According to a recent survey on international arbitration in India, conducted by Ernst & Young, arbitration is alive and well on the sub-continent. Of all those surveyed, 74% stated that the arbitration clause is an essential part of any legal contract. However, although arbitration in and of itself is popular, the type of arbitration mechanism used varies greatly. Out of the total respondents, 24% had undertaken Indian ad hoc arbitration, versus 20% opting for international commercial arbitration (with 27% utilizing both). In terms of arbitration institutes, when looking outside of India, 60% preferred the Singapore International Arbitration Center (SIAC). When arbitrating within India the institute of choice is the London Court of International Arbitration (LCIA) India.
The survey also highlighted the importance given by the Government of India to the improvement of the arbitration mechanism. More than 50% of the respondents said that the ministry’s recent steps to develop dispute resolution mechanism are in the right direction.
And of course the popularity of arbitration in India is also likely a result of the relatively favorable enforcement record, with 78% of the respondents stating that they were satisfied with the arbitral award. That being said, however, around 50% of the respondents believe that arbitration in India is expensive and does not provide timely resolutions, which highlights the need for radical changes in procedural aspects.
The Law and its Objectives
The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996, which is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976. The Act was established in recognition of the fact that “India’s economic reforms will become effective only if the nation’s dispute resolution provisions are in tune with international regime”. The Act’s stated objectives include:
To comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation
To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration
To provide that the arbitral tribunal gives reasons for its arbitral award
To ensure that the arbitral tribunal remains within the limits of its jurisdiction
To minimize the supervisory role of courts in the arbitral process
To permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes
To provide that every final arbitral award is enforced in the same manner as if it were a decree of the court to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal
To provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two International Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award
Under the Act, any commercial matter, including an action in tort if it arises out of or relates to a contract, can be referred to arbitration. However, public policy does not permit matrimonial matters, criminal proceedings, insolvency matters, anti-competition matters or commercial court matters to be referred to arbitration. Employment contracts also cannot be referred to arbitration, but director-company disputes are arbitral (due to the lack of a master servant relationship). Generally, matters covered by statutory reliefs through statutory tribunals would be non-arbitral.
The arbitrators are masters of their own procedure and subject to parties agreement, may conduct the proceedings “in the manner they consider appropriate.” This power includes- “the power to determine the admissibility, relevance, materiality and weight of any evidence”. The only restrain on them is that they shall treat the parties with equality and each party shall be given a full opportunity to present his case, which includes sufficient advance notice of any hearing or meeting.
Neither the Code of Civil Procedure nor the Indian Evidence Act applies to arbitrations.
Unless the parties agree otherwise, the tribunal shall decide whether to hold oral hearings for the presentation of evidence or for arguments or whether the proceedings shall be conducted on the basis of documents or other material alone. However the arbitral tribunal shall hold oral hearings if a party so requests (unless the parties have agreed that no oral hearing shall be held).
Arbitrators have power to precede exparte where the respondent, without sufficient cause, fails to communicate his statement of defiance or appear for an oral hearing or produce evidence. However, in such situation the tribunal shall
not treat the failure as an admission of the allegations by the respondent and shall decide the matter on the evidence, if any, before it. If the claimant fails to communicate his statement of the claim, the arbitral tribunal shall be entitled to terminate the proceedings.