Project on

“Arbitration Policies Unplugged: The India-UAE Divergence”

International Commercial Arbitration

CONTINUOUS EVALUATION COMPONENT SUBMISSION

Submitted by: Nishant Upadhyay

Roll No. 19BAL024

 "Arbitration Policies Unplugged: The
India-UAE Divergence"
The New York Convention

The United Nations diplomatic conference initially ratified the New York Convention, also
known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
on June 10, 1958, and it went into effect on June 7, 1959. The treaty in question is widely
regarded as a highly significant agreement within the realm of international trade law.
Frequently characterized as a fundamental pillar within the realm of international arbitration
The courts of the contracting states are obligated to uphold and enforce an agreement to
engage in arbitration when presented with a legal proceeding pertaining to a subject matter
that falls within the scope of the arbitration agreement. Additionally, these courts are required
to acknowledge and provide legal force to awards issued in other states, with only a few
specified and restricted exceptions. Currently, the convention has been ratified by 156 state
parties.

Article V of the New York Convention outlines the specific and comprehensive reasons for
which a competent authority in the contracting state where recognition and enforcement are
sought may decline to recognize and enforce an arbitral ruling.

The criteria for declining to acknowledge an award under the Convention and other domestic
arbitration legislation are delineated as follows: There are several grounds on which a party
may seek to challenge an arbitration. These include:

(a) the absence of a valid arbitration agreement or exceeding the jurisdiction of the
tribunal;
(b) procedural irregularities in the arbitration process;
(c) allegations of bias on the part of the arbitral tribunal;
(d) a violation of public policy;
(e) disputes regarding the arbitrability of the subject matter;
(f) concerns regarding the enforceability or binding nature of the award; and
(g) the annulment of the award in the jurisdiction where the arbitration took place.
Indian Perspective

The enforcement process for a foreign arbitral award involves a three-stage procedure. The
initial phase involves the awardee submitting an application under Section 47 of the
Arbitration Act, accompanied by all relevant supporting papers. The subsequent stage
involves the presentation of a defense by the opposing party in accordance with Section 48 of
the legislation, accompanied by the submission of all pertinent information. Finally, the court
will carry out the enforcement of the award as stipulated in Section 49.
The party against whom a foreign award is claimed may request enforcement refusal if it can
prove to the court that

The agreement mentioned in Section 44 may be invalid if the parties involved are ineligible
under the applicable law or if the agreement is invalid under the law of the nation where the
award was made.

• The party relying on the award was not adequately informed of the arbitrator's
appointment or proceedings or was unable to present their case.
• The award addresses problems not addressed by the arbitration criteria or terms or
includes rulings on excluded subjects:
• The arbitration method or authority composition did not comply with the parties'
agreement or the country's legislation.
• The award may not be legally binding or may have been overturned or suspended
by an incompetent authority or in line with relevant legislation.
• A dispute cannot be addressed by arbitration under Indian law;
• The award's execution contradicts Indian public policy.

The words "only" before the grounds limit them to 48. Only reasons (a)–(e) (1) apply.
Section 48(2)(b) allows rejection of the award if it violates Indian public policy.

Public Policy
The first such case in Indian law was Renusagar Power Co. Ltd. v. General Electric Co1.
Even though the case involved abolishing laws, the precedent is still valid. The Supreme
Court set public policy guidelines for international awards in this case. It decided that the
court could not consider the merits of a state public policy award while determining its
legitimacy. It can only comment on its legitimacy based on public policy norms. It also

1
1994 Supp (1) SCC 644
established public policy guidelines for award validity evaluation. Enforcement may only be
denied if the award was against:

1. The fundamental principles of Indian law;

2. India's interests;
3. justice or morality.

The subsequent determination pertaining to international public policy was made in the case
of ONGC Ltd. v. Saw Pipes Ltd2. The Supreme Court's ruling expanded the existing test of
public policy established in the Renusagar case. In addition to the grounds outlined in the
Renusagar case, the court included a new criterion for determining breach of public policy,
namely the presence of "patent illegality" in the award. The aforementioned act of illegality
must be fundamentally rooted in the essence of the issue in order to be deemed contrary to
public policy. An award shall not be invalidated if the illegality in question is deemed to be of
a trifling nature.

The Supreme Court further expounded on this matter in the case of Associate Builders v.
DDA3, whereby the court established three legal concepts pertaining to the notion of basic
policy in India. The assertion was made that an award would be reserved exclusively for
cases that exhibit basic issues and elicit a strong moral reaction from the court. The idea of
public policy under arbitration law underwent additional modifications with the enactment of
the amendment in 2015.

The modification explicated the notion and established the criteria for an accolade to
contravene the public policy of India, encompassing:
(i) The legitimacy of the prize is compromised due to fraudulent or corrupt practices.

(ii) This action is in violation of the fundamental policy of Indian law.

(iii) This stance contradicts fundamental principles of morality and fairness.

United Arab Emirates

The United Arab Emirates (UAE) possesses a distinctive characteristic in that it is a nation
characterized by the coexistence of two distinct legal systems and the presence of three
distinct sets of arbitration laws. The question of public policy continues to be a complex and

2
(2003) 5 SCC 705
3
(2015) 3 SCC 49
contentious one, and the absence of a cohesive set of principles, particularly within the
onshore system, has resulted in a state of ambiguity.

Overview
In 2006, the United Arab Emirates (UAE) formally ratified the New York Convention. In
2018, the United Arab Emirates (UAE) introduced a recently enacted arbitration legislation,
commonly referred to as the UAE Arbitration legislation, which draws heavily upon the
UNCITRAL Model Arbitration Law. In line with prevailing practices in many jurisdictions,
the invocation of public policy serves as a valid reason for contesting the implementation of a
foreign arbitration judgment or the annulment, either in part or in its entirety, of a domestic
arbitration verdict.
With two legal systems and three sets of arbitration laws, the United Arab Emirates (UAE) is
a unique nation. Public policy is still a complex topic, and ambiguity has resulted from the
absence of any logical rules, especially in the onshore regime.

Two common law ‘offshore’ jurisdictions in the UAE are the Abu Dhabi Global Market
(ADGM) and the Dubai International Financial Centre. These nations have English/common
law civil and commercial legal and regulatory frameworks. DIFC Law No. 1 of 2008 and
ADGM Arbitration Regulations 2015 are their arbitration laws. These statutes are based on
the UNCITRAL Model Law and provide comparable public policy exclusions for arbitration
award enforcement/annulment based on “public policy of the UAE”.

Public policy onshore

The UAE Arbitration Law does not differentiate between matters of domestic and
international public policy. The provision explicitly states that an arbitration award must not
be in opposition to the

"public order and morality of the state."

Determining whether something pertains to public policy, order, or morality is an ongoing

process that lacks an exhaustive list. Consequently, what was once deemed a tenet of public
policy may no longer be considered so in the future, and conversely.

Article 3 of the UAE Civil Code delineates the categories of subjects that qualify as matters
of public policy. Nevertheless, the definition is exceedingly inclusive and encompasses
matters pertaining to:
"[…] aspects of personal status, including but not limited to marriage, lineage, inheritance,
and inheritance; systems of government; freedom of trade; wealth circulation; regulations
governing individual ownership; and other societal-founding principles and rules; in a way
that does not contradict the definitive provisions and fundamental tenets of the Islamic
sharia."

Public policy offshore

The offshore regimes, especially the ADGM, are young; therefore, public policy advice is
sparse.

In Loralia Group LLC v. Landen Saudi Company [2018]4, the DIFC Court confirmed that its
public policy is the same as the UAE's; however, the consequences may differ.
In Lucinethlucineth v Lutinalutina Telecom Group Ltd [2019]5, the court outlined when to
use a public policy argument:

• where the award fundamentally offends the most basic and explicit principles of
justice and fairness; and
• where the award is contrary to the essential morality of the state in question or
discloses errors that affect the basic principles of public and economic life.

4
Judgment of H.E. Justice Shamlan Al Sawalehi, Loralia Group LLC v Landen Saudi Company [2018] DIFC ARB
004 dated 20 June 2019.
5
Order with reasons of H.E. Justice Sir Jeremy Cooke, Lucinethlucineth v Lutinalutina Telecom Group Ltd [2019]
DIFC ARB 005, dated 8 August 2019.
Conclusion

UAE has two legal systems and three arbitration statutes. The systems may differ, but the
reference appears to be to public policy, with various consequences. This comprehensive
term of public policy in the UAE Civil Code includes “freedom of trade”, “circulation of
wealth”, and “rules and foundations upon which society is based”. This has caused a lack of
consensus, and public policy is still being defined differently. India on the other hand has
over a period of time finally through help of plethora of cases and due to the immediate needs
of people has finally reached a conclusive definition of Public Policy in Associate builder
case which were added to the Arbitration Act in 2015. Also a striking difference between the
approach of judiciary is seen where in India public policy was determined in a secular
manner by considering law whereas UAE’s public policy is dominated by Islamic Sharia law.