A Single Bench of the Delhi High Court in the case of KLA Const Technologies Private Limited v. The Embassy of Islamic Republic of Afghanistan, [OMP(ENF)(COMM)82/2019, decided on June 18, 2021], has, inter-alia, held that a foreign State cannot claim sovereign immunity under Section 86 (suits against foreign Rules, Ambassadors and Envoys) of the Code of Civil Procedure, 1908 (“CPC”) against enforcement of an arbitral award arising out of a commercial transaction
Issues:
The two important questions of law which arose for consideration before the Court are:
Decision by the Court:
The Delhi High Court held as follows:
Further, the Delhi High Court also observed that:
“50. This proposition is in consonance with the growing International Law principle of restrictive immunity, juxtaposed with the emergence of arbitration as the favored mechanism of international dispute resolution in the past few decades. It needs no gainsaying that International Commercial Arbitration has witnessed increasing adoption across the world over the past few decades on account of it being a flexible yet stable, efficient, and legally binding mechanism of dispute resolution for entities engaging in global and cross-border transactions while eschewing the particularistic difficulties and complexities encountered in domestic legal systems. However, if Foreign States are permitted to stymie the enforcement of arbitral awards, which are the ultimate fruits of the above consensual process, on the specious ground that they are entitled to special treatment purely on account of being Foreign States, then the very edifice of International Commercial Arbitration would collapse. Foreign States cannot be permitted to act with impunity in this regard to the grave detriment of the counter-party in the arbitration proceedings.” (emphasis supplied)
Please find a copy of the judgment here.
This update has been contributed by Udit Mendiratta (Partner) and Kunal Dey (Associate).
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