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New Delhi International Arbitration Centre: Boon To Businesses

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.
     
  • 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.
     
  • 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.
     
  • 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:

  1. Sasan Power Ltd. vs. North American Coal Corporation India Pvt. Ltd., (2016) 10 SCC 813
  2. 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.
  3. CONVENTUS LAW, SIAC (Singapore) - Asia-Pacific Arbitration Report, (Dec. 17, 2019), https://www.conventuslaw.com/arbitrationreport/2019/siac-singapore/.
  4. id.
  5. 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.
  6. 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.
  7. 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.
  8. Kalawati (Dead) through legal representatives and Ors. vs. Rakesh Kumar and Ors., (2018) 3 SCC 658.
  9. 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.
  10. id.
  11. id.

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