DOCTRINE OF PUBLIC POLICY FOR THE PURPOSE OF ENFORCEMENT OF FOREIGN ARBITRAL AWARD UNDER GENEVA CONVENTION

Under Arbitration and Conciliation Act, 1996, (“the Act”) there are three provisions available to challenge an Arbitral Award namely under Section 34 of Part I against the Domestic Arbitral Award, Section 48 of Part II, Chapter I, Enforcement of Certain Foreign Awards, New York Convention Awards and under Section 57 of Chapter II, Geneva Convention Awards. The platforms under the said provisions vary from each other; however, “Public Policy” is one common concept which the aforementioned provisions are based upon. The language used in the above mentioned provisions illustrate the enforcement under each provision is different.

To place it precisely this write up is to analyze the recent Supreme Court judgment in ‘Shri Lal Mahal Ltd v Progetto Grano Spa’ reported in (2014) 2 SCC 433, wherein the Apex Court has overruled its earlier decision in ‘Phulchand Exports v O.O.O. Patriot’, (2011) 10 SCC 300. In the ‘Shri Lal Mahal Ltd’case, the Supreme Court has particularly dealt about the enforcement of a Foreign Arbitral Award under the Geneva Convention. Hence this write up is also narrowed down to analyze the particular point.

At the very outset, the doctrine of Public Policy has been evolved and enhanced by the Courts in India in accordance with the facts and circumstances corroborating with growth and developments. However, first in ‘Renusagar Power Co. Ltd v General Electric Co’, 1994 Supp 

(1) SCC 644, the Supreme Court had an opportunity to critically analyze the concept of Public Policy in depth. In ‘Renusagar Power’ matter the Apex Court carried out an exhaustive comparative analysis of judicial precedents of other sovereign countries and higher courts of countries such as United States of America, United Kingdom, Canada and Australia. Subsequently, the understanding was imported and interpreted to understand the doctrine of Public Policy in an Indian perspective. The Apex Court in Para 66 of the ‘Renusagar Power judgment; after observing all criteria, observed that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to:

(i)            fundamental policy of Indian law; or

(ii)          the interests of India; or

(iii)        justice or morality.

This interpretation was widened providing more scope for challenging the foreign award under the doctrine of Public Policy by the Supreme Court judgment in ‘ONGC Ltd v Saw Pipes Ltd’, (2003) 5 SCC 705. In the ‘ONGC case’, the Supreme Court while confirming the understanding given in ‘Renusagar Power’s case ’ (supra) supplemented one additional interpretation to the existing narrower meaning of the doctrine of Public Policy laid down in ‘Renusagar Power’ case. Thus, it was observed that an arbitral award shall be set aside if it is “patently illegal”. Further, it was also observed that, an award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court and such award is opposed to public policy and is required to be adjudged void.

Finally, as a new breath of air, the Supreme Court in its recent judgment in ‘Shri Lal Mahal Ltd’ case has overruled its earlier view on the doctrine of Public Policy.

The Supreme Court has observed that the application of doctrine of Public Policies of India for the purpose of Section 48(2)(b) of the Act is comparatively limited when it comes to application of the same expression in respect of the domestic award under section 34 of the Act. The Supreme Court further observed that the ‘enforcement court’ is not expected to re-determine question of facts while in the process of enforcement of a foreign arbitral award. The scope of inquiry under Section 48 does not permit review of the foreign award on merits. Procedural defects like admitting inadmissible evidence or ignoring/rejecting the evidence which may be binding on parties’ et al. in the course of foreign arbitration cannot necessarily excuse or impede an award from being enforced in India on the ground of ‘Public Policy’.

It has been further observed that while considering the enforceability of foreign awards, the court does not exercise appellate jurisdiction over the foreign award. Further, it it cannot enquire as to the fact/s that while rendering foreign award, some error has been committed. Under Section 48(2) (b), the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to either fundamental policy of Indian law or the interests of India or justice /morality.    

CONCLUSION:

Thus, the foreign award being an international award covered by New York Convention is enforceable in India under Section 48 of the Arbitration Act, 1996 notwithstanding the plea that it was opposed to Indian Law. Further, the defense of ‘violation of doctrine of Public Policy’ with reference to a domestic award stands on a different pedestal compared to that of a foreign Arbitral award under New York Convention.