Paving The Way Towards Strengthening International Arbitration in India

International arbitration has played a pivotal role in resolving complicated disputes that may arise in cross-border transactions. The general perception is always that the court of one party's home turf would end up favouring that party in any international dispute and as such parties to such disputes therefore prefer to seek a neutral ground. Arbitration not only offers neutrality, but also provides parties the opportunity to seek neutral as well as experienced arbitrators whose technical expertise, attitudes, and values are aligned to the demands as well as the ever-changing nature of global business practices. International arbitration has been significantly growing all over the world, primarily as a leading alternative to the litigation process in the courts, involving lengthy and indefinite timelines. Up to 70 jurisdictions have adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, lending international arbitration similar structure and much-needed uniformity on a global scale. The extent of party autonomy, flexibility, neutrality, and the unique option to choose the best possible arbitrator(s) to resolve the dispute at hand makes arbitration a preferred choice in a cross-border dispute. With the world witnessing expansion of economic activities & cross-border investments, alongside industrialisation & globalisation kicking in across the globe in the recent times, commercial relationships have become more multi-faceted. Also, the judicial systems across the world continue to grapple with high pendency rates and accordingly, delayed justice. Inevitably, such complexities have resulted in break-up and evolved the need of best means of resolution of dispute. In this regard, arbitration mechanisms have demonstrated their reliability to shoulder the burden and resolve civil disputes in a flexible and cost-effective manner to a great extent.

Features of International Arbitration:

In its strictest sense, where international arbitration permits blending of both common law procedures & civil law procedure for resolution of disputes, it would not be wrong to classify international arbitration as an "amalgamated form of dispute resolution". In the recent years, especially after the world witnessed COVID-19, progression of international arbitration has been tremendous and the international community has increasingly adopted the same as a preferred means of resolving complex, transnational commercial disputes. Though in a nutshell, it would be imperative to list some of basic features of International Arbitration as under:

• Enforceability: Acknowledgement to multi-lateral treaty known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the "New York Convention"), enforceability of international arbitral awards in 145 signatory countries is guaranteed.

• Neutral Forum: International arbitration offers a neutral forum of dispute resolution.

• Party's Autonomy: Being an "amalgamated form of dispute resolution", parties are at their will for agreement on procedure.

• Appropriate Experience: Choice of parties in selecting appropriately experienced arbitrators in tandem with nature of dispute or their understanding of with relevant commercial practices.

• Procedural Flexibility: Unlike domestic litigation process, it offers flexible and far fewer complex procedures.

Legal Recognition to International Arbitration in India:

Since India is a signatory to both the New York Convention 1958 and the Geneva Convention 1927, Part 2 of the Arbitration and Conciliation Act, 1996 ("Act") was implemented towards its commitment agreed in the Convention(s). Part 2 of the Act essentially provides framework concerning foreign awards & their enforcement. It is important to note that any award recognised in terms of Part 2 of Act may be enforced as a decree of the court under the Civil Procedure Code 1908.

Section 2(1)(f) of Act defines "International Commercial Arbitration" as an arbitration relating to disputes arising out of legal relationships irrespective of contractual or not shall be considered as commercial where at least one of the parties is:

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country

Recognition to awards is primarily dependent upon the fact that the awards were made in signatory countries. The Govt. of India in Official Gazette termed them as "reciprocating" countries. In addition to same, Section 48(2) of the Act detail two grounds for refusal to enforce any foreign award i.e. (a) dispute is not capable of settlement by arbitration in India; and (b) enforcement of the award results in the contravention of India's public policy.

Implementing International Arbitration in India: Ongoing Challenges:

Even though statistics and research show that there is a significant growth of international arbitration in India, with parties inclining towards it over litigation, there remain challenges in the system, which needs to be addressed through efficient policymaking and judicial overview. A few of the prominent issues are deliberated below:

- The system of arbitration is such that the question of appeal does not arise, and parties must abide by the award made by the arbitrator as final and binding, and therefore find themselves challenging said awards via litigation, therein defeating the purpose of the arbitration agreement.

- The enforcement of foreign arbitral awards has been provided for within the Arbitration and Conciliation Act for awards passed under the New York Convention and the Geneva Convention. Additional criterion has been added by the domestic legislation for valid enforcement of these awards, such as adherence to the public policy of India, which are concepts that are still under jurisprudential development.

- Crucial aspects of an ADR mechanism include excessive cost and time, and international arbitration is often considered to be unfavourable to these aspects.

- Regulating the code of conduct for arbitrators in international arbitrations proves to be difficult due to the diverse nature of cultural and legal backgrounds that cause a lack of uniformity.

- Lack of technical expertise is another ground for Parties to the arbitration for derailing the procedure of the tribunal by seeking the application of Section 34 of the Act. The cascading effect of this irregularity results in a delay in issuing the award, which defeats the ultimate goal of alternate dispute resolution, that is for speedy resolution of disputes.

The Way Forward:

In the wake of growing international trade and India being one of the biggest developing economies inviting international investors, the promotion of India as an arbitration hub has been on the agenda of the Indian policy and law makers. The Arbitration and Conciliation Act since its inception in 1996 and through the several amendments, the most recent one being as recent as in 2021, has the legislative intent to minimise judicial intervention in arbitral matters.

Many steps have been taken for removing bottlenecks and enabling parties to repose their confidence in India as a hub for International Arbitration. Some of them are as under:

- The Government through its premier public policy think tank NITI Aayog organised global conference with active support of international arbitration institutions. The said initiatives have been well received across India and abroad across a spectrum of industries marking it as a significant positive step embarking upon India's journey in this direction.

- India, where the most prevalent mode of arbitration is the traditional ad-hoc arbitration, is now gradually witnessing a shift towards institutional arbitration. Setting-up of and acceptability of arbitration centers viz. Mumbai Centre of International Arbitration (MCIA), Delhi International Arbitration Centre (DIAC), Nani Palkhivala Arbitration Centre (NPAC), International Centre for Alternative Dispute Resolution (ICADR) and Indian Council of Arbitration (ICA), etc. is evidence of the said thought process. In December 2021, India's first International Arbitration and Mediation Centre (IAMC) was inaugurated in Hyderabad by the then-Chief Justice of India, NC Ramana Rao and the Chief Minister of Telangana, K. Chandrasekhar Rao. IAMC aims to introduce cost-effective alternate dispute resolution methods including arbitration, mediation and conciliation for domestic as well as foreign investors in India. IAMC boasts of having a unique governing council comprising of retired and serving judges of the Supreme Court of India along with internationally renowned arbitrators hailing from several nations and aims to provide services at par with and likely beyond the services provided by major international arbitral institutions across the world. IAMC can play a fundamental role in establishing India's foothold in the sphere of international arbitration by way of becoming a major arbitral institution on a global scale.

- There are many international arbitral institutions who that have established their offices in India primarily being Singapore International Arbitration Centre (SIAC), International Chambers of Commerce (ICC), Hong Kong International Arbitration Centre (HKIAC), Japanese Commercial Arbitration Association (JCAA), the London Court of International Arbitration (LCIA), etc.

- Recent amendment in the Arbitration and Conciliation Act has also contributed to plugging gaps and making the procedure for enforcement of foreign awards robust. Unlike earlier, where application for recognition of award were to be made in the district Courts which had resulted in slowness of awards' effectiveness, the amended provisions under Section 47 and 56 of the Act mandates filing of the said application now in state High Courts having original jurisdiction. Participants of international arbitrations, whether it may be under the New York or Geneva Convention have a swifter recourse to enforcement and are likely to face fewer hurdles in satisfying the Court for enforcement due to the amendment restricting the ambit of factors that prevent enforcement, such as violation of public policy for international commercial arbitrations. Noteworthy amendments made in 2019 in the Act were resultant of India Government's initiative of forming a committee under the chairmanship of Justice (Retd.) B.N. Srikrishna with the mandate to review and reform the institutionalisation of arbitration, in order to bring the Indian standards in-line with global ones and prepare India for being a robust international centre for arbitration. One of the notable developments is the establishment of Arbitration Council of India, which will grade arbitral institutions and provide accreditation to Ld. Arbitrators.

- The Hon'ble Supreme Court of India lately in the case titled M/s. N.N. Global Mercantile Pvt. Ltd. vs. M/s Indo Unique Flame Ltd. & Ors., overruled an earlier ruling that an arbitration clause contained in an unstamped agreement cannot be enforced. In its ruling, the Court's deviation from the decision in Garware Wall Ropes Ltd. v. Marine Constructions & Engineering and decision that such non-stamping of agreement can be cured once the dispute in question reaches an arbitral tribunal is in harmony with international jurisprudence on the separate existence of the commercial contract and arbitration agreement. This decision is a clear indicator of Indian courts encouraging international arbitral standards by way of supporting arbitral awards unless the same are patently illegal, hence fostering the environment for international arbitration. M/s. N.N. Global Mercantile Pvt. Ltd. vs. M/s Indo Unique Flame Ltd. & Ors also follows the verdicts from English authorities: the English Court of Appeal in Harbour Assurance Co., and the House of Lords in Fiona Trust also ruled that the arbitration agreement survives independently regardless of insufficient stamping of the underlying contract. Such rulings harbour increasing faith in proponents of international arbitration due to foreign arbitral awards being generally upheld by the Indian judiciary.

As judicial systems across the world continue to grapple with high pendency rates, arbitration mechanisms have demonstrated their reliability to shoulder the burden and resolve civil disputes in a flexible and cost-effective manner to a great extent. Therefore, the mode of arbitration cooperation between the parties and adequate deliberation before submitting a dispute to arbitration can benefit the parties to a dispute. Further support and facilitation to arbitral mechanisms by relevant stakeholders can greatly contribute to further evolution of the arbitral mechanism on a global scale. The groundwork laid by Indian policymakers and legal fraternity has given the scope to make India a hub of international commercial arbitration, in the same way the United Kingdom and Singapore are addressed currently. However, the points of action discussed within the challenges and the way to move forward need to be addressed for this dream to become a reality.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.