Can India become a hub for international arbitration?

The recently-held Arbitrate in India Conclave, 2022 discussed how India can grow to becoming a prime centre for international arbitration like Singapore or Hong Kong. 

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When searching for a legal market, an international corporation wants to know only one thing: how easily legal disputes relating to their business can be resolved. In that vein, the enforcement of contracts is paramount, but approaching Indian courts often ties up companies in years of litigation with no end in sight.

Given the ease of arbitration and other alternate dispute resolution (ADR) methods, compared to the more traditional litigation, many companies and international corporations prefer them to resolve their disputes. Arbitration resolves disputes away from courts and allows parties to appoint arbitrators to act as judges, thereby giving them more flexibility.

Arbitration  allows parties to choose a convenient time frame and venue, unlike a traditional court.  Last week, the Indian Dispute Resolution Centre (IDRC) hosted the 'Arbitrate in India Conclave, 2022'on the topic 'Resolve in India', which discussed the way forward to make international arbitration a reality in India.

The panel consisted of Justice Arjan K. Sikri, Former Judge of the Supreme Court of India & Judge, International Commercial Court, Singapore; Balbir Singh, Additional Solicitor General; Tejas Karia, Partner and Arbitrations Head, Shardul Amarchand Mangaldas and Vanita Bhargava, Partner, Khaitan and Co. Sanjeev Srivastava, the former head of BBC India, moderated the conclave.

India's position in the world of international arbitration

Justice Sikri was asked to outline India's current situation in the world of ADR. The current goal is to make India an international hub for arbitration. Since 'international' arbitration necessarily involves at least one party being from outside India, the goal should be to create an environment which is ADR-friendly in India. For this, he stated that India would do well to look to other South Asian countries which are, such as Dubai, Singapore, Hong Kong and Malaysia. He noted that Singapore particularly has an institutional trinity: Singapore International Commercial Courts, Singapore International Arbitration Centre and Singapore International Mediation Centre, which provides different fora for companies. Though arbitration is a party appointed process, Indian courts also play a role (for example, in summoning witnesses). In his opinion, this role should be supportive and not interfering.

Balbir Singh was asked what the best way would be to go about achieving this goal. He noted that India can take example from Singapore: Singapore's focus has been on fair and transparent institutions, and their arbitrators are highly respected. Aside from these factors, India needs to have better facilities to attract foreign players. He again reiterated that courts need to facilitate ADR, something which the new amendments to the Arbitration Act also improve.

Vanita Bhargava shed light on some issues, such as timely disposal of arbitration and the costs associated with it. She also noted that international parties are used to working with foreign firms abroad, and that those firms are in a broad number of jurisdictions. Indian firms will likewise need to spread out.

Tejas Karia noted that India is too large to follow Singapore or Hong Kong, which are specific cities. Cities for arbitration need to be identified in India, too, and the best cities would be arbitration-friendly ones, where judges are trained to handle arbitrations. He also discussed bilateral investment treaties (BIT) which India had signed to give protection to foreign investors. India was sued for a large sum due BIT delays in the White Industries case. Justice Sikri also highlighted that due to this case, the Government withdrew from all BITs, though the more sustainable solution would be solving the pendency issue in Indian courts that gave rise to BIT claims in the first place.

Difficulties in domestic arbitrations with PSUs

Regarding domestic arbitration involving the government, the panellists discussed the viability of advisory boards set up to decide whether the government would lose if they went for arbitration. These boards are set up within national public sector companies, so that the government can ascertain whether to pay 75% even before going for arbitration, as waiting for it to play out in court may take years. During that time, interest may grow to be far greater than the initial sum, and so governments want to discharge liability in advance.

However, Justice Sikri noted that the boards are unlikely to be effective since the board is from within the company, which would likely not want to accept blame. To combat this, Tejas Karia suggested that the board could instead be made up of retired judges.

Ways to dispense with Indian courts

Questions from the audience brought forth comments on the feasibility of using Artificial Intelligence (AI) to deal with pendency in the judiciary. In response, Justice Sikri noted that there may be certain types of cases for which AI can be made use of, without disrupting the current fraternity among lawyers. He stated that he had seen such things being done in the Chinese legal system.

Though someone suggested that private courts could be a solution, Tejas Karia explained that it would be impossible given the basic structure of our Constitution.

A member of the audience enquired whether two Indian parties could choose a seat of arbitration outside of India. Justice Sikri mentioned that the Supreme Court has now opined that it is possible, and Vanita Bhargava responded that the choice of seat has to do with the autonomy of parties, and therefore will be permitted to make that choice.

Another question brought up the topic of arbitral tribunals and their lack of enforceability. Since orders passed by an arbitral tribunal will still have to be enforced by the Court, the point of the tribunal being an alternate method is lost. In response, Balbir Singh mentioned that there are certain processes being created now, such as forming a committee in the case of PSUs, which drafts the arbitration clause and decides on a pool of arbitrators. However, he stated that this issue is likely to persist since the loser of the arbitral award will want to still have his day in court.

The discussion provided some insight into the way forward for India's growing demand for arbitration, while at the same time educating participants as to the existing pitfalls.