- Harsh Mahaseth and Anvita Sharma[i]
India's remarkable ascent as a key player in the global economy continues, characterized by a surge in investments both within and beyond its borders. This economic dynamism has given rise to an escalating demand within the international business community for a reliable and definitive method to address disputes related to India. Faced with a significant backlog of cases and time constraints, courts are increasingly open to exploring alternative dispute resolution methods. Data indicates that as of September 2023, a staggering 80,344 cases were pending before the top court, a figure exacerbated by inadequate infrastructure and a shortage of judges grappling with an increasing workload. With arbitration emerging as a pivotal and favoured approach for dispute resolution, both domestically and globally, it is imperative for the Government of India, in collaboration with the Judiciary, to assume a pivotal role in aligning and enhancing the efficiency of arbitration processes.
Post-liberalization of its economy, India drew inspiration from the United Nations General Assembly's initiative to adopt the UNCITRAL Model Law of Arbitration. Subsequently, the Arbitration and Conciliation Act, 1996, was modelled to modernize Indian arbitration law and align it with the best global practices. However, it lacked a structural framework for institutional arbitration. The recent 2019 amendment (“Amendment”) seeks to address this gap by mandating the creation of the Arbitration Council of India, tasked with promoting alternative dispute resolution practices such as mediation, arbitration, and negotiation. With this Amendment, India is poised to become a global hub for arbitration, backed by a body dedicated to fostering amicable methods of dispute resolution. The Amendment also introduces tiered and grading systems to ensure quality checks of specific institutions. Concerning international arbitrations, the amendment empowers the Supreme Court and High Court to designate arbitration institutions graded by the Arbitration Council of India.
Traditionally, international investors favoured sending their disputes to arbitration centres in London, Singapore, Hong Kong, and the International Chamber of Commerce. In an effort to revamp India’s reputation as a foreign investment-friendly nation, the Central Government launched the New Delhi International Arbitration Centre Bill (“Bill”) in 2018. The Bill aimed to acquire and restructure the governance structure and procedural framework that were formerly under the International Centre for Alternate Dispute Resolution by establishing the New Delhi International Arbitration Centre (“NDIAC”). The Bill suggests designating NDIAC as an institute of national significance, which is anticipated to grant NDIAC independence in its academic, financial, and administrative operations.
In 2019, the Government of India approved the Bill, a major step towards developing institutional arbitration. The New Delhi International Arbitration Centre Act, 2019, requires the NDIAC to strive to facilitate the conduct of international and domestic arbitration and conciliation. Consequently, the New Delhi International Arbitration Centre (Amendment) Act, 2022, includes the conduct of other forms of alternative dispute resolution. Inevitably, the question arises as to how NDIAC would attract international investors. Three factors would develop NDIAC as a preferred arbitration institute – cost, timelines, and facility.
The shift to institutional arbitration would only occur if these institutes were designed to conduct arbitration and conciliation in a professional and timely effective manner. The Central Government believed that implementing a cost-effective process would be the best method to steer the nation away from litigation. Additionally, the NDIAC would be preferred to ad-hoc arbitration because the costs are not predetermined in the latter. It does not follow any regulations. The Supreme Court in ONGC vs. Afcons Gunanusa brought to light the excessive fees charged by arbitrators unilaterally. Building upon this, the Supreme Court highlighted how institutional arbitration can “save arbitration from arbitration cost”. The fees are determined at a prescribed rate depending upon the complexity and number of hearings.
Along with cost, time is one of the primary advantages of arbitration. According to Section 15 of the 2019 Act, the centre must provide timely resolution of disputes at both national and international levels. Studies denote that ad-hoc arbitration can be time-consuming with no guarantee that the terms agreed upon will address all issues.
In terms of facility, NDIAC has an experienced panel of accredited professionals to conduct proceedings. It provides for the specialization of arbitrators, which means parties can freely choose an arbitrator skilled in the subject matter in question. NDIAC also provides parties with alternative forms of dispute resolution such as mediation and conciliation proceedings. Such facilities will educate people about which process would work best for the effective resolution of their disputes. Moreover, the NDIAC promotes research and training, and conducts seminars in the field of alternative dispute resolution, benefiting the nation in the long run.
Alongside NDIAC, several other arbitration centres have been established in India, including The Indian Council of Arbitration, the Mumbai Centre for International Arbitration, and the International Centre for Alternative Conflict Resolution, all endorsing effective and reliable conflict resolution. The India International Arbitration Centre (“IIAC”), founded under the India International Arbitration Centre Act, 2019 is an enormous catalyst for progress. It is comprised of a group of knowledgeable individuals, including a former Supreme Court judge. The IIAC is dedicated to making India a leading centre for arbitration globally.
A focused examination of the Arbitration and Conciliation Act, especially concerning the NDIAC, illuminates the diverse strategies India is employing to establish itself as a prominent global arbitration hub. Somesh Dutta highlights the need to significantly diminish the reliance on foreign jurisdictions such as Hong Kong and Singapore for resolving domestic disputes through arbitration. Achieving this objective necessitates the establishment of a robust arbitration bar. As India continues on this transformative journey, the emphasis on cultivating a strong domestic arbitration infrastructure becomes paramount.
[i] About the Authors:
Harsh Mahaseth is an Assistant Professor and Assistant Dean (Academic Affairs) and Anvita Sharma is a law student at Jindal Global Law School, O.P. Jindal Global University, India