NPAC’s Arbitration Review: ‘A Case for Arbitral Institutions’

Rishi Kumar Dugar

India has over 35 arbitral institutions, including the Nani Palkhivala Arbitration Centre. This might be one of the reasons why, the recent notification by the Union Government to establish yet another arbitral institution, the New Delhi International Arbitration Centre received a very subdued response from the arbitration community in India.

Despite, recommendations of the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India, Chaired by Retd. Justice Mr. BN Srikrishna, (“HLC”) the new Arbitration and Conciliation (Amendment) Bill, 2019 (“2019, Bill”) has provided nothing to promote the existing arbitral institutions in India.

The Arbitration and Conciliation Act, 1996 in its current form, has been arbitration-agnostic, with no provisions specifically promoting institutional arbitration. In sharp contrast are jurisdictions like Singapore, where, Singapore International Arbitration Centre is the default appointing authority for arbitrators under the International Arbitration Act, 1994.  Similarly, under the Arbitration Ordinance 2011, the Hong Kong International Arbitration Centre has been designated as the appointing authority for arbitrators where the parties are unable to come to an agreement on the appointment of arbitrators.

Closer home, the Government of Maharashtra approved an institutional arbitration policy in October 2016. As per Maharashtra Arbitration Policy, all state government contracts with a value of over INR 5 crores shall contain an arbitration clause, providing for arbitration administered by the Mumbai Centre for International Arbitration.

In order to promote the existing arbitral institution in India, the Union Government should also consider a similar provision in their National Litigation Policy wherein all government contracts including Public Sector Undertakings (‘PSU’s’) should have an arbitration clause to be administered by one of the Indian arbitral institutions.

As per industry estimates, Rs. 54,000 Crores of capital was blocked in construction sector disputes. Dispute resolution in this sector consists mostly of ad hoc arbitration. There are similar baffling estimates for other sectors and even where Government/PSU’s are a party. Globally, it has been observed that the key reason institutional arbitration has not been the preferred mode of dispute resolution by parties is lack of legislative support for institutional arbitration and lack of governmental support for institutional arbitration.

It is time the Union Government recognizes the existing arbitral institution in India as their ally’s and partners in change,  who are also working towards the same objective, of ‘Making India’ as an arbitration hub.  Hence, it would be appropriate the Union Government takes into consideration all the Recommendations in the HLC Report while considering 2019, Bill.

About the author: M Rishi Kumar is an advocate practising at the Madras High Court.

Members of the Nani Palkivala Arbitration Arbitration Centre (NPAC) will be writing a weekly column for Bar & Bench analyzing the latest developments on the law of arbitration.