Detriments and Requirements of Indian Arbitration Mechanism

What is Arbitration?

Arbitration is one of the Alternative Dispute Resolution in which the neutral third party makes the binding decision in a dispute between the parties. As per International Chamber of Commerce (ICC), arbitration is a dispute resolution mechanism that provides diverse users worldwide with a neutral forum, a uniform system of enforcement and the procedural flexibility that allows parties to tailor-make a procedure to suit their needs in each case.

What does Indian Arbitration need to make it up to international level?

The following principles are necessary for an effective, efficient and safe seat for the conduct of International Arbitration:

  1. LAW: A clear effective, modern International Arbitration law that shall recognise and respect the choice of party’s choice of arbitration as the method of settlement of disputes by providing the necessary framework for facilitating fair and just resolution to the disputes; limiting court intervention in disputes that parties have agreed to resolve by arbitration; and, striking a proper balance between confidentiality and appropriate transparency in investor-state arbitration.
  2. JUDICIARY: An independent judiciary, competent, efficient, with expertise in International Commercial arbitration.
  3. LEGAL EXPERTISE: An independent and competent legal expertise in International Arbitration and International Disputes Resolution that shall provide significant choice to the parties.
  4. EDUCATION: There is a dire need of commitment to the need of education of counsel, arbitrators, the judiciary experts, students of International Arbitration and further developments towards the need of arbitration.
  5. PHYSICAL & TECHNOLOGICAL FACILITIES: Infrastructure needs to be developed. Online dispute resolution and e-filing and analytics of arbitration need to be brought in India. Some other examples of tech-infra are – ability to connect through net-connectivity and, therefore, no adjustments will be needed if any of the arbitrator is not present; recording of the proceedings. This in turn would be time saving and will make record keeping easy.
  6. ETHICS: There is a need to develop the norms of international ethical principles governing the behaviour of arbitrators and counsel.
  7. ENFORCEABILITY: A strict adherence to the principles, rules and norms enacted is required.
  8. IMMUNITY: An arbitrator should have immunity from any civil liability for anything done or omitted to be done by the arbitrator in good faith (as an arbitrator).

Besides all the above-mentioned factors the following are also required for both national and international level of arbitration:

  • Institutional mechanism needs to be strengthened.
  • There is a need of marketing arbitration both in India and global enterprise.
  • Physical and technological infrastructure & judicial mechanism and interpretation.
  • Transparency in the arbitration process and also in the appointment of the arbitrators.
  • Speedy and cost efficient process without compromising on the quality and process.
  • Setting of an independent appointment system. This should be well served by an independent appointment authority set up Supreme Court with the help f a group of International people having expertise in arbitration.
  • A public policy should be made by Government of India to stalk private institutions. And such private institutions must have a branding and official recognition, credibility and ecosystem.
  • Also, there is need of self-supporting, fully independent working arbitration centres where we can have access to the arbitration precedents.
  • Domain expertise should be the test to check the eligibility

LOSSES DUE TO THE LOOPHOLES AND LACK OF ARBITRATION MECHANISM IN INDIA

Arbitration is preferred by many companies in a dispute than normal legal process because it is more expeditious, though a costlier affair but its award is enforceable in foreign jurisdictions as well. All the major disputes of companies such as Vodafone, NIT DoCoMo v. Tata Teleservices moved to the international arbitration centres due to cumbersome process in India. The need of arbitration comes in the backdrop of the immense losses suffered by the business enterprises and the economy at large. This keeps resources and money of the businesses trapped till resolution of the dispute. This is a major disincentive for foreign companies coming to invest in India. So they seek alternatives. One such alternative is arbitration which can be cost effective and quick.

And as a result of the weak arbitration mechanism of India, foreign companies that partner with Indian businesses are approaching the companies outside the India for dispute resolution. In the World Bank report, the Enforcement of Contacts in India fares poorly and ranks 178 out of 1189 countries. The World Bank suggests that improving the mechanism to resolve commercial disputes in India will go a long way in bettering the India’s rank. Many Indian companies are going to arbitration centres like Singapore, London, Paris taking a huge chunk of resolution business outside India. In 2012, 49 out of the total 235 cases in Singapore International Arbitration Centre (SIAC) involved an Indian part. This figure grew to 85 out of 259 cases in 2013.

To overcome the problems in Indian Arbitration Mechanism, Indian Parliament has recently passed an Amendment to the Arbitration and Conciliation Act, 1996.


ABOUT THE AUTHOR

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TESU GUPTA

Tesu Gupta is a third-year B.A.LLB(H) student of Jagan Nath University, Haryana. She has participated in many moot court competitions and paper presentations. Passionate about law and legal research, her area of interest is Arbitration. She has won the intra-university moot court competition and received the ‘Best Presenter’ award.

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