The arbitration environment in India has historically suffered from a number of issues, two of which have been particularly serious. The first has been the attitude of the courts towards arbitration. Over the years, there have been many complaints about delay in the courts doing anything at all about arbitration once seised, and about perceived interference to an unjustified extent in arbitration. These problems may be alleviated to some extent with the passage of the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015 and the Arbitration and Conciliation (Amendment) Act, 2015 (the 2015 Acts).
The second serious problem has been the preference in India towards ad hoc arbitration. This has led to the domination of arbitration by retired judges, and no institutional assistance or oversight in the arbitral process generally. The seat of international arbitration involving an Indian party has not always been India. London was historically the main seat chosen, but in recent years there has been a marked shift eastwards towards Singapore. A number of reasons for this are usually cited, some of which are more convincing than others: perceptions of cheaper costs, quicker resolution, and the impression of still being “in Asia”, such that business culture may be better appreciated by the tribunal.
There are first class arbitration lawyers and arbitrators in India, and this has been the case for many years. What traditionally has been lacking is a home grown arbitration institution. The London Court of International Arbitration (LCIA) India was active for a number of years but has been disbanded. The Singapore International Arbitration Centre (SIAC) maintains a liaison office in India, but this appears to be largely to assist SIAC arbitrations and to market SIAC.
However, that is all set to change. The Mumbai Centre for International Arbitration (MCIA) officially opened this month, although it actually started its first arbitration in advance of the official opening. On 8 October 2016, there is to be a launch conference at which many international arbitration practitioners from around the world will be in attendance. Indeed, the MCIA’s Council comprises some very well-known names in international arbitration from all over the world. It is clear, from a review of its MCIA Rules 2016 (2016 Rules), that considerable care and thought has gone into adopting the current best practices in international arbitration (such as expedition, emergency arbitration and scrutiny of awards), as well as containing some features designed to deal with the problems which have traditionally bedevilled arbitration in India, such as appointing and challenging arbitrators, and consolidation of arbitrations. The lack of scrutiny of awards has also been a serious issue in relation to ad hoc arbitration, as it has in the past led to a variable standard in award writing, with some awards being very well written and others badly written to the extent that enforcement became very problematic. The 2016 Rules will be recognisable to anyone involved in international arbitration as reflecting international best practice. State of the art premises have been created in Nariman Point, in the heart of the city, and it seems that all the facilities that parties would expect have been thought of.
To have an infrastructure and modern rules is, of course, the first step. The next will be to attract parties, and in particular foreign parties, to arbitrate in Indian seated arbitration. This will also necessarily have to include attracting Indian parties back to India from Singapore. Effecting a culture change of this type does not happen overnight, but as centres such as Singapore have shown, with focussed application it can be done. The fee structure for the MCIA certainly looks sufficiently attractive to make users of arbitration look at the MCIA seriously. Cost (and equally the perception of cost) is a particularly significant factor in a choice of arbitral seat (respondents to the Queen Mary University of London (QMUL)/White and Case 2015 International Arbitration Survey identified cost by a considerable margin as the worst characteristic of international arbitration). What will also help is the fact that the 2015 Acts were passed recently as an attempt to redress many of the historical concerns parties have had with India as a seat for international arbitration. The present Indian government is pushing hard to improve India’s rankings for ease of doing business; a 2015 World Bank report ranked India 130 out of 189 countries reviewed. The recent legislative changes, together with the launch of the MCIA, are two concrete steps which many people are hoping will finally lead to India emerging as a serious international arbitration seat.
It will not happen overnight, of course, but there does appear to be genuine excitement and energy surrounding the launch of the MCIA. Domestic arbitration may be easier to attract, but that is not the only type of dispute the MCIA has ambitions of attracting. Large Indian companies with strong bargaining power may now more credibly be able to insist on Indian arbitration with a non-Indian counterparty being written into their contracts. In due course, the ultimate test will be whether two non-Indian companies will be prepared to sign up for Indian seated arbitration at the MCIA.
Respondents to the QMUL/White and Case 2015 International Arbitration Survey also identified “reputation and recognition of the seat” as the most important factor in choice of a seat, and when broken down, the most important reason for preference of a seat was “neutrality and impartiality of the local legal system”. The MCIA has worked hard to address many of the concerns which users of international arbitration all over the world have expressed. It deserves to succeed. Its fortunes will no doubt be closely followed by all in the international arbitration community, including the more established arbitral institutions to which it is now a rival.