By: Gourav Asati & Sarthak Chouhan (Institute of Law Nirma University, Ahmedabad)
India’s promotion as an arbitration center has long been on the agenda of Indian lawmakers. The Arbitration and Conciliation (Amendment) Act of 2015 amended the Arbitration and Conciliation Act of 1996 to achieve the goal of making it easier and more effective to resolve disputes by arbitration. Much international arbitration involving Indian parties take place in foreign countries and are handled by foreign arbitral agencies. Indian parties to domestic and international arbitrations are encouraged to use institutionally regulated arbitrations rather than ad hoc arbitrations, and India becomes a favoured site for international arbitrations. The Arbitration and Conciliation act, 1996 is amended numerous times for providing efficacious remedies and fast disposal of cases. After setting of various institutions for arbitration in India still, ad-hoc arbitration is preferred widely for the resolution of the dispute; there is a need for the promotion of institutional arbitration in our country.
Defining Scope of Institutional Arbitration
Institutional Arbitration is a method of arbitration in which the whole proceeding of arbitration is done by the institution or organization appointed by the parties in a contract. India isn’t the choice as the seat for arbitration by the parties due to lack of facilities and late disposal of cases, therefore the parties prefer International arbitral tribunals for resolution of disputes. The arbitration agreement specifies how an arbitral institution will be chosen. The parties expressly agree that if a dispute arises within the contract’s term, it will be resolved by institutional arbitration. The foreign business community prefers these intuitions because they have a variety of opportunities. A comprehensive arbitration procedure, an experienced panel of arbitrators and expertise make for a quick and effective dispute resolution process.
Justice Kapadia in the case of M/S Nandan Biomatrix Limited v D 1 Oils Limited observed that when the parties had expressly decided to settle their disputes by institutional arbitration rather than ad hoc arbitration then they shall strictly adhere to the arbitration clause without any exception or derogation. A contract between parties with an arbitration provision designating an individual as the arbitrator can invoke the jurisdiction of administrative arbitrations. These organisations follow pre-determined rules and protocols when conducting arbitrations.
Indian Perspective to the tale
India is one of the fast-growing economies in the world with the increase in foreign investment needs to reduce the complexity in procedure and increase the effectiveness of the system. Established organisations and institutions are needed in our country so that the arbitration procedure can be conducted with properly established rules and with the help of professionals. Institutional arbitration like ICA, MCA, and other institutional arbitration centers for arbitration is good. The shift has to be towards Institutional arbitration, there is purpose and need for the same while dealing with the complex economy which needs structural adjudication. MCIA is also committed to creating a thriving arbitration environment in India that benefits all stakeholders involved, including arbitrators, judges, law firms, central and state governments, businesses, and other clients.
In 2016 a committee headed by Justice B.N Krishna was set up for review and reformation of Institutional Arbitration, subsequently, the New Delhi International Arbitration Bill was also introduced which got the assent of the president on 26th July 2019. This committee aimed to identify concerns with the arbitration process and to hear about the obstacles that have been raised as institutional arbitration has evolved. At the international level, institutional arbitration is preferred by the parties for resolution of the dispute but in our country, due to lack of proper structure and lack of faith in institutions and organisations ad-hoc arbitration method is favoured for resolution of disputes. Arbitration and conciliation is an unmatched method of resolution of dispute where the party has the full autonomy, therefore refurbishment of the present structure is the need of time.
India needs to widen its platform for institutional arbitration because these entities have modern rules that encourage them to grant parties more leeway. They are preferable because they have tools such as a review of the draught arbitral award and other potential flaws. These have a well-organized administrative committee and a professional panel of arbitrators with international experience. SIAC and HKIAC were greatly aided by their respective governments, which offered adequate financial and infrastructural support as well as playing an important role in international promotion; in a similar manner the Indian Government must try to maintain an adequate standard of arbitration institutions.
Ostensible Benefits of Institutional Arbitration
Participation of arbitral institutions in issues relating to the formal structure of the arbitration, particularly at the beginning of the tribunal, such as the appointment of arbitrators or the selection of an arbitral role, has proved to be highly helpful in some situations. The stakeholders should understand the importance of institutional arbitration and its potential how it helps in resolving the dispute inefficient manner. The government should also try to provide the needed infrastructure and financial support for establishing the institution so that an arbitration-friendly environment can be created. If an effective body is situated with experienced arbitrators and proper rules the institutional arbitration can be made cost-effective and speedier. Institutional arbitration having a predetermined procedure that keeps updating with the latest development and the arbitrators who are specialized in different fields will help the parties in the resolution of the dispute. An Institutional Arbitral tribunal will provide efficient governance, flexibility to the parties, and scrutiny of defects. This will attract the parties to approach the institution for the resolution of their disputes.
To increase the strength of institutional arbitration there is a need for support from the government, statutory, and judiciary backing. Arbitration succeeds in countries where all these three are in support of arbitration. The business community should continue to understand the importance of institutional arbitration and participate in constructive dispute resolution. Second, it is the state’s responsibility to promote an arbitration-friendly environment by providing these organisations with the necessary financial and infrastructural support. The recent success of the arbitral institutions can be called a modest start. The first step toward increasing these numbers and making India a preferred venue for international commercial arbitration is to promote institutional development. Changes are expected to promote best practices in India and enhance the quality and efficacy of the institutional arbitration process.
To deal with commercial arbitration there is a need for an alternate dispute resolution mechanism other than the court litigation. The Arbitration is one of the alternate dispute resolutions which have gained supremacy in dealing with the commercial dispute. India needs to grow at the level of International Arbitration Mechanism and therefore there is a need for its Arbitral system. Foreign investment in India is increasing day by day and therefore there is a need for a proper structural system for arbitration. The system should be such the people who are from different jurisdictions are also attracted and have faith in such a system that they can approach that system in case of any dispute in India. Further, there is a need for the promotion of Institutional Arbitration. In most the developed countries, disputes are resolved through mediation or institutional arbitration.
(The authors are fourth-year students at Institute of Law, Nirma University, Ahmedabad. They have a keen interest in commercial arbitration and IP law. They can be contacted at firstname.lastname@example.org.)