[op-ed snap] Pushing institutional arbitration in India

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Mains Paper 2: Polity | Separation of powers between various organs dispute redressal mechanisms and institutions.

Once you are done reading this op-ed, you will be able to attempt the below.

Institutional arbitration is the norm for commercial dispute resolution in most advanced jurisdictions. India must follow suit” Critically examine.

From UPSC perspective, the following things are important:

Prelims level: World Bank’s Ease of Doing Business

Mains level: Arbitration mechanism in India – pros, cons, challenges and way forward


News

Context

  1. The World Bank’s Ease of Doing Business ranking for 2017 reveals that India continues to fare badly on enforcement of contracts
  2. The absence of effective means for enforcement of contracts is a serious fetter on the legal system and impedes economic growth and development.

Why low ranking?

  1. High pendency of cases and endemic delays in Indian courts.
  2. Therefore, there is a need to provide viable alternatives to litigation.

Best alternative-Arbitration

What is Arbitration?

  1. Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts.
  2. The parties to a dispute refer it to arbitration by one or more persons, and agree to be bound by the arbitral decision. 
  3. It holds the promise of flexibility, speed and cost-effectiveness.

Ad hoc arbitration

  1. Ad hoc Arbitration is a proceeding that is not administered by others and requires parties to make their own arrangements for selection of arbitrators.
  2. The parties are under discretion to choose designation of rules, applicable law, procedures and administrative support.

Problems

  1. Delayed proceedings
  2. Unprofessional arbitrators and
  3. Poor quality of awards.
  4. These issues make ad hoc arbitration vulnerable to excessive court intervention at all stages of the arbitration proceedings.

Institutional arbitration

  1. It involves the regulation of arbitration proceedings by an institution, which applies its rules of procedure.
  2. It has expertise of the arbitral institution, access to a panel of arbitrators usually maintained by the institution, and good quality infrastructure.

Problems

  1. Despite the existence of several arbitral institutions, institutional arbitration in India remains in a nascent state.
  2. Many arbitral institutions have outdated rules of procedure
  3. Inadequately trained staff
  4. Poorly staffed panels of arbitrators.

Commercial dispute resolution

  1. Institutional arbitration has become the norm, particularly for high-value disputes involving international parties, in most advanced jurisdictions.
  2. The existence of competent arbitral institutions, such as the Singapore International Arbitration Centre, the Hong Kong International Arbitration Centre, International Court of Arbitration of the International Chamber of Commerce and the London Court of International Arbitration, has enabled the sustained growth of institutional arbitration.

Pros

  1. It gained the trust of parties through their modern rules, the organized structure of proceedings, excellent administrative support and infrastructure.
  2. Expertise on the panels of arbitrators
  3. Fixed fee structures
  4. Organized and timely conduct of arbitration
  5. Almost all these institutions benefit from government support to different degrees and have gradually developed through healthy competition.

Institutional arbitration in IndiaCritical areas for improvement

  1. Need for minimum standards for arbitral institutions
  2. The accreditation of arbitrators
  3. Creation of a specialist arbitration bar and bench.
  4. Specific amendments to India’s arbitration legislation aimed at promoting India’s prospects as a preferred arbitration destination.

Way forward?

  1. Increase awareness about institutional arbitration in India so that efforts being taken to reform institutional arbitration are supported by an increase in usage
  2. Adopt best practices from around the world which will encourage parties to use their services over foreign arbitral institutions.
  3. The government must assist by creating state-of-the-art physical infrastructure for the conduct of arbitration.
  4. They must also foster innovation among arbitral institutions to help realize the flexibility, speed and cost-effectiveness promised by institutional arbitration.
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