Cairn Energy filed a case in a federal district court in the United States to impose a $1.2 billion arbitral award it received in a tax dispute with India. Cairn intended to enforce the award using international arbitration rules known as the New York Convention.
Context of the New York Convention
The United Nations diplomatic conference enacted the New York convention, also referred to as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, on June 10, 1958. It went into effect on June 7, 1959.
It is frequently regarded as among the most significant conventions within International Trade law.
In international arbitration, it is frequently referred to as a cornerstone. It requires contracting state courts to give effect to an agreement to arbitrate when they are confronted with an act entailed by an arbitration agreement and to recognize and implement awards rendered in the other states, subject to certain restricted limitations.
One hundred fifty-six parties have currently signed the Convention.
Objectives of the New York Convention
Acknowledging the burgeoning role of international arbitration proceedings in international dispute settlement, the New York Convention aims to establish familiar legislative standards for acknowledging arbitration clauses and the enforcement of foreign arbitral awards of international and non-domestic arbitration tribunals by domestic courts.
The phrase "non-domestic" seems to encompass awards that, despite being made in the subject of execution, are viewed as "foreign" under its law due to a particular foreign element in the procedures, such as applying another State's procedural legislation.
The primary goal of the New York Convention is to ensure that international and non-domestic arbitration proceedings are not discriminated against, and it requires Parties to ensure that such awards are recognized and usually competent of regulation in their purview in almost the same manner that domestic awards are.
An additional goal of the Convention is to demand courts of Parties to start giving full impact to arbitration clauses by mandating the court system to deny full functionality to court in violation of their memorandum of understanding to refer the issue to an arbitration court.
☛ Also Read: Current Affairs Today
Benefits of the New York Convention
The Convention is quite known to boost investor confidence. It will be a positive ray of hope for international investors due to India's commitment to bind by ADR, or Alternative Dispute Resolution practices practised worldwide.
It requires contracting states' courts to give effect to private arbitration agreements and recognize and enforce an arbitral award made by other states' parties.
New York Convention and India
The government of India had been ordered to pay $1.2 billion in damages to energy gigantic Cairn Plc after losing an international tribunal case over the observational levy of taxes.
The Permanent Court of Arbitration in The Hague retained that the Cairn tax dispute is a tax-related investment dispute and thus falls under its jurisdiction. It claimed that India's demand for back taxes violated fair and equal treatment underneath the UK-India Mutual Cooperation Investment Agreement.
The New York Convention applies to arbitration proceedings that are not regarded as domestic awards in the state where acknowledgement and regulation are sought. It is widely regarded as the fundamental device for international arbitration.
FAQs on New York Convention
Q1. What is the New York Convention?
The New York Convention must ensure the enforcement of foreign arbitration awards around the world.
Q2. Why is New York Convention so popular?
The New York Convention is popular because it is one of the most successful treaties of the United Nations in international trade and law.
Q3. When did India become a part of the New York Convention?
India became part of the New York Convention on June 10 1958.
Q4. When was the New York Convention set into effect?
The New York Convention went into effect on June 7, 1959.