Arbitration gains ground in India despite holdups and cost concerns

Arbitration as a form of dispute resolution is increasing in popularity in India, but remains beset by administrative problems, a survey has found.

The report, produced by Ernst & Young’s Indian fraud investigation and ­dispute services group, shows that the vast majority of Indian contracts now include an arbitration clause. However, the use of ­arbitration varies, with international arbitration as popular as ad hoc ­arbitration in India.

The survey states that institutional domestic arbitration is yet to take off, and the ad hoc variety “may result in a company getting caught in the legal tangle and not really benefiting from arbitration”.

The Indian subsidiary of the London Court of International Arbitration (LCIA) is the most popular domestic centre, with 34 per cent of respondents saying that they would be happy to refer ­disputes there.

Overseas centres are more popular. A majority (60 per cent) of respondents said they would rather go to the Singapore International Arbitration Centre than arbitrate in an Indian institutional centre. The LCIA in the UK is also popular, with 50 per cent of respondents preferring it to domestic centres.

Those surveyed said international arbitration centres tend to be more flexible and neutral than domestic ones, with their decisions seen as more binding.

Major hurdles for Indian arbitration entities are cost and process. Only 31 per cent of survey respondents thought arbitration in India was cost-effective, while 46 per cent disagreed. Timeliness was even more strongly criticised, with 50 per cent disagreeing that arbitration in India provides timely ­resolutions against a mere 17 per cent agreeing.

The report states: “The timeframe for the completion of proceedings has been done away with, based on the presumption that ­judicial interference is the root cause of delays.”

Most arbitrators in India are retired judges, but 68 per cent of respondents said they would prefer to have a professional expert in the dispute’s subject matter ­sitting on the arbitral panel.

Trilegal litigation partner Sitesh Mukherjee said the use of retired judges has tended to make arbitration in India similar to the court process. He suggested that experienced lawyers could be trained to increase the pool of arbitrators.

Mukherjee said government proposals to introduce a commercial division to High Courts in every state would increase awareness of arbitration.

“The government clearly realises that to attract investment it’s important to have a proper process for disputes,” he added.

He also agreed with respondents that arbitration is gaining in popularity in India, pointing out that 25 to 30 per cent of ­Trilegal’s litigation revenues now come as a result of arbitration work.

Ernst & Young surveyed 68 people, including ­general counsel, partners in private practice, arbitrators and advocates. The respondents represented a variety of ­sectors and business types.

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