In December last year two high-profile legal battles opted for arbitration of disputes originating in India to be taken to two different foreign locations. While Haldia Petrochemicals Ltd (HPL) got a court clearance to settle dispute over ownership through International Chamber of Commerce (ICC), Paris, global fast-food giant McDonald's moved the London Court of International Arbitration (LCIA) to resolve its dispute with Vikram Bakshi, its Indian venture partner over his appointment as managing director. What relates the two high-profile case is the place of dispute resolution-an international location for resolving local disputes. Arbitration as an alternative dispute resolution mechanism - vis-à-vis court-bound litigation - is gaining popularity in India for resolving commercial disputes. An EY study in 2011 found that India has seen a growth of nearly 200 per cent in a number of disputes that have been referred to arbitration during the previous three years. However, bulk of arbitration cases have been ad hoc in nature, and most international companies operating out of India have preferred a foreign location - Singapore, London, Paris or Hong Kong - as a seat for arbitration.
|A LEG-UP FOR FOREIGN INSTITUTIONAL ARBITRATION|
At Singapore International Arbitration Centre (SIAC), the number of cases from India rose from 36 to 85 between 2010 and 2013, a rise of nearly 136 per cent. In 2011, India accounted for 1.5 per cent of total cases resolved through LCIA, which increased to 4.25 per cent in 2012. India accounted for sixth highest number of cases in LCIA in 2012. "The number of cases filed at the SIAC, involving at least one Indian party, has grown by an astounding amount in the past three years since 2009," says Vivekananda N, deputy registrar & head (South Asia), SIAC. These cases have emerged in sectors such as trade, construction, joint ventures, corporate disputes, telecommunications, maritime, shipping and shipbuilding, amongst others. A silver lining What gave a fillip to foreign arbitration in India was the landmark judgment by Supreme Court in 2012, which said that the Indian courts have no jurisdiction over international commercial arbitration held outside India (Bharat Aluminium vs Kaiser Aluminium Technical Service, September 6, 2012). "The Balco case has been a game changer," says Ajay Thomas, director & registrar, LCIA India. Legal experts say that this decision by the Supreme Court will lead the way in reducing the intervention of Indian courts in arbitrations seated outside India. However, application of the decision is restricted to arbitration agreements entered after September 6, 2012. Trouble with Arbitration Act, 1996 At present, arbitration in India is governed by the Arbitration and Conciliation Act, 1996. In 2010, the government released a paper on amendment in the Act with one of the objectives being reduction of interference of courts. This will promote international arbitration in India and align domestic law with international standards. Legal experts say the amendments, currently being vetted by the Law Commission once come into effect, would result in minimal court intervention, enhance institutional arbitration and disclosure of any interest by the arbitrator. Through these amendments, India would become a hub of international commercial arbitration, stated a Press Information Bureau (PIB) release on the proposed amendment. However, this will only happen after general elections when Parliament is in session. This would mean that the new government would have to start afresh the process of bringing in fresh amendments to the Act. The real test is how Indian courts will react to the amendments after they become law, says Cheong. Legal experts point out that it could take some time to change India's reputation of being an "interventionist" in international arbitration circles. According to Sarosh Zaiwalla, senior partner, Zaiwalla & Co, a London-based law firm, India also needs to break away from its colonial mindset if it is to emerge as a destination for international arbitration. "Indian arbitration is largely decided by retired Supreme Court and high court judges. We need specialist and experts to man the arbitration process," he says. Absence of quality arbitration institutions facilitating and administering arbitration is another major deterrent for companies preferring India as the seat of arbitration, points out Krishnayan Sen, partner, VERUS Advocates, a Delhi-based law firm. The philosophy of alternate dispute resolution systems was well stated by Abraham Lincoln when he said, "... discourage litigation, persuade your neighbours to compromise whenever you can. Point out to them how the normal winner is often a loser in fees, expense, cost and time." Indian law makers could well heed his advice to make India a seat for international arbitration.