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Advantages and Disadvantages of Commercial Arbitration in India
Since the traditional Indian rules followed in dispute resolution, arbitration in particular, and the colonial laws like the Arbitration Act, 1940 were found to have discrepancies and inconsistencies, a conference presided by the Prime Minister of India, P.V Narasimha Rao, considered international models like the United Nations Commission on International Trade Law (UNCITRAL) Model on Commercial International Arbitration and discussed the fate of arbitration in India on 4th December 1993[1]. The conference ignited the need for a comprehensive legislation on arbitration and this led to the enactment of the Arbitration and Conciliation Act, 1996. The Arbitration and Conciliation Act, 1996 is a self-contained Code which has 86 Sections and seeks to attain the objectives of consolidating and amending existing laws relating to domestic arbitration, defining conciliation, enforcing UNCITRAL, creating a uniform system of regulation relating to arbitration and conciliation and the establishment of a unified legal framework for fair and effective settlement of disputes[2]. However, parties interested in dispute resolution through arbitration still preferred international arbitration centers not seated in India due to the globally acclaimed standards and the efficiency in proceedings. Therefore, as an attempt to make arbitration a preferred mode of settlement of commercial disputes and to make India a hub of international commercial arbitration, the Arbitration and Conciliation (Amendment) Act, 2015, amending the Arbitration and Conciliation Act, 1996 was passed[3]. The 2015 Amendment brought significant changes to the principle Act especially with respect to international commercial arbitration, impartiality and independence of arbitrators, powers of the arbitral tribunals, delays in presenting awards, and expeditious proceedings. However, with the unprecedented increase in commercial disputes set off by globalisation, industrialisation and liberalisation, the popularity of arbitration went up but Indian law governing arbitration was seen to still be behind global arbitration practices[4]. To combat this drawback, the Arbitration and Conciliation (Amendment) Act, 2019 was passed by the Parliament. The 2019 amendment seeks to strengthen institutional arbitration in the country and make India a well-equipped Centre for domestic and international arbitration by minimizing the role of courts and establishing a body – the Arbitration Council of India (ACI), which will set uniform and professional standards that are on par with global regulations. With the 2019 Amendment in place, arbitration in India has taken on a new form with increased efficiency and cost-effectivity, and India can move toward being a key player in the game of international commercial arbitration.
Commercial arbitration in India does have its disadvantages and some of them are:
- Even though interference by the court has been considerably reduced by the 2019 amendment with the establishment of the Arbitration Council of India, there are still situations when judicial intervention is permitted, and this can cause a delay in proceedings because of judicial burden and backlog of cases[5].
- Lack of proper transcription facilities in India, resulting in hearings taking significantly longer than they should. This significantly reduces the cost and time efficiencies of arbitration[6].
- Earlier a majority of arbitrations in India are ad hoc without an institution exercising some degree of control or oversight over the process and the arbitrators which meant that parties are forced to choose from a very limited pool of competent arbitrators who tend to be expensive and busy[7].
However, the Arbitration and Conciliation Act, 1996 and its amendments in 2015 and 2019 have made significant changes to the system and most of the disadvantages have been remedied. Now the advantages of arbitration with respect to the Indian scenario are:
- Speedy, quick and efficient resolution of disputes or conflicts.
- Freedom of parties to choose an arbitrator with expert and specific knowledge on the subject matter of the dispute. Parties are also free to choose the number of arbitrators who will be on the panel.
- The parties can choose the procedure under which dispute is to be settled and this is a huge advantage when compared to litigation because parties can choose their preferred date of hearing as well as trial and this furthers the speedy resolution of cases.
- The introduction of strict timelines by the Arbitration and Conciliation (Amendment) Act, 2019 whereby the arbitrators must pronounce an award within 12 months of constitution of the tribunal ensures that the process is quick[8].
The constitution of the Arbitration Council of India has created an institution which exercises authority over arbitration proceedings in India. The Council will oversee the arbitrators and accredit Arbitral Institutions, among other functions, and this has helped create a uniform system
[1] Editor, The Arbitration and Conciliation Act, 1996 – An Analytical Outlook, Shodhganga, (Apr. 10, 2020, 2:56 PM), https://shodhganga.inflibnet.ac.in/bitstream/10603/201576/10/10_chapter%204.pdf.
[2] The Arbitration and Conciliation Act, 1996, No. 26 Acts of Parliament, 1996 (India).
[3] Vikas Goel, Highlights of Amendment to the Arbitration and Conciliation Act, 1996 via the Arbitration Ordinance 2015, Mondaq, (Dec. 2, 2015, 3:15 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/448666/highlights-of-amendment-to-the-arbitration-and-conciliation-act-1996-via-arbitration-ordinance-2015.
[4] Vikas Goel, Insight into the Arbitration and Conciliation (Amendment) Act, 2019, Singhania&Partners, (Aug. 27, 2019, 8:08 PM), https://singhania.in/insight-to-the-arbitration-and-conciliation-amendment-act-2019/.
[5] Pardeep Nayak, Arbitration Procedures and practice in India: overview, Thomson Reuters, (Oct. 1, 2019, 4:17 PM), https://uk.practicallaw.thomsonreuters.com/9-502-0625?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1.
[6] Bijoylashmi Das, Commercial Arbitration in India – An Update, Mondaq, (Jan. 6, 2014, 1:12 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/284570/commercial-arbitration-in-india--an-update..
[7] Supra note 5.
[8] Ahlawat&Associates, Arbitration and Conciliation (Amendment) Act, 2019 notified, InsightSuccess, (Aug. 10, 2019, 3:53 PM), https://www.insightssuccess.in/arbitration-conciliation-amendment-act-2019-notified/.
- Alternate Dispute Resolution
- Commercial arbitration
- Advantages and Disadvantages
