“Arbitration is now the principal method of resolving international disputes involving states, individuals, and corporations. This is one of the consequences of the increased globalisation of world trade and investment. It has resulted in increasingly harmonised arbitration practices by specialised international arbitration practitioners who speak a common procedural language.’
—Redfern and Hunter on International Arbitration, USA.
The Arbitration and Conciliation Act, 1996, has brought a watershed movement to streamline the Indian Arbitration Law and to permeate it with unrivalled global modus operandi. For the last ten years, a chain of judicial pronouncements and a number of amendments, have given a whirl to metamorphose our country into a robust hub for international as well as domestic arbitration. Our country has observed some productive legal reforms in the landscape of arbitration in the recent years. The amendments have tried to orient the arbitration regime of India with the significant arbitration regimes of other realms. The Supreme Court and legislature of our country have put their best foot forward to make India an arbitration hub. With the pronouncements of reasoned judgments and the introduction of amendments to the arbitration legislation in India, the arbitration jurisprudence in India is blooming perfectly and profitably. Justice Sabyasachi Mukharji in the case of F.C.I. V. Joginderpal Mohinderpal, aptly enunciated that we should make the law of arbitration simple, less technical and more responsible to the actual realities of the situation, but must be responsive to the canons of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence, not only by doing justice between the parties, but by creating a sense that justice appears to have been done.
To make our country an arbitration hub, has been on the agenda of Indian lawmakers for quite some time now. India is making strides towards enhancing the global understanding of doing business in India. With the efflux of time, the lawmakers have amended the law as per the circumstances for the survival and well-being of the society, socially as well as economically. The importance of dispute resolution through Institutional Arbitration has gained immense significance due to the overwhelming economic growth and international trade. In this regard, Indian parties to the arbitration conjointly have started showing interest in institutional arbitration. By selecting this sort of arbitration, the responsibility of the parties is somewhat lesser as compared to the ad-hoc arbitration and because of the inclination of the parties towards the institutional arbitration in our country, the focus has raised and want of arbitration institutions has awakened.
According to Redfern and Hunter on International Arbitration, an institutional arbitration is one that is administered by a specialist arbitral institution under its own rules of arbitration. There are many such institutions, some better established than others. Amongst the most well-known are the ICC, ICSID, the LCIA, and the International Centre for Dispute Resolution (ICDR). There are also regional arbitral institutions and there are chambers of commerce with a well-established reputation. Primarily, the parties provide that the conflict will be resolved by institutional arbitration in the event of any dispute occurring during the contract duration. This kind of arbitration provides the parties with a range of services, such as the provision of a formal arbitration protocol, an experienced panel of arbitrators, and expertise to provide a swift and efficient dispute resolution mechanism. In Nandan Biomatrix Ltd. v/s D 1 Oils Ltd, it was stipulated in the contract to settle the conflict by institutional arbitration. It was established that the parties decided unanimously to resolve disputes by institutional arbitration and not through ad hoc arbitration. Therefore, a condition precedent related to a valid arbitration arrangement between the parties is an essential ingredient for the institution of the arbitration proceedings.
FEATURES AND ADVANTAGES OF INSTITUTIONAL ARBITRATION
Ad hoc and institutional arbitrations are different from each other. There are numerous advantages that institutional arbitration provides for parties as well as arbitrators. In institutional arbitration, the rules are pre-established and the parties do not have to look into such matters. The rules also undergo periodic revision in consultation with experienced practitioners. Parties are assured that their matters will get disposed of, in a precise manner. Administrative assistance is also provided through a Secretariat which helps in removing all the doubts that may arise during the proceedings or after the award has been pronounced.
In institutional arbitration, it is not necessary for the parties to choose their own arbitrators, the institutions have a list of arbitrators who are well qualified and richly experienced. The arbitrators are appointed according to the matters in issue and this helps the parties in choosing such experts who are vastly experienced in the subject matter, as their arbitrators. A plethora of important services are also provided to the parties such as providing established formats, maintaining privacy in the cases wherever required by the parties, etc. In a few cases, issues may arise in relation to the fees of arbitrators but in institutional arbitration, fees of arbitrators are fixed which means that there remains no chance for any deception or dishonesty. The specific rules and regulations provided by the institutions work to create a formal way of dealing with all the cases effectively and cogently.
DIFFERENCE BETWEEN AD HOC AND INSTITUTIONAL ARBITRATIONS
An ad-hoc arbitration has its own set of pros and cons. Despite being the most popular method of dealing with issues, there are several cases, where the results do not find it as fruitful as desired by the parties because the ad-hoc arbitration largely depends on the total effectiveness and co-operation of the parties and if parties do not adhere to an equivalent zeal throughout the proceedings, then, they could find themselves in despair. A responsibility is placed on them to appoint arbitrators who are skillful and knowledgeable. Lack of experience is one of the weighty drawbacks of an ad-hoc arbitration. Unlike an ad hoc arbitration, the timelines in the institutional arbitration are rigid and no flexibility is provided. Along with the presence of arbitrators, specialized members are also present in arbitral institutions while in an ad hoc arbitration, only arbitrators are present. Both the systems are different and it depends on the parties as to what kind of arbitration they are willing to opt for, according to their preferences.
INSTITUTIONAL ARBITRATION IN OUR COUNTRY
In the year 2019, the Arbitration and Conciliation (Amendment) 2019 was passed. It was brought into force with the view of introducing institutional arbitration in the country. It is well known that in India, ad hoc arbitration prevails. However, it was noticed that the institutional arbitration is needed to keep the working of arbitration fluent. The Amendment proposed various changes that were the need of the hour. One of the major steps was the formation of the Arbitration Council of India which shall take all such measures to promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanism and for that purpose to frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. It shall also frame policies governing the grading of arbitral institutions; recognize professional institutes providing accreditation of arbitrators; review the grading of arbitral institutions and arbitrators; hold training, workshops and courses in the area of arbitration in collaboration of law firms, law universities and arbitral institutes; frame, review and update norms to ensure satisfactory level of arbitration and conciliation; act as a forum for exchange of views and techniques to be adopted for creating a platform to make India a robust centre for domestic and international arbitration and conciliation; make recommendations to the Central Government on various measures to be adopted to make provision for easy resolution of commercial disputes; promote institutional arbitration by strengthening arbitral institutions; conduct examination and training on various subjects relating to arbitration and conciliation, establish and maintain depository of arbitral awards made in India; make recommendations regarding personnel, training and infrastructure of arbitral institutions, etc. The arbitral institutions stand as a robust preference for the business communities because of the various productive services they provide. However, our country has not fully accommodated the institutional method but it will surely evolve in the near future.
CONCLUSION
Some of the arbitral institutions even provide rules for scrutiny of the draft award before the final award is issued. An aggrieved party could then appeal to an arbitral tribunal of the second instance which might be ready to confirm, vary, amend or put aside the draft award. There are some issues and challenges that are being faced with institutional arbitration like the fee becoming excessive for the parties and in such cases, the parties may not be able to take advantage of the features available in institutional arbitration. Such issues need to be redressed so that arbitral institutions can bloom in our country effectually. The report by the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, headed by Justice B.N. Srikrishna, Retired Judge, Supreme Court of India, had identified a number of factors for the limited success of institutional arbitration in India, which are – lack of credible arbitral institutions, misconceptions relating to institutional arbitration, lack of governmental support for institutional arbitration, lack of legislative support for institutional arbitration, and judicial attitudes towards arbitration in general. Therefore, concerted steps need to be taken by all stakeholders for ballooning the institutional arbitration mechanism in our country. We need an arbitration bar having detailed knowledge and training of the arbitration jurisprudence who can work in perfect coordination with proficient institutions of arbitration for the burgeoning of institutional arbitration in our country, by remembering the words of Justice Ajit Prakash Shah—the need of the hour is institutionalisation of arbitration in India to ensure the delivery of speedy and effective justice.