A REGULATORY BODY IN THE FIELD OF ARBITRATION: A BANE

 INTRODUCTION TO ARBRITATION

"Private dispute resolution amongst commercial men is as old as commerce itself.” 1 Arbitration,
though party-oriented, does not float in a legal void, but exists within a framework set by rules,
laws, conventions, general principles, and guidelines.2

One of the principle expressions of party autonomy consists in the freedom to set the procedural
standards governing arbitration by either choosing pre-existing rules or creating new rules
themselves, or even combining these two alternatives.

When we refer in global sense, the common ground for legal harmonization is provided by the
UNCITRAL Arbitration Model Law3. Whereas in India Arbitration is regulated by Arbitration
and Conciliation (Amendment) Bill, 2019, which is the fruit of the recommendations of the High
Level Committee chaired by Justice. B. N. Sri krishna.

 NEED FOR THE REGULATION

The topic of regulation in arbitration is not new, as response to the changing needs and satisfying
the need of current cross-border commercial disputes, the International commercial arbitration
has undergone a fundamental shift to become a more formalized legal process. 4 Consequently,
arbitration itself has become a much more complex process, highly regulated, mainly for the sake
of procedural security and legal recognition.

Need for gap-bridging tools: The rationale for regulation stretches out from the requirement for
security, stability, transparency and predictability in the procedure, also the need for gap-
bridging tools between disputing parties, having various assumptions and/or expectations of a
common process to the need for finality for an expensive dispute resolution exercise, and to the

1
W. Laurence Craig, Some Trends and Developments in the Laws and Practice of International Commercial
Arbitration, 30 TEX. INT'L L.J. 1, 5 (1995).
2
Lawrence Shore, Disclosure and Impartiality: An Arbitrator's Responsibility vis-d-vis Legal Standards, 57 DisP.
RESOL. J. 32, 36 (2002) at 34.
3
UNCITRAL Model Law on International Commercial Arbitration (1985, amended in 2006),
4
INTERNATIONAL ARBITRATION IN THE 2 1sT CENTURY: TOWARDS "JUDICIALIZATION" AND
UNIFORMITY (Richard B. Lillich & Charles N. Brower, eds. 1993)

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intention to eliminate the possibility of abuse of all those rights that parties and their counsel
have.

Suitable framework: Particularly in India need for regulation was to provide a suitable
framework for all the arbitration which is appropriate for both domestic and International
arbitration. Aim is to outline a proper timeline and procedure so that India could emerge as an
arbitration friendly jurisdiction as India has set sights on becoming a hub for international
jurisdiction 

Independence of institutional arbitration: Further regulations were made to facilitate and

achieve the goal of improving institutional arbitration by establishing an independent body to lay
down standards that are international in nature, and make the arbitration process more user-
friendly, cost-effective and to also ensure timely disposal of cases. 

EFFECTS ON INTERNATIONAL BORDERS

While the field still identifies the principle of party autonomy as the cornerstone of arbitration 5,
arbitration has become so strongly affected by a set of various levels of regulations that party
autonomy has slowly but certainly lost its prevailing role. While this is a manifestation of party
autonomy itself through party-created procedures, but often the lawyers tend to judicialise
arbitration by adding litigations practices in the sessions.

Criticisms against the ever growing density of regulation 6 raise concerns that parties' fear
arbitration as becoming ‘complicated, costly and time consuming as transnational litigation'7.

While well intended and aiming to create common ground for the arbitrating community coming
from different socio-cultural and legal backgrounds, excessive regulation in fact eliminates the
exact characteristics that make arbitration an attractive alternative to litigation, to name a few
flexibility and control8. The more extensive the regulatory framework, the less room it leaves for

5
Gary B. Born International Commercial Arbitration (2nd ed, Kluwer Law International, The Netherlands, 2014) at
83-85.
6
Michael Schneider The sense and non-sense of 'para-regulatory texts' in international arbitration (President's
message of May 2010)
7
Gunther J. Horvath, above n 25, at 262.
8
Thomas J. Stipanovich "Arbitration: The new litigation" (2010) 2010(1) University of Illinois Law Review 1-59.

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flexibility and input from parties' favoured practices resulting in the gradual shift from arbitration
to other alternative mechanisms.

Commercial mediation is the main dispute resolution mechanism that is currently still perceived
as business oriented and business-friendly, not (yet) having taken over the clients' true interests 9.
It focuses on deal making, rather than strict processes, and can afford to forgo predictable and
safety-inducing procedures precisely because it is entirely dependent on cooperation and mutual
agreement of the parties involved, but also because control is not handed over to the legal
profession, as it apparently is in arbitration.

EFFECTS ON NATIONAL BORDERS

The report of the Committee had recommended that the Arbitration Council of India would serve
as a benchmark for assessing arbitral institutions and had categorically emphasized that the ACI
would not act as a regulator set up by the government. The broad idea was to set up a body with
representations from stakeholders such as parties, counsels, arbitral institutions and the
government. 

It was extremely necessary to detach arbitration from the clutches of the judiciary which has
reduced arbitration in India to a mechanism by the presiding judges, for the retired judges.
Keeping the Chairperson as a retired judge did not cure, but only further perpetuated the existing
problem of appointment of retired judges, who sadly are the worst arbitrators and continue to
apply the ills of the existing judicial procedure to arbitration.

As is the situation currently, the majority of the applications for appointment of arbitrators are
usually decided with retired judges being appointed as arbitrators. After the creation of the ACI,
the retired judges, senior counsels, and lawyers will simply become paneled arbitrators, leading
to a pool of members who would serve as an extension of the existing judicial mindset, instead of
actually providing an effective alternative dispute resolution mechanism.

The Bill has completely skipped the recommendation pertaining to the grading of arbitral
institutions as being voluntary and not mandatory. This provision was imperative to facilitate the
growth of new arbitral institutions and also necessary to ensure that the freedom of parties to

9
Thomas W. Walde, above n 20, at 205-232.

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have their dispute adjudicated by an arbitral institution of their choice is not affected by
questions of the grade of the arbitral institutions and consequently recognition and enforcement
of their awards. By failing to incorporate this key recommendation, the Bill makes ACI a
regulator instead of a facilitator.

 CONCLUSIONS/ RECOMMENDATIONS

Arbitration works efficiently 'because it is essentially self policing' 10, but such self-policing is
also becoming the victim of judicialisation through 'the growing tendency to regulate almost
every aspect of the arbitration proceedings. However, the tendency to regulate every minute
details under the noble aim of bridging cultural gaps and ensuring uniform and fair process in
disputes involving parties, counsel and arbitrators representing various legal, cultural and
academic backgrounds, can lead to an unpleasant secondary effect that of losing flexibility and
ultimately party autonomy as well. The following are the recommendations which can be
inculcated:

 Instead to stop further regulating the field and achieve the desired outcomes through
alternative means that is less restrictive.
 There exist a need for arbitration to become 'a process aimed at understanding the differing
parties' cultures and backgrounds in order to help them come to an amicable solution, and
accordingly, to achieve maximum user satisfaction.
 The field should acknowledge and embrace socio-cultural differences, rather than create one-
size-fits-all mechanisms that leave no room for differing preferences that would, ultimately,
make a dispute resolution method personalized.
 Practitioners should fully investigate the contracting parties' background and feel comfortable
with it for the purpose of successfully manage the deal 11, international dispute resolution
could greatly benefit from a tool assisting in this investigation.

10
V.V. Veeder "The 2001 Goff lecture: The lawyers' duty to arbitrate in good faith" (2002) 18(4) Arbitration
international 439.
11
Paolo Esposito and Jacopo Martire, above n 112, at 328.