Why in the News?

India’s growing economy has sparked discussions on using arbitration to handle increasing commercial disputes. The overburdened court system makes arbitration a popular choice, but questions remain about its effectiveness.

What are the two key parameters that define the credibility and legitimacy of Indian arbitration?

• Efficient Conduct of Arbitral Proceedings: Arbitrators must manage timelines, procedures, and hearings to avoid unnecessary delays and ensure speedy resolution. Eg: In a construction contract dispute, an arbitrator who ensures hearings happen on schedule and avoids multiple adjournments boosts arbitration credibility.
• Quality of Arbitral Awards: Arbitral awards must be factually accurate, well-reasoned, and legally sound so they can withstand court scrutiny. Eg: In a technology dispute, an arbitrator who carefully analyses technical evidence and explains compensation calculation clearly ensures the award is respected and upheld.

Why has the identification of elite Indian arbitrators primarily with retired judges been seen as a limitation?

• Over-Reliance on Judicial Experience: Assumes judicial skills alone are enough for arbitration, without adapting to arbitration’s flexible needs. Eg: A retired judge may strictly follow civil procedure rules, causing unnecessary delays in arbitration.
• Court-like Procedures in Arbitration: Arbitrations tend to mimic lengthy court processes, losing their speed and efficiency advantage. Eg: Instead of quick hearings, a retired judge-arbitrator may insist on prolonged cross-examinations like a courtroom trial.
• Poorly Reasoned Awards: Awards by some retired judges may lack commercial understanding and detailed reasoning, leading to challenges and setting-aside in courts. Eg: In a business valuation dispute, an arbitrator may issue an award without deeply analysing financial reports, making it vulnerable to appeal.
• Lack of Soft Skills and International Best Practices: Many retired judges are unfamiliar with global arbitration practices and soft skills like consensus-building within a tribunal. Eg: In an international arbitration panel, an Indian retired judge might struggle to navigate cultural differences or informal deliberations.
• Limited Diversity of Expertise: Arbitration needs experts from various fields (engineering, finance, tech), not just law, to handle complex technical disputes. Eg: In a complex infrastructure project dispute, a technical expert-arbitrator could resolve issues faster than a purely legal expert.

Who plays the most decisive role in ensuring the efficiency and quality of arbitral proceedings in India?

• Arbitrators Set the Procedural Framework: They design and enforce the timelines, hearing schedules, and procedural rules to keep the arbitration efficient. Eg: An arbitrator can fix strict deadlines for filing evidence to avoid unnecessary extensions.
• Arbitrators Manage Disputes and Party Conduct: They resolve procedural disputes, manage party behavior, and can impose sanctions for delays or misconduct. Eg: If a party repeatedly seeks adjournments, the arbitrator can impose a cost penalty to maintain discipline.
• Arbitrators Deliver Final, Reasoned Awards: They are responsible for writing high-quality, logical, and well-supported awards that stand strong in judicial review. Eg: In a financial fraud arbitration, a well-reasoned award citing expert evidence and quantifying losses strengthens the award’s credibility.

How can the Indian arbitration ecosystem diversify and improve the quality of its arbitrators? (Way forward)

• Diversify the Pool of Arbitrators: Include not just retired judges and advocates, but also trained professionals from fields like engineering, finance, and technology. Eg: Appointing a financial expert as arbitrator in a complex banking dispute can lead to faster and better-informed decisions.
• Mandatory Training and Accreditation: Every arbitrator, regardless of background, must undergo rigorous training through specialized certificate courses and workshops. Eg: A retired judge attending an international arbitration course learns modern practices like fast-track arbitration and efficient evidence management.
• Promote a Culture of Professional Arbitration: Build an ecosystem where arbitration is seen as a specialized profession, not as a secondary option to court litigation. Eg: Creating prestigious professional associations and ranking systems for arbitrators can motivate continuous learning and excellence.

Mains PYQ:

[UPSC 2024] Explain and distinguish between Lok Adalats and Arbitration Tribunals. Whether they entertain civil as well as criminal cases ?

Linkage: Arbitration Tribunals, requiring an understanding of their nature and function as a form of dispute resolution, which is the central theme of the Article.

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