In this article, Sachin Vats of RGNUL discusses ways of promoting institutional arbitration in India.
How to Promote Institutional Arbitration
Disputes can be settled outside the courtroom through neutral evaluation, negotiation, conciliation, mediation and arbitration. All these methods of resolving disputes without litigation are known as Alternate Dispute Resolution. Arbitration has become a preferred destination for resolving commercial disputes related to international commercial transactions, mergers and acquisitions deals in the corporate sector. There are actually two kinds of arbitration mechanism options available, namely,
- Ad-hoc Arbitration
- Institutional Arbitration
Arbitration is considered to be a convenient, cost-effective and progressive mode of dispute resolution which provides some concrete and binding result to the parties. But, due to lack of the proper infrastructure parties do not get the decisions on time which further increases the complexities.
The Government of India is eagerly trying to promote arbitration in India since the inception of the Arbitration and Conciliation Act, 1996. Ad hoc Arbitration is the normal practice significantly done in India but the business communities at international level want to resolve the disputes with pre-established rules and procedures. The Chief Justice of India stated that the International Centre for Alternate Dispute Resolution (ICADR) situated in Delhi has had only 20 cases since its establishment 20 years ago. The statistics also shows that out of 291 cases of arbitration administered by the Singapore International Arbitration Centre, 91 cases were associated with the Indian parties. The cases of Indians at SIAC are double with respect to the Chinese. The legal framework coupled with geographical advantage makes London and Singapore most preferred destination for the Arbitration by the international community.
The panacea to the drowning future of the Arbitration is the promotion of the Institutional Arbitration in India. All the processes are administered by the arbitral institutions according the arbitral agreement. The leading arbitration institutions of the world are International Chamber of Commerce (IIC), London Court International Arbitration (LCIA), American Arbitration Association (AAA), International Centre of Settlement of Investment Disputes (ICSID), China International Economic and Trade Arbitration Commission (CIETAC), World Intellectual Property Organization (WIPO). These institutions provide concrete legal framework for the arbitration.
Making India a Hub of International Arbitration
The Department of Legal Affairs, Ministry of Law and Justice constituted a ten member high level committee on 13th January, 2017 being headed by the hon’ble Justice B.N. Srikrishna who is a retired judge of the Supreme Court of India. The committee consists of other members as,
- Justice R.V. Raveendran, retired Judge, Supreme Court of India.
- Justice S. Ravindra Bhat, Judge of the Delhi High Court.
- Shri K.K. Venugopal, Senior Advocate and Attorney General of India.
- Shri P.S. Narsimha, Additional Solicitor General of India.
- Ms. Indu Malhotra, Senior Advocate, Supreme Court of India.
- Shri Arghya Sen Gupta, Research Director, Vidhi Centre for Legal Policy.
- Shri Arun Chawla, Deputy Secretary General, FICCI.
- Shri Vikkas Mohan, Senior Director, CII.
- Shri Suresh Chandra, Secretary General of this High Level Committee.
The High Level Committee reviewed the institutionalization of arbitration mechanism and suggested changes accordingly. The committee held 7 meetings and submitted its report to Shri Ravi Shankar Prasad, Hon’ble Minister of Law and Justice. The Government is dedicated to speed up dispute resolution and make India a hub for international and domestic arbitration according to International standards.
Challenges to the Institutional Arbitration in India
The situation of the Institutional Arbitration is very critical in India even after the reluctant efforts being made by the Government to attract the international parties. The challenges that are faced by the institutions in are mentioned here.
Misconceptions Regarding Institutional Arbitration
- The parties think that the cost involved in the institutional arbitration is very high but the scenario is quite different. The Ad hoc Arbitrations incur more cost due to additional procedural hearings but all these are done under one time administrative fee of the arbitration institution.
- Parties also think that the institutional arbitration is very inflexible due to prescribed rules that take away exclusive autonomy of the parties over arbitration proceedings but actually it provides a concrete framework for the parties without any discrepancy.
- The misconceptions are mainly due to lack of awareness among the business entities regarding institutional arbitration. People wrongly understand that these are affordable and available only to the big business house and high value disputes.
Government Support for Institutional Arbitration
The institutional framework is very weak in India. The Government itself provides arbitration clauses in conditions of contract in the Public Sector Undertakings but these clauses do not provide institution for it. Several recommendations have been made by the Justice Srikrishna Committee recently in its report to promote institutional arbitration. The Institution must also be backed by the statutory bodies which will enhance its credibility.
Measures to Improve the Quality and Performance of Arbitral Institutions
The High Level Committee in its report submitted different measures to promote India as the most preferred Seat of Arbitration. The overall quality and the performance will subsequently increase with the adoption of the undermentioned suggestions,
- The establishment of an autonomous body as the Arbitration Promotion Council of India (APCI) which will consist of representatives from the stakeholders to grade arbitral institutions in India.
- Recognition of professional institutes by the Arbitration Promotion Council of India to provide accreditations of arbitrators.
- The advocates having interest in arbitrations may be trained through training workshops. The interaction with law firms and law schools may be done in order to create a special arbitration bar comprising of advocates dedicated to this field.
- The Special Benches may be created in order to handle the commercial disputes, in the domain of the Courts. There have been several changes being incorporated under the Arbitration and Conciliation Amendment Act, 2015 in order to make the judicial system more friendly with the arbitration. The amendments may support speedier arbitration and attract international practice of arbitration in India.
- An opinion for incorporating arbitration in the National Litigation Policy and promote arbitration in the governmental contracts.
ICADR as an Institution of National Importance
The working of the International Centre for Alternate Dispute Resolution based in Delhi was reviewed by the committee. The ICADR works under the Department of Legal Affairs, Ministry of Law and Justice to provide requisite facilities and improve the Alternate Dispute Resolutions methods.
The High Level Committee has recommended that the ICADR should be given the status of the Institution of National Importance. The Institution should also be taken under by the Government under a Statute. The Committee believes that the revamping of the ICADR can make it an institute of international repute and significance as it has great potential in the field of arbitration.
International Law Adviser (ILA)
The creation of the post of International Law Adviser to advise the Government in the affairs related with arbitration and formulation of the dispute resolution strategy. The disputes arising out of the international law obligations especially with the Bilateral Investment Treaties (BITs) can be resolved by the International Law Adviser. The Committee clearly stated that the ILA can take the advice of the Department of Corporate Affairs during negotiations and signing of the Bilateral Investment Treaties.
Advantages of Institutional Arbitration
The prestige and reputation of the arbitral institutions is helpful in terms of enforcement of arbitral awards. The parties will have faith in the institution due to the reputation it holds and leads to more administered and supervised arbitration.
The prescribed rules of the arbitral institutions help in the smooth regulation and conduction of the proceedings and there is no chance of impartiality towards any party. The parties after submitting their dispute with the institution follows as per the given norms in accordance with the rules which they automatically incorporate into their arbitration agreement. The parties effectively follow the book of rules of the institution which does not arise any discrepancy.
One of the important advantages of the Institution is that the administration provides trained staffs to administer the arbitration. All the advance payments are made and time strictly followed by the institution in all the proceedings of the arbitration.
The Indian Institutions of Arbitration like ICADR should learn from the institutions like International Chamber of Commerce (ICC) and the International Court of Commerce in Paris to supervise effectively over the whole proceedings. There should be no controversy left with the parties and all the scrutinies should be dealt properly before publishing the award to the parties. It involves checking of all the rules followed properly and increases the quality of the arbitration which is not available in Ad hoc arbitration.
Quality of Arbitral Panel
The vast databases of arbitrators with the institution help to provide appropriate arbitrators for the resolution of their respective disputes. The Institution confirms the efficiency of the arbitrators with due care to avoid any discrepancy.
Remuneration of the Arbitral Tribunal
The institution avoids any type of discomfort to the parties and provides a full fledged mechanism to determine the scale of remuneration being published to the parties. The institution collects the remuneration from the party and pays it without directly involving the two parties. The Arbitral Tribunal focusses on the facts and circumstances of the case without depending on the individual parties.
The Government has opened the gates for the foreign participation in legal services. The Madras High Court in A.K. Balaji vs. Govt. of India has allowed the entry of the foreign lawyers in India. All the reforms suggested by the committee will make a paradigm shift to project India as investor friendly destination. These reforms will absolutely reduce the excessive burden from the judiciary. The financial strength and development of the country will get a boost and the goal of the serving for the welfare of citizen will fulfilled.