State of Commercial Laws Bhatia to Balco – The Past the Present and the Future

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The decision of the Constitutional Bench of the Supreme Court, in Bharat Aluminium Co v Kaiser Aluminium Technical Service (“BALCO”), where the Supreme Court declared that Part I of the Arbitration and Conciliation Act, 1996 (the “Act”) will not apply to arbitrations conducted outside India, is likely to have an enormous impact not only on the arbitration and commercial law jurisprudence in India but also on foreign investment flowing into India. This article sets out, in brief, the issues involved in BALCO and why they are of such great significance, a comparative analysis of the decisions in Bhatia International v. Bulk Trading S.A[1] (“Bhatia”) and BALCO, a  summary of the decision in BALCO, and a few areas of concern that remain.
 
I Introduction

The decision of the Constitutional Bench of the Supreme Court, in Bharat Aluminium Co v Kaiser Aluminium Technical Service (“BALCO”), where the Supreme Court declared that Part I of the Arbitration and Conciliation Act, 1996 (the “Act”) will not apply to arbitrations conducted outside India, is likely to have an enormous impact not only on the arbitration and commercial law jurisprudence in India but also on foreign investment flowing into India. This article sets out, in brief,
 
a. The issues involved in BALCO and why they are of such great significance, 
b. A comparative analysis of the decisions in Bhatia International v. Bulk Trading S.A[1] (“Bhatia”) and BALCO,
c. A summary of the decision in BALCO,
d. A few areas of concern that remain.
 
This article only provides a preliminary analysis of the decision in BALCO – a more detailed analysis will follow subsequently.
 
II The Issues Involved
 
Section 2(2) of the Arbitration and Conciliation Act, 1996 (the “Act”), contained in Part I of the Act, states that “This Part shall apply where the place of arbitration is in India.” In comparison, Article 1(2) of the UNCITRAL Model Law provides: “The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this State.”  The central issue therefore that was before the two judge Bench of the Supreme Court in Bhatia and before the Constitutional Bench in BALCO,