To address this issue, the 2015 amendments to the Arbitration and Conciliation Act had significantly narrowed the possibility of challenging an arbitration award on grounds of public policy. The Tata-DoCoMo verdict now clarifies the extent of this defence even further. “An award of damages is considered as a distinct category, as compared to an award directing a party to purchase shares at a specified value,” notes Karia.
Since the judgment forms a strong persuasive precedent for future cases, experts also expect the decision to bolster international investor sentiment and boost foreign direct investments. However, not all are in support of the court’s ruling. Many have expressed concern over the decision to reject the RBI’s ability to contest the enforceability of the award by terming the enforcement of the LCIA decision as an inter-party matter.
“If an arbitrator in a private dispute between parties makes important findings on the powers and jurisdiction of a statutory authority and regulator, then surely such a body should, at least, have an opportunity to put forth its position before the court of law,” says Krishnayan Sen, partner, Verus Advocates.
According to some, the verdict poses a serious threat to the supremacy of government regulations, which may, in effect, be circumvented to the detriment of the nation. Experts have also highlighted the possibility of collusive action by private parties to obtain a convenient award and wriggle out of statutory approvals that would otherwise have to be obtained. “In such cases, unless the regulator is given an opportunity to be heard or intervene, the court may not even realise that the parties could be acting in a clear abuse of the judicial process by seeking to obtain the court’s stamp on a dubious award,” adds Sen.
The verdict has also lent support to those who blame the country’s capital control restrictions and protectionist laws, which they believe are the genesis of such issues.
Regardless of the contrasting reactions to this judgment, there is a consensus that an Indian court must look into the wording of any international award and its impact on Indian public policy. Many of the conclusions arrived at by the Delhi High Court in this case may eventually have to be examined by the Supreme Court before a more comprehensive stance can finally be arrived upon.
Implications of the verdict
Increasing the scope of enforcement for foreign arbitration awards
Recognising a separate category of an award of damages
Award of damages not a violation of public policy
No role of regulator in enforcement of private arbitration award