Situating Public Policy in the Indian Arbitration Paradigm: Pursuing the Elusive Balance
| Date | 01 August 2015 |
| Published date | 01 August 2015 |
| DOI | 10.1177/2277401720150108 |
| Subject Matter | Article |
SITUATING PUBLIC POLICY IN THE
INDIAN ARBITRATION PARADIGM:
PURSUING THE ELUSIVE BALANCE
Daniel Mathew*
Arbitration in India is governed through a consolidated legislation
namely, The Arbitration and Co nciliation Act 1996 (as amended
in 2015). One of the overarching aims of the Act is to minimise
judicial intervention in the arbitral process. The Act therefore
clearly outlines permissible instances when such interventi on
could be made. One instance would be the possibilit y of having an
arbitral award set aside on clearly enumerated grounds including
that of public policy. Though seemingly straightforward, attempts
to forge an understanding of the term have resulted in much
bewilderment, the consequence of which has been co ntradictory
decisions and confused understanding. This article attempts a
critical look at how ‘public policy’ as a ground for setting aside an
arbitral award has been understood within the Indian arbitration
paradigm. Part I of the paper traces in brief the history a nd
development of law relating to arbitration in India to provide
a context for assessing current legal developments concerning
public policy. Part II elaborates on the concept of public policy
as generally understood in the arbitration paradigm, while Part
III attempts to extract a possible understanding from of ten
contradictory case laws emanati ng from the Supreme Court of
India. Part IV evaluates the effect of the recent amendments on the
prevalent understanding of public policy, and Part V concludes by
arguing that a continuing failure to clearly demarcate boundaries
of the concept of public policy would have serious repercussions
in the long run on any efforts to make In dia a hub of global
arbitration.
* Assistant Professor, Nation al Law University Delhi. Comments a nd suggestions of my
colleague Ms. Jasm ine Joseph on an earlie r draft of this work a nd Dr. Amit George on
certain a spects discus sed herein are gr atefully ackn owledged.
Journal of National Law University, Delhi [Vol. 3106
I. Introduction
Alternate dispute resolution (ADR) methods were largely conceived in
response to increasing failure on the part of traditional court systems to
de liv er j us tic e. In dia n j ud ici al sy ste m h as b ee n n o ex ce pti on to t hi s t re nd. Wi th
increasing backlogs, and costly and complex access, differing methods have
been introduced into the justice delivery system to tackle disparate disputes.
And yet considering that these alternate means of dispute resolution are
primarily private in natur e, they are firewalled by a specially designed State
support system wherein State courts are endowed with supervisory powers
to ensure that justice is indeed done. The resultant regulatory mechan ism
interfaces with the private system in numerous ways ranging from ensuring
parties adhere to previously agreed alternative methods, to granting measu res
to preserve their vitality, to recognising and enforcing outcomes therefrom.
This is t rue for most ADR mechani sms, with each witnessing a va rying level
of state intervention, forming what could be referred to as the public-private
spectru m.1
Public-Private Spec trum
Courts Arbitration Conciliation Mediation Negotiation
(Pure Public) (Increasing level of state intervention) (Pure Private)
In the past, transboundar y transactions were often limited by a high level
of mistrust towards foreign courts. Each party would attempt to have the
dispute resolved in their own courts, hoping and often managing to secure
favorable verdicts, leading to a logjam at the stage of enforcement. Invariably
the matters got agitated twice, once before domestic courts of one party
and later before courts of judgement debtor in enforcement proceedings.
The latter proceedings without fail turne d into a new litigation where the
judgement creditor had to re-agitate the entire matter, leading to massive
waste in terms of increased time, cost and possibly contradictory results.2
To address this situation, international attempts were made to smoothen out
transboundary dispute settlement systems. Two fundamental shifts animate d
1 The spectrum merely ind icates the level of state intervention in an ADR mechanism.
For instance negotiation would carr y the least state intervention (purely private), whi le
courts would have the highest level (purely public). Combination of these methods such
as Med-Arb could as easily be plotted on t his spectrum.
2 Lord Mustill, ‘Arbitr ation: History and Background’ (1989) 6(2) J Intl Ar bitration 43,
48.
Situating Public Policy in the Indian Arbitration Paradigm
2015-2016] 107
these attempts - (a) state courts, given their lack of commercial expertise and
strict adherence to complex procedures, were no longer considered as the
most appropriate forum to agitate transboundar y commercial disputes; and
(b) acknowledgement of the need to ensure smoother and speedier process of
enforcement, within the territory of a State, of awards rendered in a foreign
territory. The end result was enhanced encouragement for private dispute
resolution methods especially arbitration, and greater clarity in international
law concerning recognition and enforcement of foreign arbitral award.
Thus, increased usage of ADR (especially arbitration) globally was in
part fuelled by the disillusionment with the existing judicial mechanisms
to provide speedier, efficient and effective redressal of disputes.3 And yet
doubts have been expressed as to the effectiveness with which arbitration
has been able to tackle some of the concerns raised against the trad itional
dispute resolution system. Pa rt of the problem emanates from the manner
in which various provisions of the present legal framework of arbitration
are understood and interpreted. T his paper focus on one such provision
namely review of an arbitral award on the ground of public policy of India,
and attempts to glean from the quagmi re of judicial decisions a clearer
understanding of the term ‘public policy of India’. Part I of the paper traces
in brief the history and development of law relating to arbitration in India
to provide a context for assessing current legal developments concerning
public policy. Part II elaborates on the concept of public p olicy as generally
understood in the arbitration paradigm, while Par t III attempts to extract
a possible understanding from often contradictory case laws emanating
from the Supreme Court of India. Part IV evaluates the effect of the recent
amendments on the prevalent understanding of public policy, and Part V
concludes by arguing that a continuing failure to clearly demarcate boundaries
of the concept of public policy would have serious repercussions in the long
run on any efforts to make India a hub of global arbitration.
II. Arbitration in India
A. Background
Indian experiment with arbitration has been a long and ambivalent
one. Various arrangements in ancient India such as Panchay ats (group
of five village elders), Srenis (occupation al gui lds), Kula (fa mily or clan
3 A rbitration remains the preferre d mechanism for resolving international com mercial
disputes. See generally Queen Mar y University and others, ‘2015 International Arbitration
Survey: Improvements and Innovations in International Arbitration’ (Queen Mary
University) /www.arbitration.qmul.ac.uk/research /2015/> accessed 30 March
2016.
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