Arbitration in India: Will the LCIA help?

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We focus on how to settle a fight faster, better, easier. It has meant to offer speed and efficiency but in India arbitration is plagued by delays and inefficiencies. Companies talk to The Firm about the problems they face in settling their disputes.

The London Court of International Arbitration (LCIA) is setting up an India center this month. Will that bring more discipline to the Indian arbitration process, The Firm spoke with Dushyant Dave, Sr Advocate, Supreme Court and Berjis Desai, Managing Partner, JSA.

Q: It seems that many of these problems are all linked to one central issue and that is the court involvement and what is supposed to be an ou-of-court settlement. The fact that the court gets involved in appointing the pre determined arbitrator is not suitable to both parties, then we come to the issue of enforceability where decisions made by the arbitrator are then appealed and then court intervenes, if this is an out of court settlement process, then why is the court, so involved in this process?

Dave: The reason is very simple, the courts generally have a distrust of the arbitration which is taking place in India. So if you can provide a credible arbitration which is neutral, speedy and cost effective, the courts will start trusting the arbitration and once that happens, the courts will have very little role to play in that process.

Q: So if we had a professional dedicated body of arbitrators, if the India center of the LCIA is able to bring more discipline to this process, arbitration will truly offer the speedy, efficient course of justice that it's meant to?

Dave: Yes because one of the single most factor affecting arbitration and its success in India, which is very badly needed, is ad hoc arbitrations. Unless you have institutional arbitrations, you look at any country in the world today whether its Europe where the International Chamber of Commerce, in America its the AAA, American Arbitration Association, Switzerland, Scandinavia or even China or a small nation like Singapore, all of them have fantastic arbitration institutions. Once you have these institutions which provide an umbrella under which arbitrations take place with specific rules, constitutions and supervision and control then that the real solution to dispute resolution mechanism.

Q: How do you look at these problems, and do you think that an India center by an LCIA will help solve, if not all these problems then at least part of them?

Desai: The LCIA center will certainly help but the issues are many and as far as the court intervention is concerned although in law there is no appeal against an arbitration award and what effectively happens is that if one of the parties is adapting an obstructionist approach he can begin or bat on a second innings so to say before the court and this can go on for quite some time. The problems with the foreign arbitral award are even more serious than the domestic award. But let's put it this way that LCIA center will help and the problems are not just going to go away in a miraculous way.

Q: So what's it going to take for the problems to go away because at the end of the day if the purpose of a speedy and efficient resolution mechanism is not achieved then arbitration really offers no better alternative than litigation?

Desai: I do believe that arbitration most certainly offers a better alternative than litigation in this country despite all the constraints under which arbitration suffers from. But I think what really matters is that when there are three arbitrators that the party is appointing an arbitrator each and there is the third arbitrator who is the chairman or who is appointed either by an institution like the LCIA or by the two arbitrators themselves, in such a situation one often finds that the party appointed arbitrator doesn't display very often the required degree of independence which an arbitrator should and as a result, effectively at times party appointed arbitrators almost behave as if they are advocates of the party. So what is required is the change in the mindset of those who function as arbitrators.

Q: How exactly will the India center help, if you can enumerate some of the key things it will bring to the process of arbitration in India and is it going to be successful in changing the mindset or at least add to the pool or professional arbitrators in any fashion?

Dave: LCIA is just the beginning, you can't just change it but it's a good beginning because up till now India has not seriously. Unfortunately, I regret to say that neither the government nor the industry which really needed the most because today if you are going to be one of the fastest growing economies of the world, you really need a sound dispute resolution mechanism. With about 40 million cases pending in courts, it is impossible for investors whether domestic or foreign to have dispute resolution through existing legal mechanism. So you can make the beginning at least and the beginning will be made by this that once you have an institution like LCIA or anyone else, you have strong supervision in appointing arbitrators, you have strong and continued supervision throughout the process, you can ensure that there are rules which will provide a quick decision, you have neutrality of arbitrators as far as possible and you have cost effectiveness. So you do all these together and you can achieve what you really want to achieve.