Measure(s) undertaken to uplift Institutional Arbitration in India

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A. Establishment of a body for grading arbitral institutions

In India, there are presently over 35 arbitral institutions in operation. In terms of arbitral procedure reliability and pace, infrastructure, panel of arbitrators, and standard of arbitral awards rendered, the quality of these organisations varies greatly. The outcomes of the questionnaires’ answers. The comments on the Working Paper, as well as the comments on the Working Paper, indicated the presence of a number of issues with the functioning of Indian arbitral institutions, particularly in terms of infrastructure and facilities as well as products and services. This has had a negative effect on institutional prestige and visibility. 

As a consequence, it is important to create a body at the national level that will rate arbitral institutions based on facilities, staff, and performance standards.

The proposed body is intended to provide a standard for evaluating arbitral entities and thereby act as a consistency measure for the general public. Furthermore, it will allow underperforming institutions to strengthen their functioning and infrastructure rather than risk being weeded out by a competitive market for arbitral institutions. Finally, it is hoped that the grading process would lead to the creation of certain universal minimum criteria under which arbitral institutions in India will operate.

At the same time, it is important to note that the body will not serve as a government-run regulator, but rather will rate arbitral institutions and develop minimum requirements for centres that conduct institutional arbitration in India.

B. Accreditation of arbitrators

A pool of young, skilled, and well-trained arbitrators is needed in India. The accreditation of arbitrators is one of the measures that can be taken to help build a pool of skilled and professional arbitrators. Accreditation will also establish a solid basis for parties wanting to nominate arbitrators. As a result, arbitrators should be encouraged to obtain accreditation from organisations that already have such accreditation in India and abroad, such as the CIArb.

There are two forms of accreditation available:

(a) membership on a commission / registry of arbitrators administered by an arbitral institution; and 

(b) accreditation by a national association of arbitrators. 

For membership accreditation, institutes use strict standards. Arbitrators are granted various grades or categories of membership that represent different degrees of accreditation depending on the requirements set for each grade or category.

Technical institutes should evaluate individuals who choose to participate as affiliates using a variation of the following criteria:

  1. Professional education;
  2. Attendance of arbitration hearings;
  3. Qualifying examinations;
  4. Peer interviews / assessments by a panel of approved arbitrators;
  5. CPD requirements.

Many arbitral agencies often have a jury or registry of arbitrators that have fulfilled the institution’s qualifications and competence requirements. These agencies use these lists to name arbitrators and to recommend arbitrators to parties. The qualifications for entry to a tribunal or list, as well as the form of admission, differ from arbitral institutions to arbitral institutions. However, most arbitral agencies consider the following considerations before choosing who to add to a court of arbitrators:

  1. Educational qualification
  2. Age
  3. Experience
  4. Membership of a professional institute of arbitrator
  5. References
  6. Professional and moral standing

C. Creation of a specialist arbitration bar

The growth of arbitration, especially institutional arbitration, in India depends on the establishment of an arbitration bar that is well-trained in substantive and procedural aspects of arbitration and who frequently appear before arbitral tribunals. A strong arbitration bar will make arbitral hearings run more smoothly and effectively. The Indian legal community is widely believed to be capable of rising to the task of establishing a specialist and highly qualified arbitration bar in the region. Already, there are signs that section 29A of the ACA’s implementation of a deadline for completing arbitral hearings is reducing the tradition of evening arbitrations and promoting the creation of a dedicated bar and more devoted arbitrators in the nation. Initiatives like the Indian Arbitration Forum (a body established by arbitration practitioners at some Indian law firms with the intention of fostering best practises in arbitration) and Young MCIA (the MCIA’s forum for young arbitration practitioners or students) are promising signs that India’s legal system is acknowledging the value of arbitration.

D. Creation of a specialist arbitration bench

The teaching of judicial officers to recognise the supervisory authority of courts in the arbitral phase is one of the most significant incentives for the development of an arbitration-friendly ecosystem. Judges sometimes consider a section 34 opposition to an award as though it were a routine appeal, according to arbitration practitioners. The pending challenges under section 34, as well as the resulting uncertainties for parties, are commercial barriers to arbitrating in India. Furthermore, winning claimants are unable to be paid indemnity charges as consolation for the time and resources wasted defending an award. The formation of commercial divisions and commercial appellate divisions in the High Courts is a promising development, but it can be made ineffective without proper judicial preparation and sensitization of the judges who will serve in these courts.

E. Amendments to the ACA

The 2015 Amendment Act brought major amendments to the ACA with the intention of making arbitration more accessible and successful, as well as enhancing India’s image as an arbitration centre. Arbitration professionals have welcomed some of the reforms for clarifying ambiguities created by or undoing the impact of some “arbitration-unfriendly” judicial precedents.

  1. INTERIM RELIEF

The Amendment Act stipulates that if a court issues an interim order, settlement hearings shall begin within 90 (ninety) days of the order’s date or within the time frame set by the court. This amendment was made to ensure that the parties’ tradition of misusing this clause by strategically securing ex parte or ad hoc rulings and avoiding arbitration is curtailed.

  1. ARBITRAL TRIBUNAL

Section 17 has been revised to grant the arbitral tribunal the same authority as a judge under Section 9. To make it easier for parties to reach the arbitral tribunal and limit judicial interference, the Amendment Act states that after the arbitral tribunal has been established, courts cannot consider applications for temporary measures unless there are exceptional conditions that render the remedy of seeking interim orders from the arbitral tribunal ineffective. The Reform Act further clarifies that the arbitral tribunal’s transitional actions have the same effect as a civil court decision under the Civil Procedure Code of 1908. (“CPC”). Also after the arbitral award is made but before it is applied, the arbitral tribunal retains the authority to order transitional action under the new regime.

  1. LIMITED SCOPE TO REFUSE ARBITRATION REQUEST

When there is an arbitration arrangement, the judicial body may send the parties to arbitration until it determines prima facie that there is no legitimate arbitration agreement. While Section 8(1) applies to “judicial power,” the term “Court” is used instead of “judicial authority” in Section 8(2), which tends to be a mistake. 

  1. AMENDMENTS TO GROUNDS FOR CHALLENGING ARBITRAL AWARD

The concept of “public policy” in Section 34 has been restricted, and an arbitral award can now be overturned only if it I was influenced or influenced by bribery or corruption; (ii) is contrary to India’s fundamental policy; or (iii) disagrees with the most fundamental conceptions of morals or justice. An honour cannot be overturned either because the statute was applied incorrectly or because the proof was re-appreciated. However, in international trade arbitrations, the test of “patent illegality arising on the face of the award” has not been applied. Indian parties may contest this clause, claiming that different principles can not be applied to international commercial arbitrations. To stop this paradox, the “patent illegality” test should have been removed entirely.

  1. NO AUTOMATIC STAY OF ARBITRAL AWARD UPON FILING OF A CHALLENGE TO THE ARBITRAL AWARD

The sole submission of an appeal petition to an arbitral award may have resulted in an immediate stay of the arbitral award prior to the Amendment Act. The petition will take several years to be resolved by the judge, leaving the arbitration process inefficient and time-consuming. The Amendment Act states that the arbitral award will not be automatically stayed, except that a special application will be required to request a stay of the arbitral award. The court must also document reasons for granting a stay, and the conditions of the CPC for granting a stay of a money decree have been made valid, indicating that the losing party would be forced to deposit any or all of the amount awarded in the arbitral award, or provide protection, as the court finds necessary

6. TIME BOUND PROCEEDINGS

The Revised Act sets shortened deadlines in order to boost the quality of the arbitration process. Section 24 has been amended to provide a proviso requiring the arbitral tribunal to conduct oral proceedings for testimony and oral argument on a daily basis and not to issue any adjournments unless there is good reason. The arbitral tribunal has been granted the right to levy high costs on adjournments that are not warranted. The arbitrator(s) shall render an award within 12 (twelve) months of obtaining a formal notice of appointment. The parties can agree to extend the time limit by a maximum of 6 (six) months. The term of the arbitrator(s) will expire if the decision is not made within 18 (eighteen) months, unless the court extends the duration on an appeal submitted by one of the parties. However, there is no set period frame for contacting the court to obtain a time extension, which may lead to more delays.

Furthermore, if the court determines that the delay was caused by the arbitral tribunal, it may order a decrease in the arbitrator’s fee of not more than 5% (five percent) for each month of delay thus extending the period for making the award. In addition to expanding the time limit, the court will have the authority to adjust the arbitrator(s) as it sees fit. A court filing, as mentioned above, will be disposed of by the court within 60 (sixty) days of the day the opposing party receives the notice. An appeal to an arbitral award should be resolved quickly, and in any case within one year of the date on which the other party is presented with notification. Section 11 must now be determined within 60 (sixty) days of the date of service of the notification to the opposing party.

7. FAST TRACK PROCEDURE

Section 29B has been included, which provides the parties the option of agreeing to a fast track process in which the award must be made within 6 (six) months of the arbitrator(s) obtaining written notice of appointment. Without an oral hearing, the case will be resolved depending on the parties’ written pleadings, papers, and submissions. Only if both sides seek it or if the arbitral tribunal feels it is important to explain those issues will an oral hearing be held. There aren’t many times where the parties to a long-running disagreement settle on something, let alone a fast-track protocol.

8. A NEW EXPANSIVE COST REGIME INTRODUCED

Section 31A has been added, giving the arbitral tribunal wide cost-awarding authority. The Law Commission Report’s recommendation for an inclusive regime to grant losses based on fair and reasonable criterion rules has been adopted. The arbitral tribunal has the authority to determine when expenses must be charged, how much they must be paid, and when they must be paid. The clause also states that in most cases, the losing party would be ordered to pay the successful party’s expenses. The costs which include arbitrator, case, and witness fees and expenses, legal fees and expenses, agency administration costs, and all other costs incurred in connection with the arbitral or court hearings and the arbitral award. The inability of a party to unreasonably reject a fair offer of compensation offered by the other party is a deciding factor in determining expense awards.

9. DISCLOSURE REQUIREMENTS OF ARBITRATOR

The transparency provisions of the Amendment Act are based on the IBA Rules on Conflict of Interest in International Arbitration. The Fifth and Seventh Schedules have been included, which serve as a reference in deciding conditions that will render an arbitrator ineligible.

10. CAP ON FEES TO ARBITRATOR

The Fourth Schedule was adopted to include model payments in cases other than international commercial arbitrations and in cases where parties have agreed to the rules of an arbitral institution, in order to prevent the arbitration process from being too costly. The process for the Central Government to amend the Fourth Schedule has been detailed in Section 11A (2). However, since each State’s High Court is expected to frame rules after considering the rates specified in the Fourth Schedule, this could result in a disjointed fee regime7 around the country.

F. Other legislative / non-legislative measures that can promote arbitration practice in India

In several nations, policies that facilitate access to the jurisdiction and promote the jurisdiction as a venue by easing immigration, tax, and other constraints have been instrumental in the growth of institutional arbitration. In several nations, policies that facilitate access to the jurisdiction and promote the jurisdiction as a venue by easing immigration, tax, and other constraints have been instrumental in the growth of institutional arbitration. The legal status of India in terms of allowing international lawyers to represent clients in Indian arbitrations is unclear. The Bar Council of India (“BCI”) published draught Rules for international lawyers’ registration and control in India in 2016. The legal situation has been unclear after the draught rules were revoked.

G. Role of the government and the legislature in promoting institutional arbitration

An analysis of effective arbitral institutions around the world reveals how the governments and legislators of the countries in which they operate have played a key role in their development. This has arisen as a result of government and regulatory efforts to encourage arbitration hubs. The government will encourage formal arbitration by offering incentives for the creation of physical arbitration infrastructure. Arbitration of government contracts must be encouraged by the National Litigation Policy (“NLP”) and state litigation laws. In cases between government agencies or PSUs and private parties, arbitration can be promoted as a dispute resolution procedure.

In October 2016, the Maharashtra government approved an administrative arbitration scheme. According to the Maharashtra Arbitration Scheme, all state government contracts worth more than INR 5,00,00,000 (INR 5 crores) must have an arbitration provision enabling arbitration to be conducted by a recognised institution.

H. Changes in ADR culture

ADR is regarded as a feasible solution to arbitration, which is the standard and default approach for settling conflicts. While the increased use of alternative dispute resolution (ADR) strategies has triggered some changes in thinking, they still play second fiddle to litigation in the majority of cases.

To achieve parity between ADR processes and litigation, and to instil trust in them as equally (or more) effective and comprehensive dispute resolution systems, a paradigm shift is needed. As a result, parties will be able to decide the “right” method of dispute settlement based on the subjective facts and conditions of a situation, rather than relying on a culture of adversarial litigation. Mediation was recognised in India by Parliamentary law when section 89 of the CPC was adopted. This type of dispute settlement varies from the adjudicatory frameworks that govern court and arbitration cases.

Mediation is described as a process in which disputants seek to settle their differences with the help of a neutral (and disinterested) third party. The third-party mediator supports the parties in a negotiating process. The mechanism is intended to analytically pinpoint and segregate unresolved problems in order to formulate solutions, consider alternatives, and negotiate a consensual resolution that meets their needs and protects their rights. Although the third-party mediator does not have the power to settle the conflict amicably, he or she aims to build a pleasant atmosphere in which the parties can resolve their differences. 

In the last decade, mediation has gained popularity in India as a realistic solution to litigation. Commercial disputes, matrimonial disputes, arbitration of intellectual property disputes (primarily over matters such as damages), and family agreements have all been assigned to mediation. The mediation method has been recognised and approved by the courts. The Supreme Court has stressed the importance of cultivating and encouraging the development of this alternative, non-adjudicatory mode of dispute settlement, as it has the potential to significantly reduce the number of cases on the docket. In the last decade, mediation has gained popularity in India as a realistic solution to litigation. Commercial disputes, matrimonial disputes, arbitration of intellectual property disputes (primarily over matters such as damages), and family agreements have all been assigned to mediation. The mediation method has been recognised and approved by the courts. The Supreme Court has stressed the importance of cultivating and encouraging the development of this alternative, non-adjudicatory mode of dispute settlement, as it has the potential to significantly reduce the number of cases on the docket.

When it comes to sending conflicts to mediation, the courts play a significant role. In fact, the role of the presiding judge or the court is critical in any given case; she or he is expected to first determine whether the dispute before the court is one that can be resolved through mediation; if it is, and the parties are amenable (willing to take the step), the dispute is referred to mediation.

A number of arbitral institutions around the world also provide consultation facilities in addition to arbitration. When a disputing party refers a complaint to the SIAC, the dispute / reference is stayed for 8 weeks after the parties exchange their pleadings (claims and counterclaims) and a tribunal is established, according to the Arb-Med-Arb protocol (“AMA protocol”) jointly developed by the SIAC and the Singapore International Mediation Centre (“SIMC”). During the negotiations, the parties may try to reach a mutually agreeable agreement. The arrangement is reflected in a consent award if it is reached. Parties are free to choose their mediator(s) from the SIMC’s panel of mediators or some other mediator, according to the AMA protocol. If they are unable to reach an agreement, the SIMC will nominate a mediator.

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