Law Commission submits a report on Arbitration law, suggests changes in “public policy”

The Law Commission of India has reportedly submitted a report on changes that should be made in Arbitration and Conciliation Act, 1996. The report includes the Commission’s views on the term “public policy” and the Commission has incorporated various judgments given by the Apex Court regarding the same.

It has reportedly said that, proposed Section 34(2)(b)(ii) be replaced with a fresh clause saying the award will be treated as in conflict with 'public policy' only if "the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 of Section 81; or if it is in contravention with the fundamental policy of Indian law; or it is in conflict with the most basic notions of morality or justice".

 It has also suggested that the aspect of patent illegality on the face of the award should also be a ground for setting aside of the award and that award should not be set aside on the grounds of mere erroneous application of law or re-appreciation of evidence.

Earlier, the Law Commission had submitted a report on Arbitration law in August 2014 but it was on Friday that it submitted a fresh report, incorporating the latest judgments of the Supreme Court.

The report also states, "The UK government has announced that the legal services sector contributed 20.9 billion to the economy in 2011, a majority of which would have come from arbitration given that London is the preferred centre for arbitration". Following the same, the report aims to suggest amendments that will promote international arbitration in India.

The Union government was also working to bring in an Ordinance in relation to Arbitration and Conciliation Act, 1996 but then decided to present a Bill regarding the same in upcoming budget session of the Parliament.