Future of Arbitration

Arbitration is one popular way to settle disputes privately between two parties without going to Court. It has existed since the 1980s to make handling disputes faster and more flexible than a traditional Courtroom.

In Arbitration, both parties take place in a conference room instead of a Courtroom to deal with the dispute and come up with an Arbitration Agreement where both parties agree to the Agreement to avoid disputes in the future.

The Arbitration and Conciliation Act was created in 1996 in India based on the rules set by the United Nations Commission on International Trade Law (UNCITRAL).

Many changes have shaped Arbitration Law in recent years, from new laws to regulations. However, many people are not aware of this Arbitration and its future scope. Don't worry!

In this article, we will dive deep into the Arbitration process, its role, recent changes, and the future of Arbitration.

What Is Arbitration?

Arbitration is an Alternative way to handle a dispute between two parties and resolve the matter privately without going to the Court. This helps to make the process faster and ensures both parties agree with the final agreement. Arbitration awards are enforceable in over 150 countries globally due to the New York Convention. The Arbitration process consists of a simplified trial privately with rules of evidence for an Arbitrator (Judge) to hear both parties and come up with a decision like a court order.

The Arbitration Council of India

The Arbitration Council of India was created under the Arbitration and Conciliation (Amendment) Act, 2019. It was created to enhance India's Arbitration Procedure and ensure it is aligned with global standards. The council's main role is to promote and regulate arbitration in order to meet professional standards across all Arbitration activities in India.

In 2019, the Amendment introduced a new system where Arbitration institutions are rated or graded by the Arbitration Council based on several factors, including facilities, skills, and experience of their Arbitrator. As these Arbitration situations are private, it's important to implement a grading system to know the quality and fairness of the Arbitration process.

Plus, the Amendment also allows the Supreme Court and High Courts to choose any Arbitration institution depending on the Case. So, it Automatically reduces the Court involvement and praises the new Arbitration system.

The Arbitration system is encouraging more people and businesses to consider Arbitration for settling disputes rather than the Traditional Court process to make the entire process faster and more flexible.

Importance Of Arbitration

One of the biggest facts in India is that legal operations are extremely slow and time-consuming, and it's becoming a big issue in those legal disputes where time is precious. This is where Arbitration comes in importance in India, and it has become the best alternative to going to Court. 

The Arbitration is a privately held Court where Retired Judges or Attorneys handle the Arbitration process and mainly focus on coming up with a settlement that both parties agree to. One thing that differentiates traditional Court from arbitration is that there's no code of procedure, and they mainly focus on settling whatever they want. 

Section 19 of the Arbitration & Conciliation Act,1996, states that "the Arbitral Tribunal shall not be bound by the Code of Civil Procedure of 1908 or the Indian Evidence Act of 1872. Because both parties agree with the procedure followed by the Arbitral Tribunal in conducting its proceedings. 

It gives the parties the freedom to mutually decide and come up with an agreement. Such flexibility in Arbitration makes it a better laxative to litigation.

Disputes Governed And The Current State Of Arbitration

Currently, the Indian Institution is not as effective as it could be, and this statement is based on India's Ranking in Global Reports. Here's the Case of the World Bank Report 2019:

• Ease of Doing Business: India Ranks 77th out of 190 Countries.

• Enforcing Contracts: India Ranks 163rd out of 190 Countries.

• Average Days To Resolve Commercial Disputes: It takes about 1445 days.

The Indian Arbitration system doesn't cover every type of dispute. It's mainly used for Commercial issues but is not able to handle Criminal Cases, Family-Related Disputes, etc. However, there's still room for improvements in Arbitration to make it more effective and accessible.

Judgements Of Courts

India is heavily working on improving its Arbitration System. There are some recent changes made to Section 34 of the Arbitration Act, which states that if someone wants to change their Arbitration Case, then the changes must be new and different from the original request. So, it helps only make relevant changes.

Plus, some recent cases show how the Indian system focuses on Arbitration. For example - In the Case of Bar Council of India vs. A.K. Baja & Ors, the Supreme Court ruled that Foreign Laws can handle the Arbitration Case in India, but they can't practice in Indian Courts.

On the other hand, in Mohini Electricals Ltd. v. Delhi Jal Board, the Delhi High Court decided that Arbitration is not allowed to set deadlines for paying stamp duty, so there's no required timeline for the payment. Both these Judgments of Courts help to make Arbitration in India more effective.

Third-Party Funding Of Arbitration

Paying for Legal disputes can be very expensive for some companies, and it may affect their finances and market reputation. That's why most companies prefer third-party funding during the Arbitration to let the third party pay for the Arbitration Process. It helps them to save their own money and improve their Financial Status, where a third party pays for the Arbitration process when the company wins the case.

However, there's no Specific Law in India that covers third-party funding. But, the Supreme Court has hinted that it's allowed, and there are no clear instructions not to use the third-party option.

In 2017, the B.N. Srikrishna Committee recommended that India adopt the third-party function for the arbitration process, as in other countries like Singapore. It helps to make Arbitration more feasible and a preferred option for companies during legal disputes.

Technology-Driven Arbitration

When COVID hit, the use of Technology increased, and now it's one of the essential parts of Arbitration. Virtual hearings and online meetings become a common part of the Arbitration Process to speed up the process, cut costs, and save time. So, both parties who are having legal disputes can go for Arbitration from anywhere in the world with the help of virtual hearings. Technology Adoption is one of the reasons why impending Arbitration is easier in India.

The Provision Of Emergency Arbitration

Emergency Arbitration is one of the recent additions to the Arbitration system, which allows for quick action for urgent cases. So if both parties are in a legal dispute and looking for immediate help, then Arbitration has the energy option to handle urgent issues rather than wait for the Court Process.

Once, it happened in the case of Amazon vs. The Future Group, where the Court confirmed this case was recognized as emergency Arbitration and enforced under Indian law.

Some of the top bodies like SIAC, ICC, and LCIA are already using emergency arbitration for such needs.

In India, the 246th Law Commission Report suggested updating the Arbitration and Conciliation Act of 1996 to officially include the Emergency Award, and the Delhi High Court has already started using it.

The Challenges To Arbitration

While several steps have been taken towards increasing the growth of Arbitration in India, some challenges still need to be faced. Here are some common challenges to Arbitration:

• There are no strict rules regarding Arbitral Awards

• Lack of awareness about the Arbitration Procedure among the masses.

• There's no time limit set for completing the Arbitration Process.

• The appointment of Arbitrators is a trying process.

India's Future In Arbitration

The future of Arbitration is promising, and India is positioning itself with recent changes in the Arbitration process and streamlining by reducing Court intervention and pushing more towards Arbitration. After the COVID hit, the Country has also embraced technology to enhance the Arbitration process and focus on flexibility. These continuous efforts make arbitration a more reliable option with the aim of both Domestic and International Users.

Conclusion

Arbitration is playing a Crucial Role and becoming a more flexible and cost-effective alternative solution than Traditional Court hearings. Recent improvements to the Arbitration Act, such as Technological Advancement, the Adoption of Emergency Arbitration, and more focus on the Arbitration system, it clearly shows that the future of Arbitration is promising, and there will be more improvements in the Arbitration Act for more awareness and an easily accessible system. We hope this guide will help you know everything about the Arbitration system and its future scope.