In choosing the place where to arbitrate commercial disputes for resolution, the parties make costly mistakes by using terms like “seat,” “place,” and “venue” interchangeably when drafting a contract, leading to costly jurisdictional battles when a dispute arises, under the Arbitration and Conciliation Act, 1996.
Though those terms may sound similar in everyday language, the seat of arbitration and the place (or venue) of arbitration carry different legal consequences.
The Seat of Arbitration in Commercial Disputes
The seat of arbitration is the juridical home or legal situs of the arbitration. It ties the arbitration to a specific legal system.
The seat of arbitration dictates the curial or procedural law that governs the arbitration process itself. For instance, if the seat is in Mumbai, Indian procedural arbitration law applies, regardless of where the parties are from or what law governs the underlying contract.
The courts located at the seat of arbitration possess exclusive supervisory jurisdiction over the arbitral proceedings. If a party needs interim relief, wants to challenge an arbitrator’s appointment, or seeks to set aside (annul) the final arbitral award, they must approach the courts at the seat.
Once chosen by the parties or determined by the tribunal, the seat does not shift simply because meetings are held elsewhere. Changing the seat requires explicit mutual agreement from the parties.
The Place (or Venue) of Arbitration
The place of arbitration—more accurately referred to in modern practice as the venue of arbitration—is simply the physical, geographical location where the arbitral tribunal meets to conduct hearings, examine witnesses, or deliberate.
A venue is chosen for logistical convenience. Parties might select a specific city because it offers neutral ground, easy international flight connections, reliable conference facilities, or proximity to key witnesses and evidence.
Holding physical hearings in a particular city or place of arbitration does not give the local courts of that city supervisory power over the arbitration. The local courts cannot interfere with the proceedings or entertain challenges to the award merely because the hearings took place down the street.
The arbitral tribunal and the parties are free to move the physical venue from one city—or even one country—to another for specific hearings, site visits, or emergencies (such as travel restrictions) without affecting the legal validity of the proceedings or shifting the seat.
Why the Confusion? The Ambiguity of “Place”
Much of the confusion stems from the wording of arbitration statutes themselves. For example, under Section 20 of the Arbitration and Conciliation Act, 1996—the word “place” is used in two different contexts within the very same section:
- In the first sub-section, “place” refers to the juridical seat agreed upon by the parties.
- In a subsequent sub-section, “place” refers to the geographical venue where the tribunal may meet for consultation or to hear witnesses.
Because statutes use one word to describe two distinct concepts, poorly drafted contracts often state that “the place of arbitration shall be New Delhi” or “arbitration shall be held in London.” When a dispute breaks out, one party may argue that the named city is the legal seat, while the other argues it was merely a convenient venue.
Supreme Court Resolved the Ambiguity
The Supreme Court of India in landmark rulings such as Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. [(2012) 9 SCC 552] and BGS SGS Soma JV v. NHPC Ltd. [(2020) 4 SCC 234]—have established clear principles to prevent procedural deadlock:
- The Presumption of the Seat: When a contract designates a specific city as the “place” or “venue” of arbitration without explicitly naming a different “seat,” courts generally presume that the designated venue is the legal seat—provided there are no significant contrary indicators in the contract.
- The Non-Displacement Rule: If a contract clearly establishes a legal seat (e.g., “The seat of arbitration shall be Bengaluru”), holding physical hearings in another city (e.g., Singapore or Chennai) does not displace Bengaluru as the seat.
Bringing Clarity in Drafting Arbitration Clauses
To protect your commercial agreements from unnecessary litigation over jurisdiction, clarity is paramount. Avoid vague phrases like “arbitration shall take place in…” Instead, explicitly separate the two concepts in your dispute resolution clause:
“The seat of arbitration shall be [City, Country]. The venue for physical hearings may be [City, Country], or any other location mutually agreed upon by the parties and the arbitral tribunal.”
This will clearly distinguish the legal home from the physical meeting room and will keep the dispute out of unintended court case.
The Effect of These Judgments in Section 34 and 37 of the Arbitration Act
In BGS SGS SOMA JV v. NHPC Ltd. (2020) 4 SCC 234, the Supreme Court laid down strict rules governing where an arbitral award can be challenged (Section 34) and when an order on such a challenge can be appealed (Section 37).
Impact on Section 34 for Setting Aside an Award
A Section 34 petition to set aside an arbitral award can only be filed in the courts of the juridical seat of arbitration.
Even if the underlying contract was signed or breached in another city, courts in that city cannot entertain a Section 34 petition once a seat is established.
If a party files a Section 34 application in a court that is not the seat of arbitration, that court lacks jurisdiction and must return the petition for presentation before the proper seat court.
Impact on Section 37 Regarding Appeals
Under Section 37(1), an appeal is strictly limited to the specific orders listed in sub-clauses (a), (b), and (c), and from no others. Section 13(1) of the Commercial Courts Act, 2015 only provides the forum for appeals and does not create any independent right of appeal.
Section 37(1)(c) allows an appeal against an order “setting aside or refusing to set aside an arbitral award under Section 34”
The Supreme Court emphasized the word “under”, holding that a court must actually apply its mind to the substantive grounds in Section 34 and refuse to interfere with the award on its merits.
When a commercial court returns a Section 34 petition for lack of territorial jurisdiction, it is merely a preliminary procedural step. It does not amount to “refusing to set aside an arbitral award,” and therefore no appeal lies against such an order under Section 37 of the Act.
