India aims to strengthen its arbitration ecosystem, but the focus must shift towards developing elite, diverse arbitrators with specialized training to compete globally.

Arbitration in India

• Increase in Commercial Disputes India’s economic rise has naturally sparked discussions on the potential of Indian arbitration as a major contributor to growth. The rise in domestic and cross-border commerce has made commercial disputes inevitable.
• Burdened Court System: The Indian litigation machinery remains overburdened and inefficient, struggling with time-sensitive and technical disputes involving large monetary sums.
• Arbitral Institutions: Commercial arbitration, especially through specialised arbitral institutions, has emerged as a popular solution. However, critical questions remain: Is the Indian arbitration ecosystem living up to expectations? Can India become a global hub of arbitration?
• Beyond Legislative Reforms: While discussions often emphasise legislative reforms and minimisation of judicial intervention,  the role of arbitrators — the key stakeholders — often escapes serious scrutiny.
• Role of Human Capital: The success of any legal system depends heavily on its human capital.  For Indian arbitration, this includes arbitration lawyers. More importantly, arbitrators, who function as the ultimate decision-makers.
• Credibility and Legitimacy: The credibility and legitimacy of Indian arbitration are largely determined by efficient conduct of proceedings Quality of arbitral awards
• Powers: Arbitrators possess significant powers like dictating procedural frameworks, finalising timelines, determining procedural issues and imposing monetary sanctions for misconduct
• Subject to Judicial Review: Their arbitral awards can be challenged before competent courts in India or abroad, scrutinised for quality and fairness. 
  • Thus, the Indian arbitrator stands at the heart of the arbitration ecosystem, directly impacting its success and international credibility.

Issues with Arbitration in India

• Lack of Focus: Conversations about Indian arbitration often overlook the need to develop elite Indian arbitrators.  While initiatives to expand the Indian arbitration bar are widespread, there’s little enthusiasm for developing the arbitration bench. This oversight is unfortunate.
• Observation: In March 2024, former Chief Justice of India, Justice D.Y. Chandrachud, questioned why Indian arbitrators are seldom appointed in international disputes that have no domestic elements.  
  • His remark highlights a significant gap: Indian arbitrators are largely absent from the elite international arbitration community.
• Judicial Appointments: The predominant practice in India is to appoint retired Supreme Court or High Court judges as arbitrators, especially in high-value disputes. This has led to a widespread assumption that judicial experience equates to proficiency in arbitration.
• Ministry of Finance’s 2024 Guidelines: However, as the Ministry of Finance’s guidelines published in June 2024 indicate, the reality is different. The guidelines show that arbitration proceedings led by retired judges often mimic court procedures, leading to:
  • Lengthy and expensive proceedings
  • Poorly reasoned awards that are frequently challenged and set aside.

Way Forward

• Arbitration Skills: While the judicial mind is an asset, it is insufficient in the realm of arbitration. A capable arbitrator needs more than just legal knowledge.  An arbitrator must also be a skilled manager of the dispute resolution process, combining:
  • Procedural certainty
  • Flexibility and innovation.
• Beyond Rigidity: This requires moving beyond the rigid frameworks of civil procedure and evidentiary laws to adopt global best practices unique to international arbitration.
• Soft Skills: Arbitrators often serve on tribunals with members from diverse nationalities and cultures.  
  • In these settings, internal deliberations are crucial, and the ability to convince colleagues requires soft skills, which cannot be assumed and often require specific training.
• Drafting Arbitral Awards: Drafting an arbitral award differs greatly from writing a judgment in a common-law court.  It involves:
  • Meticulous examination of documentary evidence and testimonies
  • Intricate financial analysis to assess compensation or damages
• Expanding the Candidate Pool: To improve the Indian arbitration ecosystem, there must be a diversification of the pool of Indian arbitrators.  It should not be limited to advocates and retired judicial officers. 
  • Instead, trained experts from various fields, such as finance and technical domains, should also be considered to bring nuanced perspectives.
• Training: Each potential arbitrator, regardless of their background, must undergo a rigorous training process, Accreditation through specialised certificate courses or workshops by arbitral institutions. 
  • The goal is to upskill individuals and cultivate a culture where arbitration is not seen as the neglected sibling of court litigation.

Conclusion

To truly position India as a global hub for arbitration, the elite Indian arbitrator must be developed, trained, and recognised. Only through diversification, capacity building, and training can India create a robust arbitration ecosystem capable of competing internationally.

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