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Can India become an international arbitration hub?

Now, while the Indian judiciary is more arbitration friendly, the executive and legislature are taking steps to amend the Indian Arbitration and Conciliation Act, 1996, to make India a hub of international arbitration, writes Robin Vrindavanam for South Asia Monitor.

Jun 24, 2018
 
By Robin Vrindavanam
 
The history of settlement of disputes through discussion, negotiation and agreement in India can be traced back to the panchayat system in ancient India, where disputes were settled through negotiations and agreements between the villagers at a panchayat or assembly of villagers. In the modern era, the first comprehensive law on arbitration in India was the Indian Arbitration Act of 1899 and the first major consolidated legislation to govern the conduct of arbitrations across the country was the Indian Arbitration Act of 1940.
 
The present Indian Arbitration and Conciliation Act was enacted in 1996, in line with the UNCITRAL Model Law on International Commercial Arbitration, 1985, to achieve the general objective of international arbitration; or, minimize intervention of national courts, particularly the courts of one or both parties to the dispute.
 
Even though India has such a rich experience in arbitration and had enacted its comprehensive arbitration law in the 19th century, it never was nor is a hub for international commercial or investment arbitrations, while relatively newbies like Singapore, Hong Kong and Dubai are thriving as arbitration hubs of Asia.
 
Like any other legislation, the intended goals of the Indian Arbitration and Conciliation Act, 1996 could have been achieved only if the judiciary played its part of interpreting the Act in line with the intentions of the legislatures. However, the Indian judiciary’s reluctance to part with its adjudicatory powers to privately constituted arbitration tribunals has led to the Indian Arbitration and Conciliation Act not achieving its intended goals. In a series of judgments, the highest courts of India have interpreted Indian Arbitration laws inconsistently from internationally accepted arbitration practices, causing widespread uproar and skepticism about arbitrations in India.
 
Meanwhile, countries like United Kingdom and Singapore, which have also adopted the UNCITRAL Model Law around the same time as India, have marched much ahead of India, thanks to their arbitration-friendly judicial systems. India took more than 15 years to realize the mistakes it had committed. Now, while the Indian judiciary is more arbitration friendly, the executive and legislature are taking steps to amend the Indian Arbitration and Conciliation Act, 1996, to make India a hub international arbitration.
 
The Supreme Court of India, in its judgment in Bharat Aluminium Company v. Kaiser Aluminium Technical Services in 2012 overruled its own internationally criticised judgment in Bhatia International v Bulk Trading SA. In Bhatia International the Supreme Court of India had held that Indian courts will have jurisdiction even over foreign seated arbitrations. This view taken by the Indian Supreme Court invited criticism from the international arbitration community. However, with Bharat Aluminium Company the Supreme Court overruled Bhatia International and held that Indian courts will have jurisdiction only over arbitrations seated in India.
 
In this backdrop, the Indian Parliament in 2015 amended the 1996 Act, taking into consideration report no. 246 of the Law Commission of India in August 2014. The amendments, inter alia, intended to limit the role of courts in foreign seated international commercial arbitrations to limited circumstances. The 2015 amendment was also intended to make the arbitration process speedy and cost effective and to ensure neutrality of arbitrators in line with international arbitration practice.
 
However, these amendments were not enough to promote institutional arbitration in India. Thus, a High-Level Committee (HLC) was constituted under the chairmanship of Justice B.N. Srikrishna, a former judge of the Supreme Court, to review the institutionalisation of arbitration mechanisms in India and submit a report on suggested reforms. The HLC submitted its Report on 30th July, 2017 recommending reforms and amendments in the Arbitration and Conciliation Act, 1996.
 
The HLC report is divided into three parts, each dealing with three key areas to be reformed to improve the institutional arbitration scenario in India.  
 
In Part I, the HLC recommends methods to strengthen institutional arbitration in India by establishing an autonomous body styled the Arbitration Promotion Council of India (APCI), grading arbitration institutions, accrediting arbitrators, creating specialized arbitration bar and bench, and making a number of further amendments to the Arbitration and Conciliation Act, 1996. It also recommends governmental and legislative support for institutional arbitration.
 
In Part II, the Committee recommends that the government develop the International Centre for Alternative Dispute Resolution (ICADR) into a flagship arbitration institution. ICADR was established in 1995 and receives funding from the Indian government. It has the basic infrastructure and facilities to conduct international arbitrations. However, the HLC noted that during 2015-16, it received only four international commercial arbitrations.    
 
In Part III, the Committee examines and makes recommendations on management, resolution and prevention of disputes under bilateral investment treaties (BITs) involving the Union of India.
 
While, the recommendations in Parts II and III can be implemented through administrative action, recommendations under Part I can be implemented only through legislation. On March 7, 2018, the Government of India issued a press note stating that in view of recommendations made by the HLC, the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Arbitration and Conciliation (Amendment) Bill, 2018 for introduction in Parliament.
 
While the government intends and is taking steps to raise India as a hub of international commercial arbitration through amendments in the Arbitration and Conciliation Act 1996, real changes can be seen only if necessary infrastructure, such as well-equipped arbitration centres, well-educated and trained supporting staff and quality transcription services are provided to the parties and the tribunals. Without the requisite infrastructure that meets international standards, no change in the laws can promote arbitration in India.
 
(The author is an international arbitration lawyer and can be reached at vsrobin@gmail.com)

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