A single judge of the Gujarat High Court in GE Power Conversion India Private Limited v. PASL Wind Solutions Private Ltd.^[1] has held that the Arbitration Act does not per se prohibit two Indian parties from choosing a foreign seat as the seat of an arbitral proceeding. Such an agreement would not violate the Arbitration Act, the public policy of India or the Indian Contract Act, 1872. It further held that the nationality of the parties has no relevance for considering the applicability of Part II of the Arbitration Act, which is solely based on whether the foreign seat of arbitration is signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958. If this requirement is fulfilled, Part II of the Act will be applicable.

Separately, the Delhi High Court in the case of Dholi Spintex Pvt. Ltd v. Louis Dreyfus Company India Pvt. Ltd.^[2] has held that an arbitration agreement/clause is independent of the underlying contract. Accordingly, the parties may choose a different governing law for the arbitration clause, from the substantive law of the underlying contract. The Delhi High Court also clarified that two Indian parties can choose a foreign law as the law governing arbitration under the contract.

[1] Arb. Pet. 131 & 134 of 2019

[2] 2020 SCC Online Del 1476