Enforcement of Foreign Awards, the India-UAE BIT, and International Law

The new bilateral investment treaty ("BIT") between India and the United Arab Emirates (UAE), which came into force on 31 August 2024, has introduced significant legal advancements. Replacing the earlier 2013 treaty, the BIT not only strengthens trade relations but also addresses longstanding concerns regarding the enforcement of investor-State awards in India. One of its most notable provisions is the explicit classification of arbitration awards as "commercial," aligning them with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("NYC").

Implications for Enforcement of Foreign Awards

India has historically imposed hurdles in enforcing foreign investor-State awards, primarily due to its interpretation of the NYC. India is not a signatory to the ICSID Convention, making the NYC the principal mechanism for enforcing foreign arbitral awards. However, India's application of the NYC has been constrained by its reservation that limits its applicability only to "commercial" relationships. The new BIT eliminates ambiguity by expressly categorizing investor-State awards as commercial, thereby facilitating their enforcement under the NYC.

India’s Arbitration Act and Its Challenges

Another challenge in enforcing foreign awards in India stems from Section 44 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act"). Section 44(b) stipulates that, in addition to the arbitration being seated in a NYC Contracting State, the Indian Central Government must notify the seat as a reciprocating territory. This requirement has been a contentious issue, as India has not yet notified the UAE under Section 44. Despite recognizing UAE court judgments as enforceable under a 2020 notification, no such notification has been issued for arbitral awards.

However, the BIT addresses this issue by stating that each party shall provide for the enforcement of an award "in accordance with its Law." Crucially, it also clarifies that this shall not prevent enforcement under the NYC. This means that, for UAE-related arbitration cases, India's insistence on a separate notification under Section 44 might be overridden, provided the arbitration is conducted in a NYC-recognized jurisdiction.

Comparative Analysis with Previous BITs

The old India-UAE BIT did not include provisions explicitly endorsing enforcement under the NYC, leaving room for judicial interpretation and inconsistent application. In contrast, India’s Model BIT does categorize investor-State disputes as commercial but remains silent on enforcement under the NYC. The new BIT’s explicit reference to the NYC is a progressive step toward ensuring greater certainty for investors and avoiding protracted enforcement battles.

Key Legal Considerations and International Law

The India-UAE BIT prompts reflection on four critical legal aspects:

India’s Obligations Under Treaties:

India has made commitments under multiple international treaties, including the NYC, that require it to enforce foreign arbitral awards. However, its reservations and domestic legal frameworks have, at times, limited the effectiveness of these commitments.

Implementation in National Law:

India’s Arbitration Act imposes additional requirements, such as the Section 44 notification, which do not directly align with its international obligations. The new BIT challenges this requirement by emphasizing NYC compliance.

Interpretation Under International Law:

The Vienna Convention on the Law of Treaties suggests that treaties must be interpreted in good faith and in light of their object and purpose. The India-UAE BIT’s specific reference to enforcement under the NYC strengthens the argument that India must honor its international commitments without additional domestic restrictions.

India’s Reservations to the NYC:

India’s commercial reservation to the NYC has been a key issue in previous disputes. However, the new BIT's language makes it clear that investor-State arbitration awards must be considered commercial, effectively nullifying prior restrictive interpretations.

The India-UAE BIT represents a significant evolution in India’s approach to investor-State arbitration and enforcement of foreign awards. By explicitly aligning itself with the NYC and removing domestic procedural barriers, it provides greater legal certainty for investors. While challenges remain—especially in aligning India’s Arbitration Act with its international commitments—the BIT sets a precedent for future treaties and arbitration-friendly reforms in India’s legal landscape.