The not-for-profit, being set up in collaboration with the state government will help create a legal and regulatory framework, and reassure the international and domestic business community through a system to help enforce contracts and ensure dispute resolution.
In a step to ease doing business in India, and the evolution of Mumbai into a global financial service hub like Singapore and London, the first international arbitration centre will be launched in the city on Saturday.
Spread over a 7,000 square feet, the Mumbai Centre for International Arbitration (MCIA) at Express Towers in Nariman Point will be inaugurated by chief minister Devendra Fadnavis. It will have seven arbitration hearing rooms for commercial dispute resolution.
The not-for-profit, being set up in collaboration with the state government will help create a legal and regulatory framework, and reassure the international and domestic business community through a system to help enforce contracts and ensure dispute resolution.
Unlike court proceedings, arbitration is seen as less formal, and cost and time effective. State government officials note that for an International Financial Services Centre (IFSC) in Mumbai to succeed and attract investments, a world-class dispute redressal mechanism is necessary.
"Today, when you are entering into contracts, there are three ways of dispute resolution, namely courts, ad-hoc arbitration, and institutional arbitration," noted advocate Madhukeshwar Desai, chief operating officer, MCIA, adding that though ad-hoc arbitrals were the norm in India, it was an "inefficient way of dispute resolution." He said that around 95% of arbitration proceedings were ad-hoc, which was challenging for high-value disputes.
The MCIA will fill up for the lack of a credible international arbitral institution in the country.
Desai noted that the demand for institutional arbitration was so huge that the MCIA had conducted its first arbitration in September, even before its formal launch.
"This will be a huge fillip for ease of doing business in India," said Desai, adding that they had collaborated with global and Indian experts on arbitration to adopt international best practices for the MCIA arbitration rules.
Moreover, the lack of international arbitration systems in India ensured that other centres like Singapore had gained. The MCIA will give Indian parties an option to resolve disputes here. The Maharashtra government has also cleared its arbitration policy which allows for an in-built arbitration clause in all government contracts above Rs5 crore.
"Setting up an arbitration centre is an important step in furthering the dispute resolution system. Global examples show a strong correlation between "arbitration-friendly" venues and financial centres (like): New York, London, Geneva, Hong Kong, and Singapore," noted Sarosh Zaiwalla, senior partner, Zaiwalla & Co Solicitors, London, who is a former member of the International Court of Arbitration of the ICC, Paris. He added that in 2014, around 60% of cases arbitrated by the Singapore International Arbitration Centre (SIAC) were those of Indian companies.
State government officials claim that the MCIA will help Mumbai emerge as an international arbitration hub and incubate a wider economic ecosystem.
It will help India retain around $5-10 billion which would have headed to international locations for dispute resolution. The state has already established a task force for setting up the IFSC on a designated area in the MMRDA's Bandra Kurla Complex (BKC). The MCIA plans to set up another office there.
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