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?
By virtue of the amendment, the extent to which the defence of “Public policy” can be used to resist enforcement proceedings in India of an international commercial arbitration award or a foreign award has been restricted. The definition of public policy in now limited to circumstances where there is evidence of fraud, corruption, or contravention of “the fundamental policy of Indian law” or “the most basic notions of morality or justice”. The amendment has also narrowed the scope of “public policy” to include only awards that are: (i) induced or affected by fraud; or (ii) in contravention with the fundamental policy of India; or (iii) in conflict with the most basic notions of morality or justice.
Additionally, it should be noted that another provision of the amendment Act (amending section 2A of the Act) has been added to ensure that an arbitral award cannot be set-aside on the ground of an erroneous application of the law or by the re-evaluation of evidence.
Turning to Malaysia, their courts claim to construe the public policy exception narrowly, but they have rendered decisions that call that claim into question. In Sami Mousawi v. Kerajaan Negeri Sarawak , a court refused to enforce an award that upheld a contract for consultancy services where the consultant failed to meet the Malaysian standards for certification of architects, engineers and surveyors. Also, in Harris Adacom Corp. v. Perkom Sdn Bhd the court held that it would be contrary to public policy to enforce an award in favour of an Israeli company, due to Malaysia’s embargo on trade with Israel.
The Philippines also seems to lean towards giving a wide interpretation to the scope of the public police defence. A court in Manila in the Philippines refused enforcement of a foreign arbitral award because it found that an award made in Singapore violated Philippine public policy because it failed to apply Philippine law as required by the contract, caused unjust enrichment, applied the ‘costs follow the event’ rule, and awarded attorney fees .