The jurisprudential milieu in India has witnessed a substantial metamorphosis in recent times vis-à-vis the framework of arbitration. The laws governing arbitration have undergone a gradual evolution to keep pace with the exigencies of the burgeoning global economy of our nation. The discernible intent of India to elevate arbitration as the primary method for resolving disputes for domestic and foreign entities operating in our country’s burgeoning markets is evident. The legislative changes have been operating as a catalyst, and several pro-arbitration pronouncements have been issued by the Supreme Court and various High Courts in recent years.
The Arbitration and Conciliation Act, 1996 (the ‘Act’) is the governing statute for arbitration and alternative dispute resolution in India. It was enacted to consolidate and amend the laws relating to domestic arbitration, international commercial arbitration, and the enforcement of foreign arbitral awards. The transition from the Act to the Amendment Act, 2021, and the international development, such as the United Nations Commission on International Trade Law (UNCITRAL) Model Law, aims to bring the national law on par with international benchmarks, thereby fostering domestic development in arbitration.
The latest amendment of 2021 has brought an unconditional stay on the enforcement of domestic awards, and removing the Eight Schedule under the Act has further streamlined the arbitration process. Additionally, the recent Bar Council of India Rules that allowed foreign lawyers and law firms to practice international commercial arbitration in India is a significant milestone, not only strengthening the arbitration mechanism domestically but also enhancing India’s status in the international arena.
Arbitration has emerged as a preferred method for resolving commercial disputes in India, thanks to the increasing ease of doing business in the country. Over the past few years, several developments have occurred in the landscape of arbitration in India. The future of domestic arbitration in India looks promising as the country continues to take steps to improve its arbitration framework and make it a more attractive option for resolving domestic, commercial disputes.
The Indian arbitration framework has undergone a plethora of amendments since the enactment of the Act to ensure the expeditious resolution of disputes while staying attuned to the dynamic needs of society. The 2015 Amendment revolutionized the Act by introducing groundbreaking provisions such as time-bound arbitration, expedited arbitration, and limiting judicial intervention in the arbitral process[1]. Subsequently, the 2019 Amendment raised the bar by laying down the foundation of the Arbitration Council of India (ACI) to advance the cause of arbitration, regulate arbitrations, and maintain a repository of arbitrators. It also buttressed the arbitral proceedings’ confidentiality by including specific provisions therein.[2] The 2021 Amendment added to the already impressive list of modifications, expounding upon the definition of “arbitration seated in India” and “arbitral institution,” which has consequential effects on enforcing foreign awards. It also introduced provisions for interim relief and mediated settlement of disputes in international commercial arbitration.[3]
The Indian government has consistently amended the Act to make the arbitration process more cost-effective, efficient, and punctual. The modifications were an attempt to curtail the number of arbitration award challenges, promote alternative dispute resolution methods, and enhance the enforcement of foreign arbitral awards.
India, an economic colossus, aspires to become a prominent international hub for arbitration, exemplified by the recent amendments to the arbitration law. The proliferation of institutional arbitration in India, with the establishment of institutions such as the Mumbai Centre for International Arbitration (MCIA) and the Delhi International Arbitration Centre (DIAC), will foster a more effective and cost-efficient approach to resolve disputes as compared to ad hoc arbitrations. The MCIA, established in 2016, offers a neutral and efficient platform for the resolution of international commercial disputes and is increasingly becoming popular with parties to international arbitrations. Similarly, the DIAC, established in 2018, aims to provide top-notch arbitration facilities and services to domestic and international parties.[4] The exponential growth of institutional arbitration in India is propitious, offering parties access to a broader pool of arbitrators, ensuring that disputes are resolved promptly and effectively. The burgeoning institutional arbitration is an optimistic development that is likely to continue flourishing in the Indian arbitration landscape.
The concept of institutionalised arbitration through the Arbitration Council of India (ACI) has been a proposed statutory entity tasked with promoting arbitration, mediation, and other alternative dispute resolution (ADR) mechanisms in the nation. It was introduced in the 2019 Amendment with the primary objectives of establishing and maintaining professional standards for arbitration and ADR services, encouraging the use of arbitration and other ADR mechanisms, collaborating with other national and international organisations to develop best practices for arbitration and ADR, providing training and accreditation for arbitrators and other ADR professionals, and developing a code of ethics for arbitrators and other ADR professionals. The ACI is anticipated significantly influence on the growth and development of arbitration and ADR in India. However, its creation and operation are still under deliberation, and as of now, the ACI has not yet come into being.
The growth and prospects of arbitration in India appear incomplete without the use of technology, which is poised to play a crucial role in the future of arbitration in the country. The adoption of technology in the arbitration process is likely to provide parties with access to a broader pool of arbitrators, irrespective of their geographical location. Furthermore, the COVID-19 pandemic has increased the use of technology in the arbitration process. Parties have been holding virtual hearings, and some arbitration centres have started providing virtual arbitration facilities. This has reduced the time and expense involved in the arbitration process. The use of technology in arbitration is expected to persist, with parties and arbitrators becoming increasingly comfortable with virtual hearings. This could result in developing more sophisticated technology platforms for conducting arbitrations, such as virtual document management and video conferencing. The pandemic has compelled parties to reconsider traditional litigation methods and embrace online arbitration. Technology has enabled parties and arbitrators to hold hearings from any location globally, making the arbitration process more flexible. With the integration of technology, the arbitration scenario in India is expected to become more accessible and efficient.
The realm of institutionalized arbitration in the Arbitration Council of India (ACI) has been proposed as a statutory body responsible for promoting arbitration, mediation, and other alternative dispute resolution mechanisms in the country. Its inception in the 2019 Amendment aims to establish and uphold professional standards for arbitration and ADR services, encourage the use of these mechanisms, collaborate with national and international organizations to develop best practices, provide training and accreditation, and formulate a code of ethics for arbitrators and other ADR professionals. The ACI’s formation and function are still under deliberation, but its potential impact on arbitration and ADR in India is paramount.[5]
It is crucial to note that the Indian judiciary has recently adopted a pro-arbitration stance, bolstering the credibility of the arbitration process. Courts are increasingly supportive of arbitration agreements and have shown a willingness to enforce arbitral awards.
The advent of technology is set to play a pivotal role in the future of arbitration in India. It is imperative to incorporate it to keep pace with global trends. Integrating technology in the arbitration process will expand the pool of arbitrators accessible to parties, irrespective of geographical location. The COVID-19 pandemic has hastened the adoption of technology in the arbitration process, with virtual hearings and facilities becoming more commonplace. This has reduced the time and cost involved in arbitration, making it a more flexible and efficient option. With the increasing use of virtual hearings, more sophisticated technology platforms will likely to develop for arbitrations, including virtual document management and video conferencing.
Further, the Law Commission of India’s 246th Report recommends recognising the concept of the emergency arbitrator by expanding the definition of the arbitral tribunal under section 2(d) of the Act. This provision allows for urgent relief during arbitration, however,there is still significant uncertainty in India regarding the enforceability of emergency awards and orders.[6]
As India continues to integrate with the global economy, there will likely be an upsurge in international commercial disputes, leading to more international arbitrations in India and Indian parties opting for international arbitration. This internationalisation of arbitration in India could lead to greater efficiency and increased specialisation in various sectors such as construction, infrastructure, and intellectual property.
The future of arbitration in India looks promising as the country continues to adopt measures to make it a preferred method for resolving commercial disputes. Streamlining arbitration procedures, introducing mandatory pre-arbitration procedures, and adopting time limits for arbitrations are among the measures that could enhance efficiency and reduce costs. While the Indian government has made efforts to improve the enforcement of arbitral awards, there is still room for improvement. In the future, the focus may shift towards ensuring that arbitral awards are enforced promptly and effectively.
With great optimism, one observes the burgeoning growth of international commercial arbitration in India. The country’s strides in positioning itself as a preferred destination for resolving cross-border disputes are commendable, with the establishment of institutions such as MCIA and DIAC paving the way for more institutional arbitration centres. These centres, operating with greater efficiency and reliability, are poised to offer parties a more attractive option for resolving international commercial disputes. As India continues to adopt international best practices in arbitration, it is highly probable that more arbitration centres will spring up in the future.
To attract more international commercial arbitrations, India is likely to adopt the UNCITRAL Model Law on International Commercial Arbitration, a widely accepted framework for international commercial arbitration.[7] The development of modern and well-equipped arbitration centres, coupled with the growth of India’s transportation infrastructure, could make India a more attractive destination for international arbitrations. Creating a comprehensive marketing strategy, associated with a more favourable legal environment for arbitration and incentives for choosing India as the seat of arbitration, could make India a global leader in international commercial arbitration.
It is noteworthy that arbitration has become an indispensable tool for resolving disputes in India, particularly in the commercial sector. With increased businesses entering India and a rise in international trade, arbitration has become a preferred mechanism for resolving cross-border disputes. Furthermore, with the pandemic forcing parties to re-evaluate traditional litigation methods, there has been a shift towards online arbitration and the use of technology in the arbitration process.
The future of arbitration in India looks bright, with institutional arbitration, the adoption of technology, and the focus on enforcement being key drivers. These changes have made the arbitration process more cost-effective, time-bound, and efficient, making India a more attractive destination for arbitration. While challenges remain, the reforms and amendments to the arbitration framework in India have laid the foundation for a more efficient and effective mechanism for resolving commercial disputes in the country.
The growth of arbitration in India is a positive sign for the country, and it is expected to contribute significantly to the growth of the Indian economy. As India continues to integrate with the global economy, more international commercial disputes will likely arise, leading to a greater internationalization of arbitration in India. Overall, the potential for growth in the field of arbitration in India is immense, and the country is well-positioned to become a leader in this sphere of dispute resolution mechanism.
References:
[1] See, https://prsindia.org/billtrack/the-arbitration-and-conciliation-amendment-bill-2015[2] See, https://www.mondaq.com/india/arbitration–dispute-resolution/840292/the-arbitration-and-conciliation-amendment-act-2019–key-highlights[3] See, https://prsindia.org/billtrack/the-arbitration-and-conciliation-amendment-bill-2021[4] See, https://arbitrationblog.kluwerarbitration.com/2018/05/04/new-delhi-international-arbitration-centre-building-india-global-arbitration-hub/[5] See, https://economictimes.indiatimes.com/topic/arbitration-council-of-india[6] See, https://economictimes.indiatimes.com/small-biz/legal/the-future-of-arbitration-in-india-strengthening-the-process-of-alternative-dispute-resolution/articleshow/82114707.cms[7] Jain, Sankalp, Framework Governing International Commercial Arbitration: UNCITRAL Model Law and Principles (November 10, 2015). Available at SSRN: https://ssrn.com/abstract=2777728