Abstract
Despite the popularity of various regional arbitration centres in Asia for international arbitration, India remains significantly behind. One of the world’s quickest developing countries is encountering challenges in establishing itself as a centre for global arbitration. India frequently sends confusing messages regarding investments to the worldwide investor community. Investors frequently find themselves indecisive about investing in India. Now, what can be done to help India get out of such a situation? This paper discusses the importance of international arbitration in shaping and lifting India’s economy. In conclusion, I have identified the importance of full-time arbitration lawyers, proper drafting of the current Act, lack of institutional arbitration, and the approach and intervention of arbitrators and judges, respectively. The call for a specific international bench will be vital for shaping India’s economy.
Keywords- Arbitration, International Arbitration, United Nations Commission on International Trade Law (UNCITRAL), Arbitration and Conciliation Act, 1996 (the 1996 Act), Economy, Arbitrators, Public policy, Institutional arbitration
Introduction
India being a rapidly developing country, still faces problems claiming that one of the rules of international arbitration is leading, and the statistics make international investors feel uncertain about their investments in this nation. Lack of clarity on the investment climate has made international investors wary of investing in this nation, which creates a dilemma in their minds regarding the place of investment of their capital. Though there were some laudable efforts on the part of the Indian government and courts to establish India as an arbitration hub, somehow their strategy remained stuck in the quagmire. It is strange that, while India is a signatory of the New York Convention since 1960, Singapore became a party to it only in 1986. In the present day, however, Singapore has emerged as the favoured seat of international commercial arbitration, competing with even the cities of Paris, London, and Geneva. The factors that account for the success of Singapore is a very proactive and pro-enforcement policy of the Supreme Court, which the government is doing its best to help along by providing high-quality infrastructure and a reputation for competency and integrity. Every nation worldwide is competing voraciously to secure for itself the arbitration map to partake in the many benefits such as investment flow. But investors do consider, among other things, the arbitral system superiority of a nation, the arbitration-supportive character of its judiciary system and government, ease in conducting business operations, and security of the region as a whole.
Research Methodology
The research methodology adopted for the present study will be doctrinal in nature as it undertakes a systematic analysis, exposition and critical evaluation of legal principal/doctrine/ concept. Sources which will be relied upon for this study will be primary as well as secondary sources. Arbitration and Conciliation Act, 1996, articles published in different journals, books, articles published in leading newspapers, published government reports and cases decided by the judiciary in different jurisdictions is looked into. Based on this analysis, conceptual basis of the legal principle or doctrine will be highlighted and proposal for reforms will be put forward.
Review of Literature
Making India a Hub of Arbitration: Bridging the Gap Between Myth and Reality by Tariq Khan.
This article summarizes that The challenge to make India an international arbitration hub is pretty uphill. Despite the fact that India signed the New York Convention as way back as 1960, it lags behind other nations like Singapore that has emerged very strongly because of a very friendly legal framework and very robust infrastructure.
The current arbitration scene in India is infected with the adoption of ad hoc arbitrations, a lack of full-time arbitration professionals, and overindulgence in judicial intervention. Though well-meaning, legislative reforms often have resulted in confusion and delay. Other challenging factors that have created problems include government involvement in arbitral institutions and the general propensity of public sector undertakings to contest cases at all levels. What is needed to make India a great center of arbitration is more dedicated professionals in the field, lesser judicial interference, and an unequivocal legal framework. Independent world-class arbitration institutions and increasing awareness of the accruable benefits from arbitration would show the way ahead.
My conclusion from this article is that it misses something: there is a gap, and that could be that it does not discuss the downfall of the Indian economy. If there is no proper standard of international arbitration, then there will be less number of investors willing to invest in India. Indeed, such factors are considered by most investors before it establishes its presence in a particular market. An effective arbitration system provides an important mechanism for the resolution of disputes in a fast, impartial manner, therefore it minimizes risks and promotes a conducive environment for investment. A transparent arbitration process is bequeathing investors a security in dealing with sued investment, with more predictability. Clearly spelled out, the rule, procedures, time period, will generally reduce unwanted uncertainties related to undesired deferment of processes or other outcomes of the process. Investors are looking at a system of arbitration in which the sureness to have an objective and independent hearing should be. Extended transparent procedures promote the preservation of the people’s belief in the judiciary system and the protection of the rights of all parties involved.
Lower cost of litigation: Compared to traditional litigation, many a time, arbitration proves to be the cheaper way in resolution of disputes. Transparent procedures will prove helpful to make the process smoother and in taking steps towards reducing unnecessary expenses. Such a transparent system of arbitration would definitely convey the commitment of a country to the rule of law and the protection of the rights of investors, which may enhance confidence in drawing more foreign investment into the country concerned. While India has taken enormous steps toward the propagation of arbitration, much work is yet to be done in order to assert its position as an international hub for the resolution of disputes through arbitration. In that light, the problems identified by this literature review shall be important to address if it is to achieve the former and attract investment necessary for continued economic growth.
International Arbitration in India
Signals to the world’s investors about India’s investment potential are mixed in nature. Often, it is a dilemma for investors to take the plunge and invest in India. It must, of course, be acknowledged that magnificent efforts have been taken up by the Government and the Judiciary to make India an arbitration hub. While in search of an appropriate legal market, international MNCs are most concerned with the ease with which legal disputes involving their business operations can be resolved. Enforceability of contracts is the key element of this in their consideration. On the contrary, business litigants who end up engaging the courts in India are normally dragged into protracted litigation that the companies remain stuck with, as there is no resolution in sight.
India therefore represents a blend of success and challenges to its international arbitration standing. It has done some real valuable work through the setting up of arbitration centers and legal reforms, but challenges persist. Among the general pitfalls that have remained constant, it should be noted that the delays in dispute resolution, sporadic judicial interference, and general lack of awareness work in a way to hinder the growth of India as a prime global arbitration center. These are problems that government efforts, like the Arbitration Council of India, are trying to address. It is only by staying focused on these imperatives for enhancing efficiency, reducing delays, and fostering a legal climate hospitable to international arbitration that shall enable the country to effectively manage this dynamic situation.
Before the Indian Arbitration Act, three statutes governed arbitration in India: the Arbitration (Protocol and Convention) Act 1937 (1937 Act); the Arbitration Act 1940 (1940 Act); and the Foreign Awards (Recognition and Enforcement) Act 1961. Historically, the 1940 Act was severely criticized on account of intervention by the Indian courts, which was necessitated in the course of arbitral proceedings whenever an arbitral tribunal needed a time extension while drafting the award and at the stage of enforcement. Hence, the revision of the arbitration legislation was considered by the Law Commission of India and the Indian Legislature. A proposal was mooted on 27 July 1977 by the Secretary of the Department of Legal Affairs to the effect that the Indian government was seeking to revise the 1940 Act with a view to preventing enormous delay and disproportionate costs, which were seen at that time in arbitral proceedings. This ultimate conclusion led to the 76th Law Commission Report of India in reflection with the 1985 Model Law as the two driving forces behind the Indian Arbitration Act.
An Aid to Economic Growth
More recently, the President of the International Court of Arbitration, in her statement, Claudia Salomon, remarked on how arbitration was a dynamic landscape enabling a setting of better business. The understanding of arbitration as an opportunity for India to fuel its economic ascent. There are more and more arbitrations involving Indian parties on an increasing basis in terms of values, profiles, and numbers, such as Amazon’s challenge to the sale of an Indian retail business to Reliance.
For four years in a row, India has topped SIAC’s list of foreign users, and in each of the last two years, nearly 300 Indian parties were at SIAC. The top ten users of ICC arbitration include Indian parties. Singapore remains the preferred seat for India-related arbitrations, with London and Dubai as other popular choices. We see this trend continuing into 2024 and beyond.
At present, there are 35 Arbitral institutions in India for domestic, international, Public Sector Undertakings, trade and merchant associations, and city-specific chambers of commerce and industry. These institutions either have their own rules or are governed by the Arbitration and Conciliation Act 1996. The report of the High Level Committee for Reviewing the Institutionalization of Arbitration Mechanism in India, chaired by Justice BN Srikrishna (Retd.), has been submitted to the Union Law Ministry. Its main recommendations include the institution of the Arbitration Promotion Council of India (APCI), setting up a specialist arbitration bench, changes in the Arbitration and Conciliation Act, and the National Litigation Policy.
The last amendment to the Act was in 2021. Firstly, its ambit has been widened and it now applies to international commercial arbitration also, even though the place of arbitration may be outside India. It also allows the parties to opt for conducting the arbitration proceedings as fast track. The award will be given within six months. It has laid down that the Court has only to see whether there is a valid arbitration agreement. Lastly, the constitution of the Arbitration Bar of India ABI in the month of May 2024 is a step in the direction of making the arbitration scene better. ABI is India’s premier professional body aimed at promoting ADR mechanisms across the country. It purports to be an unanimous entity in pleading for the growth of ADR in India through teamwork with stakeholders in the relevant sectors, dialogue with government departments, and involvement in policy debates. ABI offers 3 types of membership: members, associate members, and honorary members.
“Does International Commercial Arbitration Promote Foreign Direct Investment” – an article published in the Journal of Law and Economics, authors carried out an empirical study of the bilateral investment flows and were able to conclude that foreign direct investment followed arbitration reform. The citation has come in for various reasons, but prominent amongst them are that the investors covering the investment and the recipients have a neutral and level playing field, avoid one another’s home jurisdictions, and have an enforceable award as a result. The same inflow of foreign direct investment from financial globalization seems particularly strong in countries with weak institutions and in relation to larger projects.
South Pacific: The effects of accession to the Convention and arbitration reform across the South Pacific resonate in two principal ways: first, the combination of accession and reform signals to the world that the country is open to business. The impact of increased flows from foreign direct investment, it is estimated, can be as high as 11% in gross domestic product for the South Pacific. In developing economies, where foreign investment inflows are of importance to employment, education, training, and infrastructure, and also to current and future climate adaptation and mitigation efforts, it will not be an arbitration reform magic bullet but a very important condition precedent to such investment. That investment is needed more urgently still given the impact of COVID-19, which has devastated all South Pacific economies, and particularly the many in the Pacific that rely heavily on tourism. For example, the economies of Fiji and Palau have depended on tourism for between approximately 40-55% of their GDP.
Conclusion
These have been important land points in India’s economic development a plug into the International Arbitration Act, 1996, and the Arbitration Bench. Positive views of arbitral jurisprudence have created a user-friendly environment, with domestic and international investors starting to get confident and bring capital inflow. Arbitration has supported risks with reduction of the uncertainty and made the business climate predictable through the provision of an efficient and up-to-date dispute resolution mechanism. This has attracted investment and promoted economic activity. It has situated India on an angle that will see it become an emerging global economic power.
The IAA provides a comprehensive legal regime for international commercial arbitration that is fair and effective in resolving disputes. There will be expertise and experience regarding arbitration matters on the part of the particular arbitration bench, thus decisions shall be more informed and consistent. The IAA provides freedom of party autonomy because they can model the arbitration process following the situation and requirements of the parties concerning which there is a dispute. Recognition of foreign awards: The IAA allows for the enforcement of foreign awards, ensuring legal certainty and predictability for international investment. India has, no doubt, come many a mile in terms of arbitration, but there is much that is to be done. Successive improvement in the efficiency and effectiveness in proceedings in arbitration and increasing awareness toward arbitration as a dispute resolution mechanism would be some challenges to keep up the competitive edge of India on the global platform.
It has been observed that the International Arbitration Act coupled with the help of a particular arbitration bench has considered the contribution in India’s economic growth. A strong and effective dispute resolution mechanism through these initiatives has yielded the build-up of investor confidence, promotion of business, and after all, a newly emerging economic powerhouse in the world. Now, as India gets into the act of development and growth, the contribution of arbitral jurisprudence is bound to get manifold and become a critical factor in the country’s economic success.
Anriya Joshy – Christ University Delhi NCR