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When will you change, Mr. Arbitrator?

Arbitrator - law - science - arbitration - Taxscan

“By failing to prepare you are preparing to fail” – Benjamin Franklin

Law is like science which is evolving every day. Like science, nothing is static in law and it can be changed with the change of circumstances, people and their behavior. No nations or stakeholders can afford to remain static for a long time using old technology or regulations. Same principles apply in law and its procedures.

Arbitration which is an alternative method of dispute resolution is gaining momentum across the world and so in India but still despite one of the oldest stakeholders and participant of arbitration, India is getting very small pie of international commercial arbitrations. Leave international commercial arbitration, domestic litigants are not very comfortable with arbitration and pleased with the pace of arbitrations. In the era of Everything-Available-Online, following civil law procedures in totality, insisting physical presence of counsels and freely-available-adjournment like civil court make arbitration is just like using reel camera in the era of digital currency. Will pandemic bring permanent and positive changes in arbitration practice of India?

History of Arbitration in India:

History of arbitration in India is time immemorial even before existence of codified statutes enacted by the USA and Great Britain. In our old system and social arrangements, each and every village of India had its own arbitrational tribunal which is known as “PANCHAYAT”. It was very effective system wherein most of disputes of villagers were solved in no time and money.  Award given by PANCHAYAT was final and binding without having any provisions of appeal which ultimately put dispute to end. Even great Hindi writer Munshi Premchand wrote an immortal story “PANCH PARMESHWAR (“Arbitrator is god” or God himself guide Arbitrator) on this social arrangement.

First codified arbitration law i.e. Arbitration Act of India enacted in 1940 well before independence of India. Arbitration Act, 1940 was replaced by the Arbitration and Conciliation Act, 1996. Latter is further amended by the Arbitration Amendment Act, 2015

Progress of Arbitration in India:

Though objectives of arbitration were to provide alternative dispute resolution system and take burden of judiciary away, but it failed miserably to achieve its objectives. In fact, it become extra burden on system. I was witness of many arbitrations where arbitration process could not be completed even after a long period of 4-7 years. Even after pronouncement of award, dispute didn’t end and entered into first stage of commercial litigation by way of appeal or setting aside of award which again take another 10-15 years in Hon’ble High Court itself. In some cases, even foreign claimant companies liquidated in their home country, but award couldn’t attain its enforceability.

Alas! neither arbitrators nor counsel took effort to hasten the process which ultimately killed arbitration practice in India and international companies preferred to choose Singapore, Hong Kong and Malaysia as preferred arbitration venue, particularly tiny Singapore which made its system so effective and robust that it become hub of arbitrations in the world.

Progress of Arbitration in India:

Though objective of arbitration was to provide alternative dispute resolution system and take burden of judiciary away, but it failed miserably to achieve its objectives. In fact, it become extra burden on system. I was witness of many arbitrations where arbitration process could not be completed even after a long period of 4-7 years. Even after pronouncement of award, dispute didn’t end, instead parties prefer to appeal which took another 10-15 years. In some cases, foreign claimant companies liquidated in their home country, but award couldn’t attain its finality.

Alas! neither arbitrators nor counsel took effort to hasten the process which ultimately killed arbitration practice in India and international companies preferred to choose Singapore, Hong Kong and Malaysia as preferred arbitration venue, particularly tiny Singapore which made its system so effective and robust that it become hub of arbitrations in the world.

Alas! in India, it could not progress as it should be for the reasons attributed to the counsels and arbitral tribunals who chose (knowingly or unknowingly) short term benefits instead of long-term growth of the arbitration in India.

After enactment of the Arbitration and Conciliation (Amendment) Act ,2015, things were expected to change and also changing but not with speed as expected and reasons are still same.

Arbitration in India Vs. other countries like Singapore & London etc.

Laws of arbitration are almost similar in most of New York-Convention-Signatory-Countries which follow model law of United Nations Commission on International Trade Law (‘UNCITRAL’), procedures are also similar, but practice is quite different while in Singapore/ London, we don’t meet arbitrators till the stage of cross examination/ deposition, in India, we meet arbitrator physically at every stage. Be it procedural meeting or hearing for any application, meeting of arbitral tribunal is necessary. In countries mentioned above, it is counsels of the parties who decide to meet physically or not and if need to meet then fix time is given to each party within which they need to conclude their part of proceeding. In some cases, even counsels agree to proceed arbitration on the basis of the documents only. It can’t be imagining in India. in some cases, counsels are also responsible, but Mr. Arbitrator is in command of arbitral tribunal therefore he should be blamed more. Generally, no arbitral proceeding concludes in time. Though, Indian Arbitration (Amendment )Act, 2015, sets the time limit to conclude proceeding within one year but it is hardly followed by the parties including Mr. Arbitrator but still it is better than pre-Arbitration amendment act, 2015 where pace of arbitral proceedings was even slower than tortoise. Entering into arbitral proceeding was nothing but like entering into dark tunnel.

Is it not time to change?  Mr. Arbitrator

Though practice of arbitration in India is very old but time has come when tunnel all players of arbitration need to change themselves to align with widely accepted global practice. They can’t avoid it any more without becoming redundant. In fact, it is demand of time to say good bye to some archaic practices. Like other countries, Mr. Arbitrator can also dispense requirements of unnecessary physical hearing such as hearing for procedural order or hearing for application etc. fix the time limit of each and every procedure including cross examination and hearings as followed under the International Arbitration Rules.

Though, Schedule IV of Indian Arbitration (Amendment) act, 2015 fix the fee of arbitration but it is not followed strictly, courtesy to our honorable Courts. In foreign arbitration, estimated cost of arbitration given to parties before the start of arbitration and accordingly they are asked to pay fee. After termination/ completion of arbitration, actual quantum of fee is calculated.  In most of arbitration, our clients got refund of unused amount.

Hearing-base-fee is also a big reason for lengthy arbitration proceeding.  Mr. Arbitrator, it is high time to free quantum of fee from the claw of hearing-base-Fee. Fix the quantum of fee for entire arbitration before the start of arbitration irrespective of time spent. It may contribute in reducing the length of arbitral proceeding which will be win-win situation for all constituents of arbitration because Mr. Arbitrator and counsels will have more time to do more arbitration and parties will get award in less time which will help them to recover disputed amount expeditiously.

So, are you ready to change? Mr. Arbitrator.

Authors are managing partner & Associate Partner of Singhania & Co, LLP who represented Indian, US, UAE & Singapore clients in arbitration before Singapore International Arbitral Tribunal (SIAC), London Centre of International Arbitration (“LCIA”), American Arbitration Association (“AAA”), Swiss Chamber’s Arbitration Institution (“SACI”).

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