Minimal intervention principle: A look across the border

Sarmad Sattar / June, 2022

There are currently two pieces of legislations dealing with Arbitration in Pakistan; the Arbitration Act, 1940, and the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011. It is indeed striking to note that the governing law on domestic Arbitration in Pakistan, pre-dates back to 1940, with miniscule changes, making it unpropitious when compared with laws of foreign jurisdictions. In contiguity, the Arbitration and Conciliation Act, 1996, was introduced in India, to amend and unify domestic and international commercial arbitrations and to enforce foreign arbitral awards. The Arbitration and Conciliation Act, 1996, was later amended from time to time, in 2015, 2019, and more recently, in 2021, what appears to be the unwavering efforts of the Indian Parliamentarians to tinker with the intent of Arbitration and Conciliation Act, 1996, and particularly, to limit the undue intervention of Courts. Whereas, there is a need for the governing arbitration laws in Pakistan, to be revisited and made more coherent. With no governmental domestic arbitral institutions, there are no arbitral rules, except for some which are devised by Courts within the framework of the 1940 Act.

A somewhat similar position is encapsulated in Section 34 of the Arbitration and Conciliation Act, 1996, which engulfs the legislative policy of minimal judicial interference in arbitral awards. It is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985, which does not give any power to a Court, hearing a challenge to an award, to modify such an award. This issue had been conclusively decided in the eminent Indian case McDermott International Inc. v. Burn Standard Co. Ltd., wherein it was held that the Arbitration Act only provided for a minimum supervisory role of the Courts, and envisaged limited judicial intervention, which does not include correcting errors of the arbitrators. It was observed over time that the law laid down in McDermott had been followed in other decisions – Kinnari Mullick v. Ghanshyam Das Damani, and Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies Pvt. Ltd., which also held that Section 34 did not contain any power to modify an arbitral award. As a corollary, Section 34 of the Arbitration Act was also weighed up against the corresponding provisions for challenging an award under the Arbitration laws of England, the United States, Canada, Australia, and Singapore. The Indian Supreme Court noted that in each of these legislative measures, there are express provisions which permit the varying of an award, unlike Section 34 of the Arbitration Act. Perhaps, it is of interest to introspect provisions in the India’s Arbitration and Conciliation Act, 1996, as reinforced by judicial precedents – that allow for such judicial intervention and to contrast them with the increasing judicial recognition received by the Indian Courts. The top Court also noted that to assimilate the Section 34 jurisdiction with the revisional jurisdiction under Section 115 of the Code of Civil Procedure, 1908, is fallacious. The Court noted that Section 115 of the Code of Civil Procedure, 1908, expressly sets out the three grounds on which a revision may be entertained and then states that the High Court may make such order as it thinks fit. The Indian jurisprudence on Court interference in arbitration has gone through a long and painful, almost soul-searching journey.

The Supreme Court of India handed down significant judgments on the scope of power of a Court hearing a challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The Supreme Court reiterated that there is no power under Section 34 to modify or vary an arbitral award. A challenge to the arbitral award can only lie if it was found to be perverse or erroneous in law. Nonetheless, an award based on an alternative and reasonable interpretation of the law does not make it perverse. In a recent pronouncement, a three-member bench, led by the Chief Judge of India, in N.V. Ramana, which limited the scope of interference by Courts held:

“In order to succeed in a challenge against an arbitral award, it must be shown that the award of the arbitrator suffered from perversity or an error of law or that the arbitrator has otherwise misconducted himself. Merely showing that there is another reasonable interpretation or possible view on the basis of the material on the record is insufficient to allow for the interference by the court”

In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether the Parliament intended this result. The Indian Parliament has very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996. It is only for the Parliament to amend the aforesaid provision in the light of the experience of the Courts in the working of the Arbitration Act, 1996, and to bring it in conformity with other legislations.

Given the divergent views of the Superior Courts on this issue, the judicial pronouncements of the Indian Supreme Court are significant in a lot of ways since they clarify that there exists no power to modify or vary an award under Section 34 of the Arbitration Act. These decisions once again re-affirm the minimal judicial interference followed by the Indian Courts when it comes to challenging an award. By comparison, unfortunately, the arbitration laws of Pakistan are as old as the country itself. The true import of domestic Arbitration law in Pakistan – Arbitration Act, 1940, leaves little room for arbitral awards to be set aside or modified, except on the grounds of misconduct attributed to the arbitrator or on account of invalid proceedings, as envisaged under Section 15, 16, 30, 33 of 1940 Act. Arbitration, though very much akin to Court proceedings, is an alternative mode of settlement of disputes, but not until the confidence is reinvigorated in the litigation frenzy people of Pakistan, and policy reforms are made to the archaic Arbitration laws in Pakistan.

Sarmad Sattar

Steering Committee Member, Young Arbitration Group

The writer is a lawyer based in Lahore.