Comparative Analysis of International and Indian Arbitration Institutions

ABSTRACT:

Arbitration has become a favored method of dispute resolution due to its efficiency, confidentiality, and flexibility. This article compares Indian arbitral institutions with international counterparts, examining their historical background, structure, governance, arbitrator appointment processes, interim measures, expedited procedures, types of arbitration administered, cost allocation, recent developments, and challenges. Indian institutions, while evolving and incorporating global trends, face criticisms related to administrative inefficiencies and judicial interference, unlike the more established international institutions that contend with issues of high costs and diversity.

INTRODUCTION:

Arbitration has emerged as a preferred mode of dispute resolution globally due to its efficiency, confidentiality, and flexibility. Various arbitral institutions around the world offer frameworks and facilities to administer arbitration proceedings. This article aims to provide a comparative analysis between Indian arbitral institutions and their international counterparts. 

1.HISTORICAL BACKGROUND:

International Arbitral Institutions:

• International arbitral institutions like the International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA), and Singapore International Arbitration Centre (SIAC) have a long history.
• The ICC, established in 1923, has been instrumental in shaping modern arbitration practices.
• The LCIA, founded in 1892, is renowned for its expertise in commercial arbitration.
• SIAC, established in 1991, has rapidly gained prominence, especially in Asia.

Indian Arbitral Institutions:

• Arbitration in India has a historical foundation, but institutional arbitration gained prominence more recently.
• The Indian Council of Arbitration (ICA), established in 1965, is one of the oldest institutions in India.
• The Mumbai Centre for International Arbitration (MCIA), founded in 2016, aims to position Mumbai as a global arbitration hub.
• The Delhi International Arbitration Centre (DIAC) and Nani Palkhivala Arbitration Centre (NPAC) are other notable institutions.

2. STRUCTURE AND GOVERNANCE:

International Arbitral Institutions:

ICC -The ICC primarily functions as an administrative entity, focusing on supervision and the appointment of arbitrators in accordance with ICC rules. Rather than keeping a roster of potential arbitrators, the ICC depends significantly on the expertise of its Secretariat and its National Committees for making arbitrator appointments.

LCIA -The LCIA has made notable strides in recent years to dispel the notion that it is mainly an English organization. This is evident in the appointment of five consecutive non-English presidents and the inclusion of several non-English practitioners among its vice-presidents. The LCIA Rules omit a Terms of Reference procedure and do not mandate an institutional review of draft awards.

SIAC- A significant number of parties involved with SIAC are from India and China, surpassing those from Singapore. SIAC’s rules are largely modeled on the UNCITRAL Rules.

Indian Arbitral Institutions:

Indian arbitral institutions follow a similar governance structure but often have a smaller administrative body compared to their international counterparts. The ICA has a governing council, and the MCIA has an international advisory board to ensure adherence to global standards. However, Indian institutions sometimes face criticism for bureaucratic delays and lack of administrative efficiency.

3. NUMBER OF ARBITRATORS:

International Arbitral  Institutions :

• SIAC Rule 9.1- According to the SIAC Rules, a sole arbitrator is appointed unless the parties agree otherwise or the Registrar, considering the parties’ proposals, the complexity, the amount in dispute, or other relevant factors, determines that three arbitrators are warranted.
• LCIA Article 5.8-A single arbitrator will be appointed unless the parties have agreed in writing otherwise or the LCIA decides that a three-member tribunal (or in exceptional cases, more than three) is appropriate given the circumstances.
• ICC Article 12.1 read with Article 12.2- A sole arbitrator will be appointed by default. However, if the ICC concludes that the dispute justifies the appointment of three arbitrators, the ICC will appoint three arbitrators.

Indian Arbitral Institutions:

Section 10 of the arbitration and conciliation act ,1966- Parties have the liberty to decide the number of arbitrators, as long as the number is not even. If the parties fail to make such a determination as mentioned in sub-section (1), Section 10(2) of the Act stipulates that the arbitral tribunal shall consist of a sole arbitrator.

4. APPOINTMENT OF ARBITRATOR vis -a-vis NATIONALITIES OF PARTIES:

International Arbitral Institutions:

• SIAC – No such rule is mentioned
• LCIA – Article 6 the sole arbitrator or the presiding arbitrator must not share the same nationality as any party involved in the arbitration. An exception is made if all parties who do not share the same nationality as the arbitrator agree to it in writing.
• ICC -Article 13 the ICC shall not appoint a sole arbitrator or the president of the arbitral tribunal who shares the same nationality as any party. An exception is allowed in certain circumstances, provided that none of the parties object within a specified time limit set by the Secretariat.

Indian Arbitral Institutions :

Section 11(1) read with Section 11(9) of the Act:

 A person of any nationality may be appointed as an arbitrator, unless the parties agree otherwise.

 For the appointment of a sole or third arbitrator in an international commercial arbitration, if the parties are of different nationalities, the Supreme Court or the person or institution designated by the Supreme Court may appoint an arbitrator who does not share the same nationality as any of the parties.

5. INTERIM MEASURES:

International  Arbitral Institutions:

• SAIC- Rule 30.1 read with Rule 30.2 states: The arbitral tribunal may, upon the request of a party, issue an order or award granting an injunction or any other interim relief it considers appropriate. However, the party requesting such interim relief may be required to provide suitable security related to the relief sought.
• LCIA -Article 25 , a party can request the arbitral tribunal (AT) to take certain actions after allowing all other parties a fair chance to respond. The AT can order any party to provide security for the amount in dispute; preservation, storage, sale, or disposal of items related to the arbitration’s subject matter; any relief the AT could grant as an award. The AT can also order a party to provide security for legal and arbitration costs. If a party doesn’t comply, the AT can stay or dismiss their claims. A party can also request interim measures from a state court either before the AT is formed or, in exceptional cases, after formation with the AT’s approval, until the final award.

In the case of U & M Mining Zambia Ltd v. Konkola Copper Mines Plc[1], the court dealt with a contract specifying that disputes would be referred to LCIA arbitration, England as the arbitration “place,” and Zambian courts having exclusive jurisdiction. The court noted that, as shown in Econet Wireless Ltd v Vee Networks Ltd[2], a party might exceptionally seek interim relief from a court other than the arbitration seat’s court if practical reasons necessitate it and it isn’t an attempt to bypass the arbitration agreement.

• ICC – Article 28: Unless otherwise agreed by the parties, the arbitral tribunal (AT) may, upon a party’s request, order any interim or conservatory measure it deems appropriate, provided the requesting party furnishes appropriate security. Additionally, before the file is transmitted to the AT, and in exceptional cases even after, parties may apply to any competent judicial authority for such interim measures or for the implementation of measures ordered by the AT. Such an application does not constitute an infringement or waiver of the arbitration agreement and does not affect the AT’s reserved powers.

Indian Arbitral Institutions :

Section 17 of the Act: Section 17 grants the AT the power to order interim reliefs during the arbitral proceedings. As per the provisions of the Act, the AT is given the exclusive jurisdiction to grant interim reliefs post the constitution of the AT, unless the remedy under the said Section is rendered efficacious. In the event of the latter, the courts have jurisdiction to grant interim reliefs under Section 9 of the Act. An application for interim measures under Section 9 may be made before or during the arbitral proceedings or at any time after the making of an arbitral award, but before it is enforced. Any interim order issued by the AT under Section 17 is deemed to be an order of the court and enforceable under the Code of Civil Procedure, 1908, as if it were an order of the court.

6. EXPEDITED PROCEDURE:

International Arbitral Institutions:

• SAIC – Rule 5, before the arbitral tribunal (AT) is constituted, any party may apply to the Registrar to conduct proceedings under the expedited procedure if:

The amount in dispute is no more than S$6,000,000.

All parties agree.

There are exceptional urgent circumstances.

• The President of SIAC will decide to allow or disallow the application after considering the parties’ views and the case circumstances. The Singapore High Court in BXS v. BXT29 [3] has held that under the 2016 SIAC Rules, unless an arbitration agreement explicitly excludes Rule 5.3, it overrides a stipulation for three arbitrators when the SIAC President mandates the use of the expedited procedure.
• LAIC- Article 9A says exceptional urgency, any party can apply to the LCIA for expedited formation of the AT, specifying the grounds for such urgency. If the application is granted, the LCIA can set or shorten any time period under the arbitration agreement or any other agreement between the parties.
• ICC-Article 30 r/w Appendix VI says the procedure is applicable if:

The amount in dispute does not exceed US$2,000,000 or US$3,000,000 (depending on whether the arbitration agreement was concluded before or after 1st January 2021), or

The parties agree to use the expedited procedure.

Indian Arbitral Institutions :

Section 29B of the Act

• Insertion and Purpose: Inserted by the Arbitration and Conciliation (Amendment) Act, 2015, Section 29B provides for a fast-track procedure.
• Agreement to Fast Track Procedure: The parties may agree in writing, before or at the time of the AT’s appointment, to resolve their dispute using the fast-track procedure.
• Arbitral Tribunal Composition and Procedure:

The AT may consist of a sole arbitrator chosen by the parties.

The dispute is decided based on written pleadings, documents, and submissions filed by the parties without any oral hearing.

 If oral hearings are held, the AT may dispense with technical formalities to ensure expeditious disposal of the case.

• Award Issuance: The award must be made within six months from the date the AT enters upon the reference.

7. TYPES OF ARBITRATION ADMINISTERED:

International Arbitral Institutions:

International institutions generally have a well-defined governance structure, including a secretariat, an advisory board, and a pool of arbitrators. For example, the ICC has a Secretariat that administers cases under the supervision of the ICC Court of Arbitration, while the LCIA has a court responsible for appointing arbitrators and overseeing proceedings.

Indian Arbitral Institutions :

Indian arbitral institutions have similar governance structures but often smaller administrative bodies compared to international counterparts. The ICA has a governing council, and the MCIA has an international advisory board to ensure adherence to global standards. However, Indian institutions sometimes face criticism for bureaucratic delays and lack of administrative efficiency.

8. COST ALLOCATION:

International Arbitral Institutions:

• SIAC- Rule 35 Unless the parties agree otherwise, the Arbitral Tribunal (AT) will determine the arbitration costs and their apportionment. These costs include the fees and expenses of the AT and Emergency Arbitrator (EA), SIAC’s administrative fees and expenses, and the costs of any expert or other assistance required by the AT.
• LCIA- Article 28 Unless the parties agree otherwise, the LCIA will determine the arbitration costs according to its schedule. The parties are jointly and severally liable for these costs to the LCIA and the AT. The AT will apportion the costs and provide reasons in writing. The AT can also award legal costs, and its decision will consider the parties’ relative success and failure, their conduct, and that of their authorized representatives.
• ICC -Article 37After receiving the request, the Secretary General may ask the claimant to pay a provisional advance to cover the arbitration costs, which will count as a partial payment of any advance on costs fixed by the ICC. This advance on costs is payable equally by the parties. If the respondent submits counterclaims, the ICC may set separate advances on costs for the claims and counterclaims. Each party must then pay the advance corresponding to its claims. These advances on costs can be adjusted at any time during the arbitration.

Indian Arbitral Institutions :

Section 31A of the Act: Introduced by the Arbitration and Conciliation (Amendment) Act, 2015, this section empowers the court or Arbitral Tribunal (AT), considering the circumstances of the case, to determine the amount and timing of costs payable by one party to another. The arbitration costs should be reasonable and include:

   (i) Fees and expenses of arbitrators, courts, and witnesses;

   (ii) Legal fees and expenses;

   (iii) Administrative fees of the supervising institution;

    (iv) Any other related expenses.

 Generally, the unsuccessful party is ordered to pay the successful party’s costs, but the court or AT can make a different order with reasons recorded in writing. Agreements requiring a party to pay all or part of the arbitration costs are valid only if made after the dispute has arisen.

Court Interpretations:

1. Section 31A establishes a costs regime applicable to both the AT and the court. Its non-obstante clause gives it precedence over any conflicting provisions in the Civil Procedure Code (CPC). The court or AT’s discretion to award costs is not limited by any pre-dispute agreement between the parties[4].
2. If the court sets the fee according to the 4th Schedule of the Act, Sections 38(1), 31(8), and 31A do not apply. The term “sum in dispute” in the 4th Schedule includes the total value of claims and counterclaims[5].
3. Under Section 31A, the AT must quantify the arbitration proceedings’ costs. Failure to do so renders the award vague and subject to being set aside[6].
4. A party should not be forced to bear the costs of justified proceedings nor be penalized for withholding payments without justification, compelling the other party to litigate, and then escape the costs of such litigation[7].

9. RECENT DEVELOPMENTS AND TRENDS:

 International Arbitral Institutions:

International institutions are continuously evolving to address new challenges. Innovations such as expedited procedures, online dispute resolution, and increased transparency are becoming standard. The use of technology in arbitration, such as virtual hearings, has also increased significantly, especially during the COVID-19 pandemic.

 Indian Arbitral Institutions :

Indian arbitral institutions are also adapting to global trends. The MCIA, for example, has adopted expedited procedures and virtual hearings. The Indian government has been working to improve the arbitration landscape through legislative reforms and initiatives like the Arbitration and Conciliation (Amendment) Act, 2021, aimed at reducing judicial intervention and enhancing institutional arbitration.

10. CRITICISMS AND CHALLENGES:

International Arbitral Institutions:

Despite their advantages, international arbitral institutions face criticisms related to high costs, lack of diversity among arbitrators, and perceived biases in favor of certain jurisdictions. Efforts are ongoing to address these issues through reforms and increased focus on diversity and inclusivity.

Indian Arbitral Institutions :

Indian institutions are often criticized for administrative inefficiencies, delays, and lack of international recognition. The need for capacity building, better infrastructure, and greater adherence to international best practices is frequently highlighted. The perception of judicial interference in arbitration proceedings is another challenge that Indian institutions face.

CONCLUSION:

Arbitration institutions play a crucial role in facilitating dispute resolution globally. While international arbitral institutions like the ICC, LCIA, and SIAC are well-established and widely recognized for their efficiency and expertise, Indian institutions like the ICA, MCIA, and DIAC are making significant strides in improving their services and gaining international credibility. The comparative analysis highlights the strengths and challenges of both Indian and international arbitral institutions, underscoring the need for continuous improvement and adaptation to global best practices to enhance the arbitration landscape.

References

[1] [2013]EWHC 260 (Comm)

[2] [2006] EWHC 1568 (Comm)

[3] [2019] SGHC(I) 10- See paragraph 14- “14. ..Under the 2016 Rules it has become clear that, absent an explicit provision in an arbitration agreement negating the application of Rule 5.3, the latter has the effect of overriding a stipulation for three arbitrators when the SIAC President directs that the Expedited Procedure is to be used. I note in passing that, in a similar situation, the Singapore court concluded that, even under the 2013 Rules, the SIAC President was empowered by Rule 5.2 to override a stipulation for three arbitrators and direct that the Expedited Procedure with a sole arbitrator be followed in a given case: AQZ v. ARA [2015] 2 SLR 972.”

[4] Union of India v. Om Vajrakaya Construction Company, 2021 SCC OnLine Del 5434.

[5] Ivanlal Joitaram Patel v. National Highways Authority of India, 2022 SCC OnLine Del 703.

[6]  MMTC Ltd. v. M/s. Karam Chand Thapar & Bros (Coal Sales) Ltd. 2018 SCC OnLine Del 12295.

[7] DDA v. K R Anand, 2018 SCC OnLine Del 8466.