International Arbitration: A Healthy Export for India?

Every so often we hear distinguished speakers from hallowed forums express the desire that India should do this or that to become the next international arbitration hub. Today, we have heard this from the Parliament. I feel we should be careful what we wish for. Let me explain.

What does an international arbitration hub mean? It means a jurisdiction that parties internationally want to “seat” their arbitration at. Even arbitration which has absolutely nothing to do with that jurisdiction. In other words, what it means is that if say a South Korean and Indonesian party have a large value contract, they may chose a international arbitration hub – such as Singapore or London – as their seat of arbitration. Should we rather prefer they chose India? Why?

We are not Singapore, London or Paris. If you have any doubt, compare the dockets for a week of any of their higher courts with the dockets of any of our High Courts and you will know the difference. Our problem is not that there is not enough legal work (and I say that as a litigant and citizen; as a lawyer, of course, there is never enough). Our problem is we have too much of it. We are overwhelmed. Why on earth should we want two foreign entities to come and further clog our courts with the supervisory jurisdiction of their international arbitration? Ergo, hub is not what we need to become.

What about the international arbitration involving Indian parties? Yes, it does stand on slightly different footing, but is not the same rationale applicable? To those who can afford and are happy to have Singapore of London as seat, let them. It reduces that much burden at home. And no, Indian lawyers are not losing out. Most such arbitrations do have Indian lawyers engaged. For the rest, competition is a good thing. In my experience, it has pushed Indian law firms to improve and stand up as equals. It has benefitted the legal profession in India as a whole. The international give and take is robust and helps. What we lose is some dollars in arbitrator fee and probably administrative fee, but that is fine. We cannot corner every market. We have many others where we are indispensable. More cases in court is not what we need. International arbitration is, therefore, a healthy export for us.

Does that mean there is nothing that needs to be done to improve arbitration in India? Not what I said. We need not actively attract more, but we do have a lot already – and really a lot – which needs better handling. What we need is quicker turnaround in courts, when it comes to gateway issues – such as appointment, interim protection, etc. We need robust and strict review of Section 34 challenges in summary hearings at admission stage – a la the Delhi High Court style. Not every challenge needs a full hearing, defeats the very purpose. We need compulsory application of S. 31A to all arbitration related court proceedings without exception. This single move will reduce 90% S. 11 applications and maybe even 25% S. 9 proceedings. Fear of costs is very powerful, it is time we unleash it in Indian courts.

So, is it only the courts that’s holding back the arbitration scene in India? No. There can be improvements in the proceedings as well. We need some robust arbitration institutions beyond reproach. They are arriving, but we need more at all levels to handle the volume of low value arbitrations as well. Indian arms of the international ones would be great, too. But the LCIA India experiment did not live long. Maybe we need to study what went wrong and course correct. We need to facilitate setting up of local transcription services. That alone can speed up our proceedings by 3 to 4 times. We need to free procedure in domestic arbitrations from the shackles of Civil Procedure Code, particularly the harakiri that is proof of documents in our system.

To top it all, we need better attitude from us –  the lawyers and the arbitrators. I remember a decade back we used to complain about retired judges exclusively being arbitrators and approaching the job as a post retirement benefit scheme. There was some truth to it and, as usual, some hyperbole. Today, at least in Mumbai, more than 75% appointments by courts are advocates. Has that improved the situation? No.

The takeover of arbitrator appointment by “junior counsels” has only worsened the situation. Now it is not just the lawyer but the arbitrator as well who has no inclination whatsoever to sit for a hearing during court hours. We also fail to recognize that not every good lawyer can adorn the hat of a good judge. We have arbitrators as junior as 3 to 5 years into the profession. Maybe that’s a tad too early? Somehow, senior most partners of long standing are not considered for appointment, but a counsel with 3 to 4 years PQE is “neutral” enough. We need to change that outlook. Experience counts. There is a reason retired judges are preferred arbitrators. We must expand the pool, but experience should remain a criteria. Arbitration deserves respect, not just from court, but from its practitioners.

There is a lot we need to do. But inviting international disputes home is not one of them.  Once we have achieved the rest, even that will happen whether we want then or not. But, one institute here or there will not do it, Sir.

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One thought on “International Arbitration: A Healthy Export for India?”

  1. Such a sound analysis, Sumit. Congratulations on articulating this so well. Two points particularly stood out to me – one, the absolute disregard to the costs regime by arbitrators and courts, which must change; and two, a novel thought you’ve brought out on why senior solicitors are not offered enough arbitrator appointments.

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