Prologue

In recent years, India’s economic growth has skyrocketed. There’s an apparent increase in business growth, establishment of new companies, and expansion in the general spheres of trade. This can well be attributed to the extensive economic policies of 1991: Liberalisation, privatization, and Globalisation. However, this robust economic growth is not without challenges. There are several trade disputes between companies, private individual traders, and start-up establishments that, if not amicably addressed, are likely to hinder the growth and expansion of those markets. These disputes, if not well settled, are also likely to lead to tendencies of monopolistic competition and general unfair trade practices. Besides the traditional courts and means of dispute resolution, businessmen and private entities have resorted to alternative means of dispute resolution, which include arbitration, mediation, and conciliation. Distinctly, Arbitration has emerged as the most preferred means of dispute resolution, with immense benefits such as reduced costs and time, efficiency, and social benefits between the parties. Unlike the traditional court litigations where parties appear as enemies, in Arbitration, the relationships between the parties are generally protected as they follow the arbitration clauses of their interests in the contracts they have entered in previous times. Therefore, India’s Arbitration is primarily governed by the Arbitration and Conciliation Act, 1996, which is inherently rooted in the United Nations Commission on International Trade Law [UNCITRAL], which governs international arbitration procedures and conducts. Accordingly, India’s Arbitration equally imbibes aspects of international behavior in addition to the domestic disputes. In this article, we shall therefore dive into understanding the nature of Arbitration in India, its importance, challenges, and possible reforms required. Don’t miss a line!

How does Arbitration work in India?

As regulated by the Arbitration and Conciliation Act, 1996, Arbitration in India operates under simple but guided procedure. These procedures can be set by Arbitrators or courts in the interest of the parties involved. Therefore, the following are the processes involved in conducting an Arbitration in India.

Existence of a valid contract – This is important in ensuring that the arbitration process is guaranteed by the arbitration clause in the contract. The existence of the contract also shows the nature of the relationship that exists between the parties and it helps determine the nature of the breach of the said agreement.

Initiation of the arbitration proceeding – Once the dispute arises as per the terms of the contractual agreement, parties discuss and initiate the arbitration process. This involves discussing the dates and organising the financial requirements for the same process.

Appointment of Arbitrators – This involves deciding on the arbitrators in the interest of both parties. Usually the arbitrators can be in odd numbers to ensure the fairness and ease of decision-making. Usually each party nominates an arbitrator and the Court, where necessary, chooses the third one. After the arbitrators are chosen, hearings are conducted and decisions are made based on impartial observations of the arbitrators, relying on facts of the matter and evidence so provided.

Arbitration Agreement and enforcement – After the hearing and judgements are made, a draft of arbitration agreement is made, and the same shall remain binding on both parties as though they are from official traditional courts.

Importance of Arbitration in India

There can be several benefits of arbitration in India. They include the following:

Transparency: There is open but restricted communication in the arbitration process. The information necessary for both parties are kept open to both parties and such information are restricted for the parties involved – restricted from access to the third parties who are not parties to the dispute.

Fair decisions by impartial arbitrators – Arbitrators are impartial judges who decide out of facts and evidence presented before the Arbitral tribunal. The outcome of an arbitration is referred to as Arbitral Award which is awarded to one who deserves to be compensated.

Confidentiality – There’s utmost confidentiality that is being observed during the process of arbitration. It involves releasing only that information which parties wish other parties to know.

Cost effectiveness – Arbitration processes are usually cost effective. They save both revenue and capital, as the ultimate outcome is aimed at realising amicable solutions and the continuation of the business relationships between parties.

Challenges facing India’s Arbitration system

The challenges facing Arbitration in India includes the following:

Judicial Intervention – Traditionally, the Indian Courts used to interfere in the matters of arbitration, which often led to uncertainties in the outcomes, and limited liberty for parties to exercise their full interests in the process. While crucial reforms have taken place in the Arbitration process today, certain interferences of Courts still persist such as in the enforcement of awards and compelling parties to fulfil their obligations with threats of judicial actions.

Limited Pool of Arbitrators in the country – It is pertinent to note that the concept of Alternative Dispute Resolution is still a relatively recent concept in India. There is a limited supply of skilled manpower in handling matters of arbitration, such as arbitrators. This concretely explains the rationale behind why in most arbitration processes in India are presided over by retired judges of the traditional Courts. This is prone to the inability of such judges to lack expertise in handling complex commercial disputes, such as those involving international parties, which may lead to compromised outcomes and biasness.

High Costs – Arbitration, just like ad hoc proceedings, can be quite expensive. Unlike traditional litigation, where certain expenses are not catered by parties, such as venues, in Arbitration, every arrangement is upon the parties in the dispute. Starting from the expenses for the venues to the costs of paying the arbitrators who facilitate the process of the arbitration process. All these expenses, if not considered wisely, can be very costly for parties to bear.

Procedural Delays – Meanwhile arbitration emphasizes expeditious proceedings, there are still tendencies of delays in reaching outcomes and disposing off arbitration processes. This leads to a lack of trust in the arbitration process among people.

Possible ways to navigate Indian Arbitration today

In ensuring a more efficient and robust growth in the Arbitration system, the following can be adopted;

By choosing appropriate Arbitration Institutions – This is crucial in ensuring quality of the outcomes. Members who opt for established institutions such as the Mumbai Centre for International Arbitration [MCIA] have a greater chance of benefiting from fair outcomes delivered by expert arbitrators.

By selecting expert Arbitrators –  This involves appointing arbitrators with great expertise in commercial, trade, and international disputes. It will save the burden of suffering from the inadequacies of the retired judges with limited expertise and different skills.

By drafting Comprehensive Arbitration Agreements – In every successful arbitration process, there is an arbitration agreement which determines the agreement of both parties to continue their interests. Therefore, it is important to ensure that such agreements are clearly written with simple languages for easy interpretation and understanding by the parties and that they are within the governing law of the discipline.

By keeping updated with the current Legal Developments – This is crucial in enabling businesses to align their interests and strategies with the latest standards and help them avoid compliance shortfalls prone to fines and punishments.

Conclusion

The Arbitration landscape in India is at a crossroads where current challenges persist while the government’s reformist approaches show a positive turn in securing this field of dispute resolution. Several attempts have been put in place to ensure amicable arbitration processes including the adoption of the Arbitration and Conciliation Act, 1996 with several amendments aimed at ensuring the very best. Therefore, understanding the nuances of these processes, how they work, and devising the best mechanisms to yield the best of arbitration in India is crucial. This does not only cater for the interest of national arbitration but international arbitration also.

By Charles Anyama Kalisto