Why are most of the companies trying to avoid litigation?
Companies acknowledged more familiarity with the litigation process than with arbitration. In most developed countries, however, litigation is a time-consuming procedure, businesses have avoided using litigation to save time, especially when large amounts of money are trapped in the dispute. According to companies that used arbitration, the average time taken from the start of the arbitral proceedings to the award is less than three years.
Other concerns which lead to a less preferred choice in litigation include:
The strict framework within which litigation operates, and The lack of confidentiality relating to the proceedings.Companies with experience in alternative forms of dispute resolution admitted to doing so in accordance with their organizational policy, especially with regard to low-value contract disputes where arbitration would not be a cost-effective option. Alternatively, they continued to pursue traditional litigation before contracts signed, which did not allow for arbitration in case of conflict. While most firms opted for arbitration (95 percent) due to various advantages, not everyone had a satisfactory experience:
Compared to arbitration outside India, the level of dissatisfaction is substantial for arbitrations seated in India. The level of dissatisfaction could be attributed to the following obstacles to an effective arbitration process in India.Lack of uniformity in the processes and administration of arbitral awards was an acute issue for parties to arbitrate to settle conflicts. However, in the case of Bharat Aluminum, the recent Supreme Court judgment could be a breather for arbitration outside India.
The arbitration award will be binding, regardless of the seat of arbitration, without recourse to appeal. There is an urgent need for grounds straightening to challenge an award in India. Often filing an appeal not only increases the expense and time of arbitration proceedings but also allows arbitration proceedings similar to court proceedings.Since there is no defined time limit by which the arbitration proceedings are to be resolved, arbitration is a less appealing dispute settlement mechanism. Nine percent of the firms had arbitration that lasted more than three (3) years. As observed from the qualitative responses, the duration of more than three years for the parties to resolve disputes through arbitration was a tedious and costly proposition.
The arbitral tribunal's structure is a time-consuming operation and has been listed as the highest aspect having an impact on the duration of the arbitration proceedings, followed by the exchange of pleadings, the collection, and review of records and the compliance of awards.The time and expense of the proceedings are also dramatically affected when the deficient parties take advantage of the procedural loopholes and lack the requisite degree of professionalism in the proceedings.
The fee for arbitrators was among the top three factors attributed to the costs of arbitral proceedings by the companies. Other factors included the professional fees for lawyers/law firms and counsel.
There is a small club of seasoned arbitrators that companies can choose from in case of ad-hoc arbitration in India. This creates a pause in the arbitration process because these arbitrators are inaccessible. Such administrative barriers greatly raise the costs of the trial, making it a more costly process as opposed to litigation.