Indian Arbitration System On Path To Global Recognition And Economic Growth

Last year, the former Chief Justice Of India, NV Ramana, highlighted the significance of a robust arbitration system to India's economy. According to him, such a system could be a secret ingredient to getting an investor-friendly tag. More recently, Claudia Salomon, President of the International Court of Arbitration, emphasized on the evolving arbitration landscape and how it facilitated better business.

India's arbitration landscape has evolved through the era of panchayat systems to ones driven by principles of Lex Mercatoria and the UNCITRAL arbitration laws. Further, amendments to India's arbitration laws in 2019 enabled businesses to some extent.

ARBITRATION – CONTEMPORARY INDIAN LANDSCAPE

There are two contemporary discourses worth evaluating in India's legal landscape. First, the shift in mindset among corporates who previously considered arbitration as a costly and complex process lacking co-operation. Second is the understanding on arbitration as an opportunity for India to fuel its economic ascent. In both discourses, arbitration implies several benefits, although the case may not always pan in the manner that it should.

Arbitration certainly offers flexibility in terms of the selection of arbitrators, the location of proceedings, and the rules governing the process. However, one of the biggest disadvantages is the lengthy process. In the Antrix vs Devas (2015) case, for instance, the International Court of Arbitration awarded a $562.5 million to Devas in 2015 for repudiation of a contract by Antrix (marketing arm of ISRO). But, subsequent courts in India – a single bench tribunal in 2015, and a Delhi High Court judgement set aside the ICC order. More recently, a Special Leave Petition filed by Devas in the Supreme Court too was dismissed.

One of the central tenets in the judgement was the applicability of what constitutes as a favourable public policy. The courts have since observed that the single-judge tribunal's observation on the grounds of the public policy of India was correct. A public policy promotes fairness, justice, and adherence to ethical standards in dispute resolution. More importantly, the Antrix-Devas case may be considered as an aberration given how international rulings have resolved complex cases such as the one involving global telecom major Vodafone. In 2020, the International Arbitration Tribunal at The Hague held that the Rs 20,000 crore tax liability on Vodafone imposed by India in 2007 for the buyout of Hutchison Whampoa was illegal.

Sectors such as maritime and infrastructure have used arbitration well as a strategy. The Delhi Metro Rail Corporation; Adani Group vs Gujarat Maritime Board over port-facility development; and the case of Reliance Infrastructure being upheld by the High Court of Calcutta involving a payment of Rs 405 crore by Damodar Valley Corporation, are glaring examples.

More apt examples illustrating India's changing landscape can be traced to two cases, coincidentally observed in Kolkata. In the first case, Haldia Petrochemicals Ltd (HPL)'s claim for Rs 3,285 crore worth of incentives from the Government of West Bengal was granted by a panel of arbitrators comprising of three retired Supreme Court judges, including two former Chief Justices of India. Meanwhile, in the second case, arbitrators ruled in favour of Tata Motors, granting the company Rs 765.68 crore as compensation from the West Bengal Industrial Development Corporation Ltd for losses incurred with the Nano plant at Singur near Kolkata.

Both proceedings took considerable time, but given the case load faced by the High Court of Calcutta, both cases may well have been pending still. For reference, 824,008 cases (civil plus criminal) were pending as of 2023. From an arbitration perspective, official records revealed a pendency of 195,599 as Aug 2023 on the appellate-side matters and 17,561 on the original side.

UNIVERSALIZATION OF ARBITRATION

Despite the concerns, the Indian legality around arbitration has been amended thrice since 1996. To reduce case dependency and reduce the duration of caseload, courts have appointed arbitration tribunals and set an amendment to award litigants within 12 months from the date of completion of proceedings. One of the major observations from the 2019 amendment was the removal of the 12-months' timeframe for international trade arbitrations. One must also observe how the latest amendment impedes group sovereignty or in other words the ability for other stakeholders to engage in overseas arbitration.

Some areas where India's 2019 amended arbitration laws could be reworked includes reduction in potential delays from litigants challenging awards and increased judicial intervention. India may also need to arrive with legal frameworks to assuage international participants, especially in complex jurisdictions. Doing so may help reduce the fear of bias in domestic arbitrations with predominantly Indian arbitrators. Despite the lexical confusion, India has focused on making arbitration more affordable and encouraging with Indian arbitrators, thus benefiting local legal professionals.

Positive factors also include the mandated confidentiality clause which helps protect sensitive information as well as streamlined provisions for specific aspects like appointment of interim measures. A healthy outcome from the 2019 amendments is the government's perspective that formal arbitration is acknowledged for international parties only when they opt for India as their preferred jurisdiction to such agreements. This policy is in line with the government's motive of creating India as a destination for arbitration.

Arbitration may appear slow, but it is turning into an effective tool to resolve commercial disputes amicably in India. The changing landscape of arbitration in India in line with what the CJI highlighted. More importantly, a coveted investor-friendly tag augurs well for the economy too.