Thursday, July 4, 2013

Future of Indian Arbitration-Cautiously Optimistic: Says the PWC Report.

PricewaterhouseCooper (PWC) recently released its survey report on Corporate Attitudes and Practices towards Arbitration in India.  

70 respondents comprising Legal Counsels, Legal Heads and other legal personnel of various companies in India were asked to give their feedback on various issues.  The report reveals that a staggering 91% companies include arbitration as opposed to litigation to resolve their future disputes. The top three factors that make arbitration most desired Dispute Resolution (DR) mechanism are 1. Speed, 2. Flexibility and 3. Confidentiality  The report recognizes that institutional arbitration is yet to take off in India and most companies (47%) prefer Ad-hoc arbitration over institutional arbitration (40%). Retired judges of the Supreme Court and High Courts are the most sought-after arbitrators. Among them also, there is only a small club of seasoned arbitrators that the companies choose from.

A very important finding of the survey is that the “Companies in Indian are yet to fully appreciate the tactical significance of the seat of arbitration” This, I believe is very correct because parties and to a large extent even the arbitrators do not have a clear idea of the distinction between seat/place and venue of arbitration. With recent case laws, things appear to be improving but the issue is too important to be pleaded ignorance of.

India followed by Singapore and England are the most favoured seats of arbitration and SIAC/IAC followed by ICC and LCIA finish as the top three institutions for institutional arbitrations.  Although, HKIAC currently has a share of only 3%, I anticipate that this may rise substantially after Honk Kong was notified by the Government of India as a reciprocating country under the New York Convention on enforcement of foreign awards.

Most of the arbitrations in India took more than three years for the completion and the most time consuming activity is constitution of the arbitral tribunal.

Unexpectedly, arbitrators’ fee is among the top three factors that companies attribute to cost of proceedings. What is surprising is, internationally, arbitrators fee comprises not more than 10-15 percent of the total cost involved in arbitration proceedings. The major cost ideally should be attributed to the counsels’ fee and associated expenses.  A report in 2009 by the Commission on Arbitration of the ICC (International Chamber of Commerce) had found that such costs amounted to an average of 82 percent of the total arbitration costs.

Although the future of arbitration is optimistic, companies were dissatisfied up to three times more with the arbitrations happening in India as opposed to arbitrations happening in a foreign seat.  The report says that “though India is a preferred choice as a seat of arbitration, however in practice it is not” The report also suggests that use of expert witness is not very common in India and nearly half of the companies have never used them in their arbitrations.

The report recognizes that “Arbitration remains a preferred dispute resolution mechanism, despite certain loopholes and shortcomings in the arbitration environment in India. “

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