The Hindu : Combating global disputes

Online edition of India's National Newspaper
Monday, Sep 29, 2003

Business

Business

Combating global disputes

WITH INCREASING globalisation, it is a world without boundaries and transactions between two ends of the globe are common, particularly as technology has accelerated the development of international markets. However, most international transactions are a high-risk endeavours. Delays, currency fluctuations, language barriers, political instability, changes in laws and contraventions are just a few of the many hazards commonly faced in this arena. Claims and counterclaims are an integral part of the complex commercial international disputes, and with multiple jurisdictions and conflicting laws, there remains no easy way to enforce the judgment of one country's court system in another.

In India, execution of foreign decrees is governed by the provisions of the Code of Civil Procedure, 1908, that lays down the rules pertaining to enforcement of foreign judgments. Primarily, there are two modes of enforcing foreign judgments in India. First, by filing an execution petition under Section 44A of the CPC (in case the conditions specified under the said section are fulfilled). Second, by filing a fresh suit based on the foreign judgment/decree that has been obtained through the foreign court.

A decree passed by any superior court of reciprocating territory is directly executable as a decree passed by the domestic court in India. Therefore, in cases where the decree does not pertain to a reciprocating territory or a superior court of a reciprocating territory, as notified by the Central Government in the official gazette, the decree cannot be directly executable in India. Thus, in suits where the decree pertains to a country that is not a reciprocating territory to India, a fresh suit will have to be filed in India on the basis of such a decree or judgment, which may be construed as a cause of action for the said suit. In the fresh suit, the said decree will be treated as an additional piece of evidence against the defendant. This is time consuming and adds substantially to costs.

Some countries that have been declared and notified by India as reciprocating territories and superior courts include the Federation of Malaya (now Malaysia) and the High Court and the Courts of Appeal; Colony of Aden and Supreme Court of Aden; New Zealand and Cook Islands, Trust Territory of Western Samoa and the Supreme Court of New Zealand; Burma, all civil and revenue courts; United Kingdom of Great Britain and Northern Ireland and the House of Lords, Court of Appeals, High Court of England, the Court of Sessions in Scotland, the High court in Northern Ireland, the Court of Chancery of the County Panlatine or Lancaster or Durham; Colony of Fiji and the Supreme Court of Fiji; Republic of Singapore; Trinidad and Tobago; Papua New Guinea and Supreme Court; Bangladesh and Supreme Court and courts of district and subordinate judges; Canada and the Supreme Court of Ontario. Therefore, apart from the countries and courts listed above, decrees passed by any other court would not be enforceable in India.

It is also surprising to note that none of the courts in the U.S., including the U.S. Supreme Court, has been notified as a reciprocating territory by the Government of India. Considering the substantial business flow between the two countries, it is astonishing that there are no recognition procedures. This matter is being actively considered by the Government of India and it is expected that a notification will be issued in the near future.

At present, a decree passed by a court in the U.S. will need to be filed afresh in a district court or High Court as may be applicable in India to take effect. Such a decree will be examined on various grounds, including whether it is given on the merits of the case and whether it appears on the face of the record to be based on an incorrect view of international law.

There is an immediate need to evolve an international convention on the jurisdiction and enforcement of international judgments. Implementation of such a convention will definitely aid in providing comfort to international counterparts thereby increasing the flow of business.

The only other way in the present scenario is to ensure the applicability of international arbitration, considered the most reliable protocol for global dispute resolution. Arbitral disputes are also globally recognised as opposed to a court judgment and are easily enforceable. As multinational contracts are becoming increasingly common in today's competitive world it is important to think and plan ahead and ensure closure of all stop gaps prior to any new venture.

Dorothy Thomas

Partner, Kochhar & Co.

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