New avatar of arbitration centre in Delhi

Last week, it was reported that the almost defunct ICADR (International Centre for Alternative Dispute Resolution) – a centre which was started in 1995 with much fanfare immediately after the economic liberalisation of 1991 – would now be appearing in its new avatar, New Delhi International Arbitration Centre (NDIAC). The move was made more than six months back to develop a global centre for arbitration in India, and was named on the lines of the Singapore International Arbitration Centre (SIAC), the Hong Kong International Arbitration Centre (HKIAC), the London Centre for International Arbitration (LCIA) and other established global arbitration centres.

It is also noteworthy that the new name focuses on arbitration specifically, and not on alternative dispute resolution (ADR) in general. It is well known in the business and legal fraternity that whenever stakes are high in business disputes, mediation and conciliation are rarely successful. Hence, the name of the centre sends a strong signal that it shall have arbitration as its principal method of business dispute resolution, however, it will also facilitate other methods of ADR. There are high hopes that the change in the name will not prove to be simply cosmetic, as the real purpose and the real value of any such centre lie in the efficacy of dispute resolution.

For the last twenty five years or so, the ICADR had been ineffective, primarily due to political bickering and the insistence of most of the government contracts on arbitration, rather than other means of ADR. It is true that the same contracts usually contain a clause which provides for exhausting ADR methods before invoking the arbitration clause, however, unfortunately, in most of the cases it was practised in a mechanical manner, without any real intention of resolving the dispute through softer methods, if one can call mediation and conciliation "softer methods." Arbitration itself has been criticised very often for providing an easy way out for most of the disputants and buying time as arbitration awards can be challenged in a court of law, and high value awards are invariably challenged as a rule up to the Supreme Court.

It has long been argued that arbitration has not been very effective in India as the related judicial proceedings, and even the arbitration proceedings themselves, are circuitous and force the disputing parties to live with extremely high levels of uncertainty. Amendments made in 2015 are yet to show the real impact and hopefully we will see some positive results in the form of not only speedy resolution, but avoidance of disputes also. There has been – for some known reasons and some unknown reasons – low level of confidence and trust in the Indian arbitration system by foreign businesses and foreign investors. A glaring example can be the refusal by Asian Development Bank (ADB) about a year ago to accept arbitration in Mumbai for the Mumbai Metro project, when the government of Maharashtra insisted on the seat of arbitration in Mumbai. Whether we like it or not, foreign investors and foreign businesses are undoubtedly more comfortable and at ease in having the arbitration at either a popular centre in Europe or somewhere in South-East Asia.

It will not be easy for NDIAC to compete with SIAC, HKIAC, LCIA, centres at Paris, Stockholm, Geneva, Beijing, Tokyo, Melbourne, and numerous centres in the Americas. Big multinational corporations typically choose a centre of their convenience, and most of them remain loyal despite the fact that they have to pay through the nose for availing arbitration services at most of the renowned centres. Even when similar services are made available at NDIAC at a fraction of that cost, it is going to be a herculean task to make foreign businesses and investors make a switch to the Delhi centre.

The author is a professor at IIM-A, 
akagarwal@iima.ac.in