Report No. 246

Institutional Arbitration in India

5. Arbitration may be conducted ad hoc or under institutional procedures and rules. When parties choose to proceed with ad hoc arbitration, the parties have the choice of drafting their own rules and procedures which fit the needs of their dispute. Institutional arbitration, on the other hand, is one in which a specialized institution with a permanent character intervenes and assumes the functions of aiding and administering the arbitral process, as provided by the rules of such institution.

Essentially, the contours and the procedures of the arbitral proceedings are determined by the institution designated by the parties. Such institutions may also provide qualified arbitrators empanelled with the institution. Further, assistance is also usually available from the secretariat and professional staff of the institution. As a result of the structured procedure and administrative support provided by institutional arbitration, it provides distinct advantages, which are unavailable to parties opting for ad hoc arbitration.

6. The spread of institutional arbitration however, is minimal in India and has unfortunately not really kick-started. In this context, the Act is institutional arbitration agnostic - meaning thereby, it neither promotes nor discourages parties to consider institutional arbitration. The changes suggested by the Commission however, attempt to encourage the culture of institutional arbitration in India, which the Commission feels will go a long way to redress the institutional and systemic malaise that has seriously affected the growth of arbitration.

7. The Commission has, therefore, recommended the addition of Explanation 2 to section 11(6A) of the Act with the hope that High Courts and the Supreme Court, while acting in the exercise of their jurisdiction under section 11 of the Act will take steps to encourage the parties to refer their disputes to institutionalised arbitration. Similarly, the Commission seeks to accord legislative sanction to rules of institutional arbitration which recognise the concept of an "emergency arbitrator" - and the same has been done by broadening the definition of an "arbitral tribunal" under section 2(d).

8. In this context, the Commission notes the establishment and working of the Delhi High Court International Arbitration Centre which started in 2009 and is now fairly established and is providing good service to its users. The Punjab & Haryana High Court has also started an Arbitration Centre in 2014 with its own set of rules.

The Commission further notes the working of the Indian Council of Arbitration (ICA), which is associated with FICCI and which is one of the earliest arbitral institutions in the country. The Commission further commends the working of the Nani Palkhivala Arbitration Centre in Chennai which similarly has its own set rules, governing body and staff, and is well established in the southern India.

9. In order to further encourage and establish the culture of institutional arbitration in India, the Commission believes it is important for trade bodies and commerce chambers to start new arbitration centers with their own rules, which can be modeled on the rules of the more established centers. The Government can also help by providing land and funds for establishment of new arbitration centers.

It is important to start a dialogue between the legal community which is involved in the practice of arbitration, and the business community which comprise of the users of arbitration, in order that institutional arbitration takes wing. The Government may also consider formation of a specialised body, like an Arbitral Commission of India, which has representation from all the stakeholders of arbitration and which could be entrusted with the task of, inter alia, encouraging the spread of institutional arbitration in the country.