Report No. 246

Judiciary and Arbitration

19. It is thought in some quarters that judicial intervention is anathema to arbitration, and this view is not alien to a section of the arbitration community even in India. The Commission however, does not subscribe to this view. The Commission recognizes that the judicial machinery provides essential support for the arbitral process. The paradox of arbitration, as noted by a leading academic on the subject, is that it seeks the co-operation of the very public authorities from which it wants to free itself.

20. The obvious starting point for any discussion on the role of the judiciary in arbitration is section 5 of the Act, which itself is derived from Art 5 of the Model Law, which brings reduced judicial involvement in the arbitral process and a consequential increase in the powers of the arbitral tribunal. The position is all the more stark in India, given the changed regime from the 1940 Act which envisaged a much larger and more active role for the judiciary.

However, notwithstanding the reduced role of the Courts and the enhanced powers accorded to the arbitral tribunal in the Act, it is necessary to carefully calibrate the balance between judicial intervention and judicial restraint. In this context, one may refer to the words of Lord Mustill in the foreword to the book O.P. Malhotra, Law and Practice of Arbitration (1st edn, 2002, LexisNexis) -

"First, there is the central importance of a harmonious relation between the courts and the arbitral process. This has always involved a delicate balance, since the urge of any judge is to see justice done, and to put right injustice wherever he or she finds it; and if it is found in an arbitration, why then the judge feels the need to intervene.

On the other side, those active in the world of arbitration stress its voluntary nature, and urge that it is wrong in principle for the courts to concern themselves with disputes which the parties have formally chosen to withdraw from them, quite apart from the waste of time and expense caused by gratuitous judicial interference. To a degree both views were right, and remain so; the problem has been to give proper weight to each of them. It was an unhappy feature of discourse on arbitration in the century just past that the legitimate arguments which could be advanced in favour of one or another came to be expressed, in some instances at least, with quite unnecessary vigour.

Fortunately, in recent years wiser counsels have prevailed, and it has, I believe, generally come to be recognised on both sides of the procedural divide that the courts must be partners, not superiors or antagonists, in a process which is vital to commerce at home or abroad...

Within a working lifetime, international arbitration has become a business, not a calling, often involving very large sums, and bringing in its train substantial monetary earnings for all concerned. Perhaps inevitably, there has been a concurrent decline in the standards of at least some - certainly not all - of those who take part.

It is no good wringing hands about this, for it is a fact to be faced, and part of facing them is to recognise that now the influence of peer pressure and indeed of simple honour has waned and some other means must be found of protecting this voluntary process from those who will not act as they have agreed.

In the end, like it or not, only the courts can furnish this protection, and even the most enthusiastic proponents of party autonomy are bound to recognise that they must rely on the judicial arm of the state to ensure that the agreement to arbitrate is given at least some degree of effect. It is no good complaining that judges should keep right out of arbitration, for arbitration cannot flourish unless they are ready and waiting at the door, if only rarely allowed into the room.

It is however, equally important that the balance is maintained by a recognition by the courts that just as arbitration exists only to serve the interests of the community, so also their own powers are conferred only to support, not supplant, the extra-judicial process which the parties have chosen to adopt. Anyone who has been faced in a judicial capacity with a decision which seems wrong, can sympathise with the impulse to decide the issue again, this time correctly; yet in the field of arbitration it is an impulse which must, at all costs, be resisted, except in those circumstances where the legislature has explicitly created the right of appeal...

Precisely the same considerations apply to procedures in the arbitration. The parties have chosen to arbitrate, not litigate. By doing so they have selected the procedures laid down by the relevant legislation or institutional rules. If there are none, then they have deliberately entrusted the choice of procedures to the arbitrator himself. This is another choice which the court must respect. The Judge may think, and think rightly, that the choice is unwise, that a different procedure would better have suited the dispute in hand.

Or he may believe, again rightly, that what the arbitrator did was inefficient or even in a degree unjust. But his or her task is not to re-try the case, but simply to ensure that the method of dispute resolution on which the parties agreed is what they have in the event received. Moreover, only where the departure from the agreed method is of a degree which involves real injustice, is the court entitled to intervene, and even then the intervention must be so crafted as to cause the minimum interference with the forward momentum of the process."

21. In the course of the preparation of the Report, and as an underlying theme behind the proposed amendments, the Commission has strived to adopt a middle path to find an appropriate balance between judicial intervention and judicial restraint.