India Has Potential To Be International Arbitration Hub For Commercial Businesses: Justice Hima Kohli

While speaking at an event in the national capital on the developments in the arbitration landscape in the country, Supreme Court Justice Hima Kohli said that India has the potential to be the “preferred choice” for International Arbitration for “commercial businesses”, having a “progressive legislative framework, a pro-enforcement judiciary and robust institutional support”.

Justice Kohli was speaking at a seminar organized by the Gibson Dunn, UNUM Law and Secretariat in association with International Arbitration and Mediation Centre (IAMC) and General Counsels' Association of India on Friday. The topic of discussion was- 'Recent Developments in Arbitration to Promote Business'.

Legislative Framework and enhance of statutes

Justice Kohli said that the Arbitration and Conciliation Act 1996, which is a “cornerstone of India's arbitration framework”, has undergone significant amendments three times. The amendments, the judge said, were brought in to address certain key lacunae, for aligning India's arbitration laws with international best practices and for promoting a pro-arbitration regime that inspires confidence in the resolution of commercial disputes.

She said that the 2016 amendment aimed to improve the efficiency and efficacy of arbitration proceedings by implementing time-bound measures to streamline the process and ensure prompt dispute resolution. This in turn, the judge said, “strengthened” the courts hands in dealing with “dilatory tactics”, discouraging unnecessary delays and affirming India's commitment to an efficient arbitration regime.

With respect to the 2019 amendment, Justice Kohli said that it established the Arbitration Council of India (ACI), which helped in improving professionalism in arbitration and in the selection of impartial arbitrators.

“By clarifying that interim measures can be ordered by the Arbitral Tribunal only during the proceedings and not after that, the amendment aims to minimise uncertainty and improve the enforceability of arbitral awards, which would inspire confidence in global businesses,” she said

The 2021 amendment is directed towards promoting institutional arbitration, recognising specialised arbitration institutions, ensuring confidentiality in proceedings and impartiality in appointments of arbitrators, the judge added.

On a Pro-Enforcement Judiciary

Justice Kohli thereafter pointed to various “landmark” judicial pronouncements pointing to India's commitment to upholding the “sanctity of arbitral awards”; where courts refrain from acting as an appellate authority to reassess the “merits of an arbitral award” unless there are compelling reasons.

“In the case of BALCO v. Kaiser Aluminum (2012), the Supreme Court of India has sent a strong message to the international business community regarding the pro-enforcement stance of the Indian courts,” the judge said.

Referring to a December 2023 verdict of a 5-judge bench of the Supreme Court in Cox & Kings Ltd. vs. SAP India Pvt. Ltd.,–where it had upheld the Group of Companies Doctrine (GCD)–the judge said the top court had clarified that “even non-signatories may be bound by arbitration agreements if there's a mutual intention, a concept that is distinct from the alter ego principles”.

For context, GCD is a legal principle allowing entities that are part of a larger corporate group but not signatories to an arbitration agreement to be included in arbitration proceedings.

Further referring to a March 2024 decision of the apex court in M/S Arif Azim Co Ltd v. M/S Aptech Ltd., the judge said, “the Supreme Court of India has ruled that since Section 11(6) of the Arbitration Act does not specify a deadline, for purposes of reckoning limitation for entertaining such applications, one will have to resort to Article 137 of the Limitation Act, which covers unspecified provisions”.

The Supreme Court in its verdict additionally recommended the amendment of the Act to define a shorter time limit for moving Section 11 applications (for appointment of arbitrators), considering that the three-year period provided under Article 137 of the Limitation Act is “excessively long and inconsistent with the underlying aim of the statute for swift resolution of disputes”.

Alternative Dispute Resolution (ADR) and impact of Covid-19 pandemic

Justice Kohli in her address also touched upon the impact of the Covid-19 pandemic which made courts adapt and evolve to face the challenges of the times.

Recounting an anecdote, the judge said, “When I was presiding over a Division Bench while in the Delhi High Court, just as the Lockdown was declared in March 2020, my Bench partner had to fly down to Chennai from Delhi to be with his family and could not return as all flights were cancelled. Separated by a distance of over 1700 km, we had seamlessly conducted court online for almost a month”.

Emphasizing on the “paradigm shift” brought by online dispute resolution (ODR) mechanisms, she said that virtual proceedings are “cost effective and time saving” and also makes distance and time zones manageable.

The judge further reflected on the improvements brought about by “digitisation” to the efficiency of the arbitration process, helping “prevent loss or damage to important records”.

“Indian courts have readjusted to modern times by offering an option of virtual hearings to lawyers and litigants. In the context of arbitration, this commitment ensures that it remains a reliable and preferred method for resolving commercial disputes in the digital era,” she added.

Specialised Institutions and the need for an 'Arbitration Bar'

Justice Kohli said that India has witnessed the establishment and growth of various Arbitration Centres, in its endeavour to recognise the “need for specialised institutions to administer international arbitrations”.

Some of these are–the Indian Council of Arbitration (ICA) and Delhi International Arbitration Centre (DIAC) at New Delhi, Mumbai Centre for International Arbitration (MCIA) at Mumbai, International Arbitration and Mediation Centre (IAMC) at Hyderabad and the Indian Chamber of Commerce's (ICC) Council of Arbitration at Kolkata.

Justice Kohli also emphasized on the need for fostering an Arbitration Bar in view of the growth of institutional arbitrations in the country.

“Such a Bar, composed of experts/legal practitioners solely engaged in arbitration, would have to collaborate closely with established arbitral institutions…A specialised Arbitration Bar will attract fresh talent and perhaps, at some stage, call for specialised Arbitral Tribunals at High Courts and District levels, akin to Commercial benches. Regular workshops, Seminars such as this one and training sessions will help streamline every facet of the arbitration process, from the stage of drafting to enforcement of the award. It will help boost domestic and international confidence in India as an arbitration hub,” the judge said.

Before parting Justice Kohli spoke about the “pivotal role” that General Counsels play in “promoting arbitration” as an effective means of dispute resolution, wherein their influence can ensure “better outcomes for businesses”.

She said that by incorporating detailed and precise arbitration agreements, general counsels can preemptively address potential disputes, laying down “clear procedures and timelines”.

They can also ensure quality appointments of arbitrators,  encourage using reputed arbitration institutions, reducing litigation costs by adopting arbitration for business disputes, save valuable time and enhance confidentiality, the judge added.