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?

In an effort to negate the ‘rising star’ status of the public policy defence the consultation paper proposed to introduce clear language in the Indian Arbitration Act to the effect that Part I of the Indian Arbitration Act would apply only to arbitrations emanating in India. This would be applied strictly apart from two provisions which have been specifically excluded in order to aid the arbitral process. The two provisions are sections 9 and 27 of the Indian Arbitration Act, which deal with the Indian courts’ powers to grant interim measures in support of arbitrations. It also proposed negating the effect of the Saw Pipes case by limiting the scope of public policy as a ground for setting aside arbitral awards. According to the proposal, the position should be brought back in line with the Renusagar case, which reflects the common understanding of public policy in modern developed arbitral jurisdictions. According to the consultation paper, an award would be contrary to public policy only if it violates ‘the fundamental policy of India, the interests of India or justice and morality’. The proposal excludes the ground of ‘patent illegality’ from the ambit of public policy, but retains it only for challenges to domestic arbitral awards in a more restrictive manner.

It would seem that in recent times the Indian courts have changed their attitude in dealing with public policy and enforcement of arbitral awards. In Penn Racquet Sports v Mayor International Ltd the Delhi High Court rejected a challenge to the enforcement of an ICC award, holding that the award was not contrary to the public policy of India. In reaching its decision, the Indian court held that the ground of public policy for the purposes of enforcement of foreign awards should be interpreted narrowly. The Delhi High Court held that to successfully invoke this ground, the applicant must show some cause which is more than a mere violation of Indian law. The arbitral award must violate the fundamental policy of Indian law or be contrary to the interests of India, justice or morality.

Most of the proposals in the consultative paper have been effected when on 23 October 2015, the Government of India amended the Arbitration and Conciliation Act, 1996. Although the expectation was that the 1996 Act would either be amended or repealed, the President of India issued an ordinance [ which can be done when the legislative arm of government is not in session]. Thereafter, after being passed by the two legislative houses in December 2015, the Arbitration and Conciliation Amendment Act 2015 was notified in the official gazette on January 1 2016, which has now amended the provisions of the 1996 Act.

Funke Adekoya

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