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India: A not so emerging International Arbitration hub

The widespread expansion of global trade, commercialisation and business in the recent past has entailed the need for a robust alternate dispute resolution mechanism. The strong growth of arbitration across the world has fuelled the emergence of several international arbitration centres across the world. India, currently an emerging economy has been a one stop destination for international investment, technology development and financial sponsorships which in turn has increased the number of disputes between Indians and foreign parties.

 

Since 2021, India has been the largest foreign user at Singapore International Arbitration Centre with over 300 arbitrations taking place in the year 2022. India was also in the top ten users list of International Chamber of Commerce Arbitration. This rapid growth of Indians using the ADR infrastructure has also led to development of local arbitration Centres across India but still the growth curve has been very slow.




 

Problems –

 

India was one of the very few first countries who signed the New York Convention in the year 1960. Singapore despite being a signatory in 1986 has emerged as the biggest international arbitration hub followed by Paris, Geneva, Vienna and London. The major issues that have led India needs to address are –

 

a)     Judicial Intervention – One of the major issues for India not being an international arbitration hub is the judicial intervention of courts in enforcement of arbitral awards. There have been many instances where Indian courts have overturned arbitral awards which leads to uncertainty amongst the parties. For instance, if we take the example of a Section 34 petition, which deals with challenge to an arbitral award, the same may take forever to decide. The petition is also heard as an appeal by various courts despite clear directions from the Supreme Court that the Court under Section 34 does not sit over as an appeal and cannot go into the merits. For Instance, in Delhi Metro Rail Corp. vs Delhi Airport Metro Express Pvt. Ltd., the Supreme Court exercised its extraordinary curative powers to annul an arbitral award of approximately ₹3,000 crores plus interest, on the ground of patent illegality. Along with interest, the amount totalled around ₹ 7,600 crores on the date of the DMRC Decision.This is a classic case of judicial intervention which diminishes India’s credibility on conducting arbitration on an international level.

 

b)    Specialised Arbitration lawyers – It is very difficult in India to find a lawyer who is a full time and specialized arbitrator. All lawyers who are appointed as arbitrators keep arbitrations after spending the entire day in court and being exhausted which leads to decreased quality of awards. This also leads to adjournments taking place for when these arbitrators/lawyers have important court dates. There should be a regulatory body for appointment of arbitrators to regulate that the arbitration work should not be considered secondary.

 

c)     Lack of Institutions – Apart from a few arbitration centres which are now emerging, majority of the previous proceedings were not instutinoalised which led to widespread disparity in cases.

 

d)    Retired Judges as Arbitrators – Even from those institutions that exist for arbitrations, retired high court and supreme court judges are the most common finds in cases with huge amounts. No other country is thus fond of appointing only retired Judges as arbitrators like ours.

 

e)     Rigidity of Arbitrators acting as judges – Another major reason why arbitrations fail in India is in the manner of arbitrators handling civil disputes. Section 19 of the Arbitration act clearly states that the arbitral tribunal shall not be bound by the Code of Civil Procedure, or the Indian Evidence Act. Arbitrators also should moderate cross examinations by not allowing questions on the exact contents, interpretation of evidence. Majority of the arbitrators act as court judges who stick to the word of the book and solve dispute which completely diminishes the object of ADR.

 

f)     Appealing nature of PSUs – The term ‘appealing’ here does not refer to the attractiveness of Public Sector Undertakings but their need to appeal anything and everything that is passed against them be it an arbitral award or court order.

 

g)    Privatisation of institutions – None of the major international arbitration dispute centres are government controlled be it International Chamber of Commerce (ICC) or Singapore International Arbitration Centre (SIAC). On the other hand, the New Delhi International Arbitration Centre and Arbitration Council of India have members from the Government. Therefore, a lot will depend on the functioning of Arbitration Council of India and Government’s interference should be least in arbitration matters.

 

h)    Vagueness of law – “The Arbitration and Conciliation (Amendment) Bill of 2021 seeks to amend Section 36 of the 1996 Act and raises several concerns as it provides for an unconditional stay on the operation of the award in case fraud or corruption is involved. This will take us back to the era of the automatic stay of arbitral awards as it would make it convenient for the judgment-debtors to avoid their obligations under the award” said a report on SCC. Section 29A of the Arbitration Act which sets a time limit of 12 months for passing an arbitral award also has an extension clause of 6 months which can be granted by court. This contradicts the very object of alternate dispute resolution that court intervention has to be reduced and the very application of extension can take months to be disposed off.

 

Government’s actions towards ADR -  


In 2016, the state government of Maharashtra approved an arbitration policy which mandates all government contracts exceeding value of Rs Five crore to have an arbitration clause and chose Mumbai Centre for International Arbitration (MCIA) as a recognised institution. Furthermore, in July of 2023, Securities and Exchange Board of India (SEB) has also mandated dispute resolution with Indian arbitral institutions. Apart from that the government also encouraged the inauguration of Arbitration Bar of India (ABI) which is dedicated to advancing ADR in India.

 

Conclusion -

 

But we must understand that becoming like an international arbitration hub like Singapore, Vienna, or Paris is not about making 10 storey buildings with centralised rooms, VC systems and a Starbucks but addressing the issues which are withholding us from becoming an international ADR hub. Furthermore, there exists a lack of awareness among people, citizens about choosing alternate dispute resolution mechanisms over hard core litigation and lastly, young professionals should be more inclined towards becoming special arbitrators or mediators.

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