India must reflect & implement essential reforms to strengthen the arbitration process
Arbitration has been struggling to take off in India since the first Arbitration and Conciliation Act, 1996. This is worrisome. From PM to vice-president, many have argued for a sound institutional arbitration process. Law minister Arjun Ram Meghwal recently even wondered why India can't become the hub for arbitration in the Asia-Pacific region.
As efforts are made to ensure its take- off, a recent finance ministry notification has the potential to nix the Act. It prohibits automatic arbitration clauses in any procurement and requires that even if one is incorporated, it be for less than ₹10 cr. The primary reason behind this is GoI's unsatisfactory experience in arbitration. The alternative prescribed is mediation or the courts, whose track record in timely disposal is poor.
Most contracts come with an arbitration clause because it is quick, and the awards are final. It is the choice for businesses not only in India but all over the world.
Arbitration as a law emerged after India signed the New York Convention and framed it based on the UNCITRAL (UN Commission on International Trade Law) model, which is uniform to most countries. For GoI, the biggest litigator in the country, to recommend avoiding that procedure amounts to it not trusting its own law aimed at improving the ease of doing business.
If arbitration is to be avoided, what are the options to settle disputes? The notification encourages GoI departments and state-run companies to choose the Mediation Act 2023, or negotiate a settlement to resolve the
