The year 2019 marked a pivotal moment in India's journey toward institutional
arbitration, signifying a determined effort to cultivate an arbitration-friendly
environment. This endeavour, echoed in previous amendments to the Arbitration
and Conciliation Act, 1996 (referred to as the "ACA"), finally found solid
ground in the latest amendment.
A cornerstone of this legislative change was the
delegation of authority for arbitrator appointments under Section 11 to arbitral
institutions. Fueled by concerns over India's reputation as an
arbitration-unfriendly jurisdiction, the Ministry of Law and Justice established
a High-Level Committee (HLC), chaired by retired Justice of the Supreme Court,
Justice B.N. Srikrishna. This committee was tasked with recommending measures to
foster institutional arbitration within India.
Building upon the recommendations of the HLC's report, the Indian Parliament
introduced the 2019 Amendment Act. Central to our discussion are the
amendments to Section 11, "Appointment of Arbitrators," which repealed
sub-sections (6-A) and (7). The core thrust of these changes was to strengthen
institutional arbitration in India, with the amended Section 11(6) empowering
arbitral institutions designated by the Supreme Court or High Court to oversee
However, significant questions remained unanswered: the
scope of examination by these institutions when considering appointment
applications and the possibility of challenging tribunal orders. These
uncertainties loom as potential impediments to the advancement of institutional
arbitration in India, urging the legislature to provide clarity and prevent
undue interference in the tribunal's authority.
The Arbitration and Conciliation Act, of 1996, was conceived with the aspiration
of minimizing court interference and expediting proceedings while upholding
arbitral sanctity. To this end, comprehensive amendments were introduced in 2015
and 2019, marking significant milestones. The 2019 amendment, in particular,
granted heightened recognition and authority to institutional arbitration
centres (IACs) in India, primarily through the revision of Section 11.
empowering IACs designated by the Supreme Court or High Court to appoint
arbitrators, this amendment took a crucial step toward elevating IACs in India
and promoting their use as an alternative to ad hoc procedures. However,
challenges persist, notably regarding the IACs' ability to compel
pre-arbitration compliance and the absence of provisions addressing
non-compliance, leading to protracted arbitrations. This article delves into
these issues and explores potential solutions within the framework of the Act to
bolster the authority of IACs in India.
The Role of Institutional Arbitration Centers
Institutional arbitration is a method of dispute resolution conducted under the
governance of established arbitral bodies. These organizations create and
enforce rules that complement the Arbitration and Conciliation Act, 1996 (ACA),
governing procedural aspects of arbitration. These rules are designed for both
domestic and international arbitration, covering a wide range of disputes.
Institutional arbitration centres play a crucial role in managing administered
arbitrations. One key advantage of institutional arbitration is its ability to
streamline proceedings, providing clarity and certainty.
These cases adhere to
well-defined procedural rules, reducing ambiguity and ensuring efficiency.
Arbitral institutions anticipate various scenarios, including uncooperative
parties, and oversee the arbitration process. They maintain a panel of
experienced arbitrators known for their integrity and expertise, further
enhancing the process.
Institutional arbitration offers convenience by providing standardized
arbitration clauses, reducing the burden on parties and their legal
representatives. Parties need only incorporate the institution's draft clause
into their contracts, signalling their intent to follow the organization's
rules. This approach minimizes the need for court intervention and ensures
clarity throughout the arbitration process.
Additionally, institutional arbitration promotes financial detachment, as many
institutions collect funds from parties to compensate arbitrators without direct
involvement from the arbitrators themselves. Moreover, the process enhances the
selection of arbitrators, as experts from various regions and professions
populate the institution's panel. This diversity ensures the appointment of
arbitrators with the requisite experience, facilitating efficient dispute
"Arbitration may be conducted ad hoc or under institutional procedures and
rules. When parties choose to proceed with ad hoc arbitration, the parties have
the choice of drafting their own rules and procedures which fit the needs of
their dispute. Institutional arbitration, on the other hand, is one in which a specialised institution with a permanent character intervenes and assumes the
functions of aiding and administering the arbitral process, as provided by the
rules of such institution. Essentially, the contours and the procedures of the
arbitral proceedings are determined by the institution designated by the
parties. Such institutions may also provide qualified arbitrators empanelled
with the institution. Further, assistance is also usually available from the
secretariat and professional staff of the institution. As a result of the
structured procedure and administrative support provided by institutional
arbitration, it provides distinct advantages, which are unavailable to parties
opting for ad hoc arbitration".
The HLC in its Report referred to the QMUL Survey which stated that the
International Chamber of Commerce Court (ICC Court), the London Court of
International Arbitration (LCIA), the Hong Kong International Arbitration Centre
(HKIAC), the Singapore International Arbitration Centre (SIAC) and the
Arbitration Institute of the Stockholm Chambers of Commerce (SCC) are the five
most preferred arbitral institutions worldwide. The call for the establishment
of credible institutional arbitration centres in India resonates with
international practices. The above-mentioned IACs are government-supported
entities renowned for their impartiality.
India's pursuit of a similar path is
underscored by the recommendations of the High-Level Committee to Review the
Institutionalization of Arbitration Mechanism in India, chaired by Justice B.N.
Srikrishna. This committee emphasized the need for government backing to fortify
institutional arbitration in India, a sentiment echoed by the Law Commission of
Challenges in Arbitrator Appointment
Arbitrator appointment is a critical aspect of the arbitration process,
influencing the fairness and efficiency of dispute resolution. However,
challenges often arise in this regard, particularly in ad hoc arbitration
systems. These challenges can hinder the smooth progression of arbitration
proceedings. One prominent challenge lies in the lack of clarity surrounding the
criteria for arbitrator appointment and the process itself, especially in ad hoc
Parties may struggle to agree on arbitrators, leading to delays
and disputes, which defeat the purpose of arbitration - swift and efficient
resolution. In some cases, parties may be unwilling to cooperate in the
arbitrator appointment process. This non-cooperation can further delay
proceedings and erode the benefits of arbitration.
The recent amendments to Section 11 of the Arbitration and Conciliation Act, of
1996, have taken a significant step toward addressing these challenges by
vesting the authority to appoint arbitrators with arbitral institutions.
However, certain aspects, such as the scope of examination by these institutions
and the challenge of tribunal orders, remain unclear. Legislative intervention
is needed to provide clear guidelines in these areas to ensure the efficient
functioning of institutional arbitration in India.
The Need for Compliance
In institutional arbitration, despite comprehensive procedures established by
various institutions, certain issues remain unaddressed, raising concerns about
compliance and efficiency. Firstly, these institutions often lack the power to
enforce their procedures on the parties involved. Even with the 2019 Amendment
to the Arbitration and Conciliation Act, which aimed to promote institutional
arbitration, there is no provision for sanctions in cases of non-compliance with
orders issued by these institutions.
For example, these institutions cannot
compel a non-compliant party to appoint its nominee arbitrator. Consequently,
there is no certainty that non-compliant parties will actively participate in
the arbitration process, potentially leading to prolonged proceedings and
delays, undermining the purpose of institutional arbitration.
Secondly, the existing procedures in institutional arbitration can place an
unreasonable financial burden on parties who comply with these procedures. Many
institutions require upfront payments, including arbitrators' fees, hearing
costs, administrative charges, and arbitrators' travel expenses, estimated based
on the number of arbitrators and the claim value.
Both parties are typically
required to share these costs equally. In cases of non-compliance by one party,
it is a common practice to direct the compliant party to bear the entire cost of
arbitration, with the possibility of recovering these costs once an ex-parte
award is issued. This practice can further deter parties from strictly adhering
to the institution's procedures.
To address these issues, it is imperative to establish stricter compliance
measures in institutional arbitration. One proposed solution is to introduce
legislative amendments that allow for the initiation of contempt proceedings
against non-compliant parties before the formation of an Arbitral Tribunal. This
legal sanction would incentivize parties to diligently follow the timelines set
by institutional arbitration bodies.
Alternatively, legislative amendments could grant the compliant party the
ability to approach the Court under Section 11 of the Arbitration and
Conciliation Act, requesting the Court to direct the non-compliant party to
adhere to the institution's directions regarding the appointment of an
Such applications should be decided within a specified timeframe,
such as 30 days, to expedite the process. While some may argue that this
approach could increase court litigation and contradict the principle of minimal
judicial intervention outlined in Section 5 of the Act, it is deemed necessary
to expedite the formation of Arbitral Tribunals and achieve the Act's
The authors emphasize that the principles of party autonomy, crucial
in institutional arbitration, would lose significance without affirmative
provisions for court-directed arbitrator appointments due to non-compliance.
Therefore, the first suggested option is favoured as it provides a more
effective remedy to the compliance issues faced in institutional arbitration.
In conclusion, the authors stress the critical need for legislative intervention
to bolster Institutional Arbitration Centers (IACs) and address the persistent
issue of party non-compliance with IAC directives. IACs play a pivotal role in
today's legal landscape, offering structured fee models and comprehensive
procedures that enhance transparency and cost-effectiveness in arbitration. By
implementing the suggested legislative amendments, we can fortify IACs'
authority and motivate parties to seriously consider them as the preferred
avenue for arbitration.
To complement these legislative changes, measures such as training and
certifying arbitrators and embracing technological innovations for streamlined
processes can further enhance IACs' efficiency. Transparency initiatives,
including regular reporting of case statistics, can provide valuable insights
for parties. Altogether, these efforts will strengthen IACs and promote their
role as dependable platforms for dispute resolution in India's evolving legal
- Report of the High-Level Committee on Making India a Hub of International Arbitration, https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf (accessed August 23, 2023)
- 2022 SCC OnLine Del 4367
- 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration", Queen Mary University of London and White & Case LLP (2015), available at http://www.arbitration.qmul.ac.uk/docs/164761.pdf
Written By: Aditi Sharma
is a final year B.A. LL.B. (Hons.) student at UPES, Dehradun.