Author Name:   Priyank

Dismal picture of ‘Ad-hoc Arbitration’ Highlighting the present position of Ad-hoc arbitration in light of intention of statute and the need for revamping the same...

Dismal picture of ‘Ad-hoc Arbitration’

The maxim ‘ubi jus ibi remedium’ signifies and means that whenever any wrong is done to a person, he has a right to approach the court of law. The legal pattern of resolving dispute has resulted in abundance of pending cases, which rightly justifies the cliché “justice delayed is justice denied”. Accordingly the concept of alternative dispute resolution mechanism gained importance.

Initially the intention for the birth of Arbitration as an Alternative Dispute Mechanism was to eliminate the burden of cases on Courts, and provide speedy /cost effective redressal of disputes. With eminent writers facilitating the legislators to formulate the solution to eliminate the flaws of litigation, the concept of Arbitration gained momentum.

But,
Experiencing the various ad-hoc Arbitration matters, it can now be summed up that the scope of Arbitration in light of the intention of the legislators has been diluted with passage of time.

In this instant write up, those issues have been highlighted which have raised concerns amongst all who promulgated the need for ‘Arbitration.’

As a matter of practice, services of retired Judges from Supreme Court & High Court were taken, and the same was also offered by the retired Judges so as to facilitate the cause of reducing litigation and speedy remedy to the disputes. This was mostly non-professional and gratuitous work taken up with an aim to facilitate and achieve aims & objects of Arbitration.

With the passage of time more reliance has been given to the commercial aspect arising out of the said mechanism. A commercial approach has been adopted now which is even evident from the increase in percentage of fees charged by the Arbitrators and time taken in concluding the arbitration. The end result in most of the cases has been that the slab of percentage for cost incurred for the Arbitration proceedings reaches enormously close to the slab of the claimed amount.

Issues of speed and cost-efficiency were the hallmarks of the arbitration procedure, and are often identified as the core reasons why arbitration very clearly surpasses litigation as a suitable choice for dispute resolution, especially with respect to commercial disputes.

However, the prevalent high cost of arbitration in India, as discussed above is a factor that prevents arbitration from being an effective mechanism for resolution of commercial disputes. For this reason, arbitration is not progressing in a way it was intended to.

There are cases touching about 60-80 hearings being taken for making the parties reach to the so called mound of ‘Justice’ in a span of 6 – 8 years with hearing cost more than 1.25 – 1.50 lakh per hearing.

The aforementioned sad picture of the said mechanism has also been highlighted in various cases by Hon’ble Supreme Court.

Supreme Court on Arbitration: Union of India Vs. Singh Builders Syndicate

Quote
“….the cost of arbitration can be high if te arbitral tribunal consists of retired judge/s…the government is forced to bear the high cost of arbitration by way of private arbitrator’s fee…The large number of sittings and charging of 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…. …solution for this problem is to save arbitration from the arbitration cost…it is unfortunate that delays, high cost, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitrations as an effective dispute resolution process.
[2009 (2) Arb. LR 1(SC)]

Unquote

The situation has turned grave for the Corporate world. The intention of keeping Arbitration as a medium for “effective” dispute resolution has let the shoulders down. The façade of the corporate world is apprehensive for considering Institutional Arbitration as a mechanism in place of the ad-hoc arbitration. Though institutional arbitration proclaims to be an effective replacement for ad-hoc arbitration, the answer as to the taste of the pudding can only be judged after it is tasted.

Arbitration to regain its magnitude has to be carved out with a proper and cautious implementation of substantive and procedural law. The problem has been experienced world-wide and the International regime has taken it upfront to maintain the sanctity of ‘Arbitration’ as an effective dispute resolution mechanism. With the foundation laid by UNCITRAL rules of Arbitration, the change has been witnessed in rules being kept forth by various Institutions world-wide. The dismal picture of ad-hoc Arbitration also requires a change of attitude by the corporate world towards dispute resolution.

With the above backdrop, it can be summed by stating that the solution for improving and saving the picture of Arbitration lies with the corporate world, i.e. by virtue of taking a cautious approach while adopting the appropriate and strong substantive and procedural law for the resolution process coupled with a positive approach towards the route of dispute resolution.

The  author can be reached at: priyank.srivastava@legalserviceindia.com

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