The realistic situation of Institutional Arbitration in India and its

Impact on Arbitration1

ABSTRACT:

In the present world the importance relating to dispute settlement through Institutional
Arbitration has gained importance due to the overwhelming economic growth and
International trade. In this respect Indian parties to the arbitration also choosing interest on
Institutional Arbitration. By choosing this type of arbitration parties’ responsibility is
somewhat lesser in compared to other counterpart Ad-hoc arbitration. By the interest of the
parties towards the institutional arbitration in India the focus has raised and need of
institutions aroused. On these important lines in this article the author wants to emphasise the
present condition of the institutional arbitration in India and its growth. In the present
Juncture the analysis of realistic situation of an institutional arbitration is the welcome
measure for its development. Further the author wants to describe measures to be taken for
the development of institutional arbitration in India.

KEY WORDS: Institutional Arbitration, Ad-hoc Arbitration, India.

1
V Suryanarayana Raju, Assistant Professor of Law, HNLU, Raipur.
Introduction: Arbitration is one of the Alternative Dispute Resolution mechanisms for
sorting out disputes between the parties outside the court procedure in similar like
Conciliation, Mediation and Negotiation etc. Due to globalization in the recent world, the
International Trade which has been developed drastically. By development of trade between
the nations disputes also arose with similar effect. For sorting out of these disputes, the
parties are choosing Arbitration as a lucrative mechanism. Out of the arbitration existed in the
present form is either Domestic arbitration or International Commercial Arbitration. The
finalisation of domestic arbitration and international commercial arbitration depends on the
nationality of the parties.2 In order to solve disputes by way of Arbitration the parties either
need to choose Ad-hoc Arbitration or Institutional Arbitration. Ad-hoc arbitration is the
process which parties of the arbitration agreement decides the procedure of arbitration. But in
the process of institutional arbitration the particular chosen institutional rules will be
applicable. Apart from the rules of arbitration from starting to ending of the arbitration
proceedings the particular institution will monitor all the proceedings with effective manner.
This process is completely different from Ad-hoc arbitration such as appointment of
arbitrator, conduct of the arbitral proceedings and jurisdiction of the arbitral tribunal etc. In
this type of arbitration the institution is responsible for all proceedings as per the rules
adopted by the institution. Generally all the famous centres on institutional arbitration is
following the UNCITRAL Arbitration Rules.

In particular, the famous Arbitral Institutions following their own rules, but the same rules are
at par with the United Nations Commissions Rules on International Commercial Arbitration.
The UNCITRAL Arbitration rules occupy an important position, both historically and in
contemporary arbitration practice3. In 1973, UNCITRAL proposed the preparation of model
arbitration rules.4 By seeing the objective of UNCITRAL Rules was to create a unified,
predictable and stable procedural framework for international arbitrations without stifling the
informal and flexible character of such dispute resolution mechanisms 5. Basically the
UNCITRAL Rules are designed for use in ad hoc international commercial arbitration. Like
most institutional arbitration rules, the said rules prescribe a basic procedural framework for
the arbitration. However, some Institutional rules provide for easy settlement of disputes by
following their own rules. On further, the dis-satisfied party entitles to appeal to an arbitral

2
The Arbitration and Conciliation Act, Sec 2 (1) (f), 1996
3
Gary E Born, International Commercial Arbitration, 2 nd edn, , pg 72 (2014)
4
Draft of United Commission on International Trade Law, 6 th session U.N. Doc A/9017, 85(1973)
5
Ibid.
Institution at second instance, which can confirm the Award made by the institution, amend
the award or completely set aside the first award and the decision taken in an appeal, is
determined to be final and binding upon the parties6.

In India the Arbitration and Conciliation Act, 1996 which provides provisions relating Ad-
hoc arbitration. The said Act is completely silent on the provisions of institutional arbitration.
Despite the law commission in its various reports suggested for the incorporation of
provisions relating to institutional arbitration in the Arbitration and Conciliation Act, 1996 7.
But the legislature is not developed the practice of law relating to institutional arbitration. On
the other countries such as Singapore and hong kong provided attractive provisions relating
to institutional arbitration. The international arbitration act8 enacted by Singapore and hong
kong arbitration ordinance9 having some supportive measures for the development of
institutional arbitration.

We can understand this is one of the reason the parties in india which is choosing Ad-hoc
arbitration even tho we having 35 more reputed institutions for arbitration. According to
survey conducted in 201310 most of the Indian parties prefers Ad-hoc arbitration in
comparison with the counterpart institutional arbitration. Generally in foreign countries
where the amount of dispute is more parties prefers to go for institutional arbitration. In india
completely on opposite side even the amount of dispute is more the parties adopts Ad-hoc
arbitration as a primary method of arbitration.

There is a huge confusion that which arbitration is suitable for the Indian context? There is a
clear cut advantage under the institutional arbitration which provides a clear adopted rules of
arbitration, proper timelines for the conduct of proceedings, expertise staff for smooth
proceedings and list relating to panel of trained arbitrators available under the particular
institution11. Besides on the Ad-hoc arbitration the parties having liberty to choose their own
procedure in arbitration agreement, flexibility to choose procedure relating to appointment of

6
Grain and Feed Trade Association Rules, Art 12.6
7
See 246th Law Commission report
8
See International Arbitration Act, revised Edition, 2002
9
See Hong Kong Arbitration ordinance, 2011
10
‘Corporate Attitudes & Practices towards Arbitration in India’, PricewaterhouseCoopers (2013),
available at https://www.pwc.in/assets/pdfs/publications/2013/corporate-attributes-and-practices-
towardsarbitration-in-india.pdf ( Last accessed on 13/06/2019)
11
Sundra Rajoo, ‘Institutional and Ad hoc Arbitrations: Advantages and Disadvantages’, The Law
Review (2010).
arbitrator and conduct of the arbitral proceedings etc. 12 In general to the parties of Ad-hoc
arbitration, fourfold choice of law options which available in the case of International
Commercial Arbitration. By specifying those,

1) Law relating to the Arbitration Agreement.

2) Law relating to Procedure of Arbitration.

3) Substantive law involved in the particular dispute.

4) Choice of law rules applicable in International Arbitration.

Ad-hoc arbitration which mentioned under the Arbitration and Conciliation Act, 1996 is very
useful when the both parties having same of set of intensity to solve the dispute 13. But in case
of any party wants to delay it is taking more time for solution. In India specifically in the Ad-
hoc arbitration the arbitrators collecting the fees on sitting basis i.e) which leading to the cost
affect to the parties with unnecessary conclusions. Further when the parties having no
knowledge about procedure relating to arbitration in those cases institutional arbitration shall
be preferable. The famous institutional arbitration centres solves disputes adequately. The
Arbitration and Conciliation (Amendment) Act, 201514 which brought certain changes
relating to imposing time limit for the arbitration procedure and reducing arbitrator fees in the
case of delay in arbitration proceedings also not able to solve the original problem under the
Ad-hoc arbitration. Apart from the above all aspects, Indian courts intervention and
interpretation of the arbitration law which is creating more confusion on the parties to
arbitration. By considering the above statements we could say somewhat India is unfriendly
jurisdiction for the parties to arbitration.

In India specifically there are certain reasons for failing of the institutional arbitration
includes:

a) Lack of support from the central and state governments for the development of
institutional arbitration.

b) More judicial intervention in the procedure of arbitration.

12
Ibid.
13
Ibid.
14
See Arbitration and Conciliation (Amendment) Act, 2015.
 c) Lack of infrastructure in the Arbitral institutions.

d) Absence of important and credible Arbitral institutions.

e) Absence of provisions relating to institutional arbitration in the Arbitration and

Conciliation Act, 1996.

f) Lack of Legislative support.

g) Overwhelming confusion relating to the institutional arbitration.

In India most of the arbitral institutions failed to give better services in comparison with the
foreign arbitral institutions. These Indian arbitral institutions maintaining less case load due
to the misconceptions surrounded in the institutional arbitration in India. This has created
anomaly for the Indian institutions, by taking advantage from this situation other arbitral
institutions from foreign working very hard for gaining confidence from Indian parties of
arbitration. In the Domestic arbitration the Indian parties generally opting out the Ad-hoc
arbitration mentioned under the Arbitration and Conciliation Act, 1996. Coming to the case
of International Commercial Arbitration up to some extent parties are choosing institutional
arbitration. The major drawback for not choosing the institutional arbitration is lagging of
legislative enactment.

The rules of the institutions in institutional arbitration having much weightage because of the
reason the parties majorly prefer where the parties friendly rules are existed. One of the major
problem with the Indian institutions on institutional arbitration is that not adopting party
friendly rules. Further Indian arbitral institutions should enact rules at par with the
UNCITRAL model rules. Moreover Indian institutions does not having the mechanism for
feedback on the rules and system like e-filing, e-discovery etc. another foremost important
reason for failing of the Indian institutions by not providing the system like case management
services and secretariat services. Most of the developed foreign institutions provides the said
services with an effective manner. These type of services which providing confidence on
institutions among the parties to institutional arbitration.

The important aspect in the institutional arbitration is that maintaining panel of arbitrators
from expertise industry and process relating to appointment of arbitrator. In the both the
aspects the Indian institutions failed to determine or appoint expertise panel of arbitrators.
Our Indian institutions maintaining retired judges and advocates as a panel of arbitrators.

According to phrase mentioned under high level committee report the appointment of judges
in the arbitral institutions is creating a post retirement employment to the judges and
advocates. At the same time, another drawback in the institutional arbitration in India is not
adhering with the strict time lines. In organisation like SIAC, LIAC, ICC, ADR institute of
Canada the timelines would be followed in every step of the arbitration procedure. In India
necessary delays happened during arbitration procedure by way of adjournments. Simply we
can understand the strict following of expedient time limits in the every step of arbitration
procedure could create faster results in the institutional arbitration.

Coming to the enforcement of arbitral awards, Indian courts changes its dimensions very
frequently. This scenario is causing effect on the international arbitration. In general we can
say there are two type of arbitral awards. One is domestic seated arbitral award which
includes the award made under either domestic arbitration or in international commercial
arbitration. The second type of award is foreign seated arbitral award. i.e) where seat of
arbitration situates outside India. While enforcing the foreign seated arbitral awards in India
the parties facing huge problems relating to materialisation of award. Quite obviously once
the famous arbitral institution gives an arbitral award; due to reputation of the arbitral
institution it is enforced. The scenario with Indian courts is completely different from the
other countries courts while enforcing the institutional arbitration awards. Other countries
courts enforce the famous institutions awards in a structured manner.15

Apart from the all other obstacles to institutional arbitration Cost is the major drawback. On
the direction, parties having misconception that cost of institutional arbitration is higher in
comparison with the Ad-hoc arbitration. But on the other side through adjournments of dates
under Ad-hoc arbitration is high probability then automatically cost is higher even in this type
arbitration. In my opinion choosing of institutional arbitration is much better than Ad-hoc
arbitration because the process will complete within the time limits prescribed by the
institutions.

15
Sundra Rajoo, ‘Institutional and Ad hoc Arbitrations: Advantages and Disadvantages’, The Law
Review (2010) page no, 554.
On consideration of all these mentioned issues the institutional arbitration which facing
problem in its development in India. But in the developed countries certain institutions play
important role for development of arbitration through institutional arbitration. By seeing the
certain advantages for choosing of particular institutions includes:

1) Specified rules of arbitration.

2) High standard of professionalism.

3) Expertise arbitrators.

4) Checks and balancing system.

5) Administrative support.

6) Accountability of arbitrators.

In the world wide certain arbitral institutions gained an importance for conducting the
institutional arbitration. Those some of the leading Arbitral Institutions are:

1) International Chamber of Commerce (ICC) International Court of Arbitration.

2) American Arbitration Association and international centre for dispute resolution.

3) London court of International Arbitration.

4) ADR Institute of Canada.

5) International Centre for settlement of Investment Disputes.

6) Permanent Court of Arbitration.

7) Swiss Chamber’s arbitration Institution.

8) Singapore International Arbitration centre.

9) Hong kong International Arbitration Centre.

On the other side, Many experts criticise Institutional arbitration, as parties need to comply
with the procedural requirements, Moreover need to bind on institutional rules, but in the Ad-
hoc arbitration the parties having right to follow their own procedure. The reason behind
criticism was institutional arbitration which developing delocalized approach towards
international commercial arbitration.

By seeing the Indian scenario, Institutional Arbitration is still under the pipe line to finding its
roots towards growing importance in comparison with the other institutions in the world. In
our country the parties’ years together litigates through civil courts but not opting Arbitration
as a dispute solving mechanism. In other developed countries the parties voluntarily
preferring to the institutional arbitration. Moreover the laws and policies towards the
institutional arbitration in the developed countries are attractive. By seeing these scenarios
the Indian government must and should take immediate decisions towards the development of
Institutional Arbitration in India. Previously by way society registration Act, 1860 ICADR
(The International Centre for Alternative Dispute Resolution) which established as institution
with the objective to develop Alternative Dispute Resolution as a key method to solve legal
problems. The government thought it is necessary to provide a forum for resolving
international and domestic disputes quickly.

Subsequently certain actions has initiated by forming the Justice shri Krishna Committee on
the Arbitration. The committee has submitted its report with overwhelming recommendations
towards the development of Institutional Arbitration. On the basis of report recently the New
Delhi International Arbitration Centre bill which has been passed by the parliament for
establishing a world class institution towards development of Institutional Arbitration in
India. This is a welcome measure but again with drastic lagging, further recent Amendment
Bill also which is going to come with the objective to ranking institutions and finally towards
development of Institutional Arbitration in India.

The above said NewDelhi International Arbitration Centre which establishing with the
objective of making institution for national importance then in order increase and settle the
disputes through Alternative Dispute Resolution Mechanisms those include Arbitration,
mediation, negotiation and conciliation. By specifically establishing this centre Indian
government wants to promote Institutional Arbitration is the foremost step for parties for the
settlement of disputes in comparison with the Ad-hoc arbitration. Further the mentioned
centre will give training to the prospective arbitrators.
By concluding the present research paper that there is an overwhelming requirement towards
the development of institutional arbitration in India by adopting supportive policies and
legislations.