Making Institutional Arbitration a Success in India

We live in an age which juxtaposes converging economies and diverging national legal systems. With the globalization of the Indian economy and the economic reforms that followed it, an effective dispute resolution system is necessitated. Arbitration as an institution in India is still evolving and there are multifold problems that interfere in the working of a successful arbitration in India. While we have several small arbitration institutions all over the country, none of them attract large arbitrations in India. India doesn’t have prescribed rules and adequate infrastructure for institutionalized arbitration that countries like Singapore and Germany do. This dissuades the parties and therefore, there is an urgent need for the institutionalization of Arbitration in India that would match international standards.

The absence of accountability of arbitrators and the pending cases are key issues coming in the way of India becoming a major player in the field of international arbitration.

The appointment of arbitrators not necessarily requiring professional expertise, their fees, time limits and actions to be taken in case of unethical practices are not being regulated in the country. In addition to these, infrastructure facilities and cost saving procedures are not in place thereby not assuring maintaince of quality standards in the proceedings are other facts that contribute to the hesitance of international business disputes not opting for India as a venue for settlements.

As Indian courts restrain themselves from interfering with arbitral awards, India does not come across as a jurisdiction which carries an anti arbitration bias. The Indian market has been very open and inviting to Non-resident Indians and Foreign Institutional Investors. Thus it would be favourable for international parties to choose India as the venue of arbitration as the expenditure would be much lesser in the context of those companies looking to invest or set up Special Economic Zones in India.

At present, commercial disputes involving huge amounts of money are not arbitrated in India. They go out of India because of which we are losing huge amount of time, money, human resources and expertise. Therefore, there is an urgent need for an institution in India which would match international standards. There is a need to harmonise the Indian law with the concepts on arbitration and conciliation of the legal systems of the world. Independent institutions should impart training to professionals in order for them to be competent.

The Committee recommends that the following provisions may be incorporated in the Arbitration and Conciliation Act, 1996: – Addition of Schedules. A Schedule which would provide for sole arbitration and B Schedule which would provide for institutionalised arbitration may be incorporated in the 1996 Act.

The A Schedule to be governed by Part I of the Act shall deal with sole arbitration. The Committee recommended that persons rendering their services as arbitrators should be registered as members of a professional institution like the Bar Council of India, the Institute of Chartered Accountants, the Engineers’ Association etc and shall be governed by the rules of such institution.

In order to avoid pendency of cases, the committee opinioned that the fees of the arbitrator be withdrawn, or he should be blacklisted with no further case being allotted to him.

Part IA provides for a statutory autonomous permanent institution known as the Indian Arbitration Commission to be presided over by the Chief Justice of India. Its members shall be one representative each of the Ministry of Law and the Ministry of Commerce and two representatives of recognised 145 professional bodies such as the Bar Council of India, the Institute of Chartered Accountants, the Engineers’ Association etc.
The guidelines for granting accreditation to be made public, in order to ensure transparency of the accreditation process.
The B Schedule shall be governed by Part IA of the Act and such related rules to be made public in order to familiarize the international commercial community and instill confidence in their minds.

A panel consisting of appropriate persons, competent and qualified to serve as arbitrators, conciliators and mediators or willing to serve in any other specialist capacity such as experts, surveyors and investigators shall be maintained by the institution. This list shall be made available to the public.
This would also benefit the Public Sector Undertakings and Government Departments to the mindset of unethical practices followed in such institutions at present.

Mr. Jan Paulsson, President of the London Court of International Arbitration (LCIA), addressed students of McGill University in Montreal in a lecture titled “International Arbitration is not Arbitration.”He said that “International Arbitration is no more a ‘type’ of arbitration than a sea elephant is a type of elephant. True, one reminds us of the other. Yet the essential difference of their nature is so great that their similarities are largely illusory.” Arbitration (he said) is an alternative to courts but there is no supra-national court and so, in a national environment, “international arbitration is the only game.”

The 1996 Act has experimented with a mixture of adopting the Model Law for both domestic and international commercial arbitrations and awards which has created confusion and disorder. As domestic awards are not looked upon too seriously by the courts or the parties, international commercial arbitration seated in India is also viewed from the lenses. The main objective of the Model law was to provide a framework for the regulation of international commercial arbitration and nations and individual legal systems are expected to adopt irrespective of how their domestic arbitration is regulated.

By –

Rushda Khan
3rd yr LLB, Campus Law Centre
Faculty of Law, University of Delhi