In order to reduce the burden of government litigations in courts and facilitate settlement of disputes through arbitration, conciliation and mediation, the ministry of law and justice has proposed strengthening of the existing arbitration framework in the country, prevailing under the International Centre for Alternative Dispute Resolution (ICADR) Arbitration Rules, 1996.
At present, the arrangements for settlement of disputes, either by the Committee of Disputes (COD) or through the Permanent Machinery of Arbitrators (PMA), is for resolving disputes between government departments inter se or between public sector enterprises inter-se or between a government department and a PSE.
However, a dispute between a private party and government department/PSE does not fall within the purview of these existing arrangements. Therefore, to deal with commercial disputes between the government departments/ PSUs on one hand and private parties on the other, the ministry of law has decided to introduce arbitration and conciliation clauses in all major contracts to be signed in future between the government departments/ PSUs and the private entities.
A Committee of Secretaries (CoS), under the chairmanship of cabinet secretary, K M Chandrasekhar, is meeting on January 1, 2008 to finalise the details of this mechanism along with the secretaries of finance, petroleum, power, commerce and industry, telecom, IT, DPE, rural and urban development ministries.
The proposed model arbitration clause reads, ?If a dispute arises out of or in connection with the contract, or in respect of any defined legal relationship associated therewith or derived there form, the parties agree to submit that dispute to arbitration under the ICADR Arbitration Rules, 1996. The authority to appoint the arbitration (s) shall be the ICADR.?
Introduction of such an arbitration clause will prevent legal hurdles being faced by PSUs like NTPC with the private sector biggie Reliance Industries Limited (RIL) over the issue of gas supply in the High Court for the past three years now.
Telecom major MTNL has already introduced arbitration and conciliation clauses in some of the contracts entered into by them which provide for resolution of disputes arising from such contracts through the ICADR.