With world-class investment in infrastructure, we will also be dealing with world-class disputes and hence, must be equipped with world-class dispute resolving mechanisms
It is astounding how private dispute resolution mechanism has become an intrinsic part of handling disputes these days. However, there is a shift that is recently being seen with respect to sectors involving Arbitrations. Increasing construction and infrastructure in the country has made it one of the major sectors where Arbitrations are welcomed and the stakes are higher than one can imagine. World Bank’s Logistics Performance Index (LPI) 2016 shows India to have jumped 19 places to rank 35th amongst 160 countries. The sector these days is focusing on highways, bridges, dams etc. with heavy involvement of the Government and its wings which engages many foreign players to do Engineering Procurement Construction and Commissioning (“EPCC”) in India. The infrastructure sector in India witnessed 33 deals in FY 2016-17 involving US$ 3.49 billion as against US$ 2.98 billion raised across 31 deals in FY 2015-16, with the majority of deals led by power, roads and renewable sectors, as per investment bank Equirus Capital. It is observed that most of these projects end up in disputes involving crores and it wouldn’t be wrong to say that India is rising as a hub for International Commercial Arbitrations.
While we continue to develop and improve the country’s infrastructure, we must try and deliberate on what we are doing to handle the emerging disputes effectively. Institutional arbitrations, in my opinion, are the most underestimated form of dispute redressal mechanism and we need to take inspiration from institutions like the International Court of Arbitrations of the International Chamber of Commerce (“ICC”) and the Singapore International Arbitration Centre (“SIAC”) which being the most preferred institutions, have changed the face of Institutional Arbitration. It is time for us to find the bug and put in place redressal techniques to help not only the government but business communities as well.
“Foreign collaborations can unfold the future of our Arbitral Institutions”
The National Highway Authority of India (“NHAI”) has institutionalized a Society for Affordable Redressal of Disputes (“SAROD”) to expedite resolving of disputes arising out of various kinds of contracts between NHAI and Concessionaire/Contractor. While it is an encouraging step, it is also commendable that an effort has been made to deal with the heavy caseload of highway and road projects. Interestingly, SAROD rules also provide for E-Arbitration which allows submission of pleadings, defense statements etc. through E-mail and holding of proceedings via video conferencing. Even though we see this as a progressive step, we cannot overlook the fact that the SAROD Arbitration Rules are meant to deal with Domestic Arbitrations only and International Commercial Arbitration finds no mention. This can create a roadblock in the success of this Institution as Indira Gandhi once rightly said, “You cannot shake hands with a clenched fist”. Undoubtedly, enough efforts have been made to help private dispute resolution grow and uplift standards of our Arbitral Institutions but on the global front, we have closed doors for all the market’s upper crust i.e. foreign players. The reason behind success and rise of SIAC as an Arbitral Institution is the pro-arbitration Singapore an government and most importantly, the fact that its rules are acceptable worldwide. It is rather inconceivable that SIAC has introduced International Arbitration Tax Incentive which gives fifty percent exemption on income arising out of international arbitration
cases and it has also made provision for tax exemptions to non-resident arbitrators. Needless to mention that international standards are skyrocketing and we are yet to make our first flight.
The Road Transport & Highways Ministry has invested around '3.17 trillion (US$ 47.7 billion), in the past two-and-a-half years for building world-class highways in the country. The Government of India is expected to invest massively in the infrastructure sector, mainly highways, renewable energy and urban transport, prior to the general elections in 2019. The figures indicate that with these “world-class” investments in future, we will also be dealing with “world-class” disputes and not being equipped with “world-class” dispute, resolving institutions will down the shutters on our global expansion. Before we aim for international recognition of our institutions, we must primarily try to prevent International Commercial Disputes that involve our government going abroad to seek help. It is a long road ahead but we must begin the journey in order to end it.
While multiple foreign investors have been investing in India, there have been considerably less investors opting for India as a seat for Arbitration. Therefore, with globalization greatly increasing trade and investment, it is the need of the hour to depict our State as not just investment-friendly but a pro-dispute resolving jurisdiction as well. The Law Commission in its 246th Report while proposing amendments to the Arbitration and Conciliation Act, 1996, inter alia studied the importance of promoting Institutional Arbitrations in India and also revealed in its recommendation that “The spread of institutional arbitration however, is minimal in India and has unfortunately not really kick-started. In this context, the Act is Institutional arbitration agnostic – meaning thereby, it neither promotes nor discourages parties to consider institutional arbitration”. The Commission also recommended formation of an Arbitral Commission of India which would be represented by all the “stakeholders of arbitration” and would carry out the task of promoting Institutional Arbitration. Unfortunately, the Arbitration and Conciliation (Amendment) Act, 2015 has not taken any stance with respect to the recommendations mentioned above. The amendments brought in 2015 have made all the efforts of streamlining the fee structure of arbitrators to make it a cost-effective remedy, set timelines for delivering an award but nevertheless have still resorted to ad-hoc form of arbitration.
We are already thinking of Commercial Courts and Commercial divisions to take away the caseload of adjudication but why are we failing to structure and empower resolving of disputes privately? With this current approach, we have dug too many pits without caring to plant trees and most importantly, nurture them as they grow. It is essential that we try to improvise on what we have in hand instead of jumping the gun. Our institutions need international recognition as well as international assistance for them to meet the benchmark. In my opinion, there has to be a monitoring body to advise and keep performance records of all the Institutions. Inviting foreign Institutions to collaborate or assist in matters can also prove to be very beneficial. The Indian Council of Arbitration is already known to be working in collaboration with many International Organizations, and being one of the most preferred Indian Institutions, it can play a big role in being the guiding light for others.
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.