INTRODUCTION
As enunciated by McKinsey, “Risk allocation and contract enforceability can make India a prospective hub of Institutional Arbitration.”
According to the National Judicial Data Grid and the Supreme Court, “there are now 3.9 crore cases pending in district and subordinate courts, 58.5 lakh cases pending in different high courts, and over 69,000 cases pending at the Supreme Court.” More than 58% of these cases are civil and are pending merely to settle their disputes through judicial intervention. Adoption of Institutional Arbitration, with minimum judicial intervention, would resolve conflicts and further a cooperative approach.
In institutional arbitration, the parties may agree that in the event of a dispute or disagreement, they will be referred to a specific institution such as the Indian Council of Arbitration (“ICA”), International Chamber of Commerce (“ICC”), Federation of Indian Chamber of Commerce & Industry (“FICCI”), etc. These institutions have formulated their own arbitration rules, which will apply to arbitral proceedings conducted by them. India portrays the enormous scope of Institutional Arbitration through its characteristic risk allocation, timely redressal of issues, and a binding arbitral award. European institutions provide evidence for this.
The Permanent Court of Arbitration (“PCA”) and the Government of India signed a Host Country Agreement on September 19, 2008. This enables the PCA to establish itself in India and help India prosper as an international seat of Institutional Arbitration. Second, the London Courts of International Arbitration (“LCIA”) is developing its presence in New Delhi, offering a second facility outside of London in addition to the Dubai International Financial Centre- London Court of International Arbitration (“DIFC-LCIA”) site in Dubai. The interest of international institutions to invest in India’s Institutional Arbitration platform opens gates of change and acceptance. The insistence of the Department of Justice to reduce litigation and settle disputes through arbitration became an essential step of development.
STEPS TAKEN TO UPLIFT INSTITUTIONAL ARBITRATION IN INDIA
To encourage and perform effectively on prospects, India has been taking several enforcement steps. The Arbitration and Conciliation (Amendment) Act 2019 was enacted on August 9th, 2019. It led to the establishment of an independent body, the Arbitration Council of India (ACI), responsible for fostering institutional arbitration in India by assessing arbitral institutions and promoting the accreditation of arbitrators.
The government established a High-Level Committee under the chairmanship of Justice B. N. Srikrishna, a retired Supreme Court judge, to examine the implementation of institutional arbitration mechanisms in India.
The HLC’s which submitted its report in August 2017, outlined the major obstacles to the growth of institutional arbitration in India and advocated a wide range of actions to make India a prominent centre for institutional arbitration. The New Delhi International Arbitration Centre (hereafter the NDIAC) was created and incorporated to develop an independent and autonomous framework for institutionalized Arbitration.
Arbitration proceedings in India are still lengthy and take years to complete. In this regard, amendments were made by the Arbitration and Conciliation (Amendment) Act 2015, establishing time limits for arbitration proceedings. ACA grants the arbitral tribunal significant powers to shorten delays. The Mumbai Center for International Arbitration (MCIA) was established in 2016. It aimed to bring the best international practices to the Indian Market. Consequently, the SC of India and Bombay High court have referred Two Ad-hoc matters to institutional Arbitration.
MCIA has also seen a rise of 150% growth in the total case. They have also launched Young MCIA to bring bright young students into the world of Arbitration. These are significant instances that will enable India to promote institutional arbitration.
Since the Government is a massive litigant in the country, incorporation of Arbitration as an inherent part of ministry disputes would help boost the seat of Arbitration in India. Maharashtra Government opting for institutional Arbitration to settle disputes of the ministry is a step of inclusion and experience.
ADVANTAGES OF INSTITUTIONAL ARBITRATION
It was closely examined in the case of Vandana Gupta And Anr. vs Kuwait Airways Ltd. And Ors, the critical advantage of institutional arbitration is that the parties can select the framework of appointment and replacement without the court’s intervention, which leads to the fulfillment of the true objective of Alternative dispute resolution to have expeditious and effective disposal through a private forum of the party’s choice.
It was also examined in the case of Union of India V. Singh Builders Syndicate, that In the case of Ad-hoc Arbitration, When a court appoints an arbitrator without specifying fees, either both parties or at least one of them suffers a significant drawback. The parties feel compelled to agree to whatever fees the arbitrator suggests. Institutional arbitration has also developed a mechanism in case of arbitrators’ fees. It is governed by a consistent rate prescribed by the institution under whose jurisdiction the arbitration is held, rather than by the arbitrators themselves on a case-by-case basis.
The parties in ad-hoc arbitration are supposed to make their personal decisions regarding the arbitration proceedings. This often leads to misinformed choices and subsequently irregularity in the process of arbitration. Institutional Arbitration moves past these difficulties of ad hoc arbitration. The presence and utilization of experienced arbitrators, existing rules, and predefined procedures save time and ensure a proper, justified, and dignified resolution of disputes.
Efficient Governance facilitated by Institutes fostering arbitration is a key advantage of the same. Without the hassle of falling back on discarded rules and unacceptable practices, Institutional Arbitration fosters growth and regular update of rules and regulations according to international standards. Institutional Arbitration adequately addresses the challenge of incompatibility of parties and brings forth cooperative techniques that often lack in ad hoc arbitration.
A WAY FORWARD FOR INDIA:
LESSONS FROM INTERNATIONAL ARBITRAL INSTITUTIONS
The main objective of this comparison is to determine the factors that contribute to the success of leading international arbitral institutions and to identify best practices that can be applied in the Indian context with necessary modifications. According to the QMUL Survey “The ICC Court, the LCIA, the HKIAC, the SIAC, and the Arbitration Institute of the Stockholm Chambers of Commerce” are the five most preferred arbitral institutions worldwide. The SIAC and the HKIAC have benefited enormously from the support they received from their respective governments in the form of financial and/or infrastructural cooperation. The Indian government, just like the governments of Singapore and Hong Kong, may consider aiding arbitral institutions in India by establishing appropriate infrastructure, such as integrated dispute resolution services, in major commercial centres such as Mumbai and Delhi.
The business and legal community has also played an important role in the establishment of the top 5 Arbitral Institutions. In India, the Federation of Indian Chambers of Commerce and Industry (“FICCI”) and the Associated Chambers of Commerce and Industry of India (“ASSOCHAM”) have established the two arbitral institutions, the ICA and the ASSOCHAM International Council of Alternative Dispute Resolution, respectively. There is a need for the development of more such institutions in India. India should also incorporate an hourly set rate as per Article 16 of HKIAC.
The majority of the arbitral institutes examined above had a panel of highly qualified and experienced arbitrators from various jurisdictions. The SIAC, for example, has an incredible panel of arbitrators that includes people from 41 different countries. Arbitral institutions also aim to ensure that arbitrators in arbitrations conducted by them are fair and professional
CHALLENGES AHEAD
The major challenge in the implementation of Institutional Arbitration lies in the fact of bearing the administrative cost of firms and adhering to unrealistic time frames. Unlike ad hoc arbitration, parties cannot function at their own pace, the hierarchical structure of institutions forces parties to bear exorbitant costs, based on the reputation of the institution as well as bureaucratic functions.
Another challenge that lies in the successful propagation of Institutional Arbitration in India, is the impediments in implementation. The Recommendations by the Srikrishna Committee promised revolutionary advancements in arbitration. But their implementation is nowhere near to be seen. Declaration of the International Centre for Alternative Dispute Resolution (ICADR) as an institute of National importance to invite international parties and promote out of court techniques was envisaged. But the action continues to be on paper. Lack of promotion and acceptance leads to the Centre having just 49 cases so far.
To ensure the promotion of Institutional Arbitration, India needs to ensure that Indian parties prefer an institutional approach rather than ad hoc, and India is a preferred seat of arbitration for international firms. While the second provides promising results through Government upliftment, the first seems to fail on account of legal awareness among people. A huge task before authorities is to remove the misconceptions about institutional arbitration and foster trust regarding the same.
CONCLUSION
The advent of the COVID-19 pandemic, and a sudden shift to online platforms, open doors of revolution for Institutional Arbitration in India. With a sudden and unprecedented shift to virtual platforms, the functioning of courts has been severely affected. In such a scenario, parties willing speedy resolution of disputes have started exploring the option of arbitration.
Since ad hoc arbitration becomes tedious and extensive to adhere to. Institution Arbitration comes to the rescue of parties, with predefined rules, easy virtual settlement, reduced costs with virtual compatible modes, experienced arbitrators and speedy recovery facilitate increased participation by Indians.
To ensure the promotion of Institutional Arbitration, India needs to ensure that Indian parties prefer an institutional approach rather than ad hoc, and India is a preferred seat of arbitration for international firms. While the second provides promising results through Government upliftment, the first seems to fail on account of legal awareness among people. A huge task before authorities is to remove the misconceptions about institutional arbitration and foster trust regarding the same.