This article is written by Vaibhav Raghuvanshi who is pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.

Introduction

Arbitration is an alternate dispute mechanism. In arbitration, the parties, by mutual agreement, submit a dispute before an arbitrator who is mutually chosen by the parties or in some cases appointed by the court. It is private litigation which is essentially an adjudicatory process. The process of arbitration was first developed in western countries. USA and England were among the first counties to pass statutes related to arbitration. It was only in the late 20th century that Asian countries started recognizing arbitration as a way to resolve the dispute. Singapore, Hong Kong, Australia, India, and Malaysia were among the first few countries which recognized arbitration as an alternate dispute resolution process.   

Why is there resistance to arbitration in Asia?

Though the governments of Asian countries are keen to promote arbitration as a way to resolve the dispute, people in these countries are still very resistant to arbitration. It is mainly due to the unawareness among the people regarding the statute passed by their respective governments. This is because the statute of arbitration is still recent as compared to the traditional civil laws. 

Lawyers in Asian countries follow the traditional way of practice in which they charge by the number of hearings. As arbitration is a faster process of resolving disputes, the number of hearings held during the adjudication of a matter through arbitration is much lesser than the hearings held during traditional ways of adjudication. Thus, the lawyers in these Asian countries are unenthusiastic in adopting arbitration as a process of dispute resolution. 

Institutional arbitration is another way of resolving the dispute. In institutional arbitration, the parties to a dispute submit their issue to an institution that has been designated to adjudicate the dispute by administrating the arbitration process. These arbitration institutions have their own rules for arbitration and the parties opting for institutional arbitration are bound by such rules.

With the enlargement of the Asian economy and a larger amount of foreign investment in Asia, there is a demand for institutional arbitration in Asia. Most of the countries in Asia do not have proper institutes in case parties want to refer their cases to institutional arbitration. As there is no proper spread of awareness regarding the process of arbitration, people in these countries think that it is a very costly process which is a wrong assumption. 

Multinational companies and corporate houses are the ones that most opt for arbitration as a dispute resolution process. Lawyers of such multinationals and corporate houses are well aware of the international arbitration norms. Countries like Malaysia, Thailand Taiwan etc. are not following these international norms and have passed their own statute. The lawyers of such multinationals and corporate houses find it difficult to opt for arbitration as a dispute resolution process in these countries.

Parties to international arbitration and Asia 

When talking about international arbitration the parties usually prefer some neutral location. They want to be bound by internationally recognized arbitration rules such as the ICC Rule of Arbitration (ICC Rule) or UNCITRAL Model Law on International Commercial Arbitration (Model Law) in case of international arbitration. Though countries like India, Singapore, Hong Kong, etc have adopted Model law the countries like Malaysia, Thailand, Taiwan, and Indonesia have their own arbitration law. As the counties like Malaysia, Thailand, Taiwan, Indonesia in Asia do not follow the internationally recognized arbitration rules parties to international arbitration are reluctant to proceed with arbitration in such countries.

Moreover, most Asian counties are less developed as compared with western countries due to which they are not able to provide standard facilities for international arbitration and the parties to arbitration mostly prefer choosing western countries over Asian countries for international arbitration. This is also one of the major reasons why parties to international arbitration are resistant to arbitration in Asia.

Recent developments in Asia in the field of arbitration 

In recent times there has been a tremendous amount of development in Asia in the field of arbitration. As the Asian economies have grown rapidly the governments of countries have realized the importance of international arbitration and hence have invested a significant amount of money in the field of arbitration. The government of Asian countries in past 10 years have adopted new rules and a new governance structure for many international arbitration institutions running in their country. One of the examples of such developments is Hong Kong International Arbitration Center (HKIAC). An ordinance was passed by the institute in the year 2017 which was effective from November 1, 2018, which was quite a recent development in the field of arbitration.

Another such example is the Singapore International Arbitration Center (SICA) which is one of the leading centers for arbitration in the world due to the strong support of the government of Singapore. It has updated its rules by an amendment effective from 1 December 2020 to stay up to date with the international developments in the field of arbitration. There are many such examples that have shown rapid growth and significant improvement in their functioning in Asia. But there is still much more potential in the arbitration industry which is yet to be explored by the countries in Asia and it can only be done with the support of the government.

How can the governments support arbitration in Asia?

To support the arbitration the governments, need to work on a governance framework for arbitration. This restructuring will be needed on the legislative, executive, and judicial front. Suitable infrastructure is to be developed by the governments to promote arbitration. This will require development at both physical infrastructure as well as human resource levels. The governments should promote domestic as well as international arbitration in their respective countries. 

To promote arbitration governments of Asian countries, need to set up arbitral institutions across their respective countries. These arbitral institutions should be given power and freedom so that they can operate independently, freely, and efficiently. It should be ensured by the governments that the process of these institutions remains transparent so that they become credible among the people. Governments should also focus on training, setting up of bar dedicated to the arbitrator, and developing a blacklisting system to curtail unethical practices by arbitrators.  The governments of Asian countries should aggressively promote arbitration as a dispute resolution process by preventing private players from rushing to the courts without resorting to arbitration. The Asian countries also need to consider their policy regarding the enforcement of international awards to promote international arbitration. 

India and arbitration

As far as India is concerned Arbitration and Conciliation Act was passed by the Indian parliament in the year 1996. Despite it being enacted for more than 20 years the people and lawyers of India are still resistant to the process of arbitration. It is mostly due to the lack of awareness about the enactment and due to the faith in the traditional approach towards resolving the dispute. 

Arbitration is an adjudicatory process 

Most of the lawyers and people in India still don’t consider arbitration as an adjudicatory process. They still think that it is mostly similar to the process of mediation and negotiation where parties reach the settlement with mutual understanding which is a myth, it needs to be busted. 

Arbitration is an adjudicatory process. There is fixing of liabilities, rights, and the finding of entitlements in the process of arbitration. The only difference between arbitration and litigation is that in litigation the adjudication is done by a judge and parties to the dispute have no role in the appointment of the judge. However, in arbitration, the adjudication is done by the arbitrator mutually decided by the parties or has been appointed based on a process decided by the parties. Only in case if parties are not able to decide the arbitrator, they can approach the court under Section 11 of the Arbitration and Conciliation Act, 1996. 

Arbitration is a costly affair

It is common thinking among people that arbitration is a very costly process and can only be afforded by the big business house and corporates which is again a false assumption and need to be changed. 

Arbitral awards and decisions are not final 

People also believe that if the decision of the arbitral tribunal is ultimately going to be challenged in the court of law then why not directly approach the court for the remedy as it will save their time and money which is somewhat true. But they are unaware that the decision of the Arbitral Tribunal or the award passed by the process of Arbitration can only be challenged on a certain grounds as mentioned in Section 34(2) of the Arbitration and Conciliation Act, 1996. Moreover, arbitration is a much quicker process of resolving the dispute as Section 29A(1) of the Arbitration and Conciliation Act provides the arbitrator tribunal in domestic cases should pass its award within 12 months from the date completion of pleadings.

The Arbitration and Conciliation Act, 1996 also provides incentives for the Arbitrator for resolving the dispute quickly as according to Section 29A(2) if the award is made by the tribunal within six months the arbitrator is entitled to the amount of such fee as parties may agree. 

Ways to curtail the resistance to arbitration 

As we all know arbitration is a speedy way of resolving the dispute. It is a form of alternative dispute resolution. As courts are already burdened with cases, promoting arbitration as the way of resolving disputes can help the governments to lower some burden on the judicial system. To promote arbitration as the way to resolve the dispute and to lower people’s resistance to this process of dispute resolution, governments need to spread awareness related to arbitration.

For spreading awareness, they need to organize proper seminars, workshops, etc on regular basis. The literacy program has to be conducted by the governments should create awareness. Students of the legal field should be given proper education regarding arbitration and its benefits so that they can make people around them aware of the same. There should be proper institutions giving training to the lawyers who are not familiar with the process of arbitration. Governments can also take help from NGOs for the speeding spread of awareness regarding arbitration. These efforts together will help in bringing down the resistance of people in Asian countries at a local level. 

Recognition of International rules of arbitration 

To promote arbitration in Asia, the governments of all Asian countries need to adopt internationally recognized rules and regulations regarding arbitration. They should make investments in making international standard institutes. Rules and regulations of such institutions should be updated properly from time to time. This would promote the arbitration industry and the parties to international arbitration will look at international arbitral institutes of Asian countries as a place to arbitrate their dispute.  

Arbitration in the aftermath of the pandemic 

The COVID-19 pandemic has adversely affected the dispute resolution process all over the world. As many restrictions like lockdown, social distancing norms, travel restrictions, etc were imposed during this pandemic to curtail the spread of COVID-19. Due to all these restrictions, people’s access to justice was undermined as even the adjudication process have to operate having due regard to these restrictions. As compared to litigation arbitration adapted to this pandemic much quickly and in a better way. This was because in arbitration proceeding parties have autonomy and has a flexible structure.

COVID-19 pandemic forced the arbitration community to use technology by online dispute resolution or virtual hearing method. Asian arbitral institutions like Singapore International Arbitration Center provided guidelines for virtual arbitral hearings. During COVID-19 time, as the process of arbitration was quickly able to adapt to online resources to ensure that the proceeding continues on a fair, expeditious, and cost-effective basis it became popular among people of Asia. Its the best time for the governments of Asian counties to support arbitration as it’s going to lower the resistance to arbitration at noticeable levels in Asia. 

Conclusion  

In my opinion, arbitration is a way of dispute resolution process which has an immense amount of potential yet to be explored in Asia. All which is required is the spread of awareness and a little support from the governments. The government of Asian countries should learn from Singapore and Hong Kong and encourage arbitration by providing proper infrastructure and research facilities for the arbitration industry in their respective countries.

This may result in Asian countries benefiting by earning revenue from the arbitration industry. At the same time, it will lower the burden on the judicial system of the country. During this COVID-19 situation, arbitration has come out as an emerging field in alternative dispute resolution in Asia and will continue to boom if is encourage by the government.  

References

• THE ARBITRATION AND CONCILIATION ACT 1996
•  https://sso.agc.gov.sg/Act/IAA1994
• https://www.indianbarassociation.org/how-to-promote-arbitration-and-mediation-in-india/
• https://www.kimchang.com/en/insights/detail.kc?sch_section=4&idx=18870
• https://www.mondaq.com/corporate-and-company-law/28711/international-commercial-arbitration-in-asia
• http://arbitrationblog.kluwerarbitration.com/2014/02/10/arbitration-in-asia-at-full-gallop/
• https://blog.ipleaders.in/institutional-arbitration-india/
• https://smartnet.niua.org/sites/default/files/resources/Arbitration.pdf
• https://www.mondaq.com/turkey/arbitration-dispute-resolution/1011780/effects-of-covid-19-on-arbitral-proceedings-is-the-virus-reshaping-the-future-of-arbitration

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