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Modi makes institutional arbitration a priority

Alison Ross

24 October 2016

Modi makes institutional arbitration a priority

Modi greets dignatories including Singapore's chief justice Sundaresh Menon

A major conference in Delhi on strengthening arbitration and enforcement in India has seen Prime Minister Narendra Modi declare the creation of "a vibrant ecosystem for institutional arbitration" one of the "foremost priorities" of his government, with similar endorsements from the president, chief justice and a host of other eminent figures. 

Notwithstanding India's long tradition of ad hoc arbitration, Modi spoke at the government-backed event of the need to establish "professionally run arbitral institutions which can deliver international standards of service at reasonable cost to businesses in India" and said "we welcome internationally recognised institutions in this effort."

He also called developing alternative dispute resolution in general a "national priority" and stressed the need "to promote India globally as an arbitration hub", drawing inspiration from "beyond our shores".

Modi said promoting ADR in India – including arbitration, mediation and conciliation – would provide "comfort to investors and business" and "ease the case-load of Indian courts".

Availability of quality arbitration mechanisms is an "integral component of ease of doing business, to which our government is committed," he said – noting that places like Singapore and Hong Kong have developed as business and arbitration hubs in tandem.

Modi's emphasis on ease of doing business may have been prompted by India's current low ranking for this in the World Bank's Doing Business report: 130th out of 189 countries worldwide.

Recently, Modi said, his government has made "major amendments" to India's UNCITRAL Model Law-based Arbitration and Conciliation Act to make the arbitration process "easy, timely and hassle free" and to ensure that "in normal circumstances" arbitral tribunals issue awards within 12 months, or six months if a fast track procedure applies.

Applications to challenge awards are to be decided by the court within a year with enforcement only refused in the limited circumstances allowed internationally.

"These amendments have brought our arbitration process in tune with global best practice [and] given us an opportunity to emerge as a leading arbitration jurisdiction," Modi said. However, he accepted there are challenges for India including "availability of excellent quality and globally recognised arbitrators; observance of professional conduct; ensuring neutrality; timely completion of proceedings; and cost effective proceedings".

India has "no dearth of brilliant lawyers and judges" and "retired judges, engineers and scientists who can function as competent arbitrators in various fields," said Modi. However, he argued that the state's economic interests would be "better served by a high number of arbitration experts and lawyers".

There is a need to widen the ambit of legal education in India and develop specialised arbitration bar associations as well as professionally run institutions, he said.

Modi also spoke of his government's "far reaching legal reforms" beyond the realm of arbitration – including scrapping "over a thousand archaic laws" – but emphasised that such reforms "can deliver desired results when there is an effective and efficient dispute resolution mechanism".

He quoted Mahatma Gandhi, who said he had learned "the true practice of law [...] to find out the better side of human nature and to enter men's hearts [...] to unite the parties involved in a dispute".

Modi's speech ended an event that opened on Friday evening with speeches by India's president, Pranab Mukherjee, finance and corporate affairs minister Arun Jaitley, Chief Justice of India Tirath Singh Thakhur and the president of the ICC International Court of Arbitration Alexis Mourre, among others. For a major economy to show this much high level political support for an arbitration conference is unprecedented. 

President Mukherjee's speech set the scene – relating how the first Indian arbitration statute was passed in 1899, based on its English counterpart from 10 years before and applicable only in the colonial cities of Calcutta, Bombay and Madras (now Kolkata, Mumbai and Chennai).

Cross-border enforcement of arbitral awards was permitted for the first time in a 1937 law but the possibility was not incorporated into a new arbitration act that was passed three years later. 

The laws were finally consolidated over half a century later, in the 1996 act. But this had many "shortcomings" that last year's amended act sought to overcome.  

Mukherjee spoke of India's "inherent advantages" as an arbitration centre including its use of the English language, rich "human resources" and infrastructure including internationally connected airports and world-class hotels.

Like Modi, he highlighted the need to create "an enabling framework for institutional arbitration in India", saying that "good laws themselves cannot substitute the need for good institutions" and there is "huge untapped potential".

Arbitration without the support of institutions is flexible but costly, he explained – "if for each and every dispute, the parties have to separately draft rules, appoint arbitrators, procure administrative support services, etc."

Institutions can assist with the composition of the tribunal, administer proceedings, take deposits to cover costs, fix arbitrator fees, remind parties and tribunals of deadlines and make arrangements for hearings. 

For arbitral institutions to expand their footprint in India, Mukherjee suggested they need to partner with the country's legal profession and nurture and expand the pool of arbitrators with expertise in sectors like finance, energy and infrastructure.

He also emphasised the need for judical and government support. "Judges have the delicate task of maintaining a balance between interference and over-interference," he said. Indian courts need to devise an administrative mechanism to ensure that arbitration matters are handled separately and efficiently so as to avoid any delay arising out of judicial intervention".

And while Mukherjee said government should not intervene in disputes – "state intervention in a market economy should be limited to situations of market failure, where the market itself cannot work out a solution" – he called for it to encourage private dispute resolution initiatives as an alternative to "exhausting the judiciary's resources".

Speaking earlier, Jaitley said contracts choosing arbitration should be respected and judicial interference in arbitration should be minimal or non-existent. Chief Justice Thakur noted the "perception" that "courts in this country interfere with arbitral awards more than courts in other jurisdictions," albeit he thought things are changing.

Mourre, meanwhile, said India is seen as an emerging location to conduct arbitration but raised a concern that was to resonate throughout the conference about section 29a of the amended law requiring judicial permission to extend the time period for concluding arbitration to 18 months. This simply extends the scope for judicial intervention, he warned.

While Jaitley countered that the provision was to ensure quick disposal of arbitration and would help India become known for cost-effective dispute settlement, others shared Mourre's concern.

Indeed, during a session on Saturday, the former chief justice of India RS Lahoti warned that section 29a "is not going to work" because it starts the time limit for arbitration running from the day the arbitral tribunal becomes functional."Six months are taken just completing pleadings," he said. "The sensible provision would be to begin the limitation from the time the trial begains".

A former member of the law commission who produced the report on amending India's 1996 act, Moolchand Charma, confirmed that the commission had proposed a more "practicable and reasonable" time limit for completing cases such as 24 months.

And Nish Shetty, head of Asia Pacific disputes at Clifford Chance in Singapore, said that from a practitioner's perspective the provision needs revisiting. 

However, a session bringing together representatives of the corporate world saw more support for the time limit. Aditya Ghosh, CEO of IndiGo Airlines said it ensures quick decisions in a fast-paced business environment. And Sunil Bharti Mittal of Bharti Enterprises spoke in favour of low cost, timely and expeditious arbitration through reforms such as this.

The three-day conference was organised by government think tank NITI Aayog (the National Institute for Transforming India), the law ministry, the department for industrial policy and promotion, the National Legal Services Authority and the International Centre for Alternative Dispute Resolution. The latter is a government run arbitral institution in Delhi that came under criticism from Chief Justice Thakur for its "dismal" record of handling only 20 cases in two decades of existence.

The conference also had the support of international institutions: the HKIAC, ICC International Court of Arbitration, KLRCA, LCIA and SIAC.

Sessions looked at what goes into setting up a world-class arbitration institution beyond bricks and mortar; what is good, bad, ugly and unfinished about the Indian arbitration act; best practice for managing arbitrations; how courts can provide support before, during and after cases; and how outsiders perceive the jurisdiction.

A panel bringing together judges and chief justices from around the Asia Pacific also considered the future of international arbitration in the region, with contributors from Australia, Singapore, Pakistan, Bangladesh, Sri Lanka, Bhutan and the US state of Hawaii.

The opening ceremony was attended by 1,800 delegates and followed by a dinner hosted by NITI Aayog that featured Indian senior advocate and arbitration specialist Fali Nariman as guest speaker. This was followed on the second night by a dinner hosted by various law firms with a speech by the chairman of the LCIA board J William Rowley QC.

The event came at a transformative time in Indian arbitration, after the LCIA earlier this year called time on its attempt to create a Delhi-based arbitral institution having found that uptake of the LCIA India arbitration clause was insufficient. The LCIA continues to administer India-related arbitrations from London and was among the conference's supporting institutions.

India has also just opened its first homegrown institution, the Mumbai Centre for International Arbitration – which has as its CEO Madhukeshwar Desai, the great grandson of a former Indian prime minister and a leader of the youth wing of Modi's ruling party, the BJP.

Hopes are high for the centre, which benefits from an international board of advisers and has already started administering cases at its iconic premises in Mumbai. For the present, however, the majority of India-related international arbitrations continue to be seated abroad, especially in London or Singapore.

In his speech, Mukherjee envisioned a time in the near future when there will be a successful international arbitration institution in Delhi and in other major Indian cities. Modi, meanwhile, saw the conference as a platform to discuss the "crucial regulatory, policy and mindset reform" needed to achieve this.

"We look forward to effectively implementing your recommendations," he told delegates. 


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