Adhoc Arbitration Vs Institutional Arbitration-Srikrishna Committee

If ADR (Alternate Dispute Resolution) in India has failed to take off even after the Amended Arbitration and Conciliation Act (ACA 2015), the root cause has been that the system is being controlled by a few Arbitral Institutions which are not able to effectively transform themselves and keep pace with the development.

During the last few years, I have personally contacted most of these Arbitral Institutions and tried to discuss the possibility of using Online Dispute Resolution mechanism (Check at www.odrglobal.in) to establish a transparent, accountable, economic and faster arbitration system in India. But none of them have shown interest in exploring the possibilities.

The Srikrishna Committee’s major failure is that it has not recognized and addressed the issue of “ODR as an instrument of Improvement of ADR in India”.

Was every member of the committee ignorant about ODR? If so, it speaks bad about their preparation and the quality of secretarial support they got and undermines the value of the entire report.

Even assuming that the websites adr.ind.in or naavi.org or odrglobal.in are too insignificant for the High Level Committee to look at, since the UNCITRAL model law on ODR is under discussion in the international circles, and several academic institutions and blogs have been discussing ODR as a concept, it is unthinkable that the “High Level” Committee was unaware and did not consider it necessary to at least make a mention of ODR and reject it if necessary in its deliberations.

It cannot therefore be accepted that the Committee was ignorant of ODR nor the issue was not brought before it for discussion. We must presume that the Committee did not want to make even a mention of ODR in its report and wanted to completely suppress any discussion there of.

One of the terms of reference of the committee was evolving an effective and efficient arbitration eco system for commercial dispute resolution. Under this it was imperative that the committee should have considered the use of technology which would have led them to a discussion on ODR.

The omission of ODR discussion by the committee directly indicates the mindset that is also the root cause for the failure of ADR becoming popular in India.

Without addressing this “Mindset Problem”, merely creating more institutions for regulation will only increase the overhead for the Government and will not lead to any improvement of Justice Delivery on the ground.

The Mindset Problem

The Committee recorded that there are presently over 35 arbitral institutions in India. (though only six of them responded to the Committee in its survey).

The Committee recognized that the rules and practices followed by these institutions as well as the infrastructure are outdated and inadequate. The committee also acknowledged several oter drawbacks in the existing arbitral institutions.

These observations could have been a used to make a case for promotion of “Adhoc Arbitration”. But the Committee used all its observations on the weaknesses of the Arbitral Institutions to make a case for investing more time, effort and money to strengthen these Institutional arbitration system rather than giving a thought to improvement of the Adhoc Arbitration System.

The real problem that afflicts the Institutional Arbitration system in India is because they are not being run with the objective of being an institution that can ease the grievances of the public. It is the reason why (as the committee itself notes) many of them donot have even a website let alone other public over reach programs. Most of the e-mail addresses of the enrolled arbitrators in these institutions are not reachable or perhaps donot exist. Public are therefore not the first priority of these institutions. Even the enrollment of eligible members of the profession is also not a priority though a few do conduct training programs and generate revenue in the process.

I am sorry to observe that most of the time, it appears that these arbitral institutions become a place for accommodating retiring judges with some position of power and an opportunity to take up lucrative assignments.

I have no objection for retired judges to have an opportunity to use their knowledge and skill for their own post retirement benefit as long as it does not become a hindrance to the development of the society and block the development of “Alternate” means of Dispute Resolution.

When ODRGLOBAL suggested online arbitration with a “Recording” of the arbitration proceedings, most existing institutions saw it as a threat to their current system which hides the inefficiencies and possible biases that may creep into the arbitration process which may get exposed if the proceedings are recorded.

The reason why most arbitrations end up in litigation and prolong the resolution (which has been addressed to some extent in the ACA 2015) is that the party which has lost the Arbitration does not trust the neutrality of the Arbitrator. The recording of the ODR deliberations would have eliminated this distrust. But inefficiencies of the arbitrators and their biases would have come out into the open. The same judges who today oppose recording of Court proceedings have objections to the recording of the arbitration proceedings also.

We often hear about nepotism in  Judicial appointments. Similarly the allocation of arbitration opportunities in the arbitration institutions often are not fairly distributed and donot give opportunities based on special skills and domain knowledge that some potential arbitrators may bring in.

The mindset of vested interests controlling different arbitral institutions prevent any major change in the rules of appointment of arbitrators and hence qualified and efficient arbitrators without a God Father in the Judiciary donot like to be part of the system and rather would prefer Adhoc Arbitrations.

Without addressing these type of contentious issues, the High Level Committee makes a case for discouraging Adhoc Arbitrations and recommends investments in Institutional Arbitration. This is not the right strategy for development of the ADR System.

The Advantage of Adhoc Arbitration System

If Adhoc Arbitration is encouraged, it will be able to provide an opportunity for young Advocates to look at “Arbitration” as a career (Which also will provide a stock of Mediators). It will also provide many non advocate domain specialists to take up arbitration.

Once all advocates see the opportunity to create a career in Arbitration, they will automatically ensure that every Contract automatically incorporate arbitration clauses and encourage their clients to go for arbitration even as an after thought.

Today advocates encourage litigation because they are only familiar with this system and are not concerned about the delays.

In the new ACA 2015 which provides for time bound completion of Arbitrations and incentives for early completion as well as dis-incentives for delays, the commercial disputants would be happy to resolve the issue one way or the other quickly and go ahead with their activities rather than pursuing litigation in Courts for years.

The new ACA 2015 also makes it difficult to challenge the arbitration on flimsy grounds and hence the delays due to judicial challenges can be reduced if the Judiciary actually responds positively.

The Committee’s conclusion that Adhoc Arbitration results in delays is therefore unfounded.

The only argument in favour of Institutional Arbitration against Adhoc Arbitration is that Institutions can put in efforts to bring efficient and honest persons in their panel, train them and ensure that a person who is unworthy of sitting as an arbitrator does not get an opportunity.

However, the Arbitral Institutions have failed to adequately discharge this responsibility of creating better talents and giving them a fair opportunity and they may not do so in future also.

This comment is not to be construed as a criticism of all Arbitral Institutions. If a few of the institutions do discharge their responsibilities properly, they can continue to do so without the need for any discriminatory preference under the regulations.

The recommendations of the committee is in the nature of supporting inefficient arbitral institutions  instead of leaving it to market forces to provide an opportunity for  efficient adhoc arbitrators to fight on their individual strengths.

Discouraging the growth of Adhoc Arbitral systems and encouraging inefficient Arbitral institutional mechanism is to be considered as the Second most important failure of the High Level Committee. 

(…. to be continued)

Naavi

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