Enforcement of Bilateral Investment Treaty Arbitral Awards in India: A Quandary

Akash Gupta & Ashutosh Choudhary


Investment Arbitration involves Bilateral Investment Treaties (‘BITs’), signed between two countries, where ‘investment protection’ is guaranteed with respect to investments of the investors in contracting states from other contracting states. In case of infringement of any of the standards of protection under the BIT, guaranteeing investment protection, the investors of the contracting states are allowed to pursue legal action against the host state. This mechanism of settlement of Investment treaty disputes is termed as Investor-State Dispute Settlement (‘ISDS’) procedure. 

Once the foreign-seated arbitral tribunals render the BIT Investment Arbitral Awards, investors may approach Indian courts in order to enforce such awards or to challenge such awards. However, while dealing with such cases, Indian courts have not provided a similar approach to the enforcement of such awards in India and varied interpretations exist with regards to the applicability of the Arbitration and Conciliation Act, 1996 (‘the Act’) to Investment Treaty Arbitration (‘ITA’) proceedings. 

The dilemma exists in choosing between two contradictory divisions, (i) the Act is applicable as ITA Awards are similar to other foreign awards, and; (ii) the Act is not applicable as it applies only to commercial arbitration awards. The article critically examines this dilemma pertaining to enforcement of ITA Awards in India and suggests necessary legislative reform in light of India’s reservations to the New York Convention (‘NYC’).

Enforcement of Investment Treaty Arbitral Awards in India

The International Centre for the Settlement of Investment Disputes (‘ICSID’) Convention addresses the enforcement of Investment Awards. Article 54 of the Convention obliges all the state parties to the convention to recognize such awards as binding and to enforce the awards in a similar way as domestic final judgments are enforced in that contracting state. However, India is not a contracting state to the ICSID convention and therefore ITA awards can only be enforced in India under the NYC. 

The NYC mandates every contracting state to enforce and recognize an arbitral award that is delivered in other contracting states. India ratified the NYC in 1960 with two caveats “…the Government of India declare that they will apply the Convention to the recognition and enforcement of awards made only in the territory of a State, party to this Convention. They further declare that they will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the law of India.”

Now, under the said reservations as pointed above, India agreed to enforce the NYC awards arising out of relationships that are ‘commercial’ in nature. But the absence of any definition of the term ‘commercial’ in the Arbitration and Conciliation Act, 1996 has given rise to the question as to whether the investment awards are covered under ‘commercial’ or not. The courts while interpreting the term have given contradictory views as discussed below.

Applicability of the Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 contains the mechanism for enforcement of domestic as well as foreign arbitral awards. However, the question of applicability of the Act to investment arbitration awards is still not answered. Lack of clarity in the Act has led the courts to decide as to whether it applies to investment arbitration awards as well. Different courts have different interpretations as discussed below.

The Calcutta High Court in the case of Port of Kolkata v. Louis Dreyfus Armatures SAS upheld the applicability of the Act to ITA awards and stated that applicability of the NYC can also be extended at the enforcement stage. As per the second reservation of the NYC, the convention is applicable to disputes arising out of legal (contractual or non-contractual) relationships which are ‘commercial’ in nature. Similarly, the BIT agreements signed between contracting and host states have a contractual legal relationship aspect, as in case of infringement of any terms under the BIT, the investors of the contracting states are allowed to take legal action against the host state. Similarly, the Gujarat High Court in the case of Union of India v. Lief Hoegh Co held that the expression ‘commercial relationships’ includes “all business and trade transactions in any of their forms, including the transportation, purchase, sale and exchange of commodities between the citizens of different countries”. Therefore, Investment Treaty Dispute (‘ITD’) arising out of BIT agreements, dealing with international business and trade transactions, has a ‘commercial aspect’ in terms of the second reservation to the NYC vis-à-vis Section 44 of the Act.

The Delhi High Court appears to have a contradictory opinion, as in the case of Union of India v. Vodafone Grp. Plc U.K. & Anr, it was held that even though the BIT, in this case, constitutes an agreement to arbitrate between the host state and a private investor, it does not give rise to international commercial arbitration or domestic arbitration under the Act. It was held that investment disputes are not the same as a commercial dispute as the cause of action, whether contractual or non-contractual, is based on state guarantees and assurances which make them fundamentally different from commercial contracts. The roots of investment arbitrations are in public international law, State obligations, and administrative law. Similarly, in the case of Union of India v. Khaitan Holdings (Mauritius) Limited & Ors, the Delhi Court, placing reliance upon the Vodafone Case, held that investment arbitration being a different species of arbitration cannot be said to be covered under the Act. The court further held that the Code of Civil Procedure, 1908 shall apply while deciding the jurisdiction of the courts with respect to arbitral proceedings under a BIT.

Therefore, it can be said that ITD has a commercial aspect; however, they differ from International Commercial disputes on the point of their application to a different class of relationships. ITD arises out of international treaty obligations between the investor’s home state and the host state which is governed by public international law. Unlike international commercial disputes, ITD does not apply to the relationships between private individuals/citizens. Additionally, ITD claims redress for breach of treaty obligations by states and not in terms of relationships that are contractual in nature.

Treating BIT Arbitral Awards as ‘Foreign Awards’ under the Act

As evident from the reasoning given by the courts, it is very difficult to enforce an investment arbitration award in India. Though an option to enforce a foreign judgment is available under Section 44A of Code of Civil Procedure 1908, a BIT award is neither a ‘judgment’ nor is the same delivered by a ‘court’ as mandated under Section 13 of CPC, 1908. The only viable option that can be exercised by the investor is to identify the assets of the award debtor that are located in other jurisdictions having a well-established mechanism for enforcement of BIT awards and enforce the awards in such jurisdictions. 

Further, Section 44 of the Act was enacted along similar lines with India’s second reservation to NYC Convention. ‘Foreign award’ is defined under Section 44 of the Act as “arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India.” For this purpose, it is pertinent to interpret the term ‘commercial’ in order to justify that ITA awards are ‘Foreign Awards’ under Section 44 of the Act for the purpose of enforcement of such awards in India.

The Department of Economic Affairs has approved  India’s Model BIT 2016 featuring ICSID Convention aspects to promote bilateral cooperation between the parties with respect to foreign investments. Article 27.5 of the India’s Model BIT, 2016 provides that a claim that is submitted to arbitration under this Article shall be considered to arise out of a ‘commercial relationship or transaction’ for purposes of Article I of the NYC. Further, as per Article 27.4 of the India’s Model BIT, 2016 each party shall provide for the enforcement of an award in its territory in accordance with its law.

Given the aforesaid position, ITA awards should be considered to have a ‘commercial relationship’ in order to bring them within the definition of Foreign Award under Section 44 of the Act. Further, India being a party to the ITD should provide a framework for the enforcement of ITA awards following India’s Model BIT 2016.


The power and jurisdiction of Indian courts to grant relief in case of investment treaty arbitration still remains ambiguous. India needs a well-formulated legislative framework addressing the nuances of BIT arbitration in order to define a proper balance and identify the relation of domestic courts and investor-state arbitral tribunals situated outside India. Therefore, it is pertinent to have a more unambiguous approach in terms of the legal framework applicable to disputes relating to ITA. 

Indian Courts seem more in favour of the non-enforceability of ITA awards in India, so the interruption of the legislature is much needed to bring suitable amendments in domestic laws to explicitly include investment arbitral awards within the scope of India’s commercial relationship reservation to the New York Convention. For this purpose, section 44 of the Act needs to be amended to include “ITA awards within the domain of ‘commercial reservation’ to the NYC” so that investors can seek enforceability of ITA awards in India. As of now, one can infer with certainty that parties who are seeking enforcement of ITA awards in India will have to face a complex and long battle of litigation before the Indian Courts.

The authors are students at National Law University Odisha, in the 5th year and 4th year respectively.

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