Abstract

This paper looks at how public policy is used as a reason to cancel arbitration awards, focusing on the challenge of balancing the finality of arbitration with protecting societal and legal values. Arbitration is known for being efficient and giving parties the control, but courts can step in when an award violates public policy. However, public policy is not clearly defined and is applied differently in various legal systems, leading to confusion. The paper tries to explains why public policy is important in arbitration. It reflects societal values, ensures fairness, and protects weaker parties. It discusses key sections of India’s Arbitration and Conciliation Act, 1996, such as Section 34 (which allows the courts to cancel awards that violate public policy) and Section 48 (which governs the enforcement of the foreign awards). Public policy is explored in two different ways: substantive issues like fraud and corruption, and procedural fairness, such as ensuring all parties get a fair chance to present their case. The interpretation of public policy by Indian courts has varied over time. Various cases show how courts have alternated between strict and broad views of public policy. The 2015 amendment to the Arbitration Act aimed to narrow the use of public policy as a reason to cancel awards, aligning Indian arbitration laws with the international standards like the New York Convention and the UNCITRAL Model Law, to reduce court interference and support arbitration finality. Globally, frameworks like the New York Convention and UNCITRAL Model Law suggest using public policy as an exception only in rare cases to maintain trust in arbitration. They emphasize that arbitration decisions should follow the important legal principles without unnecessary court involvement. while public policy is important for protecting fairness and societal values in the arbitration, its inconsistent use can create various challenges. Finding the right balance between respecting the finality of arbitration and safeguarding public interest is essential. Recent reforms aim to make arbitration clearer and more aligned with global practices, enhancing its reliability as a method to resolve disputes.

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