Published On: 8 October, 2023
Understanding the Landscape of Arbitration in India
INTRODUCTION
Arbitration is one of the well-known alternative conflict resolution procedures that has become very popular in India over the years. As a developing economy with a complicated legal landscape, India has embraced arbitration as an efficient and effective means of settling conflicts, particularly commercial and international issues.
HISTORICAL EVOLUTION OF ARBITRATION IN INDIA
Arbitration has been used to settle conflicts in India for millennia, even before contemporary legislation. Conflicts in ancient India were usually handled through the system of “Panchayats,” in which community elders settled disputes informally. This ancient method of arbitration was founded on the ideas of fairness, impartiality, and the rule of law.
India adopted the British legal system, which includes laws governing arbitration, during the colonial era. The English Arbitration Act of 1889 served as the primary inspiration for the first Indian Arbitration Act, which was passed in 1899. Arbitration was not very common in India at that time, and this Act also contained several restrictions.
THE ARBITRATION AND CONCILIATION ACT, 1996
The implementation of the Arbitration and Conciliation Act, of 1996 marked a turning point for arbitration in India. This Act brought arbitration standards in India up to par with those used across the world.
It is primarily based on the Model Law of the United Nations Commission on International Trade Law (UNCITRAL), which is regarded as the benchmark for arbitration law all over the world.
FEATURES OF THE ARBITRATION AND CONCILIATION ACT, 1996
Separate Legal Framework for Domestic and International Arbitration:
The Act makes a distinction between local and foreign arbitration and lays forth specific guidelines for each. India is a suitable location for international arbitration in part due to this disparity.
Minimal Judicial Intervention:
The Act emphasizes minimal court involvement in the arbitration process, focusing on party autonomy and the kompetenz-kompetenz principle, which gives arbitrators the authority to decide on their jurisdiction.
The case of BCCI v. Kochi Cricket Pvt. Ltd. & Ors highlighted the importance of judicial restraint in matters of arbitration. The Supreme Court stressed that courts should not interfere in arbitral awards unless there is a clear violation of the fundamental policy of Indian law.
Recognition and Enforcement of Arbitral Awards:
The Act makes it simpler to enforce both domestic and foreign arbitral decisions in India as the act aligns with the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Appointment of Arbitrators:
The Act establishes a precise process for the selection of arbitrators with the goals of independence and impartiality. Parties are free to select arbitrators of any nationality in international arbitration.
In the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, Inc. (BALCO), the Supreme Court of India, clarified the law regarding the seat and place of arbitration. It was emphasized that the choice of seat determines the supervisory jurisdiction of courts, and the courts at the seat of arbitration have exclusive jurisdiction over arbitration proceedings.
Confidentiality:
The Act protects sensitive trade information by guaranteeing the secrecy of arbitral hearings and awards.
Interim Measures and Emergency Arbitrators:
The Act provides for interim remedies and emergency arbitrator procedures, allowing parties to seek immediate remedy before the tribunal is formed.
In the case of Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd, The Supreme Court, in this case, clarified the scope of Section 9 of the Arbitration and Conciliation Act, 1996, which deals with interim measures by courts. The judgment emphasized the importance of a prima facie case and urgency when seeking interim relief from the courts.
Cost Efficiency:
One of the primary benefits of arbitration is its low cost, and the Act emphasizes this point by simplifying the system and avoiding delays.
ARBITRATION INSTITUTIONS IN INDIA
To ease arbitration procedures, India has developed several arbitration institutions, some of which play important roles in arbitration administration. Some of them are:
Indian Council of Arbitration (ICA):
ICA is one of India’s oldest arbitration institutions, established in 1965. It encourages arbitration and other types of alternative conflict resolution.
International Centre for Alternative Dispute Resolution (ICADR):
ICADR, founded in 1995, is an autonomous agency dedicated to the promotion and development of alternative dispute resolution processes.
Indian Arbitration Forum (IAF):
IAF is a relatively new institution that offers arbitration, mediation, and conciliation services.
Mumbai Centre for International Arbitration (MCIA):
MCIA, established in 2016, focuses on international arbitration and has gained recognition as an efficient and neutral arbitration institution.
Delhi International Arbitration Centre (DIAC):
DIAC, founded in 2009, provides facilities and administrative services for domestic and international arbitration.
CHALLENGES
While arbitration in India has made significant strides, there are still challenges that need to be addressed:
Court Backlog and Delays:
The issue of court backlog in India is well-documented. Prolonged court proceedings can indirectly affect arbitration, as parties may choose litigation due to arbitration delays. To address this concern, India has initiated significant reforms in its judiciary. Specialized commercial courts and benches have been established in several major cities, expediting the resolution of commercial disputes.
Arbitrator Independence and Impartiality:
For the arbitration process to remain fair and unbiased, arbitrators’ independence and impartiality must be guaranteed. Recent cases have highlighted the requirement that arbitrators declare any possible conflicts of interest and have enacted stronger rules for selecting arbitrators.
The case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Service (2012), often referred to as the BALCO case, clarified the role of courts in appointing arbitrators and reinforced the principle of party autonomy in choosing arbitrators.
Enforcement of Awards:
The implementation of international arbitral judgments has been made easier by India adhering to the New York Convention, although there are still difficulties. On several grounds, including public policy, parties may try to resist enforcement.
Confidentiality:
The confidentiality of arbitral procedures is strongly emphasized under the Arbitration and Conciliation Act, of 1996. However, in actuality, maintaining secrecy can be difficult, particularly in high-profile cases that receive media attention.
The case of Cipla Limited v. M/s Cipla Industries Pvt. Ltd (2001) underscored the importance of confidentiality by upholding the principle that parties are obligated to maintain confidentiality unless expressly agreed otherwise.
RECENT DEVELOPMENTS IN INDIAN ARBITRATION
Amendments to the Arbitration Act:
To improve the efficiency and efficacy of arbitration in India, the Arbitration and Conciliation (Amendment) Act, of 2019, made several major amendments. The inclusion of a deadline for concluding arbitration procedures, tighter deadlines for submitting statements of claim and defense, and provisions for the expedited arbitration of small claims were some of the changes made by these reforms.
National Litigation Policy:
The National Litigation Policy of India, which was introduced in 2020, intends to advance arbitration and other non-traditional conflict settlement procedures. It encourages government organizations to seriously explore using arbitration to settle disputes, relieving pressure off the judiciary and enhancing the country’s ease of doing business.
Arbitration Promotion Council of India (APCI):
The Arbitration Promotion Council of India (APCI) has been suggested as a way for the Indian government to further advance arbitration as the preferred form of conflict settlement. It is anticipated that APCI will concentrate on policy initiatives, capacity building, and advertising India as a center for arbitration. The creation of APCI, while not a case in and of itself, is a major milestone that demonstrates the government’s desire to enhance the arbitration environment.
International Collaboration:
To improve its standing as a venue for arbitration, India has been actively engaging with foreign organizations and institutions. Partnerships with groups like UNCITRAL and the International Chamber of Commerce (ICC) are examples of this kind of cooperation. Despite not being related to any particular cases, these partnerships demonstrate India’s dedication to bringing its arbitration procedures into line with international norms and best practices.
CONCLUSION
The Arbitration and Conciliation Act, of 1996 was a turning point in the development of arbitration in India, which has advanced significantly from its earlier days. Due to its supportive environment for investors, strong legal system, and arbitration institutions, India is widely acknowledged as a favorable location for international commercial arbitration.
While obstacles still exist, recent reforms and initiatives show the Indian government’s dedication to improving the effectiveness and accessibility of arbitration. Arbitration will become an essential component of Indian law as the country’s economy develops and it becomes more and more important in settling disputes both domestically and internationally.
REFERENCE(S)
- BCCI v. Kochi Cricket Pvt. Ltd. & Ors (2018) 7 SCC 458
- Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, Inc (2012) 5 SCC 72
- Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017) 7 SCC 4532
- Bharat Aluminium Co. v. Kaiser Aluminium Technical Service is (2012) 5 SCC 72
- Cipla Limited v. M/s Cipla Industries Pvt. Ltd (2001) AIR 2001 Bom 75
