Arbitration : An Indian Perspective

The government has been trying hard to give a major push to arbitration, an alternative dispute resolution (ADR) mechanism, for commercial disputes. 

While the President and Finance Minister pitched for institutional reforms to strengthen the framework in this regard, and to make the country an important commercial arbitral centre, the Prime Minister has emphasised that the creation of an ADR eco-system was a priority.

MCIA
Mumbai Centre for International Arbitration

The 2015 amendments to the Arbitration and Conciliation Act of 1996, setting up of the ‘Mumbai Centre for International Arbitration’ and a plethora of arbitration-friendly judgements have given a push in this regard. Experts say a lot more needs to be done for India to emerge as a serious player in the global arbitration sweepstake, currently dominated by London, Paris, Singapore and some other centres. But, let us look at where the ambitious target stands at present.

Arbitration regime in India : Some steps taken to improve 

In the recent past, India has taken strides in confirming itself to the standards of UNCITRAL and other international treaties to avoid Vodafone-Hutchison Essar, DoCoMo-Tata Sons and Shell India like controversies.

The issues that have been addressed through the legislative and judicial interpretations are :-

  • Introduction of the Arbitration and Conciliation (Amendment) Act, 2015.
  • The Bill seeks to make the arbitration process more investor-friendly, cost effective and suitable for expeditious disposal of cases. It will also facilitate in making India a hub of international commercial arbitration.
  • The Bill also includes provisions specifying and restricting the term ‘Public Policy of India’ on whose ground an arbitral award could be challenged.
  • According to the Bill, an award would be construed as against the Public Policy of India if it is induced or affected by fraud or corruption, or is in contravention of the fundamental policy of Indian law or is in conflict with the most basic notions of morality or justice.
  • Time limit for commencement of arbitration proceedings, appointment of arbitrators by courts.
  • 12-month time-period for conclusion of arbitration – can be extended by 6 months (Section 29A).
  • Incentives for making early awards.
  • Disclosure requirements (and guidelines) to ensure independence and impartiality of arbitrators.
  • Extension of interim reliefs that can be issued by court even when an arbitration is taking place outside India.
  • Reduced interference of court for arbitrations currently underway.
  • Introduction of fast-track procedures with consent of the disputing parties.
  • Restricting the scope of challenge under grounds of conflict with public policy.

Arbitration : Issues that need to be addressed

In order to realise its true potential, India needs to address various concerns before taking a quantum leap in the field of arbitration.

Some of the issues are discussed here, such as -:

  • A culture of challenging any award and frequent interference of the courts in the arbitration process have created a big set of hurdles for the dependability of an Indian ADR regime.
  • Lack of expertise, plus the time and costs associated with arbitration in India, have added to this international scepticism.
  • Enforcement of arbitration awards has long been a thorn in the flesh of Indian arbitral activity.
  • The trend of challenging arbitration awards under the grounds of public policy, though now restricted after the amendment to the arbitration law, remains a worry.
  • Section 29A of the Act sets a time bar of 18 months for completion of arbitration proceedings, which is difficult to meet, as per the experts.
  • Corporate India is asking for the establishment of an arbitration hub.
  • Credibility of the system and a change in mindsets are key factors for success of the country’s arbitral aspirations.
  • India does not have adequate arbitration infrastructure.
  • India does not have arbitration specialists.
  • There is an urgent need for a feasible time-frame for conclusion of arbitration proceedings.
  • The issues with the enforcement of award should be addressed too.

Arbitration in India : The Road Ahead

Although many issues have been addressed by the Arbitration and Conciliation Amendment Act, 2015, there are still areas of concern that require adequate attention, such as -:

  • In Singapore, the test of what is against public policy is of a very high standard, seldom ever met. That standard is what is necessary for arbitration to be successful.
  • Experts have urged for specialist arbitration courts (and tribunals) to ensure neutrality in proceedings. These courts will provide further certainty to the applicable laws.
  • India also requires a combination of legal and technical specialists in the arbitration process. Establishment of such a specialised bar would encourage companies to come to India for arbitration, say experts.
  • The right balance between practicality and efficiency is vital if India is to achieve prominence in the international arbitration arena.

Note :- India is a signatory to the United Nations-led UNCITRAL forum but it has refrained from signing the World Bank-led ICSID forum for settlement of Investment disputes.

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