PRAGYA SHARMA
UNIVERSITY OF RAJASTHAN
ABSTRACT
The business relationship has become more and more complex, which has resulted in a sharp rise in disputes between shareholders, management bodies, investors and commercial partners of companies. Traditional litigation tends to be time-consuming, expensive and public and can damage an organisation’s reputation and reputation in business. As such, arbitration has emerged as one of the best alternatives to litigation to resolve corporate disputes. This article discusses the legal status, benefits, limitations and current developments of arbitration in corporate dispute resolution. The study will assess the arbitration as an alternative to litigation at analytical and doctrinal levels, highlighting its effectiveness in terms of efficiency, confidentiality, flexibility and worldwide applicability. The paper also reviews current developments, including online dispute resolution, creation of an arbitration centre, institutional reforms and third-party financing. The study shows that, even faced with some obstacles, arbitration has emerged as one of the most appropriate methods in the international arena for resolving complex corporate disputes in the modern economy.
KEY WORDS: Institutional Arbitration, Ad-hoc Arbitration, India. Institutional Arbitration, India, Arbitration Amendment Act 2019, 1996 Act, UNIDROIT, Challenges, Resolves, International Commercial Arbitration
1. INTRODUCTION
“By embracing alternative dispute resolution, nations can demonstrate their commitment to cooperation and peaceful resolution, ensuring that disputes do not overshadow their shared goals.” – Boutros Boutros-Ghali (Former United Nations General Secretary)
1.1. BACKGROUND AND CONTEXT
Arbitration is a type of alternative dispute resolution (ADR) that involves parties to a dispute agreeing to have the dispute heard by one or more neutral arbitrators, and the arbitrator’s decision, known as an “award,” is final and binding. The Arbitration proceedings are confidential and secretive. It provides party autonomy to select rules, forum and arbitrators. It provides a quicker and more cost-effective resolution, which can be enforced internationally through conventions such as the New York Convention.
Arbitration” is thus defined by Romilly M R in the well-known case of Collins v Collins, “An Arbitration is a reference to the decision of one or more persons, either with or without an umpire, of a particular matter in difference between the parties.” Structures have enabled companies to act more internationally and globally. Due to the development of global markets, cross-border transactions and complex corporate structures, companies can now act more globally and internationally. The volume and quality of corporate disputes have greatly increased because of the introduction of structuring. In the past, such conflicts were settled in the courts.
The number and complexity of corporate disputes have greatly risen, in part due to structuring. Nowadays, there are often conflicts between shareholders and corporations concerning shareholders’ rights and management decisions. Contractual obligations, mergers and acquisitions, intellectual property rights, and corporate governance issues. Traditionally, such disputes were resolved in court. However, litigation is often too rigid, too long, too costly and not confidential. Modern Corporations often have conflicts about shareholders’ rights, management choices, contractual obligations, mergers and acquisitions, intellectual property rights, and corporate governance issues. In the past, such conflicts would be settled in court.
However, litigation typically has too many steps, takes too long, is too costly, or is not confidential. In an environment of business competition, these drawbacks can be detrimental to a business, increasing the volatility and diminishing stakeholder confidence. Structures are expected to drive up prices. Prices are likely to rise as global markets, cross-border transactions and a complex corporate structure develop. Structures have greatly multiplied and complicated corporate conflicts of the development of global markets, cross-border transactions and multiplex corporate structures; the number and complexity of corporate disputes have risen significantly. In today’s world, many modern corporations are involved in conflicts among parties regarding shareholders’ rights, management, contracts, mergers and acquisitions, intellectual property rights, and corporate governance. This kind of dispute was settled in court in the past. But often in litigation, procedural uncertainty, length of
litigation, legal costs, and lack of confidence are issues. In today’s world, corporations prefer to include arbitration clauses in their agreements instead of the uncertain and time-consuming litigation process. The Arbitration and Conciliation Act, 1996, in India was based on the UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Conciliation Rules. This act has greatly enhanced the institutional structure of arbitration in the country. It has been amended in 2015, 2019 and 2021 and interpreted by the courts, which have made the process more efficient to favour party autonomy and lessen the need for judicial involvement.
1.2. RESEARCH STATEMENT
The objective of this research paper is to investigate the chronic transition from ad hoc tribunal to institutional arbitration. The research paper will examine how established arbitral tribunals diminish the vulnerabilities of unadministered tribunals. The Paper will evaluate the comparative efficacy of institutional arbitration against traditional court litigation in resolving corporate conflicts.
1.3. CORE HYPOTHESIS
The institutional arbitration is preferred over traditional litigation because it provides a predictable, confidential and expert adjudication framework. While critics often point to its high administrative costs, it provides a long-term financial advantage for corporations by eliminating inappropriate court delays and prioritising business continuity.
1.4. SCOPE AND LIMITATIONS
The scope of this research paper is confined to examining the contemporary paradigm shift where major corporate are favored institutional arbitration over traditional litigation for high-stakes commercial disputes. The Paper’s focus is restricted exclusively to recent judicial trends and how arbitration tribunals successfully resolve complex corporate disputes. The findings of this research paper will lean towards the MNCs and giant corporate firms; it will not include the choices or financial realities of micro, small and medium enterprises, which still today rely on traditional court functioning.
1.5. RESEARCH METHODOLOGY
The study reflects a qualitative, doctrinal legal research methodology to examine why major corporations in India prefer arbitration over litigation for commercial disputes. The Paper relies heavily on primary sources, which include the Arbitration and Conciliation Act, 1996(with recent amendments), judicial precedents and corporate law commentaries.
2. THE CORPORATE FLIGHT FROM PUBLIC COURTS: ANALYZING THE PITFALLS OF JUDICIAL LITIGATION
2.1 Systematic Delays and Economic Stagnation
The relationships that businesses have today are becoming increasingly complex, and this has given rise to many more cases of corporate conflict between shareholders, management, investors and commercial parties. Litigation is generally seen as a lengthy procedure, with high costs and being public, which can have harmful effects on a company’s reputation and its business continuity. Hence, arbitration has emerged as one of the most effective alternative methods of resolving
corporate conflicts.
The biggest problem that traditional litigation has in India is the delay. Here, justice denied is not an exaggeration – it is a fact. An estimate for the disposal of the existing backlog made by the NITI Aayog in a paper in 2018 estimated that the backlog would be cleared in more than 324 years at the then rate of disposal. Improvements are now in place, but the pendency has been increasing. This delay comes with real and measurable economic impact. Trapped assets can’t be used for productive purposes in the situation of businesses entangled in commercial litigation. When investors consider where and how to place their money, they consider the risk of 10-year struggles. Research indicates that judicial slowness takes a significant portion of India’s annual GDP growth. Current conflicts are becoming more and more technical. Legal knowledge is not enough to address commercial contracts related to intellectual property, maritime or construction law, medical negligence or cybercrime; These contracts call for domain-specific expertise. These subtleties are rarely addressed well by the traditional court system with its generalist judges. By contrast, ADR mechanisms can provide the parties with the opportunity to introduce arbitrators and mediators who have the technical expertise to provide a speedier and more informed resolution.
2.2 Transition from Traditional Litigation to Institutional Arbitration
India still fares badly compared to most OECD countries. For instance, it takes 1,445 days for a company to resolve a commercial dispute through a local first-instance court, almost three times the average time in OECD high-income economies. This also accounts for close to 39.6% of the claim value4 In terms of enforcement of contracts, the individual ranking for India is 163 out of the 190 countries. India fares poorly in terms of the quality of judicial processes (court structure and proceedings, case management, court automation and alternative dispute resolution).
The Hornet’s nest for India. The present regulatory framework in India suffers from the ‘duality syndrome’. Although it provides for institutional arbitration, there is enough scope for parties to adopt ad hoc arbitration by approaching the court under the provisions of the 1996 Act. In essence, therefore, the regulatory framework provides for what can be described as a loose institutional set-up. Bhardwaj (2007) raises concern about another vital area where India is lagging behind other countries, which is the lack of institutional arbitration in India. In light of the same, disputing parties have largely opted for ad hoc arbitration as compared to institutional arbitration. Arbitration itself is plagued with issues. For instance, the costs are not predetermined and charged on a case-by-case basis without any regulation. Frequent adjournments, hearings, and procedural lethargy lead to a delay in the delivery of the award. Ad hoc arbitrations usually devolve into the format of a court hearing, with the result that adjournments are granted regularly, and lawyers prefer to appear in court rather than completing the arbitration proceeding. India’s 2019 Arbitration Act makes several modifications to the process of arbitration. In an attempt to structure the process, it introduces the Arbitration Council of India (the ACI as the apex body for arbitration. One of the key roles of the ACI is to recognise and grade arbitration institutions in India, among other functions. This was a crucial aspect in reforming institutional arbitration- whether one institution or more than one institution is to be established (NITI AYOG Publication). For instance, China has 230 arbitral institutions, while other countries, such as Singapore, have only one institution. In case having centres across the country is preferred, the choice of cities and the criteria for their selection become critical. In light of the same by enacting the 2019 Act, it appears that India has followed the Chinese model, where more than one arbitration centre is recognised, taking the total to almost 230 centres. The debate seems to have been settled in favour of the latter. There are almost 35 arbitral institutions currently carrying out their functions in India. The International Centre for Alternative Dispute Resolution (ICADR) was founded as a society in 1995. It is an autonomous organisation working under the aegis of the Ministry of Law & Justice, Govt. of India. The head office of ICADR is situated in Delhi, and two regional offices in Bangalore and Hyderabad are also located in India. In Southern India, the Nani Palkhiwala Arbitration Centre in Chennai is a private institution incorporated as a Company. Another institution is the Indian Council for Arbitration (ICA), which was set up in 1965 at the national level under the initiatives of the Government of India and the apex court. Acknowledging the significance of arbitration in resolving commercial disputes expeditiously, in the year 2017, the Indian Government constituted a High-Level Committee (HLC) supervised by Mr Justice B.N. Srikrishna, a former Supreme Court judge
2.3 The Threat of Public Exposure.
Confidentiality is an obligation that parties are expected to adhere to, where they are bound “to not disclose information concerning the arbitration to third parties or the public”.10 The process typically leads to the parties entering into a non-disclosure agreement, in which the third party involved in the arbitration is prohibited from revealing the confidential information of the parties.
Indian laws
The Arbitration and Conciliation Act, 1996, in India has been subjected to several amendments. The establishment of the High-Level Committee in 2017, with Justice B.N. Srikrishna as the President, ushered in further developments, with a particular emphasis on confidentiality in the arbitral proceedings. Section 42A was inserted into the revision in 2019 and is closely related to Section 75, which focuses on the protection of confidentiality in arbitrations12. Both clauses specify that confidentiality must be observed during the arbitration process. Confidentiality is of paramount importance in arbitration and related processes, particularly in light of the nature of the evidence submitted, which may include personal or proprietary information, including pricing, business plans, statistics, etc. Breaching confidentiality can lead to exploitation and the unearthing of an unfair advantage to one party against the other. This principle is an important one in arbitration, mediation and other similar methods.
3. THE CORPORATE ALLURE OF INSTITUTIONAL ARBITRATION
3.1 Procedural Autonomy and Flexibility
The arbitration process is fairly quick. Once an arbitrator is appointed, the case can be heard right away. In contrast, civil litigation often involves waiting for the court to schedule the case, which can take many months or even years before it is heard. Judicial settlement is a complicated procedure. The procedure under the Code of Civil Procedure, 1908, and the Rules of the Indian Evidence Act has to be followed by a court. The arbitration process is easy and informal. An arbitrator has to follow the principles of natural justice. As per the provisions of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal is not bound by the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872. Mediation and arbitration are encouraged as alternative dispute resolution mechanisms in India under the Companies Act 14, aiming to resolve corporate disputes away from courtrooms. Mediation can help you reach an agreement with a neutral mediator, whereas arbitration requires you to reach an agreement before a designated arbitrator issues a final ruling.
The Companies Act assists in these processes by giving courts the power to recommend mediation and enforce arbitration agreements. But contrary to global practice, a 2008 worldwide survey of corporate preferences in dispute resolution by PricewaterhouseCoopers and Queen Mary University of London (“QMUL”) showed that: (a) 86 per cent of arbitral awards given during the preceding ten years were given in arbitrations administered by arbitral institutions and not ad hoc
arbitrations; and (b) 67 per cent of arbitrations that states or state-owned enterprises were a party to were institutional arbitrations.
3.2 Global Enforceability
The enforcement of foreign awards was split between two pieces of legislation, one in 193716 to implement the Geneva Convention awards17 and one in 196118 to implement the New York Convention19 awards. The most interesting reason for the rise in institutional arbitration in India is the enforceability of arbitral awards over foreign court decisions. With Indian businesses growing in their commercial activities across various jurisdictions, the enforceability of the outcomes of dispute resolution is a key consideration while drafting contracts and planning a dispute resolution strategy. In contrast, in domestic litigation, territorial limitations on the enforcement of court judgments usually limit the reach of a court’s jurisdiction, whereas the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) provides a harmonised international enforcement framework for arbitral awards. The Convention, which has been ratified by over 170 jurisdictions, provides for almost universal recognition and enforcement of foreign arbitral awards. Foreign arbitral awards are, however, governed by Part II of the Arbitration and Conciliation Act, 1996, which adopts India’s obligations under the New York Convention. Convention awards can be enforced in Indian courts provided that any one of the narrow grounds for refusal provided under the Act is not established. India had a new Act on Arbitration in January 1996. All three of the previous statutes (the 1937 Act, the 1961 Act and the 1940 Act) were repealed by this Act. There are two major parts to the new Act. Any arbitration in India and enforcement of awards in India is covered by Part I. Enforcement of foreign awards is covered in Part II. Any arbitration conducted in India or enforcement of an award there under (whether domestic or international) is governed by Part I, while enforcement of any foreign award to which the New York Convention or the Geneva Convention applies is governed by Part II of the Act. That is, it is the provisions of Part II of the Act which make the New York Convention and the Geneva Convention come true. In order to be considered a foreign award for the Act, the same must fulfil two requirements. It has to overcome the differences which come up out of a legal relationship (whether contractual or otherwise) that is regarded as commercial in terms of the applicable laws of the land in India. The expression ‘commercial relationship’ has been widely used.
The Supreme Court in RM Investments Trading Co Pvt. Ltd v. Boeing Co & Anr20, while construing the expression ‘commercial relationship’ held: “The term ‘commercial’ should be given a wide interpretation to cover matters arising from all relationships of a commercial nature, whether contractual or not. The second requirement is more significant, and that is that the country where the award has been issued must be a country notified by the Indian government to be a country to which the New York Convention applies.” This was raised in the case of Transocean Shipping Agency Pvt. Ltd v. Black Sea Shipping21, where the arbitration was held in Ukraine, which was part of the USSR, a country recognised and notified by the Government of India as a country to which the NY Convention would apply. But when disputes surfaced between the parties, the USSR had broken up, and the dispute was to be settled in Ukraine, which was not notified. It was then raised whether such an award, which was not a notified country, would be enforceable in India. Both the High Court of Bombay (where the matter came up initially) and the Supreme Court of India, in appeal, held that the creation of a new political entity would not make any difference to the enforceability of the award rendered in a territory which was initially a part of a notified territory. Based on this, the court granted and affirmed the award.
3.3 The Premium on Confidentiality
“Confidentiality is a paradigmatic aspect of arbitration.”
The importance of maintaining confidentiality in commercial arbitration has long been considered a standard practice. Traditionally, it was viewed as a key advantage. However, recent developments indicate that transparency has become equally important for arbitration to function effectively and reliably as a dispute resolution method. The key issue now is whether confidentiality is necessary for all commercial arbitrations or if the increasing demand for transparency can be addressed without compromising the popularity of arbitration as the preferred alternative to court litigation. Privacy during arbitration proceedings creates a sense of security for the involved parties.
Confidentiality, however, goes beyond privacy by ensuring that the contents of the proceedings are not disclosed. A survey conducted in 2012 by the London Court of International Arbitration (LCIA) among US and European users revealed that confidentiality was perceived as the most important benefit of arbitration.
3.4 Global Enforceability
One of the key advantages of arbitration over court litigation is that it takes place in private22. In India, there is only one explicit provision related to confidentiality, found in Section 75 of the Arbitration and Conciliation Act, 199623. It states, “Those who desire confidentiality should choose arbitration. If they approach the courts, they must accept the openness that is associated with dispute resolution by public officials.”24 In 2017, the Ministry of Law and Justice formed a High-Level Committee, chaired by Justice B.N.Srikrishna, to review the existing arbitration laws in India and suggest ways to strengthen the institutional framework of arbitration. The committee noted that the Arbitration Act, 1996, did not have any specific provisions requiring confidentiality in arbitral proceedings. This lack of statutory support meant that parties had to include confidentiality clauses in their arbitration or dispute resolution agreements. This was especially problematic for those using standard or hastily drafted contracts, which often failed to account for the need for confidentiality.
In the case of R.S.Sravan Kumar v.CPIO26, the issue centred around a request for information under the Right to Information Act, 2005 (RTI Act), concerning an international arbitration case between Devas Multimedia Pvt.Ltd and Antrix Corporation Ltd., which is the commercial arm of the Indian Space Research Organisation.
In 2019, the appellant filed an RTI request seeking detailed information about the arbitration case, including
(i) the legal team representing India in the arbitration initiated by Devas;
(ii) the fees paid to this legal team;
(iii) the damages awarded to Devas and whether they were paid; and
(iv) any restrictions on the payment of the award.
The Central Public Information Officer (CPIO) of the Department of Space, Bangalore, initially rejected the application. The matter was then taken up by the Central Information Commission (CIC).
The CIC interpreted Section 42-A of the Arbitration Act. The commission ruled that since the arbitration award had not yet been issued, the information requested regarding damages and payment (points 3 and 4) did not need to be disclosed. However, the CIC concluded that, as Antrix Corporation is a public authority, the expenditure on legal fees and the identity of the legal representatives should be made public.
4. THE INSTITUINAL EDGE: WHY AD HOC NO LONGER SUFFERS
4.1 Administrative certainty
An important advantage of institutional arbitration is that it avoids the discomfort of the parties and the arbitrators discussing, agreeing and fixing their remuneration. This means that the arbitrators can maintain a certain level of material detachment from the parties. The arbitration may proceed, and an award may be made, even if a party fails or refuses to take part in the arbitration. Moreover, a leading international arbitration commentator argues that the specialised staff of an arbitral institution provide better service than ad hoc decisions by national courts with little, if any, experience or institutional resources for such matters.
In institutional arbitration, the arbitration institute provides comprehensive administrative support and professional case management services as a core service, with a dedicated team of legal counsel and administrators ensuring efficient proceedings, proper documentation, and adherence to established timelines and procedures.
4.2 Cost Structures
Cost structures are another key difference between institutional and ad hoc arbitration. Institutional Arbitration usually has lower administrative costs compared to ad hoc arbitration. This is because the arbitration institute takes care of the administrative tasks, which would otherwise be handled by arbitrators on an hourly fee basis.
In general, the process of selecting arbitrators varies between institutional and ad hoc arbitration. In institutional arbitration, the arbitration institute usually assists the parties in choosing an arbitrator. The way the arbitral tribunal is formed is typically outlined in the institution’s rules. When the institution is involved in selecting arbitrators, the parties can benefit from the institution’s extensive knowledge of qualified and available arbitrators for the case.
In ad hoc arbitration, the parties have full control over the selection of arbitrators. However, if the parties have different preferences, the selection process can become complicated. In such a case, the parties may seek assistance from an appointing authority if they are unable to reach an agreement.
4.3. Quality control and oversight
Quality control and oversight mechanisms differ between institutional and ad hoc arbitration. Institutional arbitration includes built-in quality controls within its rules, such as checking the formal aspects of awards (like completeness and following procedural rules), and there is also procedural oversight. These controls help maintain a consistent level of quality and ensure that procedures are followed properly across all cases, while still allowing arbitrators to make final decisions on the actual issues involved.
Institutional arbitration has gained widespread recognition. Around the world, many arbitration centres have emerged as leading institutions. Examples include the London Court of International Arbitration (LCIA) in London, the International Chamber of Commerce (ICC) in Paris, the Hong Kong International Arbitration Centre (HKIAAC) in Hong Kong, and the Singapore International Arbitration Centre (SIAC) in Singapore.
The Parliament of India has also recognised the need for an institution that can represent the country on the global stage.
Therefore, the India International Arbitration Centre (IIAC) was established through the India International Arbitration Centre Act, 2019. These arbitration institutions offer parties a well-structured framework and support throughout the process by providing administrative help, procedural guidelines, and lists of experienced arbitrators. However, parties may have to accept certain limitations, as institutional policies and guidelines can influence the arbitration process.
Ad hoc arbitration, on the other hand, faces several challenges. For instance, there are difficulties with the cost and time involved, as fees can be high and the number of sessions per day may be limited. Additionally, some arbitrators may not be available on certain dates. Another issue is the challenge of storing records before sending them to the court in cases that come under Section 34 of the 1996 Act.
In his address to the 6th ICC India Arbitration Day in New Delhi on 2-12-2023, the Vice President of India praised the bold remark made by the Chief Justice of India at the Delhi Arbitration Week, 2023, which referred to “the arbitration space in India resembling an Old Boys’ Club.”29 He further stated that institutional arbitration is better than ad hoc mechanisms because it offers a reliable system for reaching decisions. The Vice-President called for necessary reforms, including legislative changes, to ensure a fair, balanced, and effective dispute resolution process. Acknowledging that disputes are a natural part of commercial activities, he stressed the importance of having a strong, efficient, and scientifically sound system to handle these conflicts.
5. ROADBLOCKS AND CUREENT LEGAL FRICTIONS
5.1 Current roadblocks in the arbitration sector
Arbitration has established itself as one of the most significant tools for resolving corporate disputes in contemporary business. Its key advantages, such as confidentiality, flexibility, expert review, efficiency, and international applicability, account for its rising popularity among companies around the world. That said, arbitration also faces real challenges, including high costs, restricted appeal rights, potential bias, the absence of binding precedent, and difficulties in enforcing awards. These drawbacks make it clear that arbitration is not a one-size-fits-all answer to every dispute. Even so, the comparative analysis carried out in this study demonstrates that arbitration remains a more suitable option than conventional litigation for many types of corporate conflict, especially those involving cross-border transactions and ongoing commercial relationships. As global business continues to grow, arbitration is expected to take on an even greater role in corporate governance and dispute resolution. Future reforms should prioritise greater transparency, improved procedural efficiency, and stronger enforcement of arbitral awards.
1. Governmental Support for Institutional Arbitration – A significant reason for the underdeveloped institutional arbitration framework in India is the limited governmental support it has received over the years. Given that the government is itself the most frequent litigant in the country, it is well-positioned to do considerably more to promote and encourage institutional arbitration.
2. The Act has remained neutral on the question of arbitration institutions, with no provisions specifically designed to promote institutional arbitration. This stands in contrast to jurisdictions such as Singapore, where the Singapore International Arbitration Centre (SIAC) serves as the default appointing authority for arbitrators under the International Arbitration Act, 1994 (IAA), which governs international arbitrations. The current Indian framework has drawn criticism for being unnecessarily restrictive toward arbitral institutions that set defined timelines for the various stages of arbitration proceedings.
3. Problems With Delays And Excessive Judicial Involvement In Arbitration – Delays in Indian courts, combined with a high degree of judicial involvement in arbitration proceedings, have made India a less attractive seat for arbitration and have consequently held back the growth of international arbitration, including institutional arbitration, within the country. A closer look at the recent caseload of the Bombay High Court, for instance, reveals that judges in the commercial division frequently handle matters that fall outside the scope of commercial disputes.
India requires a strong and well-structured arbitration framework to address the problems currently plaguing the system. Establishing a capable arbitration institution, equipped with its own rules, guidelines, and facilities, would bring consistency to procedure and reduce the need for the mainstream judiciary to intervene in arbitration matters.
5.2. The future trajectory.
In an opinion piece written for a leading financial daily30, Mr Amitabh Kant (CEO, NITI Aayog) placed high importance on promoting institutional arbitration as a means to improve the investment climate of the country. Among other things, he emphasised the training of arbitrators so that arbitral awards can withstand judicial scrutiny, making institutional arbitration mandatory in government contracts, promoting indigenous arbitral institutions and Indian arbitral institutions demonstrating their ability to deliver effective arbitration work at lower costs. He noted, “As of now, several arbitral domestic and international institutions do exist in India. However, none is of global repute. This is what the NDIAC plans to become.”
Notably, several institutions, such as, Indian Council of Arbitration (ICA, 1965), Nani Palkhiwala Arbitration Centre (NPAC, recognized by Madras High Court as an institution under s.11 (b) of the Act in 2005), Delhi International Arbitration Centre (DIAC, annexed to High Court of Delhi, 2009), Society For Affordable Redressed Of Disputes (SAROD, joint initiative of the National Highways Authority of India and National Highways Builders Federation, 2013), Mumbai Centre for International Arbitration (MCIA, 2016) have been active in the sphere of institutional arbitration in India31. Recently, the Gujarat High Court also inaugurated its own arbitral institution. It is still to be seen how soon institutional arbitration can gain ground in India and which Indian arbitral institutions are eventually able to emerge as credible names in the field of international commercial arbitrations.
In the World Bank‘s Doing Business Report 2020, one of the 12 areas of business regulation, which is used as an indicator to assess ease of doing business in a jurisdiction, is ‘enforcing contracts‘ and is measured in terms of time and cost to resolve a commercial dispute and the quality of judicial processes for men and women. Even as India‘s overall rank has jumped several notches to reach 63 among 190 countries, India‘s rank on this indicator of enforcing contracts32 is an abysmal 163rd. If institutional arbitration is successfully implemented in India on a wide scale, it will certainly contribute to improving India‘s overall as well as indicator-specific ranking.
6. CONCLUSION
“The future depends on what we do in the present.”- Gandhi
This analysis has demonstrated the potential benefits and ongoing challenges of implementing alternative dispute resolution (ADR) mechanisms within the framework of the Companies Act, 2013. Key findings reinforce the potential of ADR to promote the timely resolution of corporate disputes, reduce costs, and preserve business relationships. However, to maximise ADR’s effectiveness within the corporate context, certain roadblocks must be addressed.
Improved Awareness and Understanding: campaigns about ADR mechanisms and their benefits are crucial for legal practitioners, corporate executives, and board members. These campaigns should target not only the general existence of ADR mechanisms but also their specific applications within the Companies Act framework
Specialised Training: Dedicated training programs are needed to equip legal professionals, mediators, and corporate stakeholders with the necessary ADR and negotiation skills. Training for corporate stakeholders, such as board members and executives, should focus on understanding the different ADR options available, identifying situations where ADR might be appropriate, and effectively participating in the ADR process.
Quality Assurance and Oversight: Regulatory oversight, ethical guidelines for practitioners, and standardised certifications will ensure quality and build trust in ADR processes within the corporate context. The Companies Act itself could be amended to establish a dedicated body responsible for overseeing ADR practice within the corporate sphere. This body could be tasked with developing and enforcing ethical guidelines for mediators and ADR providers, establishing minimum qualification standards, and creating a national registry of qualified ADR professionals.
Based on this analysis, the following recommendations are offered to policymakers, legal practitioners, and corporate leaders to bolster ADR’s effectiveness within the Companies Act framework:
Recommendations for Policymakers: Amendments to the Companies Act: Introduce provisions that encourage prelitigation ADR and empower judges and tribunals (NCLT, NCLAT) to refer suitable cases for mediation.
Incentivising ADR Usage: Consider incentivising parties who opt for ADR through reduced court fees, cost adjustments, or other procedural benefits. These incentives could be structured to make ADR particularly attractive for smaller or medium-sized companies, which may be more sensitive to litigation costs.
Funding and Infrastructure: Dedicate funds towards developing ADR infrastructure, training resources, and public awareness campaigns specific to businesses. This could involve establishing specialised ADR centres equipped to handle complex corporate disputes, funding training programs for legal professionals and corporate stakeholders, and launching targeted public awareness campaigns aimed at educating businesses about the benefits of ADR.
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