Arbitrating With a GIFT IFSC Entity: Seat, “International” Character and the Choice of a Foreign Seat

GIFT IFSC entities frequently enter cross-border contracts containing arbitration clauses. However, an international transaction does not automatically qualify as an international commercial arbitration under Indian law. Understanding this distinction is essential when drafting arbitration clauses, selecting a foreign seat and determining the availability of interim relief.

The Statutory Test is About Incorporation, not Internationality

Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 defines “international commercial arbitration” as an arbitration relating to commercial legal relationships where at least one of the parties is:

• an individual who is a national of, or habitually resident in, a country other than India;
• a body corporate which is incorporated in any country other than India;
• an association or body of individuals whose central management and control is exercised in a country other than India; or
• the Government of a foreign country.

An IFSC company is incorporated in India under the Companies Act, 2013 (Article 44). It is not a body corporate incorporated outside India. So an arbitration between an IFSC company and another Indian company is not an international commercial arbitration, however international the underlying transaction.

This is worth stating plainly because the opposite intuition is encouraged by exchange-control law. Regulation 3 of the FEMA (International Financial Services Centre) Regulations, 2015 treats a financial institution set up in an IFSC as a person resident outside India. Residence under FEMA and nationality for the purposes of section 2(1)(f) are different concepts answering different questions. An entity can be non-resident for exchange control and Indian for arbitration.

The characterisation matters in practice. Where the arbitration is an international commercial arbitration seated in India, appointment of arbitrators under section 11 lies with the Supreme Court (section 11(9)), not with the High Court as it would in a domestic arbitration, and the Commercial Courts Act allocates applications and appeals differently. A clause drafted on a mistaken assumption produces applications filed in the wrong forum.

Two IFSC Entities, or an IFSC Entity and an Indian Party, May Still Choose a Foreign Seat

The second common question is whether parties who are both Indian may agree to arbitrate outside India. Before 2021, the position was contested. It was settled in PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited (Civil Appeal No. 1647 of 2021), decided by the Supreme Court on 20 April 2021.

The Court held, in terms, that “nothing stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals“. Two Indian companies had arbitrated in Hong Kong, and the resulting award was a foreign award enforceable under Part II of the Act.

The judgment did something else of practical importance. The proviso to section 2(2) preserves the application of sections 9 (interim measures by court), 27 (court assistance in taking evidence) and 37(1)(b) and (3) (certain appeals) to an “international commercial arbitration” even where the place of arbitration is outside India. The Gujarat High Court had held that the expression there bore the section 2(1)(f) meaning, so that two Indian parties arbitrating abroad could not seek interim relief from an Indian court. The Supreme Court disagreed: the expression in the proviso does not take the section 2(1)(f) definition but refers to arbitrations taking place outside India whose awards are enforceable under Part II. It accordingly set aside that finding and held the section 9 application maintainable.

The combined position is therefore favourable to parties transacting through GIFT IFSC:

That last row deserves emphasis. Parties who choose a foreign seat and also exclude the proviso lose access to Indian interim relief against Indian assets. That is a deliberate choice, and it should be a conscious one.

An Arbitration Centre for the IFSC: Proposed, not Enacted

The Union Budget 2022–23 announced plans to establish an international arbitration centre in GIFT City IFSC. On 16 July 2024, an IFSCA expert committee recommended a broader Alternative Dispute Resolution Centre offering arbitration, mediation and online dispute resolution.

The committee’s proposals are ambitious and, importantly, legislative. They include:

• amending the IFSCA Act, 2019 to insert a Third Schedule modifying the Arbitration and Conciliation Act, 1996, the Mediation Act, 2023 and the SEZ Act, 2005, but only to the extent they apply to arbitrations seated at an IFSC;
• enabling IFSCA to discharge the functions of the Arbitration Council of India and the Mediation Council of India in relation to the centre;
• establishing the centre as a section 8 company, with shares available only to institutions and a holding cap of 5%; and
• a three-phase court structure: first a designated bench of the Gujarat High Court, requiring no statutory change; then a separate “IFSC International Court” for all IFSCs with the powers of a High Court other than writ and criminal jurisdiction; and then international judges sitting in it — the second and third phases, on the committee’s own analysis, requiring amendments to the Constitution of India.

As at 17 September 2026, no legislation implementing these recommendations was traced. The committee’s report is a policy document, not law. The Arbitration Council of India itself, contemplated by the 2019 amendment, had still not been constituted as at February 2026. Drafting practice should therefore proceed on the existing framework, and a clause that refers to institutional rules of a GIFT IFSC centre should be tested against whether such an institution and such rules currently exist.

Drafting Points

• Do not describe the arbitration as an international commercial arbitration unless a party actually satisfies section 2(1)(f); the label does not create the status.
• Choose the seat expressly, and distinguish it from the venue.
• Decide consciously about section 9. Silence preserves Indian interim relief in a foreign-seated arbitration; an exclusion removes it.
• Check the arbitral institution and rules named in the clause exist and administer the seat chosen.
• Think about enforcement at the drafting stage — where the assets are, and under which regime an award against them will be enforced (Article 48).

Frequently Asked Questions

1. Is arbitration involving a GIFT IFSC entity an international commercial arbitration?

Not automatically. Under Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, at least one party must satisfy the statutory criteria, including foreign incorporation for a body corporate.

2. Can two Indian companies choose a foreign seat of arbitration?

Yes. In PASL Wind Solutions v. GE Power Conversion India Private Limited (2021), the Supreme Court upheld the right of two Indian parties to choose a foreign seat.

3. Can Indian courts grant interim relief in foreign-seated arbitration?

Yes. Section 9 may permit interim relief from Indian courts, subject to the statutory conditions and any agreement excluding its application.

4. Has the proposed GIFT IFSC arbitration centre been established by law?

The proposed centre remains a policy recommendation unless implemented through the necessary legal and regulatory measures. Parties should verify the current institutional framework before naming a centre in their arbitration clauses.