含羞草社区

The intervention of courts in arbitral awards reduces the effectiveness and attractiveness of arbitration, writes advocate, arbitrator and former judge Rishabh Gandhi

Arbitration has become a preferred mechanism for resolving commercial disputes due to its efficiency, confidentiality and finality. However, the role of judicial review in arbitration remains a topic of debate. Courts must balance procedural integrity with minimal interference in arbitral autonomy. While judicial oversight can prevent arbitral errors, excessive intervention risks undermine the very purpose of arbitration.

This article examines judicial review in India, compares it with other major Asian jurisdictions and explores the evolving jurisprudence to determine best practices.

Judicial review in arbitration

含羞草社区 arbitration framework is governed by the Arbitration and Conciliation Act, 1996, which provides for judicial intervention at various stages, including the appointment of arbitrators (section 11), interim relief (section 9) and setting aside arbitral awards (sections 34 and 48). Despite its intent to minimise court interference, Indian courts have historically taken an expansive approach, particularly in domestic arbitrations.

In ONGC v Saw Pipes (2003), the Supreme Court broadened the scope of “public policy”, allowing courts to set aside arbitral awards on grounds of patent illegality, increasing judicial interference and contradicting the principle of finality in arbitration. In Venture Global v Satyam Computers (2008), the court permitted factual re-examination, weakening the autonomy of arbitral tribunals. However, BALCO v Kaiser Aluminium (2012) marked a shift by restricting judicial intervention in foreign-seated arbitrations, aligning India with international best practices.

The judiciary refined its stance in Ssangyong Engineering v NHAI (2019), where the court emphasised a restrictive interpretation of “public policy”, confining it to procedural irregularities rather than substantive errors. The most recent decision, in NTPC v Deccan (2023), reaffirmed the principle of minimal judicial interference, reinforcing the autonomy of arbitration in India.

A significant precedent in defining public policy in arbitration was laid down in Renusagar Power Co Ltd v General Electric Co (1994), where the Supreme Court clarified that the enforcement of foreign arbitral awards could be refused only on grounds of the fundamental policy of Indian law, the interests of India, or justice and morality. This judgment distinguished between domestic and international arbitration, limiting the judicial review in the latter.

In Associate Builders v DDA (2015), the court clarified that an award could be set aside only if it was against the fundamental policy of Indian law, irrational or perverse, reinforcing that courts should not interfere merely because an alternative view is possible. In Hindustan Zinc Ltd v Friends Coal Carbonisation (2006), the Supreme Court ruled that section 34 of the arbitration act does not permit a reappraisal of evidence, limiting judicial review to procedural defects. This ruling has been instrumental in restricting excessive court interference.

A five-judge bench of the Supreme Court, led by Chief Justice Sanjiv Khanna, along with Justices BR Gavai, Sanjay Kumar, AG Masih and KV Viswanathan, is hearing petitions on whether courts can modify an arbitral award under sections 34 and 37 of the act. The decision in Gayatri Balaswamy v Isg Novasoft Technologies Ltd is expected to impact judicial review and the enforcement of arbitral awards in India.

Comparisons in Asia

Singapore: Minimal intervention model. Singapore’s International Arbitration Act adopts a strict non-interventionist approach. Courts may review arbitral awards only on limited grounds such as jurisdictional errors or procedural unfairness. In AKN v ALC (2015), the Court of Appeal reaffirmed that a judicial review should not extend to reassessing the merits of arbitral decisions, reinforcing Singapore’s status as a global arbitration hub.

Hong Kong: UNCITRAL-based framework. Hong Kong follows the UN Commission on International Trade Law (UNCITRAL) model law, which restricts judicial interference. In Hebei Import & Export Corporation v Polytek Engineering Co Ltd (1999), the Court of Final Appeal held that arbitral awards should not be set aside unless there is a clear violation of procedural fairness, ensuring consistency and finality.

China: Becoming arbitration-friendly. Historically, Chinese courts had significant control over arbitration under the Arbitration Law of the People’s Republic of China. However, recent reforms have restricted judicial reviews to procedural defects. The CIETAC v Haifu (2015) decision marked a shift towards greater arbitral autonomy, promoting China as a viable arbitration venue.

Japan: Balanced approach. Japan’s Arbitration Act (2003) allows limited judicial reviews, ensuring minimal court interference. In Toyo Engineering v Government of Iran (2011), the Supreme Court upheld the principle of non-interference, reinforcing the finality of arbitral awards.

Malaysia: Pro-arbitration jurisdiction. Malaysia’s Arbitration Act (2005), amended in 2018, limits judicial reviews to fundamental procedural irregularities. The Jan De Nul v PT Emas (2016) case reaffirmed the courts’ reluctance to interfere in well-reasoned arbitral awards, strengthening Malaysia’s arbitration framework.