In India, up till now arbitrations have been synonymous with ad-hoc arbitrations. In an ad-hoc system of arbitration the parties are required to make their own arrangements for selection of arbitrators, for designation of rules, applicable law, procedures and administrative support. The ad-hoc proceedings can be more flexible than an administered proceeding.
The arbitration agreement, whether arrived at before or after the dispute arises, might simply state that "disputes between the parties will be decided by way of arbitration", and if the place of arbitration is designated, that will suffice. If the parties cannot agree on arbitral detail, the problems and questions attending implementation of the arbitration, for example "how the arbitral tribunal will be appointed", "how the proceedings will be conducted" or "how the award will be enforced" will be determined by the law of the place designated for the arbitration, i.e. the "seat" of the arbitration. This was held by the Hon'ble Supreme Court in BGS SGS Soma JV vs. NHPC Ltd.1 as well as in Brahmani River Pellets Ltd. vs. Kamachi Industries Ltd.2
Ad-hoc arbitrations are considered as flexible, which enables the parties to decide upon the dispute resolution procedure. This would require a greater degree of effort, co-operation and expertise of the parties in determination of the arbitration rules.
It is also relevant to note that ad-hoc arbitration is considered less expensive than institutional arbitration, as the parties only pay fees of the arbitrators, lawyer's fees, and the costs incurred for conducting the arbitration. This is so because in ad-hoc arbitration, parties tend to negotiate and settle fees with the arbitrators directly, which allows them the window to negotiate and reduce the fees.
However, such arbitrations were hit by the procrastinated manner in which such proceedings were being dragged, and the exorbitant fees that the parties ended up paying in the end. The Arbitration and Conciliation (Amendment) Act, 2015 tried to find solutions to these problem by fixing the timeline for conducting arbitrations and regulating the fees of the arbitrator's as well.
Whereas, the institutional arbitrations are the ones in which a specialized institution with a permanent character intervenes and assumes the function of administering the arbitral process, as provided by the rules of that institution. It is pertinent to note that these institutions do not arbitrate the dispute but provide the facility and infrastructure to the arbitrators to arbitrate the disputes, by laying down specific rules for every arbitration. What is of relevance here that the institutional arbitration center's, be it domestic or international are governed by their rules which provide for strict time line to be adhered to, within which time the arbitration is mandatorily required to be completed and the award needs to be passed.
The jurisdiction of these institutional arbitrations can be invoked upon a contract between the parties which stipulates for an arbitration clause, which will designate an institution as the arbitration administrator. These institutions have pre-established rules and procedures to conduct arbitrations. These institutions also have a list of qualified arbitrators, from which the parties can choose, nominate and appoint an arbitrator.
In December 2016, the Indian Government constituted a High-Level Committee under the Chairmanship of Justice (Retd.) B.N. Srikrishna (the "Committee") with the mandate to review and reform the institutionalization of arbitration. In order to promote the Committee's report a new bill was introduced i.e. the New Delhi International Arbitration Centre Bill. This Bill was passed by both the Houses of the Indian Parliament and assented by the President of India as 'The New Delhi International Arbitration Centre Act, 2019, on 26th July 2019.
This Act provides for establishment and incorporation of the New Delhi International Arbitration Centre (hereinafter the NDIAC) for the purpose of creating an independent and autonomous regime for institutionalized arbitration.
The NDIAC in terms of Section 14 of the Act aims to:
- bring targeted reforms to develop itself as a flagship institution for conducting international and domestic arbitration;
- promote research and study, providing teaching and training, organising conferences and seminars on arbitration, conciliation, mediation and other alternative dispute resolution mechanisms;
- provide facilities and administrative assistance for conciliation, mediation and arbitral proceedings;
- maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators;
- collaborate with other national and international institutions and organisations for ensuring credibility of the NDIAC as a specialised institution in arbitration and conciliation;
- set up facilities in India and abroad to promote the activities of the NDIAC;
- lay down parameters for different modes of alternative dispute resolution mechanisms being adopted by the NDIAC;
The Act by virtue of Section 15 aims to:
- facilitate the conduct of international and domestic arbitration and conciliation;
- provide cost effective and timely services for the conduct of the arbitration and conciliation at national and international levels;
- promote studies in the field of alternative dispute resolution and related matters and to promote reforms;
- undertake teaching and to provide for diffusion of knowledge of law and procedures on alternative dispute resolution and related matters and to award certificates and other academic or professional distinction;
- impart training in alternative dispute resolution and related matters to those who are handling arbitration, conciliation and mediation;
- cooperate with other societies, institutions and organisations, national or international for promoting alternative dispute resolution.
The Act in Section 28 provides for Constitution of the Chamber of Arbitration, which would empanel the Arbitrators and also scrutinise the applications for admission in the panel of reputed arbitrators to maintain a permanent panel of arbitrators. This Chamber of Arbitration shall consist of experienced arbitration practitioners of repute, at national and international level and persons having wide experience in the area of alternative dispute resolution and conciliation.
Apart from NDIAC, India already has some institutions to conduct arbitration in India. To name a few Indian Council of Arbitration ("ICA"), the Delhi International Arbitration Centre ("DIAC"), the Mumbai Centre for International Arbitration ("MCIA") and the International Centre for Alternative Dispute Resolution ("ICADR").
With the introduction of NDIAC, India is aiming at strengthening its institutional arbitrations, by providing a well laid down norms for these institutions to administer arbitrations in India. This is a step to raise India's ranking in the global scenario and make it an arbitration hub.
1. Civil Appeal No. 9307 of 2019 decided on 10.12.2019
2. Civil Appeal No, 5850 of 2019 decided on 25.07.2019
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.