A Comparison Of The Use Of The Public Policy Defence By Different Countries To Resist The Enforcement Of International Arbitral Awards – A Rising Star Or Setting Sun?

A Comparison Of The Use Of The Public Policy Defence By Different Countries To Resist The Enforcement Of International Arbitral Awards – A Rising Star Or Setting Sun?

This decision was based on private international law and is in line with international practice commonly accepted in most developed arbitral jurisdictions such as the United Kingdom and France, as discussed above. This decision confirmed the position that only in exceptional circumstances should the national courts interfere with arbitral awards on grounds of public policy. Also, the Supreme Court clearly held that the courts should not use the public policy defence to review the merits of an arbitral award. Unfortunately, the Indian Supreme Court decision in Renusagar has not been followed by subsequent decision of the Indian courts.

Furthermore, the public policy exception has been extended by the Indian Supreme Court to include “patent illegality” . In 1996, the Indian Arbitration Act was introduced with the hope that this will result in minimal judicial intervention in the arbitral process. Despite this, the Indian courts have shown a great propensity towards interfering with international arbitration. In this connection, judicial intervention at the award enforcement stage on grounds of public policy is the most controversial.

The Indian Supreme Court itself took a different approach in interpreting the public policy defence in Oil & Natural Gas Corp v Saw Pipes. The case of Saw Pipes arose out of a domestic dispute concerning the payment of liquidated damages under a supply contract. The matter was referred to arbitration and an award was rendered by the tribunal which held that ONGC was not entitled to any liquidated damages since it had failed to establish any loss as a result of the late supply by Saw Pipes. ONGC applied to set aside the arbitral award before the Indian court on grounds of public policy. In that case, the Indian Supreme Court held that the ground of public policy required a wider meaning than that given in the Renusagar case because the concept of public policy included matters which concerned ‘public good and public interest’. The Supreme Court noted that, as a matter of law, ONGC was not required to prove its loss and, therefore, was entitled to the liquidated damages. As a result, the Supreme Court set aside the award on grounds of public policy on the basis that the arbitral tribunal had erred when it concluded that ONGC had to prove its loss in order to seek liquidated damages. The Supreme Court felt that an award which violated Indian law could not be said to be in the public interest, because it was likely to adversely affect the administration of justice. The Indian Supreme Court further held that, in addition to the three heads set forth in the Renusagar case, an arbitral award may be set aside on grounds of public policy if it is ‘patently illegal’. It declared that an award was patently illegal if the award was contrary to the substantive law of India, the Indian Arbitration Act and/or the terms of the contract. The effect of this was that these included any error of law committed by the arbitrators.

Funke Adekoya

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