“Seat” and “Venue” in Arbitration: Significance, Ambiguity, and Drafting Recommendations

• Introduction

Most arbitration agreements refer to the terms “seat” and “venue.” Understanding these terms is essential because they directly influence the conduct of arbitration proceedings and the jurisdiction of courts.

This article, while outlining the current arbitration landscape in India, explains the legal significance of “seat” and “venue,” and highlights the importance of clearly drafting these designations within an arbitration agreement.

•  Current State of Arbitration in India

Arbitration is increasingly preferred over litigation in India as it is faster, cost-effective, and less formal. The governing legislation is the Arbitration and Conciliation Act, 1996 (ACA).

India is emerging as a leading destination for international commercial arbitration due to several factors:

• Reforms under the Arbitration and Conciliation (Amendment) Act, 2015, which strengthened the legal framework for international arbitration;
• A strong ecosystem of trained arbitrators and arbitration-focused law firms;
• Growth of institutional arbitration centres such as the Mumbai Centre for International Arbitration (MCIA) and Delhi International Arbitration Centre (DIAC);
• A stable political and judicial environment conducive to enforceable dispute resolution.

•  Reference to “Seat” and “Venue” under the Arbitration and Conciliation Act, 1996

Although the ACA does not expressly define “seat” or “venue,” Section 20 of the Act implicitly distinguishes these concepts. Under Section 20:

1. Parties are free to determine the place of arbitration;
   1. If they fail to agree, the arbitral tribunal determines it based on the circumstances and convenience of the parties;
   1. The tribunal may meet at any appropriate location for hearings, consultations, or inspections.

Judicial precedents have settled that “seat” and “place” of arbitration are used interchangeably under the ACA.

•  Significance of the Seat of Arbitration

The seat of arbitration is a fundamental determinant of an arbitral proceeding. The seat establishes:

• The curial law governing the arbitration procedure;
• The jurisdiction of courts empowered to supervise the arbitration and hear challenges to the award;
• The legal framework applicable, including provisions for interim relief and enforcement.

Thus, the chosen seat determines which court exercises supervisory authority over the arbitration.

The Supreme Court of India has consistently held that choosing a seat implicitly brings with it the legal regime of that jurisdiction. However, the Court has also stated that the phrase “place of arbitration” does not automatically mean “seat” unless supported by other clauses or contextual indicators within the arbitration agreement.

More recently, the Court has clarified that once the parties fix the seat of arbitration, it becomes immutable and cannot be altered subsequently.

•  Significance of the Venue of Arbitration

The venue refers to the physical location where the arbitral tribunal conducts hearings, witness examinations, consultations, or inspections. It is selected based on convenience and logistical considerations.

In international arbitrations, parties and arbitrators may come from different jurisdictions, making the choice of venue particularly relevant.

The Supreme Court has affirmed that the venue may change depending on convenience. Unlike the seat, which is fixed and determines jurisdiction, the venue is flexible and procedural.

•  Ambiguity from Incorrect Use of “Seat” and “Venue”

Failure to specify the seat in an arbitration clause creates uncertainty and often results in avoidable litigation. Ambiguous clauses may lead parties to approach courts that do not have supervisory jurisdiction, thereby delaying proceedings.

Courts have frequently had to interpret incomplete or poorly drafted clauses to ascertain the seat. Examples include:

• Union of India v. Hardy Exploration and Production – The Court held that “venue” or “place” cannot automatically be treated as “seat” unless (i) no additional conditions are attached, or (ii) any attached conditions are fulfilled.
• Brahmani River Pellets Ltd. v. Kamachi Industries Ltd. – Since only the venue was mentioned, the Court inferred the parties’ intention to exclude all other courts and treated the venue as the seat.
• BGS SGS Soma JV v. NHPC Ltd. – The Court had to determine the seat where the clause merely stated that arbitration proceedings “will be held in…” without further clarification.

These cases highlight the risks arising from imprecise drafting.

•  Recommendations for Drafting Arbitration Agreements

A well-drafted arbitration clause must eliminate ambiguity regarding the parties’ intentions. The safest approach is to expressly specify both the “seat” and “venue” of arbitration, even though the venue is largely logistical.

While venue may appear trivial, expressly stating it prevents conflicting interpretations and ensures that courts and parties understand the intended framework.