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Strengthening Institutional Arbitration for Domestic and International Commercial Disputes in India

Priyanka Desai*

 

The International Monetary Fund (IMF) has predicted that India is all set to become the fastest growing major economyin 2023. An effective and robust arbitration framework within India is hence all the more important. For the most part, India continues to opt for ad-hoc arbitrations over institutional arbitrations. This is perhaps owing to the allure of higher flexibility in the arbitration process and saving of costs payable to the arbitral institution. The parties that do opt for institutional arbitrations typically select older institutions such as the Singapore International Arbitration Centre (SIAC) founded in July 1991, the International Chamber of Commerce (ICC) founded in 1919, London Court of International Arbitration (LCIA) founded in November 1892, etc. In fact, India was the top user of SIAC in 2022. To cater to India-centric arbitrations, institutions such as SIAC and ICC have opened up representative/regional offices in India at Mumbai, Delhi and GIFT City.

Owing to the popularity of institutional arbitration in India, Indian arbitral institutions have also surfaced. The Mumbai Centre for International Arbitration (MCIA), founded in 2016, has seen a gradual increase of over 20% in case load in 2022 over the previous year, and MCIA’s total value of disputes under administration has crossed a billion USD, a significant milestone for a domestic arbitral institution. Similarly, the Delhi International Arbitration Centre (DIAC), established in 2009, is annexed to the Delhi High Court as an Institutional Arbitration Centre. The popularity of these institutions shows that India is slowly but surely warming up to the idea of having arbitrations administered by arbitral institutions.

Some advantages of institutional arbitration, include (a) oversight and scrutiny by the arbitral institution; (b) on-site infrastructure; (c) efficiency and speed of the pre-determined arbitral process; (d) cap on maximum administrative and arbitrator fees incurred by the parties during the arbitration; (e) available arbitrators; (f) adoption of international best practices; (g) offering a wide range of specialists to choose from which would invariably cut down on time and litigation costs spent just on appointment of arbitrators owing to an uncooperative counterparty; and (h) arbitral institution rules are updated with latest developments from time to time.

It can be seen that many of the Indian arbitral institutions have not been able to (i) actively engage and embrace developments in the arbitration ecosystem, (ii) keep pace with the dynamic nature of arbitration, (iii) address the growing needs of institutional arbitration; or (iv) bear the caseload. A closer examination of the reasons for its failure may provide valuable insights and lessons for other arbitral institutions.


REVAMP OF INSTITUTIONAL RULES

Whilst institutional rules inter alia provide for a great deal of autonomy to parties, a revamp of the rules may be required to allow for emergency arbitration, and introduce an expedited process of appointment of arbitrators. Institutions may also provide rules for Online ADR. The lockdown facilitated development of online dispute resolution models including forcomplex, voluminous matters. This has the advantages of flexibility and relatively low costs (no food, venue, travel etc. costs) and may appeal to many parties. For example, domain name disputes are resolved by WIPO (World Intellectual Property Organisation) through an online-only procedure.

APPOINTMENT OF ARBITRATORS

The removal of the minimum age of qualification for empanelment as an arbitrator can assist in appointment of young arbitrators with subject matter expertise who can conduct arbitrations swiftly (due to the availability of dates) and efficiently (owing to subject matter expertise). Not all arbitrations require the appointment of arbitrators who are retired judges with several years of judicial experience. Further, the institute may consider disqualifying underperforming arbitrators in order to promote access to quality, independent, impartial and high-quality arbitrators and may encourage diversity and inclusion. For example, efforts to include and promote women as arbitrators. 

Additionally, the institutes may regularly update and broaden the pool of arbitrators to include more foreign nationals to enable foreign parties to have greater alternatives in terms of the  selection of arbitrators. In the absence of foreign nationals, foreign parties may hesitate to select from a pool of arbitrators that are all Indian nationals. A referral system from existing empanelled arbitrators can also help broaden the pool.


OTHER RECOMMENDATIONS

In addition to the aforesaid recommendations, the arbitral institutions may also consider doing the following:

 

a.     Conduct special arbitration/ mediation training for retired judges/ tribunal members who it is looking to empanel. Given their familiarity with court/ tribunal procedures and processes, there is a tendency to adopt similar procedures and processes in arbitrations; whereas the entire premise of alternate dispute resolution is to settle disputes sans the rigours of the Code of Civil Procedure, 1908, Indian Evidence Act, 1872 etc.

b.     Provide in-house live/ realtime transcription services using AI tools and natural Language Processing (NLP) technology. This significantly reduces time taken in recording evidence and can even provide transcripts of oral arguments- thus eliminating the need to file written submissions. For example, TERES- an NLP tool which was recently used by the Supreme Court or Epiq Singapore Pte Ltd.- the official provider of transcription services for the Supreme Court of Singapore.

c.     All government contracts should mandate institutional arbitration. Since arbitration clauses in many sectors, and particularly in infrastructure projects, are contained in government contracts, the power and responsibility to switch to institutional arbitration lies with the government.

d.     Organize global conclaves like the India ADR Week (conducted by MCIA), Delhi Arbitration Weekend (conducted by DIAC), New York Conference on International Arbitration (conducted by ICC).

e.     Set up a wing of young practitioners (like the Young ICC or the Young MCIA) who can help in promoting the institution. This wing can also help promote ADR culture among students and young professionals, including through social media. It can take the shape of training programs, multi-tiered dispute resolution competitions for students, networking sessions, and events to promote ADR etc.

f.      Conduct regular conferences with industry experts, publish journals or magazines with articles contributed by seasoned professionals, conduct seminars and workshops for arbitration practitioners and undertake research and satisfaction surveys.

g.     Publish an annual report of all the activities conducted by the arbitral institute, the caseload handled, arbitrators empanelled.

h.     Regularly update the rules to stay up to date with international best practices in arbitration.

 

CONCLUSION

The need to recognize and strengthen institutional arbitration in India is now stronger than ever. The government is making attempts to strengthen India’s position as a favourable jurisdiction for arbitration. For example, the Arbitration and Conciliation (Amendment) Acts, 2019 and 2021 are aimed at promoting institutional arbitration in India and at promoting India as a hub of international commercial arbitration. Even centres such as SIAC, HKIAC and LCIA did not become recognised centres for arbitration overnight – it took them decades to arrive at the recognition they have today, with considerable support from their respective governments.


India is making progress and is gradually developing as a hub for arbitration. However, a thriving arbitration environment in India would only be possible with support from all stakeholders involved, including arbitrators, judges, law firms, central and state governments and businesses among others.


 

Priyanka Desai is currently working as an Associate at Cyril Amarchand Mangaldas. She can be contacted via mail at priyankaadesai13@gmail.com

 

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I read your article with interest. As an ex-banker and now a practicing advocate, I am unable to fathom the continued lack of attention by legal stakeholders to needs of the BFSI (Bank and Financial Service Industry) which have, by far the largest volumes of disputes, regarding loans like Vehicle loans, credit cards, housing loans etc. where there is need for speed for resolving the disputes through Conciliation or Mediation or through arbitration as the defaulting borrowers can take the Bank or Finance company downhill within 90-180 days. ODR institutions like Sama, CORD, CADRE etc are trying to resolve the problem but sheer volumes (an organisation like a Bank having credit card default in hundreds at a time, needs trained…

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