India's Hong Kong recognition is welcome, but enforcement problems remain, says expert

Out-Law Analysis | 13 Jun 2012 | 11:57 am | 1 min. read

OPINION: India's recent decision to recognise the result of arbitrations in China and Hong Kong is good news for those caught up in disputes but it doesn't solve the central problem – enforcing the outcome of disputes in India itself.

Indian law says that its courts should only recognise arbitral awards that result from proceedings in a list of countries approved by central Government. Singapore has long been on that list so arbitrations carried out there have been regarded as legitimate in India. Hong Kong has not.

This has been a considerable boon for Singapore. Disputes with an Indian connection are a major source of arbitration activity in Singapore. For the past three years India has been the single biggest source of new cases for the Singapore International Arbitration Centre.

Now Hong Kong can compete for that work on an equal footing, and it is set to become the natural place for Indian parties involved in business in China to settle their disputes.

But choice of venue is only half the story. Even if businesses agree that Hong Kong is where any arbitration happens in the event of a dispute, if the award needs enforcement action in India, a major problem arises – this is close to impossible.

The figures are startling: the Delhi High Court estimated in 2009 that it would take 466 years to clear its backlog of cases. At the moment, there are over 700,000 cases pending in just that one regional high court.

The situation has deteriorated to such an extent that an international arbitral tribunal held in 2011, in a case between Australia's White Industries and India, that delays of eight years with no date set for a final hearing for the enforcement of an international arbitration award were so severe that they breached the Australia-India bilateral investment treaty.

It is good news that India has added another country to its list of places whose arbitration awards it recognises, but those caught up in disputes would do well to bear in mind the trouble they could run into when trying to enforce any awards in India.

Vincent Connor is a construction disputes specialist in the Hong Kong office of Pinsent Masons, the law firm behind Out-Law.com