There have been two major initiatives by GoI in the last week that will help change the perception of India as a barrier-free destination for doing business. Last Thursday, Parliament passed the New Delhi International Arbitration Centre (NDIAC) Bill, meant to boost efficacious conduct and management of Alternative Dispute Resolution (ADR) proceedings.
As an autonomous institution, NDIAC will aim to make India the hub for arbitration matters.
On the same day, the Arbitration and Conciliation (Amendment) Bill was also passed. This Bill provides for the establishing of the Arbitration Council of India (ACI), an independent body empowered to frame rules on grading institutions and setting out norms on accreditation of arbitrators, quality and performance monitoring, and building capacity for arbitrators.
Arbitration is a vitally important supplement to enhance ease of doing business. It can greatly alleviate the pressure on courts, thereby reducing pendency, as well as instil investor confidence, if the dispute-resolution processes are efficient, swiftly expedited and effective.
Pendency in the courts today is a serious concern. The National Judicial Data Grid estimates that there are more than three crore cases pending across courts, with approximately 65 lakh cases pending for over five years.
The enforcement of contracts, as well as the time taken to resolve matters, are likely to worry potential investors. It is, therefore, vital that institutional arbitration is implemented across sectors.
As of now, a number of arbitral domestic and international institutions do exist in India. However, none is of global repute. This is what the NDIAC plans to become. The training of arbitrators, especially for those not having any judicial background, is needed so that the awards passed by them can withstand judicial scrutiny.
Messaging is critical. Promoting arbitration and, therefore, preventing private players to rush to the courts without resorting to the relevant provisions of arbitration in the contract, must be a goal.
This can be handled by creating awareness, and leaving a limited scope of the award being challenged under Section 34 of the Arbitration Act, 1996.
Over the past four years, legislative and executive changes have been brought about. The amendments to the Arbitration and Conciliation Act were passed in 2015 to make the arbitration process user-friendly, cost-effective and ensure speedy disposal. Indian arbitral institutions must now demonstrate that they are integrated with international institutions, and can deliver effective arbitration work at lower costs.
India will not have a robust domestic arbitration environment unless institutional arbitration becomes mandatory. This can only be done if arbitration agreements mention the specific institution that will conduct arbitral proceedings.
Once domestic arbitration becomes popular through institutional arbitration, it eventually will lead to international commercial arbitrations being conducted in India. To promote India as a business and arbitral destination, all government contracts should have a neutral arbitration institution. And to promote India as a hub, this arbitral institution should be indigenous.
GoI has made major strides in greater efficiency and efficacy in resolving commercial disputes, including major legislative measures on promoting ADR. With topclass arbitration as an alternative, many of the concerns regarding enforcement and delays in the courts will likely dissipate.
(The author is CEO, NITI Aayog)