Due to its flexibility and unique process, arbitration becomes the celebrated
dispute resolution mechanism in international trade disputes. India now is
aiming to encourage arbitration and starting to make efforts to become a hub for
international arbitration. Further to reach the desired goal the 1996 Act which
led to various practical problems, crucial changes were brought by Arbitration
and Conciliation (Amendment) Act, 2015. In addition to this amendment, a new
statute came into existence which was aimed at revitalising India’s commercial
dispute resolution ecosystem.
In the recent times, there are steps being taken to promote institutional
arbitration. In a recent discussion in the 8th BRICS summit at Goa, a creation
of BRICS-Centric arbitration centre was deliberate, with the aim of offering
services on arbitrating international commercial disputes between BRICS
To encourage the dispute resolution through arbitration there is need to promote
institutional arbitration in India. It is well-known fact that arbitration in
India is predominantly conducted through the ad-hoc method and institutional
method is not preferred. In the year 2016 out of 307 cases administered by
Singapore International Arbitration Centre (SIAC) 153 involved Indians.
Concept of Institutional arbitration and Ad-hoc arbitration
It is important to understand that parties are free to choose the method of
arbitration. It depends upon the facts and circumstances of their dispute. In
India, parties have preferred ad-hoc method of arbitration, whereas
internationally institutional arbitration is a preferred method of dispute
resolution. Therefore it is important to understand both forms as they are
having their own pros and cons.
Meaning of Ad-hoc Arbitration
It can be defined as a method of arbitration under which the parties where
parties and the arbitral tribunal will conduct the arbitration according to the
procedures which will either be previously agreed upon by the parties or in the
absence of such agreement be laid down by the arbitral tribunal at the
preliminary meeting once the arbitration has begun.
Therefore under this method, the arbitration is conducted and arranged by the
parties themselves and there is no involvement of the third party such as an
institution. The proceedings are conducted by an arbitrator appointed as per the
agreement between the parties. All the aspects related to arbitration needs to
be decided by the parties themselves like the procedure of conducting
arbitration, number of the arbitrators, how the appointment would be made, rules
and regulations applied to the arbitration.
Meaning of Institutional Arbitration
It is that method of arbitration where the whole arbitration is conducted by an
established arbitral institution or organization. The arbitration agreement
itself provides for appointment arbitral institution. The parties specifically
provide that the in case of any dispute arises in the period of contract the
dispute would be solved through institutional arbitration.
In the case of Nandan Biomatrix Ltd. V D 1 Oils Ltd
it was agreed between
the parties agreed to the resolve the dispute through institutional arbitration.
The issue arose whether not providing specific name of the arbitral institution
and only agreeing to resolve the dispute through institutional arbitration would
make the arbitration agreement invalid. It was held that as the parties
unequivocally agreed to settle the disputes through institutional arbitration
and not though ad-hoc arbitration. Therefore, there existed a valid arbitration
agreement between the parties.
Development of Arbitral Institutions in India
In December 2016, a High-Level committee to review the institutionalization of
arbitration mechanism in India was created under the chairmanship of Justice (Retd.)
B.N. Srikrishna. The objective of this committee was to identify issues in the
arbitration process and to find out the challenges faced in the development of
institutional arbitration. The report by the High-Level Committee discusses in
detail regarding the development of the above mentioned Arbitral Institutions
and the reasons why these institutions are the most preferred among the parties.
Briefly, the reasons are:
This is probably the major reason why they are most preferred arbitral
institutions. All these institutions have modern and updated rules which allow
them to offer parties more flexibility. Services like scrutiny of the draft
arbitral award and other potential defects make them more preferable. These have
experienced panel of arbitrator having international expertise and a
well-organized administrative staff. The state of the art infrastructure is
available for conducting the whole process.
Adequate Support from the government:
The foremost reason given by the committee was that among two of the top five
arbitral intuitions namely the SIAC and the HKIAC were immensely supported by
their respective governments. The governments provided them adequate financial
and infrastructural support as well as playing an important role in promoting
them to international level. Maxwell Chambers was also established through the
government support. This indeed is a problem in India.
Significant role Business Community:
To fulfil the need of business of community asking for effective resolution
services led to the establishment of several arbitral institutions HKIAC and ICC
Court both were establish to fulfil the needs of the business community.
Supportive Arbitration Jurisdiction:
The popularity of these institutions is due to the supportive legislative
system. These jurisdictions such as Singapore, Hong Kong, and London are
completely arbitration friendly seats. They have the better business-friendly
environment and also provide for better legal services. The local legislative
framework provides priority to party autonomy, the efficacy of proceedings, the
sanctity of arbitral awards and the provision of ample court assistance in
Less Interference by Judiciary:
According to the report all the mentioned arbitral institutions are blessed with
a judicial system which is very supportive of arbitration. They not only respect
the party’s autonomy but also preserve the sanctity of the arbitral award.
Whereas in India too much intervention under the proceeding and erroneous
interpretation of provisions of Arbitration and Conciliation Act has made it
more difficult to arbitrate.
All these reasons were observed by the committee. Nevertheless, some of the
feature even the Indian government is trying to adopt and make India an
International hub for arbitration.
In order to make India a global hub for International arbitration and mediation
there is a need to face-lift and revamp the entire structure of arbitral
institutions. The issues faced by the institutions can be resolved through the
recommendations of the committee. There is an urgent need to understand that
there is a difference between ADR and Litigation. ADR specifically Arbitration
and Mediation are the unsurpassed forms of dispute resolutions.
However, this can be only done with the support from the entire stakeholders in
the process. The business community should start understanding the potential of
Institutional arbitration and indulge in resolving the dispute in an efficient
manner. Secondly, it is the responsibility of state to create an arbitration
friendly environment by supporting these institutions by providing required
financial and infrastructural support. Legislative and the judiciary need to
work together and bring out a policy which would support party autonomy rather
than imposing mandatory rule.
It is equally important to ensure that the institutional arbitration in India is
speedier and more cost-effective. To achieve a continuous effort would be
required by the arbitral institutions and gain the confidence of parties to move
towards mitigation instead of litigation. This can be achieved by providing
state of the art facilities, experienced arbitrators, and effective
administrative body and well-designed framework.
Therefore, if we Evolve
as arbitration friendly eco-system, Devolve
all the lacunas only then we can Resolve
the disputes efficiently.
India is a country with great potential it has got the best possible opportunity
to achieve this goal and emerge as the most effective arbitral seat in the
Award Winning Article Is Written By: Mr.Someshwar Singh Chandel
Authentication No: AP111026360488-20-0421