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Dub
08

The decision of the Supreme Court of India in ONGC v. Saw Pipes Ltd 32 has been the subject of much criticism from the international arbitration community. The Supreme Court considered the scope and scope of the Tribunal`s jurisdiction under Section 34 of the Act. The Court first found that an arbitral award is manifestly unlawful if it is contrary to the material laws of India. It then broadened the meaning of the term „India`s public policy“ and indicated that the term should have a broader meaning and that the concept of public order converged on an issue that concerns the public good and the public interest. Moreover, it cannot be established that an arbitral award, which is manifestly contrary to the law, is in the public interest. In addition, the Court held that an arbitral award can be set aside if it is contrary to the fundamental policy of Indian law, the interests of India or to justice or morality, or if it is manifestly illegal. This position of the Supreme Court has been strongly criticized because it has opened the floodgates, giving the parties more leeway to challenge the arbitration awards. In Icomm Tele v. Punjab State Water Supply – Sewerage Board, the Supreme Court of India had to consider a compromise clause requiring the applicant to pay 10 per cent of his rights in arbitration proceedings before availing himself of the provisions of arbitration. The clause was part of the Punjab State Water Supply – Sewerage Board tender.

The Supreme Court held that such a clause would not only violate the principle of obstruction of the judicial system, but would render the arbitration process inoperative and costly. Accordingly, the Tribunal set aside the requirement for a 10 per cent pre-caution and found that the parties could initiate arbitration proceedings and that this requirement in the compromise clause could be separated from the rest of the compromise clause. the parties (unless otherwise agreed) must refer the dispute to an arbitrator with an external arbitrator (who cannot be the same person as the mediator) agreed by the parties or appointed by the institution`s president in the absence of an agreement.“ The starting point of Indian law is that there must be reciprocity in an arbitration agreement. The Delhi Supreme Court has held that an asymmetric compromise clause is not valid (or even an arbitration agreement) until the party exercises its ability to settle – before that, there is a lack of reciprocity (Union of India vs Bharat Engineering Corporation ILR 1977 Delhi 57).