Column: Taking a pro-arbitration turn

Updated: May 16 2014, 02:31am hrs
Based on the UNCITRAL Model law on International Commercial Arbitration, 1985and superseding the Arbitration (Protocol and Convention) Act, 1937, Indian Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961the Arbitration and Conciliation Act (1996 Act) was enacted with the objective of encouraging arbitration as a cost-effective and quick mechanism for dispute settlement. However, the 1996 Acts objectives were not effectively fulfilled due to various factors such as increased judicial intervention, issues in appointment and jurisdiction of arbitral tribunals, difficulty in enforcement of foreign awards, etc.

However, recent developments have resulted in a revival, making India a pro-arbitration destination. This can be attributed to the efforts to promote arbitration in India by executives, legislatures and the judiciary. But a few challenges and issues still persist.


Expensive, lengthy proceedings: Indian arbitration panels are known for frequent adjournments that contribute to long arbitration time-spans. Often, arbitrators lack the expert knowledge required to resolve disputes and calculate claimants damages, leading to further delay and numerous appeals against final awards. According to an EY study, 50% of respondents believe that Indian arbitration does not provide timely resolutions and 46% agree that arbitration in India is not cost-effective. International arbitration has, therefore, been a preferred choice for many due to its procedural rules, fixed costs and support services.

Judicial logjams: Appeals against arbitral awards lie with concerned high courts and, more often than not, parties aggrieved by the panels award take the appeal route. A problem with Indian courts is their traditional attitude towards arbitration. Some experts assert that judges are suspicious of the whole arbitral process altogether or are uncomfortable with the idea of a courts jurisdiction being outsourced to other tribunals, where the decision-makers may not be persons acquainted with the law.

Judicial intervention at various stages stretches arbitral proceedings as Indian courts are typically known for giving frequent adjournments. The Supreme Court (SC), especially, has assumed the role of a frequent judicial interventionist and recent decisions have only increased the challenges to foreign arbitral awards, generating uncertainty regarding enforceability in India. However, recent Supreme Court judgements show a major shift in approach towards arbitration proceedings.

Non-amendment of laws: Although the law ministry, on many occasions, planned to amend the 1996 Act to make it more international-arbitration-friendly, only recently has it proposed a fresh bill to make arbitration, especially international commercial arbitration, more workable.

Latest trends

A recent EY report highlights that India is witnessing a pro-arbitration trend. Some interesting trends that will shape the future of Indian arbitration are listed here.

Growing importance of technology:

e-Discovery is a growing trend in commercial arbitration proceedings, especially when parties seek significant discovery. Financial models used in quantifying damages and analyses are now being extensively used.

Rise in institutional arbitration: In the last three years, India has seen a growth of nearly 200% in the number of arbitral disputes. The entry of professional institutes (such as London Court of International Arbitration and Singapore International Arbitration Centre) in the market has brought in efficient structure, and effective case management.

Independence of arbitrators: There is a demand and need to lay down explicit provisions for checking the independence and impartiality of arbitrators.

Expert witness reports as evidence: Expert reports are gradually becoming a norm in arbitration, since they are seen as professional and unbiased. The EY study reveals that leading Indian practitioners are of the view that the need for financial experts is going to increase in arbitral proceedings.

Hot-tubbing: It is gaining importance over the old-school methods of cross examination. The process enables lawyers and arbitrators to question experts in the presence of other specialists and challenge each others evidence, thereby simplifying trials and saving time. According to leading practitioners, the controversial practice of hot-tubbing, although present in India, is practically negligible at the moment.

Arbitration in India is evolving. There have been significant developments in recent years that have influenced the outlook on arbitration in the country.

n After the Balco vs Kaiser Aluminium judgment, where the SC held that Indian courts did not have power to intervene in foreign arbitration by way of providing interim relief or entertaining a challenge to foreign arbitral awards in India, various Indian courts have given pro-arbitration judgments reinforcing and promoting arbitration as an effective means of dispute resolution in India.

n The Bombay HC in the matter of HSBC PI Holdings (Mauritius) Ltd vs Avitel Post Studioz Ltd and others, and the Supreme Court in the matter of World Sport Group (Mauritius) Ltd vs MSM Satellite (Singapore) Ltd, held that issues of fraud should properly be dealt with by arbitral tribunals and not by the courts.

n In the matter of AK Balaji vs Govt of India, the Madras HC held that foreign lawyers can visit India on fly in and fly out basis to advise their client on international laws. The HC further opined that foreign lawyers cannot be debarred from visiting India and conducting arbitration proceedings in respect of disputes arising out of a contract.

n A recent SC decision authorising the CAG to examine accounts of private companies dealing with natural resources like spectrum may become a source of potential arbitration disputes. The apex court held that opening accounts of private telecom companies to a CAG audit was imperative to ascertain how government and private firms were dealing with the countrys natural resources and whether the government was receiving its due share under relevant agreements. This ruling is especially significant for industries such as mining and natural gas, where licences for exploitation of natural resources have been granted by the government under profit-sharing agreements.

As cases begin to get more complex in nature, regulatory framework around arbitration in India is getting increasingly articulate and catching up with international trends. There have been significant developments in the field of arbitration in India. However, there is a lot more to do, and with the implementation of cost-and-time effective solutions, it is anticipated that the positive trend of resolving international disputes through arbitration will gain further momentum in India at a rapid pace.

Arpinder Singh & Yogen Vaidya

Singh is Partner and National Leader, Fraud Investigation & Dispute

Services and Vaidya is Director, Fraud Investigation & Dispute Services, EY. Views are personal