India’s Reputation As ‘Arbitration-Unfriendly’ Jurisdiction: Panel Blames Interventionist Courts, Lack Of Govt Support [Read Report]

A high-level committee set up by the Centre to review institutionalisation of arbitration mechanism has found that judicial intervention and failure of the government and its agencies to use institutional arbitration has, among others, led to India’s reputation as an “arbitration-unfriendly” jurisdiction.The HLC, in its report, has suggested various reforms for promoting arbitration as a mechanism for dispute resolution and to promote institutional arbitration over ad hoc arbitration.While reviewing institutionalisation of arbitration in India, the committee, set under the chairmanship of Justice BN Srikrishna, retired judge of the Supreme Court, also believed that developing international-level arbitration institutions with complete facilities is important and that “one of the important incentives for the creation of an arbitration-friendly ecosystem is the training of judicial officers to understand the supervisory jurisdiction of courts in the arbitral process”.The HLC was set up by the Ministry of Law and Justice on January 13 to review the institutionalisation of the arbitration mechanism in India and submit a report on suggested reforms.Other members of the committee are Justice RV Raveendran, Justice S Ravindra Bhat, Attorney General of India KK Venugopal, Additional Solicitor General of India PS Narasimha and senior advocate Indu Malhotra.It also comprises Research Director of Vidhi Centre for Legal Policy Arghya Sengupta, Deputy Secretary General FICCI Arun Chawla, Senior Director CII Vikas Mohan and Secretary of Department of Legal Affairs, GoI, Suresh Chandra.Institutional Arbitration Over Ad Hoc Institutional arbitration refers to the administration of arbitration by an institution in accordance with its rules of procedure. The institution provides support for the conduct of the arbitration in the form of appointment of arbitrators, case management services including oversight of the arbitral process, venues for holding hearings, etc. It differs from ad hoc arbitration in that several aspects of the arbitral proceedings such as appointment of arbitrators, conduct of the arbitral proceedings, scrutiny of awards, etc. may be determined by the arbitral institution.Despite the existence of numerous arbitral institutions in India, parties in India prefer ad hoc arbitration and regularly approach courts to appoint arbitral tribunals under the relevant provisions of the Arbitration and Conciliation Act.The preference for ad hoc arbitrations by Indian parties is not limited to arbitrations where the amounts in dispute are small, the HLC found, as it cited the example of construction and infrastructure, one of the fastest growing sectors in the Indian economy, which spends crores of rupees on resolution of disputes. In 2001 alone, Rs. 54,000 crores of capital was blocked in construction sector disputes. Dispute resolution in this sector consists mostly of ad hoc arbitration.“Broadly, it has been accepted that ad hoc arbitration is more effective in cases where parties to a dispute cooperate with each other, and can mutually agree to constitute a tribunal and select arbitrators to resolve their dispute. However, typically once a dispute reaches arbitration, it is highly likely that parties no longer want to cooperate. In such a case, ad hoc arbitration is vulnerable to the risk of dilatory tactics, which increases delays and costs. A developed arbitral institution can handle these challenges adequately,” the HLC found.There are over 35 arbitral institutions in India. These include, in addition to domestic and international arbitral institutions, arbitration facilities provided by various public sector undertakings (PSUs), trade and merchant associations, and city-specific chambers of commerce and industry.A large number of these arbitral institutions administer arbitrations under their own rules or under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL Arbitration Rules).Some of the Indian institutions that administer arbitrations include the ICADR, the Indian Council of Arbitration (ICA), the Delhi International Arbitration Centre (DAC), and recently, the Mumbai Centre for International Arbitration (MCIA). Many of these institutions have their own sets of arbitral rules, panels of arbitrators, and offer venues for conducting arbitral proceedings.They offer varying degrees of administrative support for arbitrations. While these institutions are growing in popularity, their caseload is insignificant compared to those of well-established international arbitral institutions, the HLC noted.“The promotion of institutional arbitration in India by strengthening Indian arbitral institutions has also been identified as being critical to encouraging dispute resolution through arbitration. Though various arbitral institutions have been set up in India, particularly in the last five years, they have not been preferred by parties, who have leaned in favour of ad hoc...

India’s Reputation As ‘Arbitration-Unfriendly’ Jurisdiction: Panel Blames Interventionist Courts, Lack Of Govt Support [Read Report]

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