Institutional arbitration has achieved a significant place the world over.
Due to various well reputed arbitral institutes and competitiveness inter se,
these institutes tend to afford greater facilities, time and cost effective
arbitration mechanism.
However, in India Institutional arbitration has not been
successful due to plagued arbitral institutions and this as a consequence tends
parties particularly in commercial arbitration to prefer foreign seat.
Therefore, addressing this serious concern New Delhi International Arbitration
Centre Act, 2019 is enacted, envisioned with making India an International
arbitration hub. This with concomitant effects will attract and incentivise
foreign investment and will build country's reputation globally concerning
alternative dispute resolution process.
Parties to Arbitration prefer such Alternative Dispute Mechanism in order to
resolve their disputes in efficient and cost effective manner. There exist some
prominent arbitral institutions in India like Indian Council of Arbitration (ICA)
and Mumbai Centre for International Arbitration (MCIA) and over 35 other
arbitral institutions but plagued by lacunas these institutions handle less
number of cases. Entities on the other hand prefer ad-hoc arbitration or foreign
institutional arbitration.
Whether it is consumers perception or institutional
inefficiency, is needed to be addressed. In Sasan Power Ltd. vs. North American
Coal Corporation India Pvt. Ltd.[1], the High Court of Madhya Pradesh held that
twoIndian parties are free to arbitrate in any place outside India and an award
rendered thereby would be a foreign award falling under part-II of the
Arbitration Act. Simultaneously, it can be observed that in 2016 Singapore
International Arbitration Centre (SIAC) witnessed a sudden hike in number of
arbitrations filed per year.[2] This hike in number of arbitrations can be
attributed to increase in number of international arbitrations as the number of
domestic arbitration remains steady.[3] The report[4] also evidences India as
the main country of origin of parties calculated to 20.3% followed by china
(11.6%) in 2016. Continuously, in 2018 India remained strong contributor of
cases.[5]
The New Delhi International Arbitration Centre Act, 2019 (NDIAC Act, 2019)
came into force on 26th July, 2019. It establishes and declares the New Delhi
Arbitration Centre as an institute of national importance tending to become
major arbitration hub advancing quick and efficient dispute resolution
mechanism. Reiteratively, judiciary and legislators have geared towards making
India a global arbitration hub through legal and infrastructural means. Despite
these efforts inexperience of commercial culture and judicial delays have
dissuaded foreign parties from choosing to seat international commercial
arbitration in India. Also, Foreign Business entities preclude themselves from
investing in and entering into contracts with Indian businesses due to time lag
in contractual enforcement. Efficient justice delivery system for ease of
business is the need of the hour. This is where dispute resolution mechanism
comes in of which the core value is expeditious settlement of disputes. This,
once streamlined will have a huge impact on the Indian economy as well as on
global perception on doing business in India.
New Delhi International Arbitration Center
The New Delhi Arbitration Centre Act[6] is envisioned with the object of
creating an autonomous regime of institutionalised arbitration. Enumerating the
pressing needs the New Delhi Arbitration Act consists of dedicated provisions
for revitalising the efficiency and for better management of arbitration.
Justice B.N. Srikrishna committee which was constituted to identify the
hindrances in the development of institutional arbitration, submitted in its
report that nearly all arbitral institutions are not at par with international
institutions with respect to performance.[7]
Since the International Center for
Dispute Resolution (ICDR) was plagued with increasing cost, delays and
procedural formalities, it was not able to sustain the growth and development of
institutional arbitration system and hence, the committee report recommended the
acquisition of the undertakings of ICDR. This created a need for clear framework
with regard to establishment of an institution so as to make it a Centre for
institutional arbitration. The New Delhi Arbitration Centre through this Act
acquires the undertakings of International Centre for Dispute Resolution (ICDR).
The Act is formulated with a view to incorporate an institution which leads in
conducting international and domestic arbitration, promoting research and study
and to get together with other national and international institutions. It also
affords empanelment of accredited arbitrators, conciliators and mediators having
knowledge and expertise in institutional arbitration.
How Alternative Dispute Resolution affects business?
A government who works to improve regulation helps to improve Economy. Public
and private sector have a huge impact on an economy. When businesses in a nation
flourish, they contribute to its Gross Domestic Product (GDP) by creating jobs
and generating income. Any rational government pays special attention to laws
and regulations affecting small and medium enterprises. Since effective business
regulations afford business entities the opportunity to grow. For Ease of
Business, effective regulation like New Delhi Arbitration Bill is a pressing
priority insofar as arbitration proceedings in India are concerned. On the other
hand enforcement of contracts through judicial process would slog the
plaintiff's way through it. It would be appalling to acknowledge about a
case[8] where the plaintiff filled a suit for enforcement of contract in 1987
and was delivered the judgment in 2018. One does not need to go into numbers to
show that cases in the judicial system take a prolong time to get seen through.
Fast changing times of today demands expeditious settlement of disputes.
Therefore, it is time to introduce effective changes in the Alternative Dispute
Resolution process to streamline the system so that arbitration proceedings can
be decided efficiently. A World Bank Flagship Report, 2019 on doing business places India among top 10 improvers in business reforms, India being fifth in
the list.[9] Report shows that India ranks 77th in the Ease of Doing
Business.[10] Also, India manages to get an honorable mention in almost all
areas in the list of Who reduced regulatory complexity and cost or strengthened
legal institutions in 2017-2018. However, there was no acknowledgement of India
under the category making it easier to enforce contracts.[11]
Benefits of NDIAC Act, 2019
Arbitration is the most preferred method of dispute resolution in international
transactions as well as domestic transactions in this era. Today, this private
system is the method of choice where parties decide to resolve their dispute
outside any judicial system. In any arbitration proceeding cost, speed and
efficiency are the core values which should be adhered in every case. With these
same objectives, that manifest from the preamble of the NDIAC Act, 2019, the
foundation of New Delhi Arbitration Center has been kept.
Addressing serious concerns where India's Alternative Dispute Resolution system
lacked, the NDIAC Act, 2019 provides for valiant measures to incorporate a
robust institution for domestic and international arbitration. This would
attract and incentivise foreign investment in India and would build country's
reputation globally. Key benefits are enumerated as under:
Flagship Institution
NDIAC Act, 2019 establishes and declares the New Delhi Arbitration Centre as
an institute of national importance tending to become major arbitration hub.
It is envisaged with the object of creating an independent and autonomous
regime for institutionalised arbitration. The Centre will be funded by the
Central Government each financial year as per its usage. Also, it is the
objective of the Center to promote research and study, provide training,
organise conferences and seminars on alternative dispute resolution. This as
a concomitant would incentivise institutional arbitration in India.
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Composition of Centre's Structure
The act constitutes a seven member council for governing the institute. This
compared to the governing council of previously existing ICDR is much lesser
in numbers. The governing council of ICDR consisted of 47 members. Also,
compared to the other institutes like Mumbai Centre for International
Arbitration (MCIA), which consists of seventeen members, the New Delhi
arbitration Centre has fewer members in the governing council. This makes
the Centre fast and efficient in decision making process.
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Efficiency and Cost Effectiveness
As discussed earlier time and cost are the core values of any arbitration
proceedings. The act has dedicated provisions for the conduct of arbitration
and conciliation in a cost effective and efficient manner.
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Constitution of body of Management and Training
The Act establishes two bodies i.e. Chambers of Arbitration and Arbitration
Academy. Chambers of Arbitration functions to empanel the arbitrators to
maintain a permanent penal of reputed and experienced arbitrators. On the
other hand the Arbitration Academy is set up for training and research where
arbitrators will be trained in the area of international commercial
arbitration.
The Road Ahead
It will be a matter of application that how effectively the provisions of the
New Delhi International Arbitration Act, 2019 get implemented. With SIAC being
the first and the greatest competitor in Asia and with other reputed
institutions like ICC, LCIA, HKIAC and ICDR which presently compete for cost and
efficiency, India still has a long way to go before it becomes an international
arbitration hub. Proper implementation of the NDIAC Act will bring a major
change in the regime of institutionalised arbitration.
End-Notes:
- Sasan Power Ltd. vs. North American Coal Corporation India Pvt. Ltd.,
(2016) 10 SCC 813
- SINGAPORE INTERNATIONAL ARBITRATION CENTRE, Annual Report, 2016, (Dec.
17, 2019), https://www.siac.org.sg/images/stories/articles/annual_report/SIAC_AR_2016_24pp_WEBversion_edited.pdf.
- CONVENTUS LAW, SIAC (Singapore) - Asia-Pacific Arbitration Report, (Dec.
17, 2019), https://www.conventuslaw.com/arbitrationreport/2019/siac-singapore/.
- id.
- SINGAPORE INTERNATIONAL ARBITRATION CENTRE, Annual Report, 2018, (Dec.
17, 2019), https://www.siac.org.sg/images/stories/articles/annual_report/SIAC_AR2018-Complete-Web.pdf.
- New Delhi International Arbitration Centre Act, 2019, (Dec. 17, 2019),
http://legalaffairs.gov.in/sites/default/files/The%20New%20Delhi%20International%20Arbitration%20Centre%20Act%2C%202019.pdf.
- Retd. Justice B. N. Srikrishna, Report of the High Level Committee to
Review the Institutionalisation of Arbitration Mechanism in India, (Dec. 17,
2019), http://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf.
- Kalawati (Dead) through legal representatives and Ors. vs. Rakesh Kumar
and Ors., (2018) 3 SCC 658.
- WORLD BANK GROUP FLAGSHIP REPORT, Doing Business, 2019, (Dec. 17, 2019),
https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2019-report_web-version.pdf.
- id.
- id.
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