On Thursday, the Lok Sabha passed the government's Arbitration and Conciliation (Amendment) Bill. Had the Congress Party not been boycotting parliament, I would have spoken on the subject. I would have taken longer than the length of a column to do it, but my main concerns haven't been addressed, and they are worth airing before the Bill goes to the Rajya Sabha.
First, all citizens of India should be alarmed at the large number of Ordinances which have been brought in under the garb of "governance'' by this government. The power to promulgate ordinances, under Article 123 of the Constitution, is a special intervention by the Executive as a matter of last resort to fill a policy vacuum. By promulgating more than ten Ordinances in the last few months, including the Arbitration and Conciliation (Amendment) Ordinance, 2015 (on 23 October), the government has overlooked the route of mediating to achieve conciliation among parties, but has instead bred a culture of 'governance through ordinance'.
Having said that, however, there is no doubt that an efficient Alternate Dispute Resolution (ADR) system is crucial for a country like India. We cannot expect our business ventures to succeed if they are stuck in long and tedious judicial proceedings to resolve their disputes. It is an undisputed fact that litigation is a time-consuming exercise in India. As of 2014, the number of pending cases in the courts of India were as high as 65,970 cases in the Supreme Court, 44,79,023 cases in the High Courts and 2,73,60,814 cases in the District Courts of the country - a total backlog of more than three crore cases in courts across the country.
Our economic growth and burgeoning population have not seen an equal increase in the number of courts and judicial officers. I have myself urged the government on many occasions to establish a Bench of the High Court of Kerala in Thiruvananthapuram, the capital of Kerala, to supplement the High Court at Ernakulum for the expeditious disposal of cases. I have a pending Private Member's Bill in this House for this cause. But no action has been initiated by the Government to set up such a Bench or generally to increase the number of courts and judges in our country. Delays continue, cases pend, while justice weaves its stately, process-laden course into the dreary desert sands of dead habit.
No wonder foreign investors have shown great reluctance to set up offices in India, citing our tedious legal system. Arbitration is an excellent mechanism for speedy resolution of conflicts, but to our shame, international businesses operating in India prefer to arbitrate abroad in places like Singapore and Hong Kong. Even Mauritius is offering itself as a place to settle disputes affecting businesses in India!
To take Singapore as one example, apart from a strong legal framework, it offers hefty tax breaks to law firms on income from arbitration cases and has eased restrictions to enable foreign law firms to practice in Singapore. Singapore is therefore attracting arbitration business from our country (India is the country with the most number of cases at the Singapore International Arbitration Centre). This is a standing reproach to our failure to deliver an effective arbitration mechanism in India. We cannot urge businesses to "make in India" without encouraging them to Arbitrate in India.
Mahatma Gandhi mentions in his autobiography,
The Story of My Experiments with Truth, how it struck him one day 'that the true function of a lawyer was to unite parties riven asunder'. This is perhaps the best argument for arbitration, which has been an alternative system of justice since ancient times. One doesn't have to recall examples of arbitration in Roman law, when even in ancient India, disputes were often resolved by a single headman or a village panchayat.
The economic reforms of 1991 ushered in an era of globalisation and created a need for an alternative forum to resolve disputes involving international commercial transactions. The Arbitration and Conciliation Act, 1996 was introduced by the then Congress government to consolidate the law on domestic arbitration and provide for international commercial arbitration on the basis of the United Nations Commission on International Trade Law model. But India has resisted adopting this practice widely, and though the Act has been in force for nearly two decades now, the practice has not kept up with the law.
The BJP government's 2015 Ordinance did not do enough to minimize the supervisory role of courts in arbitration proceedings. Under clause 15 of the Ordinance, for instance, arbitration proceedings have to conclude within a period of 18 months, or else the mandate of the arbitrator will be terminated unless the Court extends the time period. But arbitration proceedings in our country take a minimum of two years to conclude and vary depending on the nature, complexity, and stakes involved in different disputes. For arbitration proceedings that exceed this time period, the parties will have to apply to the Court for an extension of the mandate of arbitral tribunals. This has created an unnecessary interference of the Court and will defeat the very objective of arbitration by delaying the arbitration process.
While the Government wants to allow High Courts in India to pass interim orders for international commercial arbitrations seated outside India, it has failed to specify the criteria for determining the jurisdiction of the High Court. Ideally the jurisdiction of a Civil Court or a High Court is determined on the basis of the place or territory of the subject. But when you are talking about International Commercial Arbitrations seated abroad, involving transactions conducted abroad, how do you decide which High Court will have jurisdiction? If we do not address this loophole, parties in dispute will have to wait for the courts to decide the criteria - which will bring in more delays in arbitration.
Additionally, the new law should have had a provision for recognizing emergency arbitrators and their decisions. Decisions of emergency arbitrators are now recognized in arbitration rules of most international arbitral institutions to assist parties who want urgent relief. Countries such as Hong Kong and Singapore have recently amended their arbitration laws to enforce the decisions of emergency arbitrators. Our new law doesn't do this.
The Arbitration practice in our country should encourage academicians or lawyers as arbitrators instead of only retired judges of the Supreme and High Courts. This is the practice in countries with successful arbitration mechanisms, such as the US. While a judge would bring judicial experience to a proceeding, arbitration doesn't have to resemble a judicial hearing. There is a need to create a pool of experienced professionals in Arbitration who can be formally trained and certified as arbitrators by a specialized body. In that regard, the law also overlooks the need for a specialized body such as an Arbitral Commission of India to encourage and create awareness of the practice of Arbitration as an alternate method of dispute resolution.
The objective of the law is supposed to be to put in place an updated and modern practice of Alternate Dispute Resolution. Yet there are no provisions that encourage the use of technology during arbitration proceedings. Use of teleconferencing and video-conferencing to replace formal sittings of the arbitral proceedings would save time and aid in a smoother and more efficient conduct of arbitration proceedings.
While I welcome the government attempting to promote arbitration through an amended law, I feel that it could have done more to modernize arbitration in our country, especially when India is favourably placed to take advantage of the shift in global trade and investment from the West. Instead of taking the challenge from Singapore and Hong Kong head on, the government has missed a golden opportunity to address and resolve issues plaguing our dispute resolution system.
We need to reform our arbitration regime to bring it into the 21st century. Sadly, the government's new law doesn't come close enough. Instead of creating the legal equivalent of a bullet-train, the Modi Government has simply missed the bus.
(Dr Shashi Tharoor is a two-time MP from Thiruvananthapuram, the Chairman of the Parliamentary Standing Committee on External Affairs, the former Union Minister of State for External Affairs and Human Resource Development and the former UN Under-Secretary-General. He has written 15 books, including, most recently, India Shastra: Reflections On the Nation in Our Time.)Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.