"After the enactment of the new Act (Arbitration & Conciliation Act, 1996), which was based on the UN Model law, almost all the defects were rectified and the ADR system was improved."

Talking about
ADR with...

ABOUT OUR GUEST
 

Practising lawyer in the High Court of Kerala since 1991, mainly dealing with constitutional, civil, banking, arbitration, company and labor matters. Acted as arbitrator in many cases. Has authored a book on arbitration, “Handbook on Arbitration”, dealing with the Arbitration & Conciliation Act, 1996, (Indian Act) the foreword of which was written by Hon’ble Mr. Justice K. S. Paripoornan, Former Judge, Supreme Court of India. One of the founder members of Indian Institute of Arbitration & Mediation, is associated as the Director – Administrator of the Institution.

Q. The Indian Institute of Arbitration and Mediation is a fairly young ADR service provider established in the summer of 2003. As IIAM approaches its first anniversary, how would you describe its impact on the legal and business communities of Bangalore, Cochin…and elsewhere?

A. Even though arbitration was known to Indian legal and business community, the concept of institutional arbitration is relatively new. Arbitration under the earlier Act, (Arbitration Act, 1940) had many deficiencies to the effect that the court interferences during and after the course of arbitration were numerous and the very purpose of arbitration, being a fast and fair process of dispute resolution, had serious set-backs. This created a fair amount of hesitation and apprehension in the legal and business communities to opt for arbitration. Once a person gets into it, he finds it difficult to come out of it.  He gets exhausted financially and physically. In fact the Supreme Court of India, while referring to the 1940 Act, observed that “the way in which the proceedings under the Act are conducted and without an exception challenged in courts, has made lawyers laugh and legal philosophers weep” in view of “unending prolixity, at every stage providing a legal trap to the unwary.”

After the enactment of the new Act (Arbitration & Conciliation Act, 1996), which was based on the UN Model law, almost all the defects were rectified and the ADR system was improved. For the first time mediation was given statutory recognition. But the adverse impact created by the earlier Act had to be removed gradually with awareness programs like seminars, workshops as well as through write-ups and magazines. For this purpose IIAM had conducted a number of seminars and is publishing a bi-monthly magazine “The Indian Arbitrator”.

The advantages of institutional arbitration and mediation is now gradually accepted by the legal and business community and institutional ADR is gaining recognition as an effective alternative for dispute resolution. IIAM is gaining the acceptance and confidence of the legal and business community, because of its integrity, expertise, impartiality, dispute resolution skills and reputation. The institutional ADR provided by IIAM is guided by its Rules, which provide an easy and comprehensive procedure for the parties to adopt and the same allows the parties to settle the issues finally within a period of 6-10 months.

Q. With a bit over a billion inhabitants, India doubles the population of all Spanish speaking countries combined. The combined population of the European Union and the United States of America does not either come close to India’s. Let us move from the statistical concept “population” to the more humane concept of “people”.  Generalizing permitting, how do the Indian people take to ADR?

A. As stated earlier the concept of dispute resolution outside court was known to Indians from age-old times. In fact the ADR system was practiced in ancient India in the form of “Panchayat” system, where civil and family disputes were resolved by elderly persons outside court. But later on the concept of arbitration had a general set-back due to lack of proper rules and guidelines and allegations of bias and disproportionately huge expenses involved in arbitration.

The mindset of average litigant was not attuned to opt for arbitration. Arbitration had an image synonymous with obstructions, astronomical costs and delays.  The procedure was tedious and many times it took years for final resolution of disputes.  The new Act has brought about positive changes and emergence of institutions regulating ADR procedures, expenses and empanelling of accredited arbitrators, hopefully has regained the lost confidence in ADR system. IIAM is trying to popularise the concept of institutional ADR by creating awareness and generating confidence in the system.

Q. In 2001, the 16^th Law Commission of India issued its 176^th report on India’s Arbitration Act of 1996. Justice M.J. Rao, President of the Commission, presented the report and he was rather critical of certain substantive and procedural aspects of the current Act [see report]. Additionally, and also in 2001, a bill was introduced in Congress to amend the 1996 Act. Three years later the Act has not been amended, although amending it continues being the subject of intense debate. As far as procedure is concerned, and from your standpoint as ADR case managers, does current ADR practice in India warrant amending the Act? What in your opinion, if anything, needs improvement?

A. Based on the demand from various quarters of professionals and business community, the Hon’ble Minister for Law, Justice & Company Affairs, requested the Law Commission to suggest amendments to the 1996 Act. It was based on this that the Law Commission issued the 176th report on the Arbitration & Conciliation (Amendment) Bill, 2001. It is understood that the Bill is now sent to the Standing Committee and opinions are called for from judges of Supreme Court and High Courts.

The 1996 Act was the result of recommendations for reform, particularly in the matter of speeding up the arbitration process and reducing intervention by the court. But even now there are certain areas which requires improvement and the Law Commission has given recommendations to rectify these defects. As far as IIAM is concerned, the time limit for arbitration proceedings is already fixed as per the IIAM Arbitration Rules and the same allows the parties to settle the issues finally within a period of 6-10 months. But fixation of time is required to be made in the Act in the case of ad-hoc arbitrations. Further, amendment is also required for fixing time limits for challenge procedures in court and also for easy execution procedures.

Q. On a particular substantive aspect of the Act, it is suggested that the very concept of “international arbitration” be clarified and redefined. Specifically, it has been openly suggested that the term “international” not be applicable to foreign companies if they do business in India through duly incorporated branches or subsidiaries in India. Always careful of the word “assume”, it can be reasonably concluded that India wishes to exercise greater control over what it does not necessarily consider “foreign arbitral awards” by turning them “domestic”. Widespread debate, or isolated suggestion? How does IIAM see the future of international arbitration in India?

A. International Commercial Arbitration was not dealt with in 1940 Act. The definition of ‘international commercial arbitration’ under Section 2 (1) (f) of the 1996 Act shows that it is akin to a ‘foreign award’ defined under Section 44 of the Act if one of the parties to the arbitration agreement is an individual who is a national of, or habitually resident in, any country other than India or a body corporate incorporated in any other country or a company or an association or a body of individuals whose central management and control is exercised in any country other than India or the Government of a foreign country.  In other words, if one of the parties to the agreement is an Indian and the other party a foreigner, either by its nationality or its incorporation as a body corporate or its management and control is exercised in any other country or it is the Government of a foreign country, it will be styled as ‘international commercial arbitration.’ At the same time, the arbitration pursuant to such an agreement may take place in India or outside.  If it takes place in India the resultant award would be considered as a ‘domestic award’ and would be governed by the provisions of Part I of 1996 Act.  On the other hand, if the arbitration takes places outside India the resultant award would be a ‘foreign award’ governed by the provisions of Part II of 1996 Act.

As international business and investments has drastically increased in India, in case India becomes the hub of international commercial arbitrations it will reduce arbitration costs of parties, who presently sustain heavy expenditure on account of arbitrations conducted abroad. It is therefore advisable for a foreigner governed by the international commercial arbitration under the 1996 Act of India to prefer India as the place of arbitration so that resultant award would be considered as domestic award and avoid risks and hurdles on the way of a foreign award for enforcement as provided under Part II of the 1996 Act. The requirement for bringing in such international arbitrations depends on the availability of institutions with international standards, which can provide internationally approved infrastructure, qualified and accredited arbitrators and expertise professional assistance. IIAM is striving to achieve this object and is entering into mutual co-operation agreements with various international institutions all over the world, whereby IIAM could offer such facilities to their clients as well. 

Q. Attorneys are a key element to the utilization of ADR. How they feel about it does in fact sway business people one way or the other. On the other hand, there is no ADR provider to our knowledge that feels that ADR is an easy sell. About attorneys in India specifically, do they tend to resist or embrace institutional ADR if proposed?

A. It is true that attorneys are a key element to the utilization of ADR. As I have stated earlier the 1940 Act was in place for such a long period that it is still in the mind of senior attorneys and their first reaction to ADR is based on that Act. But trends are changing for good. Of course new generation attorneys are supporting ADR system and are advising business people to opt for it. They see many advantages to institutional ADR system, being fast, fair, confidential and more importantly maintaining the good business relationship. The hostile atmosphere of courts are driving the business community to prefer institutional ADR, where they could sort out their disputes and differences in a more friendly and congenial atmosphere and continue their business unaffected by any hostility. Attorneys also tend to support this system in the developing business world.

Q. In the end, ADR is an attractive alternative if the Judiciary allows it be so. Do you see the Judiciary in India inclined to favor the continued growth of ADR, whether domestic or international? What concerns, if any, has it expressed since the enactment of the 1996 Arbitration Act?

A. The 1996 Act makes it mandatory for the courts to refer the parties to arbitration, if the dispute raised by the parties is the subject matter of an arbitration agreement. The Act makes it clear that no judicial authority shall intervene unless otherwise provided in the Act. The Act also gives more authority to the arbitral tribunal, taking away much of the powers given to the courts under the 1940 Act. Thus the statute as well as the courts give a positive nod in favour of ADR after the new Act.

In regular court litigations in which there is no specific clause for ADR, substantial changes were brought about recently. Towards the end of 1980’s when cases pending in different courts of India crossed twenty five million and the need to get away from the traditional conception that court is the only place to settle disputes was severely felt, the Government of India constituted Justice Malimath Committee, which on the recommendations of the Chief Justices’ Conference, made a number of recommendations in its Report. The Report emphasized the desirability of disputants taking advantage of Alternative Dispute Resolution (ADR) which provided procedural flexibility, saved valuable time and money and avoided the stress of a conventional trial. 

ADR is seen as part of a system designed to meet the needs of consumers of justice, especially in the context of recent reforms in the economic sector. Civil Procedure Code (Amendment) Act, 1999 by virtue of Clause 7 provided for settlement of disputes outside the court based on the recommendations made by Law Commission of India and Malimath Committee. The latter even recommended to make it obligatory for the court to refer the dispute, after issues are framed, for settlement either by way of arbitration, conciliation, mediation, judicial settlement or through Lok Adalat. To that end, the statute has introduced Order X by the Amendment Act, 1999.  Rule 1A provides that after recording the admissions and denials, the court shall direct the parties to the suit to opt either mode of the settlement outside the court as specified in sub-section (1) of section 89 i.e. arbitration, conciliation, judicial settlement including settlement through Lok Adalat or mediation.  The Hon’ble Supreme Court of India has opined, “It is quite obvious that the reason why Section 89 has been inserted is to try and see that all the cases which are filled in Court need not necessarily be decided by the Court itself.  Keeping in mind the laws delays and the limited number of Judges, which are available, it has now become imperative that resort should be had to Alternative Dispute Resolution Mechanism with a view to bring to an end litigation between the parties at an early date."

CONCLUSIONS

Indian Institute of Arbitration & Mediation, under the able guidance of Hon’ble Mr. Justice M.N. Venkatachalaiah, Former Chief Justice of India and Former Chairman of the National Human Rights Commission is striving to achieve its focused objective of becoming one of the best ADR Institutions in the world. After the recent economic reforms and the enormous foreign investments in India, India is fast developing into a center for international business. IIAM is trying to have mutual co-operation with all major ADR institutions of the world to have a network, whereby international arbitrations could be done effectively with less expense.  IIAM is striving hard to make India a center for international arbitration with international standards.

I take this opportunity to thank ARyME for giving this opportunity to introduce and explain the activities of IIAM. 

Anil Xavier

Director - Administrator
Indian Institute of Arbitration and Mediation (IIAM)
May, 2004