Jurisdiction to Set Aside a Foreign Arbitral Award, in Particular an Award Based on an Illegal Contract: A Reflection on the Indian Supreme Court’s Decision in Venture Global Engineering* – Vol. 19 No. 1

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Author: Koji Takahashi**

Published: April 2009

Procedure and Grounds for Setting Aside
New York Convention



In the judgment delivered in January 2008 in the case of Venture Global Engineering v. Satyam Computer Services, the Supreme Court of India held that the Indian courts had jurisdiction to set aside a foreign arbitral award, i.e. an award rendered outside India. Drawing inspiration from this decision, this article will examine whether setting aside a foreign arbitral award produces any negative effect and will explore what useful purpose, if any, could be served by exercising such jurisdiction.


Before embarking on the analysis, it should be noted that the setting aside of a foreign arbitral award is not a commonly encountered practice. Thus, in International Standard Electric v. Bridas Sociedad Anonima Petrolera, the plaintiff invited the U.S. District Court for the Southern District of New York to set aside a Mexican award. The award had been rendered by the application of Mexican law to the procedure and New York law to the substance. In its submission, the plaintiff relied on the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. Though the Convention contains no provision enumerating grounds for setting aside an arbitral award, the plaintiff invoked Article V(1)(e), which provides that the recognition and enforcement of an award may be rejected if it has been set aside by a court of the country in which, or under the law of which, it was made. The plaintiff argued that the law under which the award was made referred not to the law governing the arbitral procedure (curial law) but to the law governing the substance. Therefore the New York Convention presupposed, so the plaintiff argued, that an award could be set aside in the country whose law had been applied to the substance of the dispute. The District Court rejected this argument and accordingly declined jurisdiction. It held that the words in question referred not to the substantive governing law, such as the law of contract, but to the law governing the arbitral procedure. The court came to this conclusion on the ground, inter alia, that reopening the merits (révision au fond) should be impermissible to set aside an award. The governing law of arbitral procedure is, under the New York Convention, supposed to be the law of the country where the arbitration takes place. On that interpretation, Article V(1)(e) would mean that the recognition and enforcement of an award may be rejected if it has been set aside in the country where the arbitration took place, a reading which presupposes that an arbitral award may be set aside in the country where it was made. From this, it might be inferred that the Convention does not approve its contracting states to set aside a foreign arbitral award. It cannot be stated unequivocally, though, since the Convention contains no express provision setting forth grounds of vacating an arbitral award.

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*Arbitral & Judicial Decisions
**Professor of Law, Doshisha Law School, Japan. This article originates from the symposium “Economic Development and the Role of Arbitration in India” which I organized on December 14, 2008 under the aegis of the Doshisha University Research Center for Worldwide Business. I would like to record my gratitude to Messrs Shishir Dholakia, Yasuhei Taniguchi, and Naoki Iguchi for their contributions to the symposium which have immensely facilitated my understanding of Indian arbitration law.