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India’s Approach towards Institutional Arbitration

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 countries.

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:

Efficient Governance:

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 arbitrations.

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.

Conclusion

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 globe.

Award Winning Article Is Written By: Mr.Someshwar Singh Chandel
Awarded certificate of Excellence
Authentication No: AP111026360488-20-0421

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