Commercial Reservation of New York Convention in India & Latest Developments in India's International Investment Treaty Practice

India was one of the founding signatories to the New York Convention, 1958, formally known as the Convention on Recognition & Enforcement of Foreign Arbitral Awards, 1958. The commercial reservation meant that the New York Convention insofar as applicable to India was only in respect of international commercial arbitration and not international investment arbitration.

This position was reiterated in Union of India vs. Vodafone Group Plc United Kingdom and Ors. (07.05.2018 - DELHC) : MANU/DE/1673/2018, where the Delhi High Court held:

"89. Also, though the BIPA constitutes an arbitration agreement between a private investor on the one side and the host State on the other, yet it is neither an International Commercial Arbitration governed by the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Act, 1996") nor a domestic arbitration.

90. The Act, 1996 including Sections 5 and 45 thereof, do not apply proprio vigore to a BIPA..." 

BIPA referenced here was the UK Bilateral Investment Protection Agreement.

There have been numerous papers, etc. written on the lack of enforcement mechanisms of BIT awards in India. The Model BIT addresses this issue by holding:

"27.5 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 New York Convention."

This provision has now found its place in various BITs signed since 2015-2016. For instance, the Belarus India BIT, 2018 states:

"27.5 A claim that is submitted to arbitration under this Chapter shall be considered to arise out of a commercial relationship or transaction for purposes of Article I of the New York Convention."

Note that this BIT has been signed and is in force as well.

Similar provision exists in Article 27.5 of the India Kyrgyzstan BIT (2019) too, although it does not find any place in the Brazil India BIT, 2020 most likely because the Brazil India BIT does not provide for Investor-State Disputes. 

Thus, it appears that India has now sought to address the problem of enforceability of the BIT awards through recognition that BITs are "commercial" transactions for the purpose of the New York Convention, thereby retaining the Commercial Reservation but also by providing that BIT awards would be enforceable under Part II of the Arbitration and Conciliation Act, 1996, which deals with enforcement of foreign awards.