NAFED V. ALIMENTA: UNPREDICTABILITY IN THE APPLICATION OF THE ‘PUBLIC POLICY’ EXCPETION

Abstract

The ‘unruly horse’ of public policy continues to be one of the most controversial impediments to the enforcement of foreign arbitral awards. The ‘public policy exception’ is one of the few grounds for refusing the recognition or enforcement of a foreign arbitral award under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, and the following United Nations Commission on International Trade Law Model Law on International Commercial Arbitration, 1985. Whilst there is no international consensus on definition of ‘public policy’, many established arbitral jurisdictions have adopted a pro- enforcement approach by defining it narrowly, and only exceptionally refuse the enforcement of a foreign award on this ground. However, many national courts that have taken diverse approaches and interpreted the concept erratically. The lack of uniformity and unpredictability in the interpretation of ‘public policy’ and the application of the exception in refusing enforcement of foreign awards in the Indian context, has been brought to light by the recent ruling of the Supreme Court in the NAFED v Alimenta SA Case. This article would trace the evolution of the public policy jurisprudence in India by examining the judicial practice in applying the public policy exception to foreign awards, and would further compare the Indian approach with that of other arbitral jurisdictions. It would analyse the case of NAFED v Alimenta decision and consider some of the implications this decision would have on the future of international commercial arbitration in India, particularly, in view of recent governmental efforts to make India an arbitration hub. It would finally recommend bringing uniformity in the interpretation of ‘public policy’ and suggest a restrictive scope of judicial interference in the enforcement of foreign awards.