What Happens If the Parties Do Not Specify the Seat of Arbitration?
The seat of arbitration is one of the most important concepts in international arbitration. It is not merely the physical place where hearings are conducted. Rather, it is the legal home of the arbitration and the jurisdiction that provides the procedural framework and judicial supervision of the arbitral process.
A recent judgment of the Supreme Court of India revisited this distinction and addressed an important practical question: what happens when the parties have not clearly identified the seat of arbitration?
The judgment reinforces the distinction between the legal seat and the physical venue of hearings, while also explaining the principles that may assist courts in identifying the seat where the parties’ agreement is unclear.
The Legal Significance of the Seat of Arbitration
The seat of arbitration determines the juridical home of the proceedings.
Its significance extends well beyond geography. The seat generally determines the procedural law governing the arbitration and identifies the courts that exercise supervisory jurisdiction over the arbitral process.
Accordingly, choosing the seat may determine which courts have authority to hear applications relating to matters such as challenges to arbitrators, interim measures, procedural supervision and applications to set aside the final award.
The seat should therefore be distinguished from the place where the underlying contract was performed, where the dispute arose, or where the parties themselves are located.
In practical terms, the seat establishes the legal connection between the arbitration and a particular national legal system.
Seat and Venue Are Not the Same
A recurring source of confusion in arbitration is the use of the terms seat and venue as though they were interchangeable.
They are not.
The seat is the legal or juridical home of the arbitration. The venue, by contrast, is simply the physical location where a hearing, meeting, witness examination or other procedural activity takes place.
An arbitral tribunal may therefore have its juridical seat in one city or country while conducting hearings in another.
There may be many practical reasons for doing so, including convenience for witnesses, accessibility for the parties, availability of hearing facilities or cost considerations.
The Indian Supreme Court reaffirmed that conducting hearings outside the seat does not, by itself, alter the juridical seat.
This distinction has significant jurisdictional consequences.
In Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited (2017), the Supreme Court of India recognised that the designation of a seat operates in a manner comparable to an exclusive jurisdiction clause. Once the seat is established, the courts of that jurisdiction acquire supervisory authority over the arbitration.
Consequently, another court does not necessarily acquire supervisory jurisdiction merely because part of the underlying cause of action arose within its territorial jurisdiction.
Once the Seat Has Been Chosen, Can It Change?
Where the parties have expressly agreed upon a seat, their agreement is the primary reference point.
According to the judgment, the seat derives from the parties’ intention and cannot ordinarily be displaced merely because hearings later take place somewhere else or because another location is mentioned in the arbitral award.
This distinction becomes particularly important where an award records a location different from the one originally chosen by the parties.
A reference to a city in the heading or body of an arbitral award does not necessarily mean that the juridical seat has changed.
The Supreme Court rejected the proposition that simply referring to New Delhi in the arbitral award could alter the previously established seat. The Court held that the seat was determined by the parties’ agreement rather than by an incidental or subsequent reference appearing in the award.
The Court further indicated that once the seat has been established, it remains legally effective unless the parties subsequently agree to change it.
In other words, the seat is not something that moves automatically with the tribunal.
If the tribunal travels to another location to conduct hearings, examine witnesses or hold procedural meetings, the legal home of the arbitration remains unchanged.
But What If the Parties Never Specified the Seat?
The more difficult question arises where the arbitration agreement does not expressly identify the juridical seat.
In such circumstances, courts and tribunals may need to interpret the arbitration agreement and the surrounding circumstances in order to identify the jurisdiction with which the arbitration is most closely connected.
The judgment referred to two important interpretative approaches.
1. The “Closest and Most Intimate Connection” Test
One method is to determine which jurisdiction has the closest and most intimate connection with the arbitration.
This approach has roots in English arbitration jurisprudence, including Naviera Amazonica Peruana S.A. v. Compania Internacional de Seguros del Peru (1988).
Where the contract does not expressly specify the seat, relevant circumstances may assist in identifying the legal system most closely connected to the arbitration.
The enquiry is not necessarily limited to the place where hearings occurred. Instead, the overall structure of the agreement and arbitration may have to be examined.
The objective is to determine which jurisdiction the parties can reasonably be understood to have selected as the juridical home of the arbitration.
2. The Shashoua Principle
Another important principle originates from the English decision in Roger Shashoua v. Mukesh Sharma (2009).
Under what became known as the Shashoua principle, a location expressly designated as the venue of arbitration may, in appropriate circumstances, be treated as the juridical seat where the agreement and surrounding circumstances demonstrate that the parties intended that location to have legal significance beyond simply hosting hearings.
This does not mean that every reference to a “venue” automatically determines the seat.
The terminology used by the parties must be considered together with the structure of the arbitration clause and the surrounding circumstances.
The Shashoua principle therefore operates as an interpretative tool rather than an automatic rule.
Express Party Choice Remains Paramount
The most important point emerging from the Court’s reasoning is that these interpretative tests are secondary mechanisms.
They become relevant primarily where the parties’ agreement does not clearly identify the seat.
Where the parties have expressly chosen a seat, there is usually no need to resort to tests such as the closest-connection analysis or the Shashoua principle.
Party autonomy remains the starting point.
The role of the court is therefore not to replace the parties’ choice with what it considers a more convenient jurisdiction, but to identify and give legal effect to the parties’ agreement.
Why Does the Distinction Matter?
The distinction between seat and venue is not merely theoretical.
Imagine that the parties agree that the seat of arbitration is Dubai, but the tribunal conducts hearings in London because the witnesses are located there.
London does not necessarily become the legal seat simply because hearings took place there.
The supervisory courts would ordinarily remain those associated with the agreed seat.
Similarly, where an arbitration agreement does not identify the seat but merely states that hearings will take place in a particular city, a more detailed analysis may be required before concluding that the city was intended to serve as the juridical seat.
This distinction can affect:
which courts have supervisory jurisdiction;
where an award may be challenged or set aside;
the procedural law applicable to the arbitration;
applications for judicial assistance or interim relief; and
the broader legal relationship between national courts and the arbitral tribunal.
A drafting error involving only a few words can therefore have substantial jurisdictional consequences.
A Practical Drafting Lesson
Commercial parties should avoid leaving the juridical seat open to interpretation.
An arbitration clause should ideally state the seat expressly.
For example:
“The seat of arbitration shall be Dubai, United Arab Emirates.”
The clause may separately provide that hearings can take place elsewhere:
“The tribunal may conduct hearings or meetings at such other locations as it considers appropriate without affecting the juridical seat of the arbitration.”
This distinction substantially reduces the risk of later disputes concerning supervisory jurisdiction.
Using expressions such as “arbitration shall take place in…”, “venue shall be…”, or “hearings shall be held in…” without clarifying the juridical seat may create unnecessary uncertainty.
Conclusion
The seat of arbitration is not simply the city in which arbitrators and parties meet.
It is the legal anchor of the arbitration.
It connects the proceedings to a particular legal system, determines the supervisory jurisdiction of national courts and may have significant consequences throughout the arbitration and any subsequent challenge to the award.
The Indian Supreme Court’s approach reinforces three fundamental propositions.
First, the seat and venue are legally distinct concepts.
Second, where the parties have expressly selected a seat, that choice generally remains controlling notwithstanding hearings or procedural activities conducted elsewhere.
Third, where the seat has not been expressly identified, principles such as the closest and most intimate connection test and the Shashoua principle may assist in determining the juridical seat from the agreement and surrounding circumstances.
For arbitration practitioners and commercial parties alike, the practical lesson is straightforward:
Do not leave the seat of arbitration to implication when it can be expressly agreed in the arbitration clause.
References
Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited & Others, Supreme Court of India, 2017.
Naviera Amazonica Peruana S.A. v. Compania Internacional de Seguros del Peru, English Court of Appeal, 1988.
Roger Shashoua & Others v. Mukesh Sharma, High Court of England and Wales, 2009.
Supreme Court of India judgment concerning the distinction between the juridical seat and venue of arbitration, as discussed in this article.
Asser Harb, Arabic commentary discussing the distinction between the seat and venue of arbitration and the related Indian Supreme Court jurisprudence.
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