Govt starts talks on using services of private third party arbitrators

Move aimed at cutting legal costs, improving ease of doing business rankings

In a bid to cut down on its own legal costs, the central government has started consultations on using the services of private third party arbitrators for alternate dispute resolution, Business Standard has learnt.
 
These private arbitrators could be employed by the government on a short-term basis in the pilot phase soon, the sources said. The government’s role could be limited to only recognising the private arbitration Centre’s powers, they said.
 
The move is aimed at improving India’s standing in the ease of doing business rankings, the sources said.
 
The government is looking at the Singapore International Arbitration Centre as the model to follow for established of either a semi-government or a private body with arbitration powers, the sources said. The Singapore centre has been hailed by many as one of the best arbitration centres in the world.
 
As a part of the consultations, Indian Administrative Services (IAS) officers serving as representatives of different states met representatives from the Nani Palkhivala Arbitration Centre (NPAC), among others, at the Lal Bahadur Shastri National Academy of Administration this month to discuss the ideas and possible solutions, people who attended the meeting said.
 
“The idea behind this venture was to try and get the government to reduce as much of the litigation that takes before the court. The seminar was also to explore the ways by which the load on the courts can be cut through alternate dispute resolution,” said senior advocate N L Rajah, the director of NPAC, who was present in the meeting.
 
As part of the proposals discussed, the stakeholders have requested the government to provide the initial infrastructure such as buildings for these arbitration centres. Other services, such as manpower, however, should be left to third parties, they said. Other ideas, such as mandatory institutional arbitration and mediation were also discussed, the sources said.
 
“One of the things that they can look at as a solution is that they can take all this out of the court jurisdiction and give it for alternate dispute resolution,” said Rajah.

 
For government contracts, especially in the cases of projects in the public-private-partnership mode, the solution to avoiding a lengthy resolution is to allow the possibility of arbitration
during the signing of agreement at the initial stages itself, the stakeholders suggested.
 
It is also important, they said, that the government keeps its interference in appointment of arbitrators for the centre to a bare minimum to improve the confidence of non-government parties, especially foreign companies.
 
The issue of unpredictability, when it comes to factors such as how much time and money is going to be spent during the arbitration process also deters foreign companies from entering into agreements in India, the stakeholders told government representatives.
 
“We are not talking about controlling the outcome. You must be able to control the process, predict how long it will take. The flaw about our legal system is that it is quite wonky. If you adopt institutional arbitration, the path forward is very clear,” said Rajah.
 
State governments, which mostly have disputes related to construction projects, have also expressed their interest in carving out a role for institutional third party arbitration at the time of signing of such contracts, he said.
 
“The Uttar Pradesh government created a tribunal that would deal with such construction projects so that there is no delay due to arbitration. But what happens with such tribunals is that once again the government controls them. So, invariably there is a delay of one to one and a half years,” said Rajah.