BJP promise on developing arbitration is good news
Reliance Industries may feel particularly aggrieved in that, though it began arbitration proceedings against the government almost 30 months ago, the process has not even begun since the third or presiding arbitrator has not yet been named—after naming the arbitrator, the Supreme Court withdrew the name. It, however, joins a long list of firms aggrieved by not just the delays in Indian courts, but also in the manner India implements its alternate dispute resolution mechanism. While there are several cases of arbitral awards that have not been implemented, the most illustrious of them is that involving Australian mining firm White Industries. White won an arbitration case against Coal India in May 2002, but Coal India got this set aside by the Calcutta High Court—the case is still pending in the Supreme Court. Meanwhile, White applied for justice under the India-Australia Bilateral Investment Treaty (BIT)—it argued the delay in enforcing an arbitral award violated the ‘effective means’ standard incorporated in the BIT, and won the case in 2011 though the government argued the case did not come under the jurisdiction of the BIT.
Which is why investors would cheer the BJP’s manifesto when it says, as it does, that special emphasis will be paid to developing India into a global hub for arbitration. Were the BJP to look at how to speed up arbitration proceedings, it needs to look at two specific flaws in the Arbitration and Conciliation Act of 1996, supposedly cast along the lines of modern arbitration laws in other countries. The very first hurdle is Section 9 that grants courts the power to grant ‘interim’ protection to parties prior to them approaching the arbitration tribunals. The problem, however, is that having got ‘interim’ protection, parties often fail to approach the arbitration tribunal. Once this hurdle is crossed, and the arbitration panel is constituted and even gives its award, you come to the hurdle called Section 34 that allows courts to set aside arbitral awards on various grounds, the most prominent being what is called ‘public policy’—any award that a smart lawyer can argue is in conflict with whatever can possibly be defined as ‘public policy’ is liable to be set aside. What was meant to be an alternate and quick dispute resolution, away from lengthy court proceedings, has got stuck in those very courts. It needs rescuing at the earliest.