facts of the case were that on July 5, 1955, the parties to the above appeal, namely, the defendants/petitioners Michael Golodetz and others, who were carrying on business in New Youk under the name and style of Michael Golodetz & Co., a firm registered in New York and the plaintiff/appellant, which was a firm registered in Calcutta, India, under the Indian Partnership Act, entered into an agreement in writing for purchase and sale of 25,000 tons of managanese ore of the specifications mentioned therein. There was dispute between the parties.
56. The buyer i.e, the above foreign firm alleged breach on the part of the seller. The seller denied the above breach and pleaded full satisfaction and discharge or frustration of the contract due to intervening events. Thereupon, the buyers referred the dispute to the arbitration of the American Arbitration Association. The seller filed a suit in Calcutta High Court for declaration for the discharge of his obligation under the above contract. The buyer filed an application under section
34. In the meanwhile arbitrators were appointed by the American Arbitration Association. The arbitral Tribunal waited for the decision on the aforesaid application of the buyer under section 34 of the Arbitration Act which was granted, against which the aforementioned appeal was filed. The appeal was allowed and the order of the trial Court staying the suit was set aside and the respondent's application under section 34 of the Arbitration Act was dismissed. In the body of the judgment P.N. Mookerjee, J. Who headed the Bench has elaborately dealt with the question, as to whether section 34 would be applicable where the proposed arbitration was a foreign arbitration and was to take place in foreign land. He held that the above section was not applicable though the right and obligations under the disputed contract were concerned, the parties must now be taken to have accepted the Indian Contract Act as the relevant law for their determination.
57. ' As regards the question, what constitutes a foreign arbitration, his Lordship observed as under:-- "(42) Before, however, we actually proceed to give our reasons, it is necessary to clear up one particular matter Mr. P.B. Das and also the learned trial Judge, Ray, J. Described the contemplated arbitration in the present case as a foreign arbitration. To the use of that term, the learned Advocate-General objected and he protested against the making of any submission on that footing or assumption. What, in the eye of law, is a foreign arbitration, is not very clear. But the decisions, in which the terms ' foreign arbitration' and ' foreign award' have been used, appear to have used the same in connection with arbitrations in foreign lands by foreign arbitrators, to which foreign law is applicable and in which a foreign national is involved. A particular class of such arbitrations and awards has been dealt with in the Arbitration (Protocol and Convention) provisions of the different countries, which were parties to the Geneva Convention, under a particular definition or definitions, but that is certainly not exhaustive on the point and, even outside the said Protocol countries, the two terms have their use and application. The arbitration, with which we are here concerned, is to be between the plaintiff which is a partnership firm in India, and the defendants, who are citizens of the United States, and so not one which would come within the Arbitration (Protocol and Convention) provision of this country, namely, the Indian Arbitration (Protocol) Act, 1937, the United States not being a party to the Geneva Convention, but it will certainly be an arbitration, in which a foreign party is involved and which has to be held in a foreign land and in which, as we shall presently see, the arbitration is to be by foreign arbitrators, and as, in our opinion, the American law applies to this arbitration on a proper construction of the agreement between the parties, it has all the characteristics of a foreign arbitration, as explained hereinabove."
58. ' Indeed the above case supports Mr. Bandial's contention to the extent that section 34 of the Arbitration Act, 1934, had no extra-territorial operation and cannot have any application where proposed arbitration was a foreign arbitration and was to take place in foreign land in which under the contract the parties provided for any difference arising out of the agreement being referred to arbitration. However, the above Calcutta view runs counter to inter alia some of the cases of foreign jurisdiction. In Bergesen v. Muller (701 F. 2d 928 (1983), the US Court of Appeals (2d Circuit) held that although the arbitration had taken place in New York and was governed by law of New York the award given in New York was still a foreign award because the parties were foreigners even though the goods were transported from USA to Europe under the charter party which contained the arbitration clause.
59. ' The French Court of Appeals in the case of Commander of the Air Forces of Iran v. Bendone Derossi International (decision of 5 May 1987-1987 Journal du droit international 964, excerpts in English in XIV Year Book Commercial Arbitration 629 (1989) and (1989 XIV ICCA Yearbook on Commercial Arbitration 627-628) also held that an award made in France between the Republic of Iran and an American company was not a French award in France and, therefore, an application for the setting aside of the award could not be made to a French Court.
60. It is, therefore, evident that the nationality of the award does not solely depend on the venue of the arbitration proceedings. An award given in a foreign country which is generally treated as a foreign award in another country may be treated as a domestic award. In the case of Oil and Natural Gas Commission v. Western Company of North America (AIR 1987 SC 674), the award given at London was treated by the Indian Supreme Court as a domestic award for the reason that the parties had agreed under the contract that the arbitration proceedings were to be governed under the Indian Arbitration Act read with relevant rules.
9. At this stage it would be pertinent to point out that the treatise under the title "The Law and Practice of Commercial Arbitration in England" (Second Edition) by Sir Michael J. Mustill and Stewart C. Boyd the authors have pointed out that the problem arising out of an arbitration matter, at least in theory, call for the application of anyone or more of the three laws, namely, the proper law of the contract, the proper law of the arbitration agreement, and the curial law. It would be advantageous to reproduce the following extract from page 62 of the above treatise, wherein the scope of the above three laws has been dilated upon:--
61. (A)
1. The proper law of the arbitration agreement governs the validity of the arbitration agreement, the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the constitution of the Tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future disputes.
2. The curial law governs: the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator questions of evidence; the determination of the proper law of the contract.
3. The proper law of the reference governs: the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute.
(B) Reference may also be made to the treatise titled "LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION" (Second Edition) by Alan Redfern and Martin Hunter, wherein the authors under the caption "The "seat" theory and the lex arbitri" have made the following observations:- "The 'seat' theory and the lex arbitri.
62. ' The strength of the seat theory is that it gives an established legal framework to an international commercial arbitration so that instead of 'floating in the transnational firmament, unconnected with any municipal system of law' . The arbitration is firmly anchored in a. Definite legal system which will both assist and, to some degree, control it. The drawback to the theory is that the reference to the law of the country in which the arbitration takes place is a reference to a particular local or national system of law. This law will differ from country to country. Some countries have modern, relatively shophisticated codes of law which are well adopted to the requirements of international commercial arbitrations. Other countries have codes of law which are out of date or inadequate. Nevertheless, most countries may be expected to exercise some control over arbitrations which take place on their territory."
63. ' Reference may also be made to the following passage from the above book under the caption "The lex arbitri":-- The lex arbitri: ' An international commercial arbitration is governed by the national law of the country in which it takes place (except for arbitrations such as those under the ICSID Arbitration Rules which are governed by international law and treatises). Any mandatory provisions of the governing law which affect the conduct of the proceedings must be taken into account. In theory, it is open to the parties to specify a national law to govern the arbitration proceedings which is not the law of the country in which the arbitration is held, provided the law and public policy of the place of arbitration so permit. In practice, it is difficult to see why parties should wish to complicate their lives in this way. If the parties prefer the law of a particular country (country A) to the law of the place of arbitration (country B) they should either:-- -- hold the arbitration in country A; or -- adopt as Rules governing their arbitration the particular provisions of the law of country A which they admire.
64. ' To attempt to conduct an arbitration in country B according to the law of country A merely adds another tier or Rules of law to those to which ' the parties (and the arbitral Tribunal must pay heed. International commercial arbitration is complicated enough, without such flights of fancy; fortunately, however, it appears that in practice such a choice is rarely, if ever, made.
65. ' Another possibility, which has become fashionable in recent years, is for the parties to agree that the arbitration procedure should not be subject to any national law at all. In such a case the parties refer to the 'de-localisation' of the arbitration. This is an attempt to take the arbitration, and in particular the award, out of the scope of intervention of the local Courts. Whilst this course may be attractive in theory, it is more prudent in practice to ensure that the arbitration complies with any mandatory provisions of the place of arbitration, so as to ensure the enforceability of the award under international conventions."
66. ' And under the caption "Place of Challenge:-- "Place of challenge: ' A challenge to the validity or effect of an award is addressed to a Court of competent jurisdiction.
67. In general, this will be a Court at the place in which the arbitration was held. If the arbitration was held in Switzerland, for example, the competent Court is the Federal Supreme Court (although the parties may agree on the Court of the Canton in which the arbitration took place); in France, by contrast, it is the Court of Appeal of Paris. In England, it is the Commercial Court.
68. ' There is one notable exception to this general rule, though it is probably more theoretical than real. The freedom of the parties to an international arbitration to decide how it should be conducted is generally taken to include freedom to subject the arbitration to the procedural law of a country other than that in which the arbitration is held. It seems to be both unnecessary and unhelpful for parties to use their freedom in this way. Nevertheless, the existence of such freedom is accepted, even by commentators who do not accept the concept of delocalised arbitration.
69. Indeed, the New York Convention itself recognises that recognition and enforcement of an award may be refused on the basis that the award has been 'set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made'.
70. ' Accordingly, the possibility exists, in theory at least, that an award might be challenged under the law of a country other than that in which the award was made. Germany is one of the few countries which provides for the possibility of an award being set aside by its Courts if the award was made in another State, but under German procedural law. It seems that, in practice, however, the point has not arisen.
71. ' The theoretical possibility of an award being, challenged in the Courts of a country other than that in which it was made is mentioned only in passing; in this chapter it is assumed that the Court to which the challenge of an international arbitral award is directed will be the competent Court of the country in which the arbitration was held. Certainly the draftsman of the Model Law contemplated that the Courts of a particular State would have jurisdiction only to set aside awards made within the territory of that State."
72. We may also refer to "Russell On Arbitration" (21st Edition) by David St. John Shutton, John Kendall & Judith Gill, wherein the author has dilated upon the above aspect of the case as under:-- "Law of arbitration agreement may be different from the proper law. --While the law of an arbitration agreement usually follows the proper law of the main contract, an arbitration agreement is separable from the main contract between the parties and an arbitration agreement may have a different law from that of the proper law. The parties may choose different proper laws for the two agreements, and other factors may indicate that different laws should apply. Within the arbitration agreement itself it is also open to the parties to specify, as a law governing the procedure for the arbitration, a law different from the law governing the arbitration agreement; and again, other factors may indicate that different laws should apply. In particular ad hoc submission agreements drawn up after disputes have arisen do not form part of the main contract, and there may be less reason to imply the same proper law. Where the parties have made no specific choice of law for the arbitration agreement. The applicable law may be the law of the 'country where enforcement .Is sought under the New York Convention Matters covered by the law of the arbitration agreement.- -The law of the arbitration agreement regulates substantive matters relating to that agreement. Including in particular the interpretation, validity, void ability and discharge of the agreement to arbitrate, and similar issues relating to the reference and enforcement of the award. An issue as to whether a particular dispute falls within the wording of an arbitration clause will therefore be governed by the proper law of the arbitration agreement."
73. Further reference may be made to the following passage from the above book under the caption "The 'seat' or place of arbitration":-- The "seat" or place of arbitration.- -Like other jurisdictions, England regards it as essential for an arbitration to have a "seat", a geographical location to which the arbitration is ultimately tied and which prescribes the procedural law of the arbitration. The parties are free to choose a seat, or specifically, a procedural law of the arbitration, which may be different from the proper law of the contract and the proper law of the arbitration agreement. English law does not recognise the possibility of "delocalised" arbitral procedures which do not have a connection with any national system of law. Under English law the procedural law of an arbitration is generally the law of the country in which the arbitration has its seat. The parties' choice of a seat is therefore, extremely important, not simply in relation to the proper law of the contract, but also because the law of a particular seat may contain provisions which have important consequences for the conduct of the proceedings. The expression "seat" is often used to refer to the particular city chosen, rather than the country (for example, "arbitration in London") and while the parties' agreement is on a city, the crucial choice is of the jurisdiction in which the city is located. An effective choice of procedural law can always be made without reference to a specific venue for the arbitration, but by specifying a jurisdiction: but this is muchless common. The seat is the legal, rather than the physical, place of arbitration proceedings, and hearings can be held in other jurisdictions."
(D) We may also advert to the following passage from "Dicey and Morris on The Conflict of Laws"
74. (Twelfth Edition), Volume 1, in which the authors have dealt with the question of the law governing arbitration proceedings as under:-- "Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate prima facie, as being governed by the law of the country in which the arbitration is held, on the ground that it is the country most closely connected with the proceedings. This statement was approved in Whitworth Street Estates (Manchester) Ltd. v.
75. James Miller & Partners Ltd., where it was held that the English Courts had no jurisdiction to exercise their supervisory powers over an arbitration being conducted in Scotland even though it was held (by a majority) that the law governing the contract and the arbitration agreement was English law.
76. This was because the parties had evinced an agreement that the arbitration should be governed by Scots law. In that case the seat of the arbitration was in Scotland as a result of the conduct of the arbitrator and of the parties. Although clause (2) of the rule and the speeches in this decision treat the primary principle as being that the parties may choose the law to govern the procedure of arbitration, the usual ease this means that the parties may choose the place or seat of arbitration, and thereby choose the procedure prevailing in that country ' The procedural law of the arbitration will determine how that arbitrators are to be appointed, in so far as this is not regulated in the arbitration agreement, the effect of one party's failure to appoint an arbitrator, e.g. Whether an arbitrator may be appointed by a Court, or whether the arbitration can proceed before the sole arbitrator can be revoked. That law will also determine what law the arbitrators are to apply, and whether they are expected or allowed to decide ex aequo et bono or as amiables compositeurs, and, if not, whether the parties can give them this power or impose on them this duty. That law will also determine the procedural powers and duties of the arbitrators, e.g. Whether they must hear oral evidence (but not their jurisdiction to decide the dispute, which is governed by the arbitration agreement and the law applicable to it) or whether the arbitrators have been guilty of misconduct. It will also determine what judicial remedies are available to a party who wishes to apply for security for costs or for discovery or who wishes to challenge the award once it has been rendered and before it is sought to enforce it abroad, and the circumstances in which judicial remedies may be excluded."
77. ' We may also refer to the 10th Edition of the above treatise wherein at page 1127 the authors have highlighted as to the scope and applicability of the substantive law and procedural law as follows:- - "In both cases the Courts consider the validity, effect and interpretation of an agreement to arbitrate as matters of substantive law, governed by the proper law of the agreement and not as matters of procedure to be determined by the lex fori of the Court called upon to enforce the award. When the arbitration clause is part of a contract (including the arbitration clause) is the law of the country in which the arbitration is to be held. But this presumption, though strong, can be rebutted, for the House of Lords has emphasised that an arbitration clause is only one of several circumstances to be considered in determining the proper law of a contract.
78. ' Of course the presumption does not apply if the parties cannot agree on the place of arbitration and their contract provides that the arbitrator is to be appointed by, e.g. The President of a Chamber of Commerce or of a trade or professional association. Occasionally the contract may provide that certain disputes arising out of it are to be submitted to arbitration in one country while other dispute are to be submitted to arbitration in another. Sometimes the parties include in their contract a 'joint arbitration clause' under which it is left to the Presidents of the Chambers of Commerce or other similar body to which each of them belongs to decide where the arbitration is to be held. But these are exceptional situations: as a rule the parties, by fixing the place of arbitration, implicitly choose the proper law of their contract in general and that of the arbitration clause in particular. When the agreement is to refer an existing dispute to a particular arbitrator, the law of the country in which the arbitration is to be held is even more likely to be the proper law of the contract, because the arbitration is the sole object of the agreement.
79. ' The question whether the arbitration clause is wide enough to cover the dispute between the parties is a question of interpretation and therefore governed by the proper law of the contract.
80. That law will therefore, normally determine whether the clause remains binding on the parties although one of them alleges that the contract is void, voidable or illegal, or that it has been discharged by breach of frustration. The proper law will also determine whether an arbitration clause can be imported by implication into a different contract between the same parties, or between one of them and a third party."
81. ' Reference may further be made to the following passage from the above treatises 10th Edition under the caption "The law governing the arbitration proceedings": "The law governing the arbitration proceedings.- -It is, however, for the parties not only to choose the law which is to govern their agreement to arbitrate, but also the law which is to govern the arbitration proceedings. Normally the parties exercise this power by determining (expressly or by implication) the country in which the arbitration is to take place. i.e, normally the choice of the proper law of the contract, which includes the agreement to arbitrate, coincides with the choice of the law governing the arbitration proceedings. It cannot however be doubted that the Courts would give effect to the choice of a law other than the proper law of the contract. Thus, if the parties to an English contract provide for arbitration in Switzerland, English law would govern the validity, interpretation and effect of the arbitration clause as such (including the scope of the arbitrators' jurisdiction), but the arbitration proceedings (including the extent to which they are subject to judicial control) would be governed by Swiss law. Where the parties fail to choose the law governing the arbitration proceedings, those proceedings will almost certainly be governed by the law of the country in which the arbitration is held, on the ground that it is the country most closely connected with the proceedings. However, if there is no law governing the arbitration proceedings, because they have not yet begun, the proper law of the contract (in default of any other) will have to determine such questions as whether the Court has power to extend the time within which arbitration must be begun."
(E) Reference may also be made to Cheshire and North's "Private International Law" (Twelfth Edition), wherein the authors have pointed out that in the world a number of separate municipal systems of law are obtaining. It has also been highlighted under what circumstances private international law comes into operation as part of English law as follows:-- "The raison d'etre of private international law is the existence in the world of number of separate municipal systems of law---a number of separate legal units---that differ greatly from each other in the Rules by which they regulate the various legal relations arising in daily life. The occasions are frequent when the Courts in one country must take account of some Rule of law that exist in another. A sovereign is supreme within his own territory and, according to the universal maxim of jurisprudence, he has exclusive jurisdiction over everybody and everything within that territory and over every transaction that is there effected. He can, if he chooses, refuse to consider any law but his own. The adoption, however, of this policy of indifference, though common enough in other ages, is impracticable in the modren civilised world, and nations have long found that they cannot, by sheltering behind the principle of territorial sovereignty, afford to disregard foreign rules of law merely because they happen to be at variance with their own territorial or internal system of law.
82. Moreover, as will be shown later, it is no derogation of sovereignty to take account of foreign law."
10. From the above-referred treatises the following principles of law are deducible:--
(i) That the proper law of the arbitration agreement governs the validity of the arbitration agreement, which will include; whether a dispute is covered by the arbitration agreement, the constitution of the Tribunal, the question whether an award lies within the jurisdiction of the arbitrator, the formal validity of the award, the question whether the parties have been discharged from any obligation to arbitrate future dispute.
(ii) That the curial law governs the manner in which the reference is to be conducted, the procedural powers and duties of the arbitrator, questions of evidence, the determination of the proper law of contract.
(iii) That the proper law of the reference governs the question, whether the parties have been discharged from their obligation to continue with the reference of the individual dispute.
83. ' (N.B. For above paras. (i) to (iii), please refer to "The Law and Practice of Commercial Arbitration in England" (Second Edition) by Sir Micheal Mustill and Stewart C. Boyd at page 62).
(iv) That the strength of "The Seat Theory" is that it gives an established legal framework to an international commercial arbitration, so that instead of "floating in the firmament unconnected with any municipal system of law", the arbitration is firmly anchored in a definite legal system.
(v) That an international commercial arbitration is governed by the national law of the country in which it takes place in the absence of any express contrary agreement. In theory, it is open to the parties to specify a national law to govern the arbitration proceedings which is not the law of the country in which the arbitration is held, but the same may create complications.
(vi) That a challenge to the validity or effect of an award is addressed to a Court of competent jurisdiction. In general, this will be a Court at the place in which the arbitration was held.
(vii) That the possibility exists, in theory, at least, that an award might be challenged under the law of a country other than that in which the award was made. Germany is one of the few countries, which provide for the possibility of an award being set aside by their Courts if the award was made in another State.
84. ' (N.B.: For above paras. (iv) to (vii), please refer to "Law and Practice of International Commercial Arbitration" (Second Edition) by Alan Rdfern and Martin Unter, pages 90, 299, 300, 431 and 432).
85. (viii)That while the law of an arbitration agreement usually follows the proper law of the main contract, an arbitration agreement is separable from the main contract between the parties and arbitration agreement may have a different law which may be provided within the arbitration agreement.
(ix) That the law of the arbitration agreement regulates substantive matters relating to that agreement including in particular the interpretation, validity, void ability and discharge of the agreement to arbitrate and similar issues, relating to the reference and enforcement of the award.
86. An issue as to whether a particular dispute falls within the wording of an arbitration clause will, therefore, be governed by the proper law of the arbitration agreement.
(x) That like other jurisdictions England regards it as essential for arbitration to have a "seat" a geographical location to which the arbitration is ultimately tied and which prescribes the procedural law.
87. ' (N.B.: For above paras. (vii) to (x), please refer to "Russell On Arbitration" (21st Edition) by David St.
88. John Suttan, John Kendal and Judith Gill, pages 72, 73 and 74).
(xi) That where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate, prima facie, as being governed by the law of the country in which the arbitration is held, on the ground that it is the country most closely connected with the proceedings.
(xii) That the procedural law of the arbitration will determine, how the arbitrators are to be appointed, in so far as this is not regulated in the arbitration agreement, the effect of one party's failure to appoint an arbitrator e.g. Whether an arbitrator be appointed by a Court or whether the arbitration can proceed before the sole arbitrator appointed by the other party, and whether the authority of an arbitrator can be revoked. That law will also determine what law the arbitrators are to apply or whether the arbitrators have been guilty of misconduct. It will also determine what judicial remedies are available to a party who wishes to apply for security of costs or for discovery or who wishes to challenge the award once it has been rendered and before it is sought to enforce it abroad, and the circumstances in which judicial remedies may be excluded.
89. (xiii)That the validity, effect and interpretation of an agreement to arbitrate are matters of substantive law, governed by the proper law of agreement and not as a matter of procedure to be determined by the lex for of toe Court called upon to enforce the trial.
(xiv) That when the arbitration clause is part of the contract (including the arbitration clause) is the law of the country in which the arbitration is to be held. But this presumption, though strong can be rebutted. The above presumption does not apply if the parties cannot agree on the place of arbitration and their contract provides that the arbitrator is to be appointed e.g. By the President of the Chamber of Commerce or of any other professional organization or if the contract provides that certain disputes arising out of it are to be submitted to arbitration in one country while other disputes are to be submitted to arbitration in another country.
(xv) That it is for the parties not only to choose the law which is to govern their agreement to arbitrate, but also the law which is to govern the arbitration proceedings. If the parties fail to choose the law governing the arbitration proceedings, those proceedings will almost certainly be governed by the law of the country in which the arbitration is held.
90. ' However, if there is no law governing the arbitration proceedings because they have not yet begun, the proper law of the contract (in default of any other) will have to determine such questions as whether the Court has power to extend the time within which arbitration must have begun.
91. ' (N.B.: For above .Paras. (xi) to (xv) "Dicey and Morris on The Conflicts of Laws" (Twelfth Edition), Vol. 1 at pages 580 and 582 (Tenth Edition) at pages 1127 and 1128).
(xvi) That the raison detre of private international law is the existence in the world of a number of separate municipal systems of law and a number of separate legal units. A sovereign is supreme within his own territory and according to the universal maxim of jurisprudence, he has exclusive jurisdiction over everybody and everything within that territory and over every transaction that is there effected. But in the modern civilized world, the same has become impracticable and the nations have long found that they cannot, by sheltering behind the principle of territorial sovereignty afford to disregard foreign Rules of law merely because they happen to be at variance with their own territorial or internal system of law.
92. ' (N.B.: Please refer to Cheshire and North's "Private International Law" (Twelfth Edition) pages 3 and 4).
11. After having referred to the various treatises on the question as to the laws involved in an international arbitration, we may now refer to some of the cases which have been relied upon by the learned counsel for the parties.
(a) Mr. Bandial has inter alia relied upon the following cases:
(i) James Miller & Partners Ltd. v. White Worth Street Estates (Manchester) Ltd. 1970 (1) Lloyd's Law Reports 269).
93. ' In the above case the respondent-company which had its registered office in London owned premises in Dumbarton in Scotland which they wished to convert into a whisky bonded warehouse.
94. On May 10, 1965 the above English Company entered into an agreement in the English Royal Institute of British Architect standard form with James Miller and Partners Ltd., a building contractor of Glasgow to do the above work of conversion. Disputes having arisen between the parties, they resorted to arbitration in pursuance of arbitration clause contained in the agreement which provided that the arbitrators were to be appointed on the request of either party by the President or Vice-President for the time being of the Royal Institute of British Architect. The arbitration proceedings commenced in Scotland. Upon the respondent's application Master Elton ordered by way of originating summons to state his award in the form of special case for the decision of the High Court in terms of section 21 of the Arbitration Act, 1950. The appellant appealed against the aforesaid order on the ground that the proper law of the contract under which the arbitration was held was the Scottish Law and the Arbitration Act, 1950, did not apply to the Scottish arbitration and stating of an award in the form of special case was improper. Mr. Justice Eveleigh allowed the appellant's appeal but the ' respondent's appeal to the Court of Appeal was successful whereby the orders of Master Elton was restored. Thereupon, the appellant appealed to the House of Lords, where two questions were argued. The first was, whether proper law of the contract was Scots or English. The second question was whether assuming that the proper law of the contract was English, the law governing the procedure in the arbitration was Scots of English. Lord Guest in his opinion held that since the arbitration proceedings had taken place in Scotland and the arbiter plainly indicated that he was following a Scots procedure, then in the absence of any protest, the parties would in his opinion be taken to have agreed that the arbitration would be governed by the curial Rules of Scotland.
95. Whereas Lord Wilberforce in his opinion inter alia made the following observations:-- "What law, then, should be taken to apply to the procedure here? The arbitration clause itself is silent, and I would agree that in the normal case, where the contract itself is governed by English law, any arbitration would be held under English procedure. Moreover, the mere fact that the arbitrator was to sit either partly or exclusively in another part of the United Kingdom or, for that matter abroad, would not lead to a different result: the place might be chosen for many reasons of convenience or be purely accidental: a choice so made should not affect the parties' rights."
96. ' The House of Lords allowed appeal and set aside the judgment of the Court of Appeal and declined to state the award upon the respondent's application.
97. ' The above case is distinguishable from the facts of the instant case inasmuch as in the above- reported case it has been held that since the parties did not object to the application of the Scottish law by the arbitrator to the arbitration proceedings, they by their conduct accepted the Scottish law as the law for the arbitration proceedings and, therefore, the respondent could not have invoked section 21 "of the English Arbitration Act, 1950, for requesting the arbitrator to state the award to the Court. However, it may be pointed out that Lord Willber force's above-quoted observations indicate that in the absence of any express agreement as to the procedure in the arbitration clause, in normal case where the contract itself is governed by English Law, any arbitration would be held under English procedure and that venue of the arbitration may not be the determining factor for the above purpose.
(ii) Black Clawson International Ltd. v. Papierwerke Walshop Achaffenburg A.G. (1981 (2) Lloyd's Rep 446).
98. ' In the above case the facts were that the applicant Black Clawson International Limited (seller) agreed with M/s. Papierwerke Waldh of Aschffenburg A.G. (buyer) to manufacture a paper-making machine and ancillary equipment at their premises at Stockstadt in the Federal Republic of Germany. The contract provided that any dispute as to the construction or effect of the agreement should be decided by three arbitrators sitting in Zurich. There arose some disputes. Thereafter, the three arbitrators were duly appointed and in the course of next fifteen years there were numerous hearings. All the three members of the original Tribunal resigned and were replaced by the new members. The matter was subject of nine hearings in the Swiss Courts arising from three distinct applications for the Court to intervene in the reference. On October 8, 1977, the Tribunal intimated a decision in favour of the buyer for a much smaller sum that what had originally been claimed. At that stage no reasons were given for the decision because one of the applications to the Swiss Court was still pending. Eventually on September 17, 1979, the Tribunal delivered a reasoned award of 137 pages. The buyer moved immediately towards the enforcement of award, obtaining a certificate of finality from the Zurich Court. After that he obtained leave ex parte to enforce the award in England in the same manner as a judgment or order pursuant to section 26 of the Arbitration Act, 1950, and section 7 of the English Arbitration Act, 1975. However, these proceedings were overtaken by events in Switzerland for on March 24, 1980, the Obergericht of the Canton of Zurich made an order, the effect of which was to set aside the award, and remit the award to the arbitrators for further consideration. An appeal by the buyer to the Federal Supreme Court had been declared incompetent without prejudice to the right of the buyers to argue after the arbitrators have reconsidered the matter and published another award, that the original award was, after all, valid. The seller commenced an action in the High Court in England and applied for (i) an injection restraining the buyers from taking any further steps in the reference to the arbitration and (ii) a declaration that the arbitration agreement had been terminated by reason of frustration and/or by reason of the defendants' wrongful repudiation of the agreement and/or by reason of the inordinate and inexcusable delay of the defendants in proceeding with the arbitration.
99. ' The questions before the Court were: (1) Was the agreement to arbitrate expressly or by implication governed by English Law? Had the sellers a sufficiently arguable case for saying that the contract was frustrated? And (3) If the first two requirements were satisfied was the action one, which in the exercise of Courts' discretion, should properly be retained by the English Court. It may be observed that the arbitration clause in the agreement provided arbitration in conformity with the Rules of Conciliation and Arbitration of International Chamber of Commerce. It was also provided that reference shall be deemed to be submission to arbitration within the meaning of the Arbitration Act of England of 1950 or any modification or re-enactment thereof, but the venue provided for the arbitration was Zurich. It was also provided that the question as to the construction or effect of the contract shall be decided according to the laws of England if the reference to arbitration shall have been made by the purchaser and according to the law of Federal Republic of Germany if such reference shall have been made by the seller. Mr. Justice Mustill inter alia held as under:-- "I would, however be inclined to the view that whatever the proper law of the sale contract the parties had by their inclusion of Zurich as an invariable locus for the arbitration indicated a sufficient intention that the law governing the continuous agreement to arbitrate should, throughout the life of the contract, be the law of Zurich; so that this may be one of the uncommon cases where the law of the substantive contract and the law of the continuous agreement to arbitrate are not the same. It is however unnecessary to express a concluded opinion on this point.
100. ' In the result, I hold that the present action relates to the individual contract to refer, and since this was, in my judgment, governed by the law of Zurich, the only ground upon which it was sought to justify the grant of leave under 0.11 is not well founded, and the order for service must be set aside."
101. ' The above case, to some extent, supports Mr. Bandial's contention that even when under the Arbitration clause the construction or effect of the contract was to be decided according to the laws of England if the reference to arbitration was made by the purchaser (who in fact made such reference) it was held that the parties by including Zurich as an invariable locus for arbitration indicated a sufficient intention that the law governing the continuous agreement to arbitrate should throughout the life of the contract is the law of Zurich.
(iii) Naviera Amazonica Peruana S.A. v. Campania International De Seguros Del Peru (1988) 1 Lloyd's Rep. 116).
102. ' The breif facts of the above case were that a Peruvian insurance company (the insurer) and a Peruvian shipowning company (the shipowners) under a hull policy covering four vessels classed with different Classification Societies in America, Europe and Japan. The policy was dated September 20, 1982 and insured the vessels against marine risks under various American and other Institute Clauses and certain printed general conditions. The premiums were stated in U.S. Dollars.
103. The terms of the cover were varied by an endorsement dated October 18, 1982. This contained an arbitration clause which had given rise to the proceedings in the above case. When the policy expired on August 31, 1983, a dispute arose as to what the renewal premiums should be. The shipowners considered the quoted rates too high, but the insurers said that they were reasonable and in any event governed by the rates obtainable from their reinsurers. The substantive dispute between the parties was simply of what was a reasonable rate of premium for each of these four vessels during this period of six months. However, the proceedings before the Court of Appeal solely related to a procedural disputer arising out of the arbitration clause in the endorsement. The issue was, whether its effect, in the context of the policy as a whole, was to provide for disputes under the policy, including the dispute which was in issue, to be resolved by arbitration in London or Lima. It may be pertinent to point out that printed Article 31 of the policy provided that the city of Lima was to have jurisdiction over all disputes. A typed endorsement contained an arbitration clause which provided Arbitration under the conditions and laws of London. The shipowners initiated legal action in England, Mr. A. Diamond Q.C., Deputy Judge, held that the parties had agreed that any arbitration under the policy was to be governed by English law, the application for the appointment of an arbitrator pursuant to the Arbitration Act, 1950, would be refused because the parties has also agreed that any arbitration under the policy was to be held in Lima. Lima was the agreed forum but the agreed lex fori was English. The matter was taken up to the Court of Appeal by the shipowners in the form of an appeal, which was allowed by a Bench comprising Kerr, Russell L.JJ. And Sir Denys Buckley. Lord Kerr spoke on behalf of the Court. It was held by the Court on appeal (1) that the typed arbitration clause in the endorsement clearly overrode Article 31 of the general conditions both as a result of Article 1 of the printed conditions and as a matter of ordinary principle, and that the phrase "arbitration according to the conditions and laws of London" meant that the arbitration was to be held in London; (2) that the case involved a marine policy between insurer and shipowners who operated internationally and that there was nothing surprising in concluding that these parties intended that any dispute under this policy should be arbitrated in London; (3) that the correct interpretation of this policy was that the seat or forum of the arbitration should be London and this was the effect of the declaration of the shipowners. Consequently the appeal was allowed and the case was remanded to the Commercial Court for that purpose. The above case lays down that if an arbitration clause provides that arbitration shall be under the conditions and laws of certain country the venue or forum would be the country so specified. In other words, this will inter alia be construed as an agreement between the parties as to the venue or lex fori. The proper law of the main contract may be different than that of the country where the arbitration may take place.
104. ' In the discourse of the above judgment there is a very illuminating discussion on the three different sets of laws which have relevancy/applicability to an arbitration involving foreign element.
105. We may quote relevant observations which read as under:-- "A. All contracts which provide for arbitration and contain a foreign element may involve three potentially relevant systems of law. (I) The law governing the substantive contract. (2) The law governing the agreement to arbitrate and the performance of that agreement. (3) The law governing the conduct of the arbitration. In the majority of cases all three will be the same. But (1) will often be different from (2) and (3), And occasionally, but rarely, (2) may also differ from (3).
106. ' In the present case there was no investigation of (1) the substantive law because nothing turns on it, but I am content to assume that this was the law of Peru on the ground that this was the system with which this policy was most closely connected. On this appeal there was also ultimately no contest about law; (2) which may be regarded as the substantive law of the agreement to arbitrate. The Judge rightly held that on the wording of the arbitration clause the parties had agreed expressly that their agreement to arbitrate should be subject to English law and that the leave granting under 0.11 to serve the insurers out of the jurisdiction had been correct on this ground. Accordingly, the entire issues turned on law (3); the law governing the conduct of the arbitration. This is usually referred to as the curial or procedural law, or the lex fori. B. English law does not recognize the concept of a 'de-localised' arbitration (see Dicey & Morris at pp.541, 542) or of "arbitral procedures floating in the transnational firmament unconnected with any municipal system of law" (Bank Mellat v. Helliniki Techniki S.A. (1984) Q.B. 291 at p. 301 (Court of Appeal)].
107. Accordingly, every arbitration must have a "seat" or locus arbitri or forum which subjects its procedural Rules to the municipal law which is there in force. This is what I have termed law (3).
108. C Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate prima facie. As being governed by the law of the country in which the arbitration is held, on the ground that it is the country most closely connected with the proceedings."
(iv) Bank Mellat v. Helliniki SA (1983) 3 ELR 428.
109. ' In the above case the relevant facts were that a tripartite contract was executed/concluded on September 29, 1974, among Bank Omran of Tehran, Helleniki Techniki SA (HT) of Athens and A Danish Company Larsen & Nielsen. The above contract pertained to joint venture for the development of certain land near Teheran. The land was to be provided by Bank Omran, and HT and the Danish company were to provide the necessary design and construction services for its development. The contract stated that it was to be governed by the laws of Iran and contained an arbitration clause, the relevant portion of which reads as under:-- "Any dispute arising between the parties hereto in any way related to or connected with the interpretation or implementation of this agreement shall be finally settled by arbitration, by an arbitral Tribunal composed of 3 arbitrators, in accordance with the Rules of Conciliation and Arbitration of The International Chamber of Commerce, Paris.... The venue shall be the city of London, and the arbitration proceedings shall be conducted in the English language."
110. ' It may be noticed that none of the parties carried on business in England or had any other connection with the country. It seems that subsequently HT took over all rights and liabilities of the Danish company, which disappeared from the scene of the above controversy. In June, 1979, Bank Omran was merged, together with other banks, into Bank Mellat which took over all rights and liabilities of Bank Omran under the contract. Bank Mellat was registered even in England under the Companies Act, 1948, and held a licence under the Banking Act, 1979 to carry on banking business in England but its place of incorporation was Iran.
111. ' It appears that by 1980 serious disputes had arisen between Bank Mellat and HT under the contract. On 26-7-1980 HT served a notice of default and commenced the present arbitration proceedings against Bank Mellat by a request addressed to the ICC through letter dated 29-11- 1980. Three arbitrators were appointed. It seems that under the I.C.C. Rules each of the parties was initially asked to deposit US $ 500 by way of advance towards the I.C.C.'s administrative expenses.
112. After that each party paid a further sum of US $ 95,000 in response to the request for the I.C.C. The matter was proceeded by the three arbitrators inasmuch as on 6-10-1982 they drew up necessary terms of reference pursuant to the I.C.C. Rules in agreement with the parties. These defined the issues in dispute. HT claimed damages in the sum of US $ 6,753,200 and reimbursement of a further sum alleged to be in excess of US $ 1,000,000. Whereas Bank Mellat counter claimed damages of about US $ 30,000,000. As regards the conduct of the arbitration, the terms of reference merely recited the provisions of the contract concerning application of I.C.C. Rules as set out above, and that the contract was to be governed by the law of Iran.
113. ' It appears that Bank Mellat initiated legal proceedings in England and got issued summons on 18- 2-1983 for an order that the HT should provide security for Bank Mellat's costs in a total sum of US $ 118,850. The above prayer of Bank Mellat was declined by Bingham, J. Thereupon Bank Mellat filed an appeal which was heard by a Bench comprising Waller, Kerr and Robert Goff, L.JJ. In this case also Kerr, L.J. Rendered the leading opinion. The above opinion contains very exhaustive discussion as to the various Articles of the I.C.C. Rules, particularly, relating to deposit of cost, Rules 'governing the proceedings etc. After referring the relevant Articles of the I.C.C. Rules Kerr, L.J. Commented on the I.C.C. Rules as follows:-- "I think that it is true that the rules provide a code which is intended to be self-sufficient in the sense explained above. The detailed provisions of the rules are designed to cover every step in an arbitration conducted under their terms, from the inception of the arbitration to the issue of a final award which is designed to be enforceable against the unsuccessful party. If one traces these steps through the rules, they proceed (though not always in numerical order) from the original request for arbitration and the answer to the request to the appointment of the Tribunal, then to the pleadings, including counterclaims, then to the conduct of the proceedings and the procedural Rules to be applied, and finally to all aspects of the award. They also deal with the costs of the arbitration in two distinct respects. First, there is that part of the costs which is payable to the I.C.C.
114. In the terminology current in relation to English arbitrations, these costs can broadly be described as 'the costs of the award', i.e, those which are secured to the I.C.C., and through the I.C.C. To the arbitral Tribunal and its experts, by advance deposit. Second, there are the respective legal costs of the parties arising out of the arbitration apart from the costs of the award. In relation to the latter there is no provisions for the giving of any security in advance and this is clearly significant.
115. However, it is also significant that, in the same way as under section 18 of the Arbitration Act, 1950, the arbitrators are expressly required by the Rules to deal with these costs in their final award; and I return to this aspect later."
116. ' On merits his Lordship concluded inter alia under:-- "I agree with the Judge that in considering whether or not to make an order for security for costs, in circumstances where, as here, the Court has jurisdiction to did so, it is relevant to take account of the financial position of the party against whom the order is sought. But I equally agree with him that in the present case this is not a sufficient factor to outweigh the considerations which led him to the conclusion that no such order should be made. Indeed I would go further. Since. I consider that in an arbitration under the I.C.C. Rules, which has no connection with this country other than that it had been agreed between foreign parties that any such arbitration was to take place here, it would be inappropriate in principle to make an order for security for costs on the ground that the claimant is ordinarily resident abroad, I would also regard it as wrong in principle to make any such order on the ground that the claimant may be unable to pay the other party's costs if the award requires him to do so."
117. ' However, we may point out that House of Lords in a recent decision in the case of Coppee-Lavalin v. Ken-Ren Chemicals Ltd. (1994 (2) All E.R. 449) ordered for the deposit of security for costs of arbitration under section 12(6)(a) of the Arbitration Act, 1950, though the arbitration was under I.C.C. Rules and the substantive governing law was Belgium. Law. Their Lordships were persuaded because they found that the respondent was insolvent and his cost of the arbitration was borne by a third party, who would not be responsible for cost awarded against the respondent. The above House of Lords' judgment indicates that notwithstanding the application of the I.C.C. Rules, and the fact that the parties to the above arbitration were foreigners and had no closest connection with Londin (which was the venue of the arbitration as per the arbitration clause), the Court passed the order on a procedural matter.
(v) International Tank and Pipe SAK v. Kuwait Aviation Fuelling Company KSC (1975) 1 All ER 242).
118. ' The relevant facts of the above case are that by a written contract the contractors agreed to construct a new fuelling depot for the employers at the Kuwait International Airport. Both parties were companies registered in Kuwait. The contract was expressed to be subject to general conditions prepared by the International Federation of Engineers together with certain supplementary conditions of particular application. Clause 75 of the conditions provided that the contract was to be construed and operated in conformity with the laws of England and that the respective rights and liabilities of the parties were to be in accordance with the laws for the time being in force. Clause 67 provided mechanism for the settlement of disputes by requiring them to be referred in the first place to the Engineer and then within 90 days of the receipt of Engineer's decision, notice to arbitration under the Rules of conciliation and Arbitration of the International Chamber of Commerce was to be served by the party wishing to invoke arbitration. Article 16 of the above Rules provided that the arbitration procedure was to be governed by the law of procedures chosen by the parties or failing such choice, by that of the country in which the arbitrator held the proceedings. It appears that the contractor did not initiate the arbitration within 90 days as provided in clause 67. He, therefore, applied to the High Court in London for extension for the purpose of initiating arbitration under section 27 of the English Arbitration Act, 1950. The learned Judge of the High Court extended the time by six weeks. The matter was taken up by the employer to the Court of Appeal. The appeal was heard by Lord Denning MR, Orr and Browne L.JJ. It was held that as the English law was the proper law of contract, it governed the interpretation and effect of the contract between the parties and in particular it governed the arbitration clause even though the law governing the procedure in arbitration arising from the contract might be of some other country. It will be advantageous to reproduce the following extract from the opinion of Lord Denning MR:-- "Counsel for the employers drew our attention to Ch E Rolimpex Ltd. v. Avra Shipping Co. Ltd. (The Angeliki). In that case Kerr, J. Said that, when there was a time limit under the Hague Rules, it would be very rare for our Courts to exercise their power under section 27 of the 1950 Act to extend the time. Counsel submitted that, when parties contracted on the form of an international agreement, the time ought not to be capable of extension by the fortuitous circumstance that the determination of the matter might arise in England. I cannot accept this submission. It may be that other countries have provisions similar to section 27. In any case the parties have agreed that the contract shall be interpreted and operated in conformity with the laws of England. This means reading into it section 27 of the 1950 Act. In my opinion, therefore, the High Court has jurisdiction under section 27 to extend the time."
119. ' The above case lays down that the Court of the country of which proper law governs the contract will have jurisdiction to entertain an application for extension of time for initiating arbitration though the venue of the arbitration may be in a different country. It also lays down that the proper law of the contract will also govern the arbitration clause.
(b) We may now refer to some of the cases of the foreign jurisdiction relied upon by Mr. S.M. Zafar and the learned Judge in Chambers in the judgment under appeal.
(i) Dalmia Dairy Industries Ltd. v. National Bank Of Pakistan (1978 (2) Lloyd's Rep. 223).
120. ' The brief facts of the case were that a number of agreements were made between 1962 and 1964 the plaintiffs Dalmia a company carrying on business in the Republic of India, whereby it agreed to sell certain cement factory to P. Limited. The later agreed to deliver to the plaintiffs certain quantity of cement over a period of three years. The defendant bank (which was incorporated in the Republic of Pakistan) guaranteed performance by P. Limited in the following terms: "We shall pay to Dalmia in English in sterling other than sterling held by us in India, or in Indian Rupees from our non-resident account in India, a sum equivalent to 94 Pakistani Rupees for every ton by which the said deliveries of cement to Dalmia shall fall short of the said annual quantity of 75,000 tons.
121. ' The above guarantee also contained the following arbitration clause: "All disputes arising in connection with the guarantee shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by a sole arbitrator in accordance with the Rules. The Arbitration shall be conducted at Beirut (Lebanon) or Geneva (Switzerland) at the discretion of the sole arbitrator. All questions arising from or pertaining to this guarantee and the arbitration, if any, shall be decided with reference to the Indian Laws, We agree that the Courts in India alone shall have jurisdiction in all matters arising from or connected with the guarantee and the arbitration, if any."
122. ' It seems that no cement was delivered over the period of three years and then the matter was referred to the arbitration in terms of the above arbitration clause. The venue selected by the arbitrator was Geneva (Switzerland.) The arbitrator made two awards in favour of the plaintiffs, the first for Pounds 827,492.67 and the second for Pounds 2,152,806.68. The above awards also stated that the sums must be paid "in India in sterling or in Indian Rupees as specified in the Bank guarantee". The plaintiffs sought to enforce the awards in the English Courts. The defendants denied the liability inter alia on the grounds that (i) the arbitrator's decision that he had jurisdiction was wholly ineffective in law; (ii) the awards were not final and binding in India and were not enforceable in this country; (iii) the arbitrator had no jurisdiction to make either award; (iv) if the awards were made between enemies at any material time (for hostilities between Pakistan and India were in progress in 1965 and again in 1971 either by reason of war or the Trading with the Enemy legislation of the two countries, the Court should decline to enforce them as being contrary to English public policy; and (v) the Court should refuse to enforce the awards on the ground that they were contrary to the principles of natural justice in that the arbitrator refused to hear any oral evidence.
123. ' Kerr, J. Who heard the matter at the Queen's Bench Division, held that (i) the proper law governing the arbitrations and determining the validity of the awards was the Indian law; the awards were valid by Swiss law if they were valid by the Indian law; and the procedure of the arbitrations was governed by the rule of arbitration of the I.C.C. And by Swiss law as the law of the forum in so far as the rules did not cover the ground; (ii) by the Indian law the arbitrator had jurisdiction to decide on his own jurisdiction, and his decision that he had jurisdiction had the same legal effect as any other decision made by him; (iii) the awards were prima facie binding and valid under the Indian law and subject to the issues of English public policy and natural justice (infra), were enforceable here;
(iv) it would be held that by Indian law neither the guarantee nor the arbitration agreement, even if there was war between Pakistan and India in 1965 or 1971 was abrogated; (v) the enforcement of the awards should not be refused as being contrary to English public policy; (vi) there had been no breach of the principles of natural justice for in refusing, to hear oral evidence inasmuch as the arbitrator had followed the usual procedure applicable to I.C.C. Arbitrations; and under the Indian law there was no absolute obligation on him to hear such evidence. The defendant National Bank of Pakistan filed appeal against the above judgment whereas the plaintiffs filed cross appeal for declining their claim for higher rate of interest. Both the appeal and the cross-appeal were dismissed.
124. ' As regards the application of procedure to the arbitration proceedings the following was concluded:-- "The other remaining matter is the question of the procedural law of the arbitration. Mr. Lloyd contended that the effect of cl. (ix) of the guarantee was to make Indian law also the procedural law. He contended, in the alternative, that in the course of the arbitrations an ad hoc agreement to this effect was made between the parties. The arbitrator accepted neither of these contentions and nor do I. For the reasons set out hereafter the procedure of the arbitrations was in my view governed by the rules of arbitration of the I.C.C. And by Swiss law, the law of the forum, in so far as these rules did not cover the ground."
125. ' With reference to the difference between English and Indian laws as to the scope of attack to the validity of an award, the following observations were made:-- "I should also mention in passing that although all the arbitrator's awards in both arbitrations were 'speaking awards' with full reasoning, the bank rightly did not seek to contend that the awards could be attacked before me on the ground that they contained errors of law on their face. This could only have been done in proceedings to set aside the awards under the Indian Arbitration Act, 1940, before the Indian Courts, or possibly in the Swiss Courts, but no such proceedings were ever brought. I shall have to return to this aspect later in another connection."
126. ' As regards the mechanism provided in the Indian Arbitration Act, 1940, as to the procedure for challenging the award, the grounds of the challenge and the limitation for filing relevant application, the following comments were made:-- "(C) In Indian law the position is regulated by the Indian Arbitration Act, 1940, and I heard a good deal of evidence about it. The basic position is the same as in England and evidently in Switzerland, viz. That an award is valid, final and binding unless and untill it is set aside by any procedure available for this purpose. I must refer to certain of its provisions. Under section 14 the arbitrator may be required by either party or directed by the Court to file the award and certain other documents with the Court. Unless and until this is done the award cannot be enforced in the sense that any process of execution can be levied upon it. This process is governed by section 17 which can only come into operation once and award has been filed, and provides as follows: ' Where the Court sees no cause to remit the award or any of the matters referred to .Arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow:-- ' This is the only method of enforcing a 'domestic' award under Indian law. In such a case there is no procedure for bringing an action on an award.
127. ' There are two provisions whereby an award can be challenged. First, an application to set aside an award may be made within 30 days from the date of notification that it has been filed under section 30, which provides as follows so far as relevant."
128. ' The above case clearly indicates that the factum that an arbitration takes place under the I.C.C.
129. Rules is a foreign country under a foreign arbitrator simpliciter does not necessarily lead to an inference that an award pursuant to such an arbitration is a foreign award. If the governing law of the contract and arbitration agreement is the municipal law of the country where the award is filed either for enforcing it or for assailing it, it is to be treated as a a domestic award. In the above case, the arbitration clause reproduced hereinabove provided arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by a sole arbitrator in accordance with the said rules, the venue was at the option of the arbitrator either at Beirut (Lebanon) or Geneva (Switzerland). It was also provided that all questions arising from or pertaining to this guarantee and the arbitration, if any, shall be decided with reference to the Indian laws. The award rendered by the foreign arbitrator under the I.C.C. Rules at Geneva was examined with reference to the provisions of the Indian Arbitration Act, 1940.
(ii) National Thermal Power Corporation v. Singer Company and others (1992) 2 Comp. L.J. SC].
130. ' The brief facts are that National Thermal Power Corporation (NTPC) and Singer Company entered into two formal agreements dated 17-8-1982 at New Delhi. The general terms and conditions of contract dated 14-2-1981 (the 'general terms') are expressly incorporated in the agreements and they inter alia stated that: "The laws applicable to this contract shall be the laws in force in India.
131. The Courts of Delhi shall have exclusive jurisdiction in all matters arising under this contract." (7.2).
132. ' It may be observed that the general terms deal with the special responsibilities for foreign contractors and Indian contractors. The Singer, being a foreign contractor, was governed by the provisions relating to the foreign contractors. Clause 27.7 thereof provided arbitration clause relating to foreign contractor, which reads as under:- "27.7. In the event of foreign contractor, the arbitration shall be conducted by three arbitrators, one each to be nominated by the owner and the contractor and the third to be named by the President of the International Chamber of Commerce, Paris. Save as above, all rules of conciliation and arbitration of the International Chamber of Commerce shall apply to such arbitrations. The arbitration shall be conducted at such places as the arbitrators may determine."
133. ' Whereas in respect of an Indian contractor, clause 27.6.2 provided that the arbitration shall be conducted at New Delhi in accordance with the provisions of the Arbitration Act, 1940, and the venue of arbitration shall be ' New Delhi, India.
134. ' It may further be stated that clause 32.3 of the contract laid down that "the contract shall in all respects be construed and governed according to Indian laws".
135. ' It may also be stated that the aforesaid two formal agreements, which were executed by the parties on 17-8-1982 contained a specific provision for settlement of dispute, namely, Article 4.1 which provided as under:-- "4.1. Settlement of disputes.-- It is specifically agreed by and between the parties that all the differences or disputes arising out of the contract or touching the subject-matter of the contract, shall be decided by process of settlement and arbitration as specified in clause 26.0 and 27.0 excluding 27.6.1 and 27.6.2, of general conditions of the contract."
136. Since the Singer was a foreign contractor, abovequoted clause 27.7 was applicable. The dispute arose between the parties which was referred to an arbitral Tribunal constituted in terms of the Rules of Arbitration of the I.C.C. Courts (the 'ICC Rules'). It may be mentioned that in accordance with Article 12 of the aforesaid rules, the I.C.C. Court chose London to be the place of arbitration.
137. ' The award made in London was an interim award. NTPC filed application under sections 14, 30 and 33 of the Arbitration Act in the Delhi High Court, which was dismissed by a learned Single Judge.
138. After that an appeal was filed in the said High Court which was also dismissed by a Division Bench.
139. It was concluded that since the award was given in a foreign country the Foreign Award Act, 1961 (which was based on New York Convention), was applicable and that London Court alone had jurisdiction for the purpose of setting aside the same and that the Delhi High Court had no jurisdiction to entertain application or objection filed by the appellant.
140. ' Thereupon, the NTPC filed an appeal in the Indian Supreme Court with its leave, which was allowed. It was held that the overriding principle is that the Courts of the country whose substantive laws govern the arbitration agreement are the competent Courts in respect of all matters. It will be instructive to reproduce the following extract:-- "But the overriding principle is that the Courts of the country whose substantive laws govern the arbitration agreement are the competent Courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the Courts of the seat of arbitration is merely concurrent and not exclusive, and strictly limited to matters of procedure. All other matters in respect of the arbitration agreement fall within the exclusive competence of the Courts of the country whose laws govern the arbitration agreement. See Mustil & Boyd, Commercial Arbitration, Second Edn.; Allen Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, 1986; Russel on Arbitration, Twentieth Exn., 1982; Cheshire and North's Private International Law, Eleventh Edn. (1987)."
141. ' With reference to the scope and effect of the I.C.C. Rules the following observations were made:-- "33. An International commercial arbitration necessarily involves a foreign giving rise to questions as to the choice of law and the jurisdiction of Courts. Unlike in the case of persons belonging to the same legal system, contractual relationships between persons belonging to different legal systems may give rise to various private international law questions such as the identity of the applicable law and the competent forum. An award rendered in the territory of a foreign State may be regarded as a domestic award in India, where it is sought to be enforced by reason of Indian law being the proper law governing the arbitration agreement in terms of which the award was made.
142. The Foreign Awards Act, incorporating the New York Convention, leaves no room for doubt on the point.
34. The ICC Rules provide for settlement by arbitration of business disputes of an international character. They furnish an institutionalised procedure of arbitration. These rules being a self- contained or a self-regulating code, they operate more or less independently of judicial interference in the conduct of arbitration, except in so far as they conflict with the mandatory requirements of the governing system of the proper law of the place of arbitration. Party- autonomy in international business is thus the guiding principle of the self-regulating mechanism envisaged by the ICC Rules, and interference by any Court with the actual conduct of arbitration is to a large extent avoided.
143. 35
36. Where the ICC Rules apply, there is generally little need to invoke the procedural machinery of any legal system in the actual conduct of arbitration. These rules provide for the submission of request for arbitration, the appointment of arbitrators, challenge against the appointment, pleadings, procedure, selection of the place of arbitration, terms of reference, time limit for award, cost, finality and enforceability, and similar matters of procedure (Article 11 of the ICC Rules). The parties are free under the ICC Rules to determine the law which the arbitrator shall apply to the merits of the dispute. In the absence of any stipulation by the parties as to the applicable law, the arbitrators may apply the law designated as the proper law by the rules of conflict which they deem to be appropriate (Article 13 of the ICC Rules). These and other provisions contained and self-regulating system, but subject to the overriding powers of the appropriate national Courts."
144. ' A distinction between a foreign award and a domestic award was also highlighted as under:- "38. An award is 'foreign' not merely because it is made in the territory of a foreign State, but because it is made in such a territory on an arbitration agreement not governed by the law of India. An award made on an arbitration agreement governed by the law of India, though rendered outside India, is attracted by the saving clause in section 9 of the Foreign Awards Act and is, therefore, not treated in India as a 'foreign award' ."
145. ' The Indian Supreme Court also dilated upon the question of choice of procedural law other than the proper law of the contract and its effect in the following words:- "48. Courts would give effect to the choice of a procedural law other than the proper law of the contract only where the parties had agreed that matters of procedure should be governed by a different systems of law. If the parties had agreed that the proper law of the contract should be the law in force in India, but had also provided for arbitration in a foreign country, the law of India would undoubtedly govern the validity interpretation and effect of all clauses including the arbitration clause in the contract as well as the scope of the arbitrator's jurisdiction. It is Indian law which governs the contract, including the arbitration clause, although in certain respects regarding the conduct of the arbitration proceedings, the foreign procedural law and the competent Courts of that country may have a certain measure of control. See the principle stated by Lord Denning, MR in International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co. KSC, (1975) 1 All ER 242."
52. All substantive rights arising under the agreement including that which is contained in the arbitration clause are, in our view, governed by the laws of India. In respect of the actual conduct of arbitration, the procedural law of England may be applicable to the extent that the ICC Rules are insufficient or repugnant to the public policy or other mandatory provisions of the laws in force in England. Nevertheless, the jurisdiction exerciable by the English Courts and the applicability of the laws of that country in procedural matters must be viewed as concurrent and consistent with the jurisdiction of the competent Indian Courts, and the operation of Indian laws in all matters concerning in so far as the main contract as well as that which is contained in the arbitration clause are governed by the laws of India."
146. ' The above judgment clearly lays down that if the proper law of the main contract including of the arbitration is the municipal law of a country in an international arbitration to be held under the I.C.C. Rules in a foreign country by a foreign arbitrator, the procedural law would be governed by the I.C.C. Rules or in the absence of an I.C.C. Rule on a particular point by the procedural law of the country where arbitration is conducted, but there will be concurrent jurisdiction in procedural matters of the Courts of the country where arbitration venue is and of the Courts of the country of which proper law is applicable to the contract. As regards the legality and enforceability of the award the municipal Courts of the country of which proper law is applicable will have exclusive jurisdiction.
(iii) Sumitomo Heavy Industries Ltd. v. Oil and Natural Gas Commission (1994) 1 Lloyd's Rep. 45).
147. ' In the above case the relevant facts are that on September 7, 1983 the plaintiffs and the defendants entered into a contract for the installation and commission by the plaintiffs of a Well- cum-Production Platform deck and additional plant to be installed some 100 miles off the south coast of India. It may be observed that clause 17 of the agreement provided inter alia that disputes arising under, out of, or in connection with the contract were to be subject to the laws of India (17.1); that any dispute arising under the contract was to be referred to arbitration, the proceedings of which were to be held in London in accordance with the provisions of the International Chamber of Commerce (17.2); and that if there was any change in any legal provision which affected the economic position of the plaintiffs, the defendants would compensate the plaintiffs for all necessary and reasonable extra cost caused by such change.
148. ' The contract was completed in the year 1984. The Indian Finance Act, 1987 was enforced with effect from 1-4-1983 introducing revenue provisions. As a result nominated sub-contractors of the plaintiffs became liable to pay various sums to the tax authorities in respect of which they were entitled to indemnity under their contract with the plaintiffs. The plaintiffs claimed reimbursement from the defendants pursuant to inter alia above clause (17.3), which ensued lengthy correspondence between the parties. Eventually, the matter was referred to arbitration by the plaintiffs, which was contested by the defendants inter alia on the ground that the arbitrators had no jurisdiction. The arbitrators directed the defendants to submit defence within 21 days from the receipt of the statement of claim, but the defendants failed to comply with the above direction. On the other hand, they commenced proceedings in the High Court of Bombay under section 33 of the Indian Arbitration Act, 1940, to determine the scope and effect of the parties' original arbitration agreement and for declaration that the arbitration and statement of claim filed by the plaintiffs were not arbitratable; that there was no dispute under the terms of the contract and that the arbitrators had no jurisdiction to entertain the plaintiffs' claim. They sought an order to restrain the arbitrator from proceeding.
149. 'It seems that the plaintiffs also initiated proceedings in the High Court (England) and obtained on December 29, 1992 from Mr. Justice Laws leave to issue and serve out the jurisdiction an originating summons on the defendants. The time given for acknowledgement of service was 23 days.
150. However, on January 6, 1993 on the plaintiffs' application that period was reduced to 10 days.
151. ' On January 18, 1993 the defendants made an interim application to the Bombay High Court for an order (i) restraining the plaintiffs from taking any Court proceedings in any Court other than the Bombay High Court; (ii) restraining the plaintiffs from proceedings in the section 5 proceedings and (iii) staying the arbitration proceedings pending the hearing and final disposal of their petition.
152. The above application was declined by the Bombay High Court on January 22, 1993. The appeal filed by the defendants was also dismissed by the Court of Appeal on February 11, 1993.
153. ' After that the defendants applied to set aside the order made by Mr. Justice Laws dated 29-12- 1992. They contended that the order should not have been made and that all subsequent proceedings should be set aside on the ground that the English Court lacked any jurisdiction in the matter. The case was heard by Mr. Justice Potter, and it was contended before him that Indian law on the question of choice of curial law was different. But this contention was repelled as follows:-- "I have not found Mr. Majumdar's reasoning easy to follow. Further, it has been the subject of a contrary affirmation by Mr. Rajadhvaksha (Indian Counsel) on behalf of the defendant. Suffice it to say that there is nothing in Mr. Majumdar's submissions, or in the authorities relied on, to indicate to me that Indian law regards the choice of curial law and the implications which arise from the parties' choice of arbitration in London and/or ICC arbitration in any way differently from the English Courts. The references contained in the Singer decision are to principles of law to be found is Dicey and Morris on The Conflict of Laws and to a number of English decisions."
154. ' As regards the effect of the application of the I.C.C. Rules to the arbitration and of the Indian substantive law to the arbitration agreement, the following was concluded:-- "Where, however, the parties have, as in the instant case, stipulated that the arbitration between them will be conducted in accordance with the I.C.C. Rules, those rules, being in many respects self-contained or self-regulated and constituting a contractual code of procedure, will govern the conduct of the arbitration, except and in so far as they conflict with mandatory requirements of the proper law of arbitration, or of the procedural law of the seat of arbitration. See .... Bank Mellat v.
155. Helliniki Techniki SA. To such an extent the appropriate Courts of the seat of arbitration, which in the present case are the competent English Courts, will have jurisdiction in respect of procedural matters concerning the conduct of arbitration. But the overriding principle is that the Courts of the country whose substantive laws govern the arbitration agreement are the competent Courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the Courts of the seat of arbitration is merely concurrent and not exclusive and strictly limited to matters of procedure. All other matters in respect of the arbitration agreement fall within the exclusive competence of the Courts of the country whose laws govern the arbitration agreement.
156. See Mustill & Boyd. Commercial Arbitration, 2nd Edn....
157. ' If the parties had agreed that the proper law of the contract should be the law in force in India, but it also provided for arbitration in a foreign country, the laws of India would undoubtedly govern the validity interpretation and effect of all clauses including the arbitration clause in the contract as well as the scope of the Arbitrators' jurisdiction, although in certain respects regarding the conduct of the arbitration proceedings the foreign procedural law and the competent Courts of that country may have a certain measure of control...
158. ' All substantive rights arising under the agreement including that which is contained in the arbitration clause are, in our view, governed by the laws of India. In respect of the actual conduct of arbitration, the procedural law of England may be applicable to the extent the I.C.C. Rules are insufficient or repugnant to the public policy or other mandatory provisions of the laws in force in England... The jurisdiction exercisable by the English Courts and applicability of the laws of that country in procedural matters must be viewed as concurrent and consistent with the jurisdiction of the competent Indian Courts....Accordingly, I find nothing in the evidence of Indian law which leads me to any conclusion different from that which would result from the application of English law, namely, that albeit the chosen or proper law of contract and/or the arbitration agreement may be Indian law, the procedural (curial) law is English law."
159. ' The above report is in line with the judgment of the Indian Supreme Court in the case of National Thermal Power Corporation v. Singer Company and others (supra).
(c) We may also refer to the case of Union of India v. Mcdonnel Douglas Corporation (1993) 2 Lloyd's Rep. 48, in which Mr. Justice Saville has dealt with the question of choice of procedural law to govern an international arbitration inter alia as under:-- "If the parties do not make an express choice of procedural law to govern their arbitration, then the Court will consider whether they have made an implicit choice. In this circumstance the fact that the parties have agreed to a place for the arbitration is a very strong pointer that implicitly they must have chosen the laws of that place to govern the procedures of the arbitration. The reason for this is essentially one of common sense. By choosing a country in which to arbitrate the parties have, ex hypothesi, created a close connection between the arbitration and that country and it is reasonable to assume from their choice that they attached some importance to the relevant laws of that country, i.e, those laws which would lie relevant to an arbitration conducted in that country.
160. Indeed, English law at least has turned its face against the notion that it is possible to have arbitral procedures that are wholly unconnected with any national system of law at all..
161. ' These arguments are nicely balanced. It is clear from the authorities cited above that English law does admit of at least the theoretical possibility that the parties are free to choose to hold their arbitration in one country but subject to the procedural laws of another, but against this is the undoubted fact that such an agreement is calculated to give rise to great difficulties and complexities, as Lord Justice Kerr observed in the Amazonica decision. For example (and this is the proviso to which I referred earlier in this judgment) it seems to me that the jurisdiction of the English Court under the Arbitration Acts over an arbitration in this country cannot be excluded by an agreement between the parties to apply the laws of another country, or indeed by any other means unless such is sanctioned by those Acts themselves. Thus, to my mind, there can be no question in this case that the English Courts would be deprived of all jurisdiction over the arbitration. However, much of that jurisdiction is discretionary in character so that if the Court were convicted that the parties had chosen the procedural law of another country, then it might well be slow to interfere with the arbitral process. Again, for the sake of avoiding parallel Court proceedings, the Court might be minded to regard the choice of a foreign legal procedure as amounting to an exclusion agreement within the meaning of section 3 of the Arbitration Act, 1979.
162. Be that as it may, the choice of a procedural law of the place of the arbitration will, at least where that place is this country, necessarily mean that the parties have actually chosen to have their arbitral proceedings at least potentially governed both by their express choice and by the laws of this country."
12. Before recording our conclusion, we may take up the submissions of Mr. S.M. Zafar that the Government of Pakistan, Ministry of Industries, Investment Promotion Bureau, approved the agreement in question under the Deputy Director (Chem. Dte) for Director-General, Investment Promotion Bureau's letter dated 19-5-1985 subject to the amendments in the agreement contained therein, which inter alia under sub-para. (iv) provided that "Agreement and arbitration are made subject to Pakistan Laws". The above letter was followed by the Government of Pakistan, Ministry of Industries, Investment Promotion Bureau's letter dated 21-5-1985, whereby the contract was approved and again in clause (ii) it was provided that Arbitration are made subject to Pakistan Laws". He has also invited our attention to the copy of the agreement on record which is also signed by the Investment Promotion Bureau, Ministry of Industries, Government of Pakistan, besides the parties, which indicates that the same contained an endorsement of the above Ministry providing that "Approved and authenticated subject to the conditions contained in this Bureau's letter No,IPB/CHEM/R.Polyester" dated 21-5-1985. It will be advantageous to reproduce last page the agreement containing the signatures of the parties:-- ' "IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their proper officers hereunto duly authorized as of 20th May, 1985, in duplicate any of which shall constitute original and altogether shall constitute but one and the same instrument. {{TABLE}} SIGNATURE BUYER Rupali Polyester Limited SC-6 Block "C"
163. North Nazimabad, Karachi Pakistan dated 20th May, 1985.
164. SELLER Mitsui & Co. Europe G.m.b.H Signed.
165. 4 Deusseldorf 1 Koenigsallee 92 a F.R. Germany, Karachi dated 20th May, 1985 {{TABLE}} Signed.
166. ' Approved and authenticated subject to the conditions contained in this Bureau's letter No, IPM/CHEM/R. Polyester dated 21-5-1985.
167. (Sd.)
168. SAJAJD AHMED, Assistant Director, Investment Promotion Bureau, Ministry of Industries, Government of Pakistan, Karachi."
169. ' A perusal of the above last page of the agreement supports Mr. S.M. Zafar's above submission.
170. However, Mr. Bandial, learned counsel for the appellants, submitted that the parties signed the agreement on 20-5-1985, whereas the above letter of the Investment Promotion Bureau is of 21-5- 1985. According to him, the appellants had not agreed to the above condition. According to Mr. S.M.
171. Zafar, the appellants had received a duplicate signed copy of the agreement containing the aforesaid endorsement of the Invstment Promotin Bureau. He again pointed out that the aforementioned condition was also in the Investment Promotion Bureau's above earlier letter dated 19-5-1985. The appellants after having received the above document did not object to the aforesaid endorsement. Be that as it may, even if we were to ignore the above endorsement, it does not make any difference as to the legal position.
172. We may observe that it is evident from the above various treatises of the authors of standing and of international repute and the above-discussed case-law that if there is no express agreement between the parties as to the law governing arbitration agreement, the law which governs the main agreement will also govern arbitration agreement if the arbitration clause is embedded as a part of the main agreement. In the present case Article 13 of the agreement, which contains the arbitration clause, is a part of the main agreement and, therefore, in the absence of any contrary express agreement between the parties, Pakistani law will also govern the arbitration agreement in view of Article 16.7 of the agreement which provides that "contract shall be governed and construed by the Pakistan Law". We have already held so hereinabove for the reasons recorded.
13. Adverting to the main question in issue, it may be pointed out that in the above various treatises the-authors have pointed out that there are three laws which may be relevant in an international arbitration that is, namely (i) proper law of the arbitration agreement; (ii) curial law, and (iii) proper law of reference. The above classification has also been approved in some of the above reports/cases of the British jurisdiction. It may also be observed that Sir Michael J. Mustill and Stewart C. Boyd in their well-known treatise titled "The Law and Practice of Commercial Arbitration in England" (Second Edition) have elaborately defined the scope of each of the above three laws involved in an international arbitration. According to the authors, the proper law of the arbitration agreement governs "the validity of the arbitration agreement: the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the constitution of the Tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future dispute". Whereas according to them the curial law governs "the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator; questions of evidence; the determination of the proper law of the contract". They have also opined that "the proper law of the reference" governs: "the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute". The other authors of the above other treatises have also referred to the above three sets of laws applicable to an international arbitration. The learned Judges in some of the above cases of British jurisdiction have also dilated upon the above classification. There seems to be no unanimity/consensus as to the scope of each of the above three laws. They are overlapping in some of the above treatises and the reports. We are inclined to subscribe to the view projected in the aforesaid treatise authored by Sir Michael J. Mustill and Stewart C. Boyd as to the scope of the proper law of the arbitration agreement.
14. (a) We may now refer to the ratio decidendi of the above five cases relied upon by Mr. Bandial.
173. In this regard, it may be pointed out that the judgment of the House of Lords in the case of James Miller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd. (1970) 1 Lloyd's Rep 269 (supra) ,loes not lay down a broad legal proposition that if the curial law of the country where the arbitration is held, becomes applicable, the proper law governing the contract and the arbitration agreement can be ignored altogether. The above case has its own peculiar features inasmuch as the parties instead of getting the arbitration conducted in England got the arbitration, conducted in Scotland and not only this they did not object to the application of the Scottish law by the arbitrator. The question, as to whether the arbitrator was bound to state a case for award to the Court under section 21 of the English Arbitration Act, 1950, was a procedural matter and, therefore, the House of Lords had held that the arbitrator was not obliged to state the case under the above English Act as Scottish curial law was applicable. However, Lord Wilberforce in his opinion pointed out that where the arbitration clause itself is silent as to the procedural law applicable to arbitration, in the normal case where the contract is itself governed by English law, am arbitration would be held under English procedure. His Lordship further pointed out that the mere fact that the arbitrator was to sit either partly or exclusively in another part of the United Kingdom, or for that matter abroad, would not lead to a different result. It has also been observed that the place might be chosen for many reasons of convenience or be purely accidental and that a choice so made should not affect the parties' rights. The case of Black Clowson International Ltd. v. Papeier Waldhop (1981) 2 Lloyd's Rep 446 (supra) has also no direct relevancy inasmuch as, in that, the arbitration proceedings had taken place in Zurich (Switzerland) for nearly fifteen years. The matter was subject to nine hearings in the Swiss Courts arising, from three distinct applications to the Court to intervene in the reference. In view of the above peculiar facts and conduct of the parties, it was held that though English law was the proper law but English Court would not intervene in the matter.
174. ' The facts of the case of Naviera Amazonia Paruana S.A. v. Compania International (1988) 1 Lloyd's Rep. 116 (supra) are also distinguishable inasmuch as the question involved was, whether the arbitration should be held in Lima or London. It was held that since the typed endorsement contained an arbitration clause which provided arbitration under the conditions and laws of London, London would be the venue for arbitration inter alia on the principle that the typed clause would prevail over the printed clause which contained Lima as the place of arbitration. The above judgment also deals with the aforesaid three classifications of laws applicable to an international arbitration.
175. ' The above fourth judgment in the case of Bank Mellat v. Helliniki Techniki S.A. (1983) 3 All ER 428)
176. (supra) also does not touch upon the basic issue involved in the present case. In the above case the question in issue was, as to whether the English Court should intervene and to order H.T. To deposit security of the cost of arbitration in respect of the arbitration which was to be held in London under the Rules of Conciliation and Arbitration of the ICC.
177. ' The judgment in the case of International Tank and Pipe SAK v. Kuwait Aviation Fuelling Company SSC (1975) 1 All ER 242) (supra) has also no direct relevance inasmuch as the question involved in the above was, as to whether the English Court could entertain an application under section 17 of the English Arbitration Act for the extension of time for initiating arbitration in a case in which proper law of the contract was English law. It was held that the English Court had jurisdiction prior to the commencement of the arbitration proceedings notwithstanding the fact that the arbitration venue might be in a different country than England.
(b) The cases relied upon by Mr. S.M. Zafar have direct relevancy. Potter, J. In the case of Sumito Heavy Industries Ltd. v. Oil and Natural Gas Commission (1994) 1 Lloyd's 45) (supra) and the Indian Supreme Court in the case of National Thermal Power Corporation v. Singer Company and others (1992) 2 Com LJ 256) (supra) have taken more or less the same view. In the above last case, it has been held that the overriding principle is that the Courts of the country, whose substantial laws govern the arbitration agreement, are the competent Courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the Courts of the seat of arbitration is merely concurrent and not exclusive and strictly limited to matters of procedure and that all other matters in respect of the arbitration agreement fall within the exclusive competence of the country whose laws govern the arbitration agreement.
178. It may be observed that no doubt that the above view is seemingly somewhat contrary to the earlier view of the Indian superior Courts as highlighted by Mr. Bandial with vehemence, but the Courts are not slaves of the fi doctrine of stare decisis. A Courts may change or modify its view with the passage of time. The development of jurisprudence is an on-going process.
15. We are inclined to hold in the present case since the arbitration is subject to the I.C.C. Rules and as the seat of the arbitration is London, the procedural matters would be governed by the I.C.C.
179. Rules and curial law of England and that English Courts will have jurisdiction as indicated above.
180. We are not inclined to subscribe to the view that this jurisdiction of the English Courts in respect at curial law will be concurrent with the Pakistani Courts for the reason that the Pakistani substantive law governs the arbitration agreement. Theoretically the above view of the Indian Supreme Court may be correct but it is not practicable. The Courts of the seat of the arbitration can deal with procedural matters more effectively and conveniently.
181. ' Additionally the parties by agreeing the application of the I.C.C. Rules and London as a seat of arbitration in fact expressly/impliedly agreed that the English curial law would govern the arbitration. This view is also in line with the preponderance of view reflected in the above various treatises. But we are in agreement with the view of the Indian Supreme Court expressed in the case of National Thermal Power Corporation v. Singer Company and others (supra) that the Courts of the seat of the arbitration have limited jurisdiction to procedural matters covered by the curial law.
182. The same will include, the manner in which reference is to be conducted, the procedural powers and duties of the arbitrator, questions of evidence, the determination of the proper law of the contract if it is not expressly agreed by the parties as defined by Sir Michael J. Mustill and Stewart C.
183. Boyd in their above treatises.
184. However, the validity of the arbitration agreement; the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the constitution of the Tribunal; the question whether the award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future disputes, are not the matters covered by curial law, but are governed by the proper law of the arbitration agreement as opined by the above learned authors in the above treatise titled "The Law and Practice of Commercial Arbitration in England" (Second Edition). The same view is expressed in the "Russel On Arbitration, 21st Edition (supra). However, it may be mentioned that Alan Redfern and Martin Hunter in the treatise titled "Law and Practice of International Arbitration (Second Edition) (supra) under the caption "Place of Challenge" have stated that "A challenge to the validity or effect of an award is addressed to a Court of competent jurisdiction. In general, this will be a Court at the place in which arbitration is held". But the learned authors have not clarified, whether it would be so, even in a case in which the proper law governing the contract and Arbitration Agreement is of a country other than of the country, where the arbitration is held.
16. Since we have held that in view of section 9(b) of the Arbitration (Protocol and Convention) Act, 1937 the two awards in question cannot be treated as foreign awards as the same are made on an arbitration agreement governed by the laws of Pakistan, it must follows that the same are domestic awards and the provisions of the Act (Arbitration Act, 1940) would be applicable. This was even conceded indirectly by Mr. Bandial when he submitted that before the commencement of the arbitration proceedings an application under section 33 of the Act for challenging the existence or validity of the arbitration agreement or to determine its effect could have been filed. In our view, if an application under the above section was competent prior to the commencement of the arbitration proceedings in England, there cannot be any legal basis to urge that the Pakistani Courts had ceased to have jurisdiction upon the commencement of the arbitration proceedings in England in respect of the matters which fall within their jurisdiction. It may be pointed out that it is an admitted position that till today no application relating to arbitration in question has been filed in an English Court, and, therefore, it cannot be urged that there may be conflicting orders/judgments.
185. It may be observed that clause (c) of section 2 of the Act gives the definition of the Court by providing that "'Court' means a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under section 21, include a Small Cause Court". In other words, by virtue of above definition the same Court will have jurisdiction in respect of arbitration matter, which would have jurisdiction if the matter would not have been covered by the arbitration agreement. It may further be observed that section 33 of the Act, referred to hereinabove, not only covers the question as to the existence or validity of an arbitration agreement but also of an award and also to have the effect of either determined.
186. ' It may further be observed that section 30 of the Act provides the grounds on which an award can be set aside. The said section reads as under:- "30. An award shall not be set aside except on one or more of the following grounds, namely:--
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35;
(c) that an award has been improperly procured or is otherwise invalid."
17. It would not be out of context to point out that the Pakistani Courts have the closest connections/nexus with the dispute in issue, inter alia, for the following reasons:--
(i) The agreement was executed in Pakistan;
(ii) The plant and machinery were supplied and installed in Pakistan;
(iii) The alleged breach was committed in Pakistan;
(iv) The agreement itself provides that the proper law governing it would be Pakistani law; and
(v) One of the parties to the dispute resides and carries on business in Pakistan.
187. ' It may further be observed that England's only connection or nexus with the subject-matter of dispute is that the seat of arbitration is London . None of the parties reside or carry on business in England nor any cause of action has accrued therein.
18. We are mindful of the fact that the parties should be made to honour their contractual commitment, particularly, involving multi-national parties as was observed by one of us (Ajmal Mian, C.J.) in the case of Messrs Eckhardt & Co. v. Muhammad Hanif (PLD 1993 SC 42, relevant portion at page 52) relied upon by Mr. Bandial, which reads as follows:- "I may observe that while dealing with an application under section 34 of the Arbitration Act in relation to a foreign arbitration clause like the one in issue, the Court's approach should be dynamic and it should bear in mind that unless there are some compelling reasons, such an arbitration clause should be honoured as generally the other party to such an arbitration clause is a foreign party. With the development and growth of International Trade and Commerce and due to modernization of Communication/Transport systems in the world, the contracts containing such an arbitration clause are very common nowadays. The rule that the Court should not lightly release the parties from their bargain, that follows from the sanctity which the Court attaches to contracts, must be applied with more vigour to a contract containing a foreign arbitration clause. We should not overlook the fact that any breach of a term of such a contract to which a foreign company or person is a party, will tarnish the image of Pakistan in the comity of nations. A ground which could be in contemplation of party at the time of entering into the contract as a prudent man of business, cannot furnish basis for refusal to stay the suit under section 34 of the Act. So the ground like, that it would be difficult to carry the voluminous evidence or numerous witnesses to a foreign country for Arbitration proceedings or that it would be too expensive or that the subject-matter of the contract is in Pakistan or that the breach of the contract has taken place in Pakistan, in my view, cannot be a sound ground for refusal to stay a suit filed in Pakistan in breach of a foreign arbitration clause contained in contract of the nature referred to hereinabove. In order to deprive a foreign party to have arbitration in a foreign country in the manner provided for in the contract, the Court should come to the conclusion that the enforcement of such an arbitration clause would be unconscionable or would amount to forcing the plaintiff to honour a different contract, which was not in contemplation of the parties and which could not have been in their contemplation as a prudent man of business."
188. Keeping in view the above dictum, we are inclined to hold that even it if is to be assumed that in procedural matters the Pakistani and English Courts have concurrent jurisdiction in respect of the arbitration in question, this Court will be reluctant to press into service the above concurrent discretionary jurisdiction.
19. The upshot of the above discussion is that the judgment under appeal is modified and the ing respondent No,1 's application under sections 5, 11 and 12 of the Act is set aside and the order of the trial Court in respect of thereof is restored, but the order of remanding respondent No,l's application under sections 14 to 17 of the Act to the learned Civil Judge is maintained. In our view, the question whether the arbitrators should be removed or should not be removed is to he determined under the I.C.C. Rules or by the English Courts which have jurisdiction to apply English curial law. However, it may be clarified that Pakistan Courts will be competent to go into the question. Whether the arbitrators and/or the Chairman have misconducted themselves or the proceedings, while considering the grounds for setting aside the awards under section 30 of the Act.
189. ' The above appeals are partly allowed as above with no order as to costs.
…and 13 more citing cases