1. Background

(i) How prevalent is the use of arbitration in your jurisdiction? What are seen as the principal advantages and disadvantages of arbitration?

Arbitrations are very common in commercial contracts in India (especially in cross border agreements). Indeed, arbitration clauses are not only advisable, they are considered necessary. This is because the ordinary civil courts (which would otherwise entertain a suit for damages or breach of contract) are so badly clogged with backlog and judicial delays that in low stake matters it can become pointless to pursue these remedies. Added to this are ad valorem court fees payable up front in civil suits.

The principal disadvantages of an arbitration in India are: the lack of a pool of specialized arbitrators; the absence of strong domestic arbitration institutions; and local arbitrators (mostly retired Judges) not being in sync with the best practices of international commercial arbitration. At the same time, India is an arbitration friendly jurisdiction and the State is working vigorously toward strengthening arbitrations.

(ii) Is most arbitration institutional or ad hoc? Domestic or international? Which institutions and/or rules are most commonly used?

Most arbitrations are ad hoc. UNCITRAL Rules are sometimes used in ad hoc international arbitration.

Amongst the domestic arbitration institutions, the Indian Council of Arbitration (ICA) (headquartered in New Delhi) was historically at the forefront but is now perceived to be suitable only for low stake domestic arbitrations. The Delhi International Arbitration Centre (which functions under the aegis of the Delhi High Court) is popular for Delhi seated arbitrations. The Mumbai based MCIA (Mumbai Centre for International Arbitration) is rapidly emerging at the forefront for international arbitrations. However, the Delhi based International Center for Alternate Dispute Resolution (ICDAR) (to be renamed as the New Delhi International Arbitration Centre) is set to be the main arbitration institution due to recent legislative intervention. The New Delhi International Arbitration Centre Act, 2019 (No.17 / 2019) provides for the takeover of the ICDAR by a new autonomous institute (created under the Act) called the New Delhi International Arbitration Centre. The Statute conceives this to be an autonomous institute with requisite State backing to make it a hub for institutional arbitration. Accordingly, the New Delhi International Arbitration Centre has been declared to be an institution of 'national importance'.

Amongst the international institutions, the Singapore International Arbitration Centre (SIAC) has gained a prime place. The ICC is very popular too (specially with Government agencies).

(iii) What types of disputes are typically arbitrated?

Shipping, construction, joint venture agreements and cross border commercial contracts usually contain an arbitration clause. However, for loans and borrowings, arbitrations are not ordinarily used, as the lenders typically depend on the built-in securitization mechanism contained in special statutes which affords them vigorous protection.

(iv) How long do arbitral proceedings usually last in your country?

A standout feature of the Indian statute is the strict timelines it prescribes in relation to arbitration proceedings. Provisions to this effect were introduced vide an Amendment in 2015 to the Arbitration and Conciliation Act, 1996 (Act) and further amended in 2019 (w.e.f. 30th August, 2019). The timelines prescribed are as below:

  • In domestic arbitrations, the arbitral tribunal is required to deliver its award within 12 months from the date of completion of pleadings (which expression is not defined). This does not apply to international arbitrations (where the arbitral tribunal is to endeavour to dispose the proceedings within 12 months or "as expeditiously as possible").
  • Parties may consent to extend the period of 12 months by another 6 months (but no further).
  • Upon expiry of the aforesaid period, any party may apply to the competent court for an extension, which extension may be granted only for a sufficient cause and on terms which may entail substitution of one or all of the
  • The mandate of the arbitrator shall continue during the pendency of an application for extension of time. The court can extend the time even if the mandate of the arbitrator stands terminated due to lapse of time.

(v) Are there any restrictions on whether foreign nationals can act as counsel or arbitrators in arbitrations in your jurisdiction?

The Act expressly states that a person of any nationality may be an arbitrator, unless otherwise agreed by the parties. It is fairly common for foreign arbitrators to sit as arbitrators in high stake international arbitrations. Foreign advocates sometime appear in arbitrations and there is no legal bar to do so in relation to international commercial arbitration.

The 2019 Amendment however has introduced a controversial provision. Where parties do not have a mechanism to appoint an arbitrator (or chairman) and cannot mutually agree on the same necessitating resort to a court (under Section 11 of the Act) to make the appointment, only a person of Indian nationality can serve as an arbitrator (whether the arbitration concerns Indian or non-Indian parties). This newly introduced provision is in conflict with Section 11 (9) of the Act which envisages appointment of an arbitrator of a nationality other than the nationality of the parties (where the parties belong to different nationalities) and has rightly attracted fair bit of criticism. It is believed that the Government is considering a suitable amendment to remove the anomaly.

Download >> Arbitration Guide IBA Arbitration Committee - INDIA - (Updated December 2019)

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