Prime Minister Narendra Modi’s statement on making India a global hub for arbitration for international commercial disputes is commendable in intention but perhaps ambitious in terms of execution. Mr Modi made the standard case for India: The existence of good human capital resources in India and their cost-effectiveness. In talking about the timely completion of proceedings and professional conduct as additional virtues for conducting international arbitration in India, however, the prime minister may have been overstating the issue by a generous margin. Perhaps Mr Modi’s confidence stems from the fact that the government has over the past year made an important move towards improving the arbitration regime in India, principally with the passage of the Arbitration and Conciliation (Amendment) Act, which came into force on October 23, 2015.
The Act admittedly goes a long way towards streamlining the arbitration process, setting time limits on proceedings and including fast-track procedures. But several provisions do raise pertinent questions about the efficacy of the new law in practice. For instance, the new law requires an arbitral tribunal, which has the same power as a court, to make its award within 12 months, extendable by six months, and it makes tribunal fees time-bound; the shorter the time, the higher the amount. In the event of a delay, fees will be reduced by five per cent for each month of delay. The Act also requires that any challenge to an arbitral award that is made to a court must be disposed of within a year, but it does not provide for penalties if the timeline is exceeded. In any case, given the pending list of cases in the high courts, which have been designated the relevant court for international arbitration, it is worth asking whether any of these deadlines are realistic. The parties are also required to approach the courts to seek extensions to complete the arbitration, which is hardly conducive to the speed that commercial disputes demand. The record of India’s 1,200-odd “fast-track” courts alone point to the scale of the problem, with their backlog of over 600,000 cases.
Overall, given that the arbitration function is embedded within the country’s legal system, anyone with a passing experience of Indian courts will testify that global corporations are unlikely to change their preference for Singapore or London as locations for arbitration of commercial contracts anytime soon. The experiences with Vodafone and, more recently, Tata DoCoMo are unlikely to enhance their confidence. It is worth noting that the London Court of International Justice in June this year closed its India chapter – which briefly emerged as one of India’s foremost arbitral institutions – after six years for lack of business. In that sense, the Mumbai Centre for International Arbitration, set up in October this year, has its task cut out. A joint initiative between the government of Maharashtra and the Indian and international legal communities, it has been set up principally to bring Indian cases back from the Singapore International Arbitration Centre — apparently over 90 per cent of its cases come from Indian parties. At a time when India seems to be emerging as a high-potential investment destination, the success of “Doing Business” metrics, such as enforcement of contracts is becoming increasingly critical. The question is whether the legal ecosystem is up to the challenges.
