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Institutional Arbitration: Indian Approach

The key behind arbitration is to allow parties to resolve disputes mutually, particularly in the business sector, without arduous judicial proceedings, thus reducing time and money and increasing efficiency, with minimal court interference.

In India, where ad hoc arbitration is far more practical than institutional arbitration, parties, councils and arbitrators are beginning to recognize ad hoc arbitration as a fully scrutinized free procedure that leads to lengthy dispute settlement and ultimately deprives the whole purpose of arbitration. Provided this scenario and a regional approach to arbitration, India's legislature.

Although in India, especially in the past five years , different arbitration institutions have been set up, ad hoc arbitration is still a preferred form of arbitration.

Furthermore, a large number of Indian parties' international arbitrations are held abroad and administered by foreign arbitral bodies. In order to facilitate the arbitration of institutions in India, it is imperative that:
  1. Indian parties engaged in domestic and foreign arbitrations should be encouraged rather than ad hoc arbitrations to become institutionally administered; and
  2. India should become a preferred arbitration centre for international arbitrations, at least in matters involving Indian party.
This paper discusses some of the problems in the institutional arbitration environments in India against this framework. We seek to raise a number of important questions, which have to be asked to better understand why India has not yet become an institutional arbitration centre.

In order to do this, there will be an effort to explain the failure of many established arbitral institutions in India. Certain collection of data from such arbitral bodies and arbitration stakeholders may help us to understand these reasons.

Meaning of Institutional Arbitration

It is the arbitration mechanism where an existing arbitration institution or entity carries out the entire arbitration under a set of rules. Appointment arbitral organization is provided for in the arbitration agreements. In particular, the parties provide that the dispute would be resolved through institutional arbitration in the event of any dispute during the contractual period.

Nandan Biomatrix Ltd. v. D 1 Oils Ltd [1] In this case it was agreed upon the resolution of the dispute by institutional arbitration between the parties. The problem emerged because the arbitral body did not have a clear name and agreement to settle the conflict only by formal arbitration.

Arbitrator: Analogy To A Referee

  1. An alternative dispute resolution mechanism may be referred to arbitration by the Arbitrator, where an independent third party arbitrates as a referee.
  2. The arbitrator mediates the dispute at the arbitration hearing and even in a game, the arbitrator sorts out the players differences.
  3. The arbitrator has the power to determine the dispute between the parties; also the arbitrator has the power to decide the disputes between the players.
  4. But, in contrast to the decision of a referee at a sport match, the arbitrator's decision is final. The decision of the arbitrator determines the outcome of the dispute.
  5. conclusively the arbitrator's position is more like a tribunal than an arbitrator. The proceedings are nevertheless less formal than the Court.

Development of Arbitral Institutions in India

The high-level Committee's report examines in depth the trends of the above-mentioned arbitral institutions and the reasons why the parties favour such institutions. In a nutshell, why
Effective governance: this is probably the most important explanation why arbitration institutions are the most common. All these institutions have new and up-to - date regulations to provide more flexibility to parties. Which include resources such as the review of the draft arbitration award and other possible defects. The arbitrator panel has international know-how and well-organized administrative personnel. For the entire process, state-of-the-art infrastructure is available.

Adequate government support: The committee's main reason was that its respective governments immensely supported two of the top five arbitrary intuitions, namely, the SIAC and the HKIAC. The governments have provided them with sufficient financial and infrastructural assistance and have played an significant part in internationally promoting them. The government support also created Maxwell Chambers. In fact, this is an Indian problem.

Nevertheless a positive move forward in establishing arbitration in India is the 2018 New Delhi International Arbitration Centre (NDIAC) Bill introduced recently in Lok Sabha. The Project also recommends that a Chamber be set up to take over the current International Centre for Alternative Conflict Resolution.

Concept of Institutional arbitration and Ad-hoc arbitration

The parties should be informed that the process of arbitration is open to decide. It depends on the circumstances and details of their dispute. In India, parties have preferred ad hoc arbitration, while international arbitration is a preferred means of settling disputes. It is necessary therefore to consider all types because they have their own advantages and disadvantages.

Ad-Hoc Arbitration In Relation With Institutional Counterpart

The ad-hoc arbitration need not be entirely divorced from its institutional counterpart.
  1. As the appointing authority: In ad hoc proceedings it is often necessary to appoint unbiased or skilled arbitrators. For such situations, the ad hoc arbitration parties will decide to select the arbitrators by selecting an external provider.
  2. To administer the proceeding: Additionally, ad hoc arbitration parties can decide at any time to involve an institutional provider in the administration of arbitration.

Essential Issues To Be Looked Into While Choosing For Institutional Arbitration
The choice of the institution suitable for dispute resolution arising from the contract in institutional arbitration is the first question to be raised for the agreement of the parties. Different considerations must be considered when making such a choice:
  1. the dispute's nature & business value,
  2. administrative laws as these regulations differ,
  3. the institution's past record and reputation;
  4. institutional rules are in keeping with recent developments in international trade arbitration.

There are many institutional arbitration administrators, some of which are associated with a trade association and many of which are independent
  1. The London Court of International Arbitration,
  2. The Chartered Institute of Arbitrators (UK),
  3. The National Arbitration Forum (USA) and
  4. The International Court of Arbitration (Paris) etc.
Why to choose institutional arbitration over ad hoc arbitration in India

Institutional arbitration has benefits including:

  1. The availability of rules and procedures predetermined to ensure that arbitration is released and concluded with dispatch;
  2. administrative assistance from the secretarial institutions or arbitration tribunals;
  3. lists of arbitrators eligible, frequently broken down by skill areas;
  4. appointment by the institution of arbitrators should be appointed by the parties;
  5. arbitration support and physical facilities;
  6. support to encourage reticent parties to arbitrate and
  7. an establish proven record-based format.

Conclusion

The parties, however, have essentially all rights, such as appointment of arbitrators, etc., in formal arbitration. The institutions are also in a position to enforce the parties their will. This is against the very spirit of arbitration, and it can be argued that in the true sense it is not arbitration.

Although ad hoc arbitration will then be preferred, ad hoc arbitration is only suited to disputes involving smaller claims, less stable parties and domestic arbitration in today's modern and complex commercial environment, except where States parties are involved, for reasons which are minimal.

In the context of Indian commercial disputes, it can be argued that institutional arbitration is more appropriate, even if it is apparently costlier, time consuming and more rigid than ad hoc arbitration, bearing in mind that it provides established and updated rules for arbitration, support, arbitration supervision & monitoring, award review and, above all, strengthens the credibility of awards.

References:
  • Report of the High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India (2017) p. 3. (Further the Report)
  • National Juridical Data Grid ( Feb. 10, 2017 ), http://njdg.ecourts.gov.in/njdg_public/main.php
  • (1) Nandan Bio matrix Ltd. V D 1 Oils Ltd, (2009) 4 SCC 495

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