Open Access Research Article
ARBITRATION- AN OLD MAN’S CLUB?
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Article Details
ARBITRATION-
AN OLD MAN’S CLUB?
AUTHORED BY
- SEJAL CHAUDHARY
INTRODUCTION
The ever-developing globalized world
with its increasing international trade and commerce has led to inevitable
disputes and the urgent need to shift from traditional and conventional court
systems to alternative methods of dispute resolution. Arbitration is one such
majorly popular alternative dispute resolution mechanism.
The United Nations Commission on
International Trade Law (UNICTRAL) in 1985, introduced the “Model Law” on
International Commercial Arbitration. Inspired by the model, India adopted the
Arbitration and Conciliation Act, of 1996, to check the overburdening of courts
and establish arbitration as a cost-effective and time-efficient mechanism for
the settlement of commercial disputes in the national and international spheres.
It is a process where two parties to
a dispute resolve their conflict through the arbitrator, in an outside court
process. It is a procedure in which the dispute is submitted by an agreement of
parties to one or more arbitrators whose decision, rather “arbitration award”
on the matter is binding.
APPOINTMENT OF ARBITRATOR
The process of arbitration gives the
concerned parties the privilege to choose an arbitrator by mutual agreement.
However, in case of failure by the parties to decide, Sec.11 of the Arbitration
and Conciliation Act, 1996 empowers the Chief Justice of India and the Chief
Justice of the State High Court, in case of international and domestic
disputes, respectively, or such delegate as he may assign, to appoint an
arbitrator.
While the legislation does not
provide any specific qualification or mechanism to appoint the arbitrator, in
reality, at most times, a specific group of people are preferred as arbitrators
at the exclusion of others. A perusal of the appointments and the decisions of
the courts regarding the same shows that it has practically been made a mandate
by the courts to appoint retired judges and their former colleagues as
arbitrators.
The Chief Justice of India, D.Y.
Chandrachud, in February 2023, at an inaugural session in Delhi, addressed the
growing concern of homogeneity in arbitration space and remarked it to resemble
an “Old Boy’s Club”. According to the official roster of the Delhi
International Arbitration Centre on 27th December 2023, the
institute empanels around 397 retired judges as arbitrators, as opposed to
around 250 advocates, 33 retired bureaucrats, 23 Chartered Accountants, 2
architects, and 2 professors.
INEFFICIENT MECHANISM AND ITS EFFECTS
This article attempts to shed light
on the lack of transparency in the process of appointment of arbitrators under
Section 11 of the 1996 Act. Badrinath Srinivasan in his article[1]
studies and analyses the information received through filing RTI applications
to the Supreme Court and High Courts. He addressed questions related to the
methodology and qualifications considered by the courts to appoint an
arbitrator. The Supreme Court and 10 High Courts responded to his applications,
out of which only the High Court of Kerela and Calcutta maintained a list of
relevant candidates for the job. He further lists down the problems associated
with the appointment of retired judges as arbitrators:
1. A huge fee is paid to a retired judge
who functions as arbitrator.
2. The proceedings are generally held in
star hotels which increases the overall cost of arbitration.
3. Inflexible arbitral proceedings which
more or less mimics court proceedings.
4. Lack of technical knowledge leads to
increased time in making them understand the technical aspects. Lack of
technical knowledge at times may lead to faulty appreciation of a situation.
5. Long gaps between hearings,
especially in cases of three-member arbitral tribunals where hearings are held once
in three or more months. (Srinivasan, 2014)
Bibek Debroy[2] and
Suparna Jain[3] have
also, in their article, identified the heavy reliance on retired judges as
arbitrators and how it affects the proceedings in two ways. Firstly, when
judicial members act as arbitrators, the case acquires a rather languid pace,
with traditional hierarchy taking precedence over the matter. Additionally, the
exorbitant fees charged by the judges leave the parties to the dispute
dissatisfied, giving a severe blow to the growth of arbitration in the country.
They suggest fixing a lump sum fee for the arbitrators instead of per-hearing
remunerations to be a solution to the problem.
Since the enactment of the 1996 act, the
chief justices and their designates have consistently appointed retired judges
alone as arbitrators. The practice of appointing retired judges has become so
entrenched into the system that it has become extremely difficult for the
parties to choose efficient, impartial arbitrators who are not retired judges
or lawyers for that matter.
In its judgment in Union of India v.
Singh Builders Syndicate (2009)4 SCC 523, the Supreme Court itself highlighted
the high arbitrator fee acting as an impediment to the growth of arbitration in
the country. The relevant paragraph of the judgment has been reproduced herein
under:
20. Another aspect
referred to by the appellant, however requires serious consideration. When the
arbitration is by a tribunal consisting of serving officers, the cost of
arbitration is very low. On the other hand, the cost of arbitration can be high
if the Arbitral Tribunal consists of retired Judge(s).
21. When a retired
Judge is appointed as arbitrator in place of serving officers, the Government
is forced to bear the high cost of arbitration by way of private arbitrator's
fee even though it had not consented for the appointment of such non-technical
non-serving persons as arbitrator(s). There is no doubt a prevalent opinion
that the cost of arbitration becomes very high in many cases where retired
Judge(s) are arbitrators. The large number of sittings and charging of very
high fees per sitting, with several add-ons, without any ceiling, have many a
time resulted in the cost of arbitration approaching or even exceeding the
amount involved in the dispute or the amount of the award.
It has been stated that arbitration
has recently been particularly influenced by litigation procedures thus
affecting the very nature of the arbitral system. (Nariman, 2000) emphasizes that ‘international
commercial arbitration has almost become indistinguishable from litigation,
which it was at one time intended to supplant’. (Kerr, 1997) claims that
international arbitration seems to have acquired ‘the pejorative sobriquet of Arbitrigation’
which signals large-scale judicialization of arbitration. In an anecdotal
survey, an expert confirms that such a tendency prevails in India which
emanates from the fact that most arbitrators are from the legal field- such as
eminent lawyers and retired judges from the High Court and the Supreme Court.
NEED FOR DIVERSITY AND REFORM
The myth that only judges can be good
and efficient arbitrators creates impediments and leads to the exclusion of the
wider community of well-versed professionals and technicians of the industry
including legitimate researchers, young practitioners, engineers, company
secretaries, academicians, etc. The classical court procedure mindset of the
judges has led to snail-paced work in arbitration which is defeating the main
purpose of the enactment, thereby limiting the exposure and growth of the
institution of arbitration.
Moreover, the dominance of judges has
pushed the key element of the process, i.e. the technical nature of disputes to
the sidelines. Individuals from diverse backgrounds may bring unique
problem-solving methodologies and thinking patterns producing innovative
solutions that a traditional legal perspective might not cover. The changing
regulatory landscapes and technological and business advancement have
underlined the need for a crucial understanding of the commerce industry and
its shifts for expeditious and effective disposal of disputes. Professionals
from non-legal backgrounds who understand the business context may be more
adept at emphasizing the core issues at stake in complex commercial disputes,
thereby enhancing the arbitration process by making it more attuned to the
modern business world.
Diversity of views is a concept
fundamental to a conflict resolution process for an unbiased outcome. The over
or under-representation of a particular demographic of arbitrators is an issue
of constant concern. A dense and homogenous community of arbitrators leads to a
narrowly informed body with significant underrepresentation of women, as the
gender imbalance in the judiciary naturally extends to arbitration.
PriceWaterhouse Coopers (2006)[4]
surveyed the main stakeholders in the arbitration practice which revealed the
serious need for a wider pool of arbitrators with specialization or expertise
in the subject matter of the dispute. The study proved that arbitrators with
specific skills and experience in a particular area of practice were more
likely to conduct proceedings expeditiously rendering satisfactory outcomes and
resolutions.
A majority of the arbitrators today
do not identify with the aggrieved parties on account of inadequate experience
in the same work field as the workers who’ve come before them seeking justice.
A diverse panel of arbitrators will create room for a wider range of
perspectives thereby enhancing the credibility of the process in the eyes of
the aggrieved.
CONCLUSION
Arbitration is a concept instituted
to reduce the burden of traditional courts and dispose of commercial and
technical disputes expeditiously with the aid of trained professionals. From
senior legal experts to young practitioners, academicians, engineers, chartered
accountants, and company secretaries, there is a wide array of choices now
available to grace the arbitrator panel. To negate them at one stroke and refer
cases to former judicial colleagues is violative of the fundamental principle
of fairness. The over-reliance on retired judges as arbitrators is not just
empirically questionable but also sets false normative expectations. As the
country strives for the efficient and structured establishment of alternative
modes of dispute resolution, it is about time to undergo a transformative
journey and facilitate the creation of a more reliable and credible system.
REFERENCES:
Anesa,
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Vijay K. Bhatia, International Arbitration Discourse and Practices in Asia .
Aragaki, H. N.
(n.d.). Arbitration Reform in India : Challenges and Opportunities. In W. G.
Anselmo Reyes, The Developing World of Arbitration : A comparative study of
Arbitration (pp. 228-235).
Bhatia, V. K. (2013
). International Commercial Arbitration : A Protected Practice . In G. Tessuto,
Language in the Negotiation of Justice: Contexts, Issues and Applications (pp.
69-77).
Bibek Debroy, S. J.
(n.d.). Strengthening Arbitration and its Enforcement in India - Resolve in
India .
Dr. Sachin Rastogi,
M. C. (2021). The Concept of Institutional Arbitration - Need for the Hour . Psychology
and Education , 6601-6609.
Kerr. (1997).
Concord and Conflict in International Arbitration. Arbitration International,
121-144.
Nariman. (2000). The
Spirit of Arbitration . The Tenth Annual Goff lecture . Arbitration
International , 261-278.
Shukla, S. (2023,
September 25). Arbitration, the key to ease-of-doing-business: Modiji’s
aspiration and the ground reality. The Times Of India .
Srinivasan, B.
(2014). Appointment of Arbitrators by the Designate under the Arbitration and
Conciliation Act: A Critique . Economic and Political Weekly , 59-66.
Union Of India v.
Singh Builders Syndicate . (2009). 4 SCC 523.
[1] Appointment of Arbitrators by the
Designate under the Arbitration and Conciliation Act: A Critique
[2] Member, Niti Aayog
[3] OSD, Niti Aayog
[4] Pricewaterhouse Coopers is a
multinational consultancy firm which published a survey- Corporate Attitudes and
Practices towards Arbitration in India in 2006.
Article Information
ARBITRATION- AN OLD MAN’S CLUB?
Authors: SEJAL CHAUDHARY
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/12/29
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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