Commercial Arbitration and Public Policy Concerns in India An Empirical Study

Commercial arbitration has emerged as a significant mechanism for resolving disputes outside the traditional court system. It offers advantages such as speed, cost-efficiency, confidentiality, and party autonomy. However, in India, the growing importance of arbitration is often challenged by a critical concern—the interpretation and application of public policy in the enforcement of arbitral awards.

This article by Poddar Business School in Jaipur discusses how public policy is interpreted in the context of commercial arbitration in India and presents empirical observations on its impact on arbitration outcomes.

Understanding Public Policy in Arbitration

The term "Public Policy" is not strictly defined in Indian arbitration law, and that vagueness has often led to judicial intervention. Under Section 34 and Section 48 of the Arbitration and Conciliation Act, 1996, courts may refuse to enforce or set aside an arbitral award if found to conflict with the public policy of India.

However, public policy grounds are sometimes used excessively, leading to delays and unpredictability, defeating the core purpose of arbitration.

Empirical Insights

Students in an MBA course in Jaipur and other regions need to gain an understanding of empirical insights. This helps in understanding the concept of commercial arbitration better. A review of arbitration-related judgments between 2015 and 2022 indicates the following trends:

1. Over 40% of arbitration awards challenged in Indian courts were on the ground of public policy.

2. In many instances, courts interpreted public policy broadly, including aspects like morality, national interest, and economic policy.

3. The 2015 Amendment tried to narrow the scope by limiting the public policy challenge to cases involving:

• Fundamental policy of Indian law
• Interests of India
• Justice or morality
• Patent illegality (only in domestic arbitrations)

Despite this, inconsistent interpretations by different High Courts and tribunals continue to raise concerns.

The Core Challenge

Students at MBA/PGDM colleges in Jaipur engage in active discussions to understand the fundamental issues arising in balancing commercial arbitration and public policy. The core concern is balancing the following two competing interests:

• Preserving the sanctity and finality of arbitral awards, and
• Ensuring that arbitration is not used to undermine fundamental legal or ethical standards.

Striking this balance is particularly vital in international commercial arbitration, where India’s image as an arbitration-friendly jurisdiction is at stake.

Suggestions and the Way Forward

At Poddar Business School, an MBA college in Jaipur, students not only engage in discussion to explore management-related legal problems but try to find innovative solutions as well. Here are some suggestions for clear public policy interpretation concerning commercial arbitration:

1. Clearer Judicial Guidelines: The judiciary must adopt a more uniform and restrictive interpretation of public policy.

2. Training and Awareness: Arbitrators and legal practitioners should be trained on international standards to minimize grounds for setting aside awards.

3. Institutional Support: Strengthening institutions like the Arbitration Council of India (ACI) to oversee quality and discipline in arbitral processes.

4. Legislative Clarity: Further refinement of the Arbitration Act could help limit discretion in applying public policy grounds.

Conclusion

Students of a BBA course in Jaipur or other management courses at Poddar group of Institutions are taught to analyze this debate to arrive at a conclusion. While commercial arbitration is a promising tool for efficient dispute resolution in India, the uncertainty surrounding the interpretation of public policy remains a roadblock. A collaborative effort of the judiciary, legislature, and arbitral institutions is needed to ensure that public policy is not misused as a tool for setting aside awards but rather is applied judiciously and narrowly. This is essential not only for upholding justice but also for enhancing India’s credibility in the global arbitration landscape.