Even as Prime Minister Narendra Modi is planning to make India an international arbitration hub for the resolution of domestic and global commercial disputes, the existing arbitration landscape in the country does not give much hope.
The issues are at different levels -- infrastructure to mentality -- and they needs to be addressed simultaneously if India indeed hopes to see itself as a commercial arbitration hub. Here are problems that commercial arbitrations face in India:
Arbitration is a part-time job: Both lawyers and judges consider it as a part-time job. Experts say we need professionals who deal with arbitrations on a full-time basis.
"Arbitration is done on a part-time basis--both by the lawyers and judges. One in the morning, one in the afternoon and probably one in the evening after 4 o' clock. Arbitration can't be a part time job. You have to sit 9:00 (am) to 4:30 (pm) and finish the whole days' work," says Pallavi Shroff, Managing Partner at the law firm Shardul Amarchand Mangaldas. She says often judges and lawyers get two hours in between court cases to finish arbitration. "How can you finish it? Even if it is time-based you cannot finish it," says Shroff.
The arbitrators are mostly retired judges and are used to functioning of a court but arbitration can be different, says Joyjyoti Misra, Partner, Private Equity, Khaitan and Co,.
He believes arbitration is fairly new in India and people who practice it should become arbitrators in the future.
Obsolete ways that delay proceedings: The technique that we use in international arbitration is not used here. "Why do you have to put to a witness this question-- I put it to you this is your case. Please stop using this, even in courts we have stopped doing this," says Shroff pointing out the old ways in which arbitration courts function in India.
Often these delay proceedings and, therefore, arbitrators need to ask lawyers to stop asking these questions. The way the system works, nobody is under any time pressure.
The good thing is that the amendment in the Arbitration and the Conciliation Act asks for time-bound completion (within 18 month) of the cases. However, even that is going to be tough because there is lack of infrastructure.
Lack of infrastructure: We do not have arbitration centres, we do not have anyone monitoring of arbitration. We do not have institutional arbitration. Today arbitrations are done at hotels or clubs. Arbitration lawyers say there's no proper recording facility, there's no library and at times there's no video conferencing facility. There are no facilities that are conducive for completing an arbitration in a short period.
India does not have institutions like the London Court of International Arbitration, Singapore International Arbitration Centre or ICC International Court of Arbitration, Paris, to monitor the progress of arbitration. These institutions in many ways monitor the progress of arbitration. And if it's not happening fast enough, they would probably say ask the arbitrator why is it delayed. There are timelines fixed for all the procedures there.
The mindset problem: One of the main challenges is the way arbitrators view these arbitration cases. Experts say that often in commercial disputes the law of natural justice and civil procedure codes do not work.
However, most of the arbitrators being retired judges, they often decide the cases based on these broader laws and philosophies which may lead to delays. Devesh Juvekar, Partner at law firm Rajani Associates, says that half of the arbitrators are retired judges but they forget that they are sitting in court and they use CPC (Civil Procedure Code). The Arbitration Act says you should avoid using CPC.
And if the dispute involves one foreign partner, this attitude can work against the foreign company.
"The judges comes from the past mentality where 95 per cent of the businesses were with government and they needed to use your constitutional power to keep the government in check or the party with bigger bargaining power in check. May be in today's context, they think the foreign companies are the one with bigger bargaining power," says Sitesh Mukherjee, partner, dispute resolution, Trilegal, a law firm.
He believes courts haven't moved fully towards allowing parties autonomy to prevail.