Should courts be allowed to modify arbitral awards? Justice Somasekhar Sundaresan shares insights

Justice Somasekhar Sundaresan of the Bombay High Court recently delivered an address on whether courts should have the authority to modify arbitral awards and posed critical questions regarding the implications of such judicial intervention.

He cautioned that allowing courts to modify arbitral awards could undermine the foundation of arbitration itself.

“If we embrace the principle that awards can be modified by courts, we may inadvertently open the floodgates to full appellate review,” he warned, emphasising the risk of diluting arbitration’s intended finality and efficiency.

Justice Sundaresan further explored the challenges faced by arbitration as a dispute resolution mechanism. He stated,

“As legal professionals and arbitrators, we must ask ourselves: Are we delivering value to our stakeholders?”

The question is posed at a time when corporations are weighing the benefits of arbitration in favour of traditional litigation, which may appear more straightforward.

The judge was speaking at a session of the ongoing India ADR Week, 2024 organised by the Mumbai Centre for International Arbitration at the Trident.

Addressing the need for a credible institutional framework, he proposed that while party autonomy in selecting arbitrators is essential, the appointment process could be handled by established institutions.

“We should think of creating an institutional framework where party autonomy exists in terms of choosing the dispute resolution mechanism, but stopping short of identifying who the arbitrator should be,” he suggested, referring to the success of arbitration as a dispute resolution mechanism in sports.

This approach could help mitigate disputes over arbitrator selection and enhance overall efficiency, he added.

Justice Sundaresan also highlighted the importance of self-regulation within the arbitration bar, asserting that “the arbitration community cannot be a weekend bar.”

He called for a robust regulatory framework to ensure accountability among arbitrators, noting,

“For the markets to believe in that institution, it must carry a lot of credibility.”

He underscored the need for the arbitration community to demonstrate its commitment to high standards and professionalism.

In closing, Justice Sundareshan urged active participation in discussions surrounding arbitration rules and legislative amendments.

“We get the laws we deserve,” he remarked, stressing that meaningful engagement in legislative processes is crucial for improving the arbitration landscape in India.

He encouraged the legal community to reflect on their collective responsibility, stating,

“Every time you advise your clients to challenge an award, ask yourselves, what externalities are we creating?"