This article has been authored by Yashwardhan Singh is a 3rd year law student at Jindal Global Law School, O.P. Jindal Global University.
Introduction
Establishing itself as a leading and trustworthy hub for international arbitration has been a sustained objective in India’s legal evolution. The author believes that the power to take a remarkable leap towards that objective rests with a committee under the Chairmanship of Dr. T.K. Viswanathan that looks to decipher the viability of having separate laws for domestic and international arbitration, nearly 20 years after this idea was first evaluated in 2003. The 2003 Arbitration and Conciliation (amendment) bill stated, “The main problem with the existing Act was that UNCITRAL Model Law which was meant as a Model for International Arbitration was adopted also for domestic arbitration between Indian parties in India. In several countries, the laws of arbitration for international and domestic arbitration are governed by different statutes”. In light of these observations, in this article, the author presents an argument for separating the legislation for international and domestic arbitrations and delves into how that decision could propel parties to view India as an arbitration-friendly jurisdiction.
Separate Legislation: A Natural Evolution of the Current Legal System
Before delving into the merits of having separate laws, it is pertinent to note that the already existing legal setup noticeably has a dual system that has been consolidated in one statute which negates the benefits of both, a uniform law and two separate statutes. This, in the author’s opinion, results in a system that is indeed functional but functional at best. Part I of the Arbitration and Conciliation Act (Arbitration Act) deals with domestic arbitration and part II with recognition and enforcement of foreign awards. This arrangement for having two systems under one statute breeds confusion as courts have, in some cases, applied provisions of Part I in international arbitrations because certain sections in Part I such as sections 11 and 34 did lay down provisions for it. The court later changed its position to determine the applicability of Part I on the basis of the seat of the arbitration which prompted the 2015 amendment. However, even after this amendment, the criterion for deciding the nature of the arbitration still remains ambiguous. A partial reason for this ambiguity is also that the international arbitration system of the model law has been adapted for both domestic and international arbitration in India which resulted in courts misapplying jurisdiction which did not technically apply to domestic arbitration thus this model law system, which was created for international arbitration, has turned out to be a bad fit for our domestic setup.
It is undeniable that international and domestic arbitration are quite distinct in nature. International arbitrations need to abide by several jurisdictions and international laws but are not bound by domestic laws. Thus, using a one-size-fits-all policy would compromise the efficacy of either one or both systems. Further, international arbitration in India presently has a significantly higher standard than its domestic counterpart as the quality of domestic arbitrators has witnessed some scrutiny. This is also a major reason behind the higher degree of involvement of courts in arbitral proceedings in India which puts off several international parties. Against this backdrop, separate legislation would solve a multitude of problems. It would help minimise judicial involvement in international arbitrations while also bringing it in line with the latest global practices, and help achieve ease in doing business across borders. A separate legislation would also push for institutional arbitration which, according to the chairperson of the Indian International Arbitration Centre’s claims will significantly boost the international arbitral landscape because presently no arbitral institute in the country is on the level of world-renowned ones like the Singapore International Arbitration Centre and the London Court of International Arbitration. This separate legislation would not only benefit international arbitration but also provide the required bandwidth to allow the upliftment of domestic arbitration to help it match the standards of the international one. Moreover, Most problems regarding the ambiguity in the application of laws and jurisdictions would also be clarified as the international arbitrations would then shift to an opt-in opt-out model, followed by the leading arbitration hubs like Singapore and France and the domestic statute can be tailor-made to fill the gaps in the current domestic model. All in all, the separate statutes would make Indian arbitration more pro-enforcement.
Global Horizons and Strategic Opportunities
A separate law for international arbitration can help remove some of the tallest obstacles that currently lie on the path of India becoming a foreign party’s go-to one-stop destination for arbitration. One of the biggest ones being that the international arbitration forums can now seamlessly extend their jurisdiction to arbitrate various matters without the need for evaluating their compatibility with domestic provisions. Issues such as minority oppression, company management, intellectual property, and allegations of fraud are issues where the arbitrability in India is unclear. This posed a massive problem for foreign parties as if there was a chance of these issues ever coming up in discussion, parties would immediately start looking for other options like Singapore or France where these issues are clearly arbitrable. With a separate law, the possibility of directly enforcing foreign awards can also be considered which currently requires the foreign tribunal to grant interim relief. These efforts coupled with the fact that the judicial intervention will significantly reduce will entice many foreign parties to give Indian arbitration a chance. The parties will not be afraid of judgements that could change the interpretation of laws and issues such as the group of companies doctrine and stampings will no longer deter interested parties. The increased party autonomy will also be an added boon as parties will be able to choose an opt-in or opt-out approach (which several important judgements have unsuccessfully tried to implement) and thereby expressly assert their intentions regarding the degree of judicial involvement they would want. This reduces the court’s work as well as they will neither have to decide the jurisdiction nor look into the intent of parties through the medium of their preferred kind of arbitration. A separate law, in the author’s opinion, will paint a picture showing to the world that India has become a more trustworthy and well-equipped venue that has made special laws just to effectively deal with international arbitration and not as a nation that distrusts their own domestic arbitration system (as argued by some people against the idea of implementing separate laws). Thus, against the backdrop of these aforementioned arguments, the author would see not separating the laws for international and domestic arbitration as a lost opportunity for specialisation and garnering global confidence in the Indian legal system.
Way Forward
In navigating the intricate path toward establishing India as a premier hub for international arbitration, the decision at hand mirrors a critical juncture. From the author’s vantage point, the current legal statute, ostensibly labelled as a “harmonious law,” masks a dual system that not only breeds confusion but also hinders the potential of each component. However, the committee set up to analyse the viability of a separate law gives the country a golden opportunity to transcend the limitations posed by the incomplete and implied duality of the current legal structure. Key elements, such as the prospect of improving institutional arbitration, the interest of global stakeholders, the underperformance of the domestic system, and crucial statutory sections like sections 8, 11, and 34, align to signal this transformative shift. This shift will not only clarify ambiguities but also signify India’s unwavering commitment to becoming a globally recognised arbitration-friendly jurisdiction, fostering a pro-enforcement environment. The author believes that this change, although will take us back to the pre-1996 regime of having separate laws, is only a strategic and logical evolution of the current statute, that will guide the nation towards its aspirational destination.