What Are The Current Trends In Domestic Arbitration In India?

A survey by Khaitan & Co reveals that arbitration is preferred method of dispute resolution over litigation due to speed and cost effectiveness
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The Indian government has made concerted efforts to encourage domestic dispute resolution via arbitration, but there’s still considerable scope for improvement, according to a survey by full-service law firm Khaitan & Co.

The survey titled ‘Current Trends in Domestic Arbitration in India’ saw participation of over 100 respondents, predominantly comprising in-house counsels, Khaitan & Co said in a statement.

The survey focused on the experience of parties to arbitration proceedings, rather than advocates, lawyers or other experts involved in domestic arbitration in India, it added.

Khaitan & Co said only 40% of respondents confirmed that they are satisfied with domestic arbitration as a dispute resolution mechanism, while 66% of respondents did not consider that the mandatory time limits in the Arbitration Act are being adhered to.

Key findings of the survey are:

  • Arbitration is the preferred method of dispute resolution over litigation because of the speed of resolution, confidentiality and cost effectiveness.

  • 60% of respondents expressed either dissatisfaction or ambivalence regarding the experience of parties involved in domestic arbitration, indicating a substantial scope for improvement in the arbitration process.

  • Mandatory time limits in the arbitration process imposed in the 2015 amendments to the Arbitration Act are not being adhered to.

  • Most arbitrations are taking 24 to 36 months to complete instead of 12 months, which is what parties expect. 59% of respondents said that arbitrations should be completed within 12 months.

  • A large majority of respondents intend to use domestic arbitration in the future for both small disputes (75%) and large disputes (85%).

  • More than 80% of respondents considered that emergency arbitration measures for urgent or time sensitive issues should be provided for and 40% considered that this should be completed within 30 days.

  • Despite significant efforts to promote institutional arbitration, an ad hoc arbitration remains popular with almost half of survey respondents.

  • Despite institutional arbitration being more favorably considered by respondents, over 50% of respondents still intend to use an ad hoc arbitration in the future. This suggests that the arbitral institutions still have some work to do to win acceptance in India.

  • Simplification of award enforcement, penal consequences for non-compliance with time limits, and special court benches to deal exclusively with arbitration related matters were most favored measures for improvement in the domestic arbitration process.

The survey assumes significance domestically and internationally, given that arbitration stands as the preferred mechanism for dispute resolution in commercial contracts in India, according to Khaitan & Co.

This makes arbitration crucial for everyone doing business in India, whether they are a local or foreign firm, it said.

Khaitan & Co Senior Partner Haigreve Khaitan said arbitration is an efficient and effective dispute resolution mechanism of critical importance to Indian business, foreign investment in India, the Indian economy, and the rule of law.

“Both local and foreign investors embrace effective and efficient dispute resolution in commercial contracts as being fundamental to doing business in India and there is increasing interest with the massive foreign investment,” he added.

Khaitan & Co has over 1,000 legal professionals, including over 240 partners and counsel, and presence in India and Singapore, according to the statement. The firm offers end-to-end legal solutions in diverse practice areas to its clients across the world.

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