Arbitration and Mediation & The Promotion of ADR in India

The legal system in India is viewed by many as part of ‘colonial legacy’. It has withstood many challenges in the last century. With the changes happening all over the country, increasing population, the mounting pressure of all sorts of cases, civil, criminal, revenue, industrial, has increased leaps and bound and cases remain undecided and stuck in the courts for years.

We’ve also seen in the recent few years the boom of industries in India. Business organizes have expanded their horizons and have come to operate beyond borders in India. And with the increased number of contracts and agreements, cross-border investments (FDI) come the disputes and disparities. And hence we have the mechanism of out of court settlements, namely, arbitration, conciliation and mediation. The arbitration and conciliation act of 1996 governs the arbitration law in India, which is based on UNCITRAL Modal Law.

As companies enter the Indian market, they’ve been noticed to choose a foreign city for resolution of disputes between two parties. As of now, global hubs of arbitration include Paris, London, Singapore, Hong Kong, Geneva and New York. Though India, the third largest economy in the whole world, which has even displaces Japan, the companies refuse to India as a seat of arbitration. Foreign investors and corporate doing business in India are just not ready to bear the risks associated with having the arbitration seated in India. The problem lies, not in the poor business intrepidity, but in the way the laws of this country and the environment of law are perceived. Though the steps to mark a change in the Arbitral field of India have been taken, by the way of promulgation of the Arbitration and Conciliation (Amendment) Ordinance, 2015, and henceforth the passing of the Arbitration and Conciliation Bill 2015, which became an Act on and came into force on 23rd October, 2015, is a welcome move reflecting India’s pro-arbitration approach.

But more than anything, we first of all need to identify the problems relating to this issue. When the parties rely on the award of the arbitrators, it has to be executed by a court of law. Plus, the losing party may also challenge the award in a court of law, though on rare grounds. This, therefore, becomes a tiresome and long process, which both the parties would prefer to avoid. Confidentiality, enforceability of the judgment, are other few things to be kept in mind. And due to this fact, the companies are always skeptical when it comes to choosing India as a seat for Arbitration.

Now that the problem has been identified, we need to discuss how to deal with this problem, and what exactly needs to be done in order to make India one of the most preferred seat and an international hub for arbitration. The best example for India to learn its lesson from, can be Singapore.

Rising intra-Asia trade and a conducive legal regulatory environment are factors that contributed to Singapore’s rise as a major arbitration centre. Two upcoming centres are expected to extend the Republic’s role in arbitration. The legal regulatory environment there is a key factor. For example, legislation has been updated regularly to keep in step with global best practices. There are no restrictions in Singapore on foreign counsel, or foreign arbitrators coming in and out to do arbitrations. And no work permit restrictions or requirements. Singapore’s new Attorney-General, Viljaya Kumar Rajah S.C. has stressed that, “In fifty years, Singapore has managed to create a legal environment that is, and should be, the envy of the emerging economies of the world.” India, hence, can take a few lessons for improvement from the drastic improvement of legal platform in Singapore.

All this also has to do with the corruption rate in our country. India’s ranking on global corruption index is 85th. Though it has showed some improvement in addressing corruption this year, ranking 85th among 175 countries as against 94th last year. While Singapore has been ranked the 7th least corrupt nation in the world – ahead of America, Hong Kong, and the United Kingdom.

Thus we can see, that there are a lot of factors and problems that we need to overcome for India to become the international hub for arbitration. Though there is no dearth of legal expertise in India, there are large numbers of lawyers, retired judges, technocrats and bureaucrats, Indian arbitral institutions have to stand up in competition with respect to experience, networking, commensurate remuneration to arbitrators, professionalism in secretarial services, and timely completion of tasks. It is undoubtedly going to be a difficult road ahead, but when Singapore can do it, so can India. With the support of businesses and the legal fraternity, combined with nationalism, patriotism or protectionism, India will surely become the most sought after and chosen arbitral seat by the worlds businesses.

By –

Anshruta Maheshwari
Symbiosis Law School, Pune