What India needs to do to make Institutional Arbitration Success in India?

Arbitration is considered to be an alternative to the Adversarial system of Court litigation on account of being a convenient, progressive and cost efficient method of resolving disputes. However, in India, it is the absence of the aforesaid that has sidelined Arbitration as an option for parties intending to resolve domestic and international disputes. Parties start off Arbitration with an optimistic dream of having their disputes settled in a speedy and cost effective way, conversely, by the time Arbitration ends and the Award is enforced, the parties are in a dilemma as to whether their decision to opt for Arbitration was apposite. Due to lack of proper infrastructure, timely arbitration proceedings don’t happen and even if one is fortunate enough, the Arbitration Act provides ample scope for parties to approach Courts to intervene in the proceedings on one account or the other. Further, per hearing fees charged by most of the Arbitrators at times is so pricey that parties can’t afford them. The Arbitration and Conciliation Act, 2015 has made an attempt to come to rescue in this regard by fixing fees and timeline for arbitration but the thorn in the flower is that courts are again to intervene to investigate as to who is to be blamed for the delay in meeting the timeline. Further, the High Courts have been provided the power to make rules for fees and the manner of payment which again would lead to lack of uniformity as each High Court of different states across India would have their own rules.

Therefore, the panacea to the diminishing future of Arbitration in India is to promote Institutional Arbitration in India. To start with, it is universally acknowledged that, the quality of arbitration proceeding depends to a large extent on the quality and skill of the arbitrators chosen and the Courts may not have the expertise in appointment of arbitrators who would be expert qua the subject matter in dispute. Moreover, in International Commercial Arbitrations, a national court judge understandably will have limited experience, expertise and resources for selecting suitable international arbitrators; particularly if practitioners form other countries must be selected. While having an arbitral institution making an appointment would be more beneficial as then they would be specifically organized to perform the function of selecting international arbitrators because of their day-to-day involvement in international arbitration and access to a pool of highly qualified arbitrators. Further, assigning the role of appointing arbitrators to the Chairman/Head of a particular Arbitral Institution rather than courts becomes all the more important as there is no specific roster of judges to decide such applications nor are arbitration applications treated at a higher lever as compared to other applications filed before the courts.

Secondly, to tackle time problem, Institutional Arbitration should be promoted where arbitration is carried out on a day to day basis say for instance 10 am – 4 pm so that there is no backlog of cases or delay in concluding the arbitration proceedings. Fees issue would also be taken care of by Institutional Arbitration as such Institutions have a fix fee schedule which will negate space for ambiguity.

Thirdly, so far as finality of the decisions given under Institutional Arbitrations is concerned, steps can be taken to make the order passed by the Arbitrator under Institutional Arbitration open to appeal or review only by a President/Registrar(Head) of the Institution so as to negate parties taking the court route. Further, the decision of the abovementioned authority can be made final and binding upon the parties and also the parties shall be taken to have waived any right to appeal or review in respect of any decision of the abovementioned authority to any state court or other judicial authority. Besides, Court intervention in arbitration proceeding could be allowed only when arbitration agreement specifically provides for it.

Finally, to make Institutional Arbitration an attractive hub for foreign parties and investors, certain things are to be kept in mind. For instance, a forum is attractive as a seat only if it has a judiciary that is supportive of arbitration. In this regard, the courts in India should have a pro-enforcement approach. To further promote the enforcement of awards, the concept of indemnity cost rule (as followed in Hong Kong) can be introduced through which, where a party unsuccessfully resists enforcement or challenges an award, or seeks unsuccessfully to reopen through court proceedings, an issue dealt with in an arbitration, it will have to pay costs on an indemnity basis unless special circumstances exist. This will serve as a strong incentive for parties to carefully weigh up the potential cost consequences of launching unfounded challenges to arbitral awards. Likewise, the pool of resources that is readily available to assist the arbitral proceedings is another important determining factor in choosing a seat of arbitration. Thus, resources and infrastructure are other minute aspects that demands major attention.

Further, the Institutions conducting Arbitrations in India should be provided ample resources and opportunities to participate in important international arbitration conferences and to host one to two major international arbitration conferences at least in a year so that it would invite worldwide participation/attention and exposure that can enhance the international image of Institutional Arbitrations in India and attract foreign parties to arbitrate in India. It is likewise also important to have enriching bilateral relationships with numerous other international arbitration institutions and to ensure constant update of the Rules governing Institutional Arbitrations so as to cater to the specific needs of the respective industries. A mandatory review by the Institutions conducting Arbitration of their services should also be encouraged with a view to improve the range and quality of its services.

Last but not the least, one needs to keep in mind that any new system/mechanism should be given sufficient time to adopt and accommodate so as to ascertain its success/output. Thus, Institutional Arbitrations should be given a green flag with patient expectations about its results rather than taking any hasty decisions because one thing is trustworthy that if countries like Singapore and Hong Kong can become Arbitration hubs on the strength of Institutional Arbitrations, so can India.

By-

Adv. Shijo George
(B.A. LL.B, LL.M.)
Delhi Bar Council- D/1888/2012