Need for the Reforms in Indian Arbitration System

General Studies Paper -2

Context: Vice President Jagdeep Dhankhar underlined the need for reformation in the Indian Arbitration system.

About

• He highlighted that the process has become very complex.
  • Award (by arbitration court), objection to award, appeals, and then invocation of Article 136 of the constitution is followed by review and Curative petitions, which has become the norm.
  • Therefore, he stressed the need for streamlining to enhance efficiency.
• Article 136 deals with Special leave to appeal by the Supreme Court.
  • Article 136 allows citizens to file so-called special leave petitions (SLPs) to appeal before the Supreme Court against any “judgement, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India”.
  • It is up to the apex court to decide whether it wants to hear an appeal or not.

Arbitration Mechanism in India

• Arbitration is a quasi-judicial process of settlement of disputes between Trading Member, Investor, Clearing Member, Authorised Person, Listed Company etc.
• Arbitration aims at quicker legal resolution for the disputes.
• The Arbitration and Conciliation Act 1996 has been modelled on lines of the UNCITRAL (United Nations Commission on International Trade Law) framework of laws.
• Arbitration Agreement: Parties can agree to resolve their disputes through arbitration either before or after a dispute arises.
• Arbitral Tribunal: The arbitral tribunal, comprised of one or more arbitrators, is appointed by the parties or as per the procedure agreed upon by them.
  • The decision on the dispute is mostly binding on the parties.
  • Generally, there is no right to appeal an arbitrator’s decision.
• Arbitration Proceedings: The Arbitration Act provides a framework for conducting arbitration proceedings, including the appointment of arbitrators, the conduct of hearings, submission of evidence, and issuance of the final arbitral award.
• Enforcement: The Act empowers arbitral tribunals to grant interim measures to preserve the rights of parties, pending the final resolution of the dispute.
  • Arbitral awards, once granted, are enforceable in the same manner as court judgments.
• Institutional and Ad Hoc Arbitration: Arbitration in India can be conducted through institutional arbitration bodies like the Indian Council of Arbitration (ICA), International Chamber of Commerce (ICC), or through ad hoc arbitration where parties directly appoint arbitrators.
• Amendment in 2019: In 2019, further amendments were made to the Arbitration Act to streamline the arbitration process, expedite proceedings, and reduce the scope of interference by courts.

Need for the Arbitration Mechanism

• Overburdened Judiciary: Arbitration provides an alternative mechanism for resolving disputes efficiently and expeditiously, thereby relieving the burden on the courts.
• Promotion of Business and Investment: A robust arbitration framework is essential for fostering a conducive business environment and attracting foreign investment.
• International Trade and Commerce: Arbitration offers a neutral and internationally recognized forum for resolving cross-border disputes, providing certainty and predictability to parties engaged in international transactions.
• Confidentiality and Privacy: Arbitration proceedings are generally confidential, allowing parties to maintain the privacy of their disputes and sensitive business information.
• Specialized Expertise: Arbitration allows parties to choose arbitrators with expertise in the relevant subject matter or industry, ensuring that disputes are resolved by professionals who understand the complexities and nuances of the issues involved.

Challenges

• Judicial Interference: Courts often entertain challenges to arbitral awards on grounds that go beyond those permitted under the law, leading to delays and undermining the finality of arbitral awards.
• Delays and Backlogs: Factors contributing to delays include procedural complexities, frequent adjournments, and challenges in enforcing procedural timelines.
• Lack of Specialized Arbitrators: Despite efforts to promote arbitration, there is a shortage of qualified and experienced arbitrators, particularly those with expertise in specialized fields.
• Costs and Accessibility: The costs associated with arbitrators’ fees, legal representation, and administrative expenses deter parties from opting for arbitration, particularly in low-value disputes.
• Confidentiality Concerns: Despite provisions for confidentiality in arbitration proceedings, concerns persist regarding the disclosure of sensitive information and the potential for breaches of confidentiality.
• Institutional Infrastructure: While there are several arbitral institutions in India, the institutional infrastructure for arbitration remains underdeveloped compared to other jurisdictions.

Way Ahead

• Reforms aimed at streamlining procedures, enhancing judicial support, promoting arbitration education and training, and strengthening institutional infrastructure can contribute to the growth and development of the arbitration mechanism in India.