Arbitration now preferred method for commercial justice: CJI Chandrachud

Chief Justice of India (CJI) Dhananjaya Y Chandrachud has underscored the pivotal role of arbitration in the realm of commercial justice, asserting that it is no longer an alternative but a preferred method of dispute resolution. He stressed that arbitration must be steered by considerations of public policy, thereby empowering courts to intervene when necessary to prevent injustice.

Delivering his address at the Supreme Court of the United Kingdom on Thursday evening, the CJI highlighted the evolution of arbitration from a supplementary dispute resolution mechanism to a primary choice for commercial entities worldwide.

“Arbitration is no longer an ‘alternative.’ It is, in fact, the preferred method of seeking commercial justice,” stressed the judge, adding the shift is driven by the desire of parties to distance themselves from domestic court systems and resolve their disputes through a neutral, third-party arbitrator.

Adding a historic touch to the event, Lord Reed, the President of the UK Supreme Court, extended the

unique privilege to justice Chandrachud of occupying the President’s seat during his speech, signifying a deep respect and solidarity between the judiciary of the two nations.

Also Read:Judges aren’t princes but service providers: CJI at J20 Summit in Brazil

The event took place last evening and was attended by a distinguished audience of legal luminaries and arbitration experts from around the globe.

In his address, the CJI pointed out that courts in India are overburdened despite high courts disposing of 2.15 million cases and the district courts disposing of 44.70 million cases in 2023.

“These figures show the trust that the people of India have in their judiciary... Every aggrieved person who approaches the doors of the judiciary has the right to a just remedy. In attending to these grievances, the courts in India perform their plain constitutional duty. The width of our jurisdiction was designed to ensure the widest access to justice. But surely every case need not find a remedy before a court, with emerging forms of dispute resolution such as arbitration and mediation gaining acceptance,” he said.

According to justice Chandrachud, the values of a liberal democracy enshrined in the Indian Constitution allow people to seek individualised solutions to their legal problems outside the judicial setup, if the solutions do not violate established law, and that arbitration is one such alternative method of dispute resolution.

The democratisation of the political space, access to public institutions and liberalisation of commerce, he said, has enabled private parties to converse within a structure of ordered liberty governed by the rule of law, regardless of their positions or hierarchies, on a level playing field.

“Arbitration provides this level playing field outside domestic court systems. I firmly believe that now is the time for countries such as India to step up to the occasion to create and promote a culture of commercial arbitration. The robust institutionalisation of arbitration will further the culture of arbitration in the Global South,” maintained the judge, adding arbitral institutions ought to be transparent, accountable, technologically advanced and at the same time bring greater diversity in terms of gender or from the Global South to make for a broad-based process.

In his speech, the CJI also emphasised the importance of public policy in guiding arbitration proceedings and the enforcement of arbitral awards. He articulated that while arbitration offers autonomy and flexibility, it must still adhere to the overarching principles of justice and fairness, which are integral to public policy.

“Domestic courts should adopt a pro-arbitration approach and limit their interference to grounds explicitly provided in the New York Convention,” he remarked, indicating a balanced approach where judicial oversight ensures fairness without undermining the autonomy of arbitration.

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) provides a framework for the recognition and enforcement of arbitral awards across jurisdictions. Both the UK and India are signatories to the New York Convention, and their domestic arbitration laws are aligned with the Convention’s provisions.

Furthermore, justice Chandrachud addressed the critical role of courts in preventing and correcting injustices within the arbitration framework.

“If arbitration has to be efficient by reducing delay, the law must ensure that the adjudication of substantive legal rights of all parties, including non-signatories who are intricately connected to the underlying contract, is achieved within the fold of arbitration. This will preclude satellite litigation by non-signatories and allow arbitration to maintain its credibility in the face of domestic legal systems,” he underscored.

The CJI also commented on the necessity of judicial intervention in exceptional cases to uphold the integrity of the arbitral process and safeguard against procedural and substantive injustices. Referring to a much-quoted statement of UK judge Lord Burrough in one of his judgments in the 19th century that “public policy is an unruly horse”, justice Chandrachud stressed that it is this “unruly horse” which allows the courts to step in and rein in injustice after the award has been granted.

“The intervention of courts in such situations where the arbitral award will cause grave injustice essentially upholds the rule of law...If judges were not to interfere when the process of arbitration has been subverted on matters bordering on fraud, the credibility and legitimacy of the universe of arbitration may be in danger of being brought into disrepute,” said the CJI.

Justice Chandrachud concluded with a significant endorsement of arbitration as the primary avenue for commercial dispute resolution while setting a forward-looking agenda for arbitration practices, emphasising the dual imperatives of maintaining procedural autonomy and adhering to public policy considerations to ensure justice and fairness.