Problems with the Arbitration process
The objective of the Arbitration and Conciliation Act, 1996 is to enhance the speedy, fair and cost-effective trial so that the burden of the Courts is reduced. Lawyers have been encouraging parties to have an arbitration agreement in all their business transaction documents but even after 23 years of the enforcement of the Act, there is a serious lack of adoption of the provisions of the Act.
There are various reasons on the point of why the arbitration is not working in India and one such important factor is that there is no encouragement by the Government to pursue the method Arbitration to resolve the dispute.
Another important aspect is that of confidentiality. The characteristic of confidentiality is an important feature of the Arbitration but Courts do interfere in the matters of Arbitration also. The Arbitral Award is expected to be up for appeal or review in the Higher Courts and that does not instill confidence in the parties involved in disputes.
The cost involved in the entire process of arbitration right from appointing an arbitrator to the execution of the arbitral award is relatively higher than that of the cost involved in the litigation process. The execution of the arbitral awards requires the involvement of the Courts, which at the end doubles the cost of the arbitral proceedings.
The common question that comes in the minds of the people is about the reliability of the arbitration proceedings. The answer to this question lies in various factors. There is no specific code of conduct for them. Most things are left to the personal discretion of the arbitrators, which means they enjoy unprecedented autonomy and have a lot of opportunities to indulge in corruption or unethical and unprofessional behavior.
Unavailability of reliable ad-hoc arbitrators, doubts over the credibility of many of them, lack of information regarding the past performance of arbitrators make it hard for parties to find arbitrators trustworthy.
The basic aim of the Arbitration is to complete the proceedings as early as possible. But, what we see in the real world is quite opposite. The process of arbitration is time-consuming. The primary reason for the delay is that almost all the arbitration executions go for appeals in the Higher Courts. And the most used reason for the appeal is that the “arbitral award is against the public policy”.
The Arbitration and Conciliation Act, 2019 is passed by the legislature to cover-up the loopholes of the Act of 2015. The Act has stated various provisions and one of them is the setting up of an Arbitration Council of India for the promotion of the ADR mechanisms.
Arbitration should be accessible to small, medium and micro-entrepreneurs as well. The situation where disputes are resolved in a time-bound manner and with ease is far but approachable and our country is working towards it very significantly.