INSTITUTIONAL ARBITRATION IN INDIA: UPCOMING NEED OF THE HOUR

Arbitration is the new way of resolving disputes as the burden on the Court is increasing. With the changing times, there have been advancements in settling the case with the help of arbitration. There are two ways to conduct the process of arbitration:

1. Ad-hoc Arbitration

The parties to arbitration decide the procedure to be followed in ad-hoc arbitration beforehand. Else wise, by the arbitral tribunal once the process of arbitration has begun. All matters like a number of arbitrators, place, and date of proceedings, etc, will be looked into by the parties. It is the responsibility of the appointed arbitrator(s) to administer the entire process in a well-organized manner.

2. Institutional Arbitration

It is the kind of arbitration in which the proceedings of arbitration is conducted by an institution. Institutional arbitration can be selected when the parties can mention the desired institution in the arbitration agreement or have voluntarily approached the Centre. The Courts can also refer the disputes to any institution/arbitration center. This type of arbitration is preferred over the other. Because the institution provides the experienced arbitrators and other expertise that provides a quick and efficient dispute resolution process. Another important characteristic of this type of arbitration is that the institution/arbitration Centre is well versed with the latest developments of laws related to arbitration.

Some institutional arbitration institutions in India are:

1. International Centre for Alternative Dispute Resolution (ICADR)
2. Council of Arbitration (ICA)
3. Delhi International Arbitration Centre (DAC)
4. Mumbai Centre for International Arbitration (MCIA)
5. Nani Palkhivala Arbitration Centre (NPAC)

These institutions have their own set of arbitral rules or administer under the United Nations Commission on International Trade Law (UNCITRAL Arbitral Rules).

Must Read: Mediation as an Alternative Dispute Resolution 

In India, the majority of the cases of the arbitration are concluded through ad-hoc arbitration because it gives liberty to the parties in devising the procedure and allows arbitrators to fix their fees. The efficiency of the arbitrator is sometimes not within acceptable time limits. But globally, the method which is accepted is that of institutional arbitration. The institution/arbitration Centre provides for the transparent fee calculator based on the quantum of the claim and the workload.

To make India a hub of institutional and domestic arbitration in India and addressing the issues of the current mechanism of arbitration in India, the BN Srikrishna committee came out with a report on 3rd August 2017. The report was named as “Report of the High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India”.

On 2nd March 2019, the president of India promulgated the New Delhi International Arbitration Centre Ordinance, 2019. Its objective was institutionalizing arbitration in India.

Institutional arbitration in India is evolving and yet to reach a stage where it is fully accepted. A cultural shift is inevitable for institutional arbitration to be successful in India. In order to keep pace with the rest of the developed and developing world, there is an urgent need to popularize institutional arbitration in India. We need to achieve the foremost objective of arbitration law, viz. to provide a quick and cost-effective dispute resolution mechanism.

Following are the recommendations for enhancing the need for institutional arbitration:

1. Create Awareness

Firstly, there is a lack of awareness amongst the people regarding the advantages of institutional arbitration. The domestic arbitration institution should regular and consistent steps to create awareness about the existence of the institution, inform the public about its rules, and the nature of procedural and administrative support it offers. Foreign arbitration institution does the same by conducting seminars, workshops, and conferences at regular intervals to draw the attention of the potential users to the services of arbitration.

2. Cultural Shift

Secondly, there has to be a cultural shift in the minds of the Judges, lawyers, and parties to refer the disputes to the institutional arbitration. There has to be the least tolerance in committing a breach of contractual obligations. It is very important to uphold the objectives of the Arbitration and Conciliation Act, 1996. The will of the parties should be respected and adopt practices conducive for making the arbitration speedy, cost-effective, and binding.

3. Establish more arbitration institutions

Thirdly, India is not preferred arbitration institution center because of the undue delay and enormous costs. The number of arbitration institutions is very less. If one of the parties to the dispute is the foreign national then foreign international arbitration institution such as the Singapore International Arbitration Centre is preferred over the Indian arbitration center. Hence, setting up more arbitration institutions in India can help regulate and streamline the arbitration process and thereby allow more people to use institutional arbitration.

Also Read: International Commercial Arbitration 

4. Costs and fees

Lastly, The high cost of ad-hoc arbitration in India is a factor that prevents arbitration from being effective. The fourth schedule with respect to fees of the arbitral tribunal is the right step in making the ad-hoc arbitration less expensive. Fees of institutional arbitrators may be based on the value of the claim or on an hourly basis so that parties know the costs upfront which will enable them to make an informed choice.