Arbitration for IFSC contracts

Why the choice matters for IFSC parties

An IFSC unit sits in India but deals mostly with foreign counterparties, in foreign currency, often under foreign-law documents. A single transaction may involve an IFSC lender or lessor, a foreign obligor, an Indian group company and security in several countries. The dispute clause decides where a dispute is heard, which courts can grant interim relief, and where the award can be enforced against assets. It is worth deciding deliberately, not by template.

Matters to settle early

• Seat. The seat is the legal home of the arbitration. An Indian seat, including GIFT City, brings the arbitration under the Arbitration and Conciliation Act, 1996 and the supervision of the Indian courts. A foreign seat brings the law and courts of that place. Name the seat in terms, not only a venue for hearings.
• Institution and rules. Choose an institution whose rules suit the dispute (for example, expedited or emergency procedures), or agree ad hoc arbitration with a clear appointing authority.
• Governing law of the contract, and separately of the arbitration agreement if the parties want certainty on it.
• Interim and emergency relief. Consider whether the parties will need urgent relief from a court where the assets are (an aircraft, a ship, a bank account), and whether the chosen rules provide an emergency arbitrator. Lessors and lenders should check that the clause does not shut out the court remedies the security documents rely on.
• Multi-party and multi-contract disputes. Group structures and syndicated or leasing transactions often need consistent clauses across documents so that related claims can be heard together.
• Language, number of arbitrators and confidentiality.
• Enforcement. Identify where the counterparty's assets are and check that an award from the chosen seat can be enforced there.

Regulated entities: points to check

• Regulatory powers sit outside the contract. IFSCA's supervisory and enforcement powers come from the IFSCA Act and the Acts in its First Schedule. A dispute clause between an IFSC entity and its client does not displace them, or the statutory appeal routes. See where IFSC disputes are decided.
• Investor and client documents. Fund documents, portfolio management agreements and client terms should state the dispute route clearly and consistently with what the activity regulations require to be disclosed. Check also whether the entity's regulator or exchange provides a grievance or dispute mechanism that clients may use.
• Exchange-traded business. Disputes between members and clients of IFSC exchanges may be subject to the exchange's bye-laws, rules and arbitration mechanism. Check them before drafting a separate clause.
• Group agreements. Intra-group services, cost-sharing and IP licence agreements are often ignored until a tax or regulatory review. Give them a workable dispute clause too. See group services agreements.

Drafting checklist

1. Name the seat, the institution and the rules in one clause.
2. State the governing law of the contract.
3. Decide whether court interim relief is preserved, and where.
4. Align the clause across all transaction documents, including security and guarantees.
5. Record the number of arbitrators, language and appointing authority.
6. Check enforceability against the assets that matter.

For the wider contract framework, see commercial contracts and security and enforcement.