While arbitration as a term can be defined in a technical fashion, it is in effect simply is an alternative dispute mechanism that has privatised the judiciary. The award passed by an arbitral tribunal is enforceable as a court decree. Amongst other things, the most promising advantages of arbitration have been the expediency, flexibility and party autonomy in deciding how, when and where a dispute shall be resolved. The parties at time of entering into a contractual relationship decide, what will be termed as a dispute, who will arbitrate it and, what would be the venue of arbitration. The reality for the Indian commercial dispute resolution through arbitration has been very different from the extolled virtues of “the expediency, flexibility and party autonomy”.
Most Indian arbitrations are ad hoc arbitrations, meaning that they are not administered by an arbitration institution like Singapore International Arbitration Centre (“SIAC“) or London Court of International Arbitration (“LCIA“). In an ad hoc arbitration the parties decide details such as, composition of the arbitral tribunal, procedure of arbitration etc. On the other hand, an institutional arbitration is more structured. Once an institutional arbitration is invoked, the institution has its own set of rules and procedure, and even a procedure for appointment of an arbitrator. An institution would typically have a list of eminent arbitrators. An arbitration institution is usually more effective in compelling a party, avoiding arbitration, to participate. One of the deterring factors for a party choosing an institutional arbitration has been the fee an arbitration institution charges. However, surprisingly a very small portion of the fee goes towards the revenue of an institution; whereas, a major portion of the cost goes towards legal fee. Singapore allows foreign lawyers and law firms to represent a party in an arbitration proceeding. This results in a lower cost in terms of legal fee as a party is not compelled to choose a Singapore lawyer or a law firm. Instead one can be represented by their counsels or a law firm from their home country at a relatively lower legal fee.
Indian ad hoc arbitrations have been, at least in high stake matters, primarily dominated by former High Court and Supreme Court judges. These judges have managed to bring with them the same tolerance for delay that has plagued the Indian court system. Seeking dates and adjournments is a common practice in the Indian courts system, which is often done at the expense of the parties. Also, there are a special category of parties, who after having become painfully aware of their weak case on merit, will want to resort to any delaying tactics to delay adjudication. With a combination of an interfering courts and sometimes unscrupulous parties, this class of litigants can very conveniently impugn every aspect of the arbitration clause, which they voluntarily chose to incorporate. Even if the matter is referred to an ad hoc arbitration, and the courts do not intervene, the arbitrator in an ad hoc arbitration can take his or her time in arbitrating.
India and Indian parties have much to gain from expediting our adjudication process. Our trial court system has an abysmal disposal rate and commercial litigation in major metropolitan cities largely has become an interim injunction practice, while the trials drag on. With lack of trial there are some fundamental deficiencies in the Indian system as evidentiary rules have lost its significance because a court at an interim injunction only takes a prima facie view. This has in itself led to a strange mutant version of an adversarial system that India inherited from the British legal system. An adversarial system is based on the premise that both the plaintiff and a defendant try to establish their factual veracity through examination and cross examination of witnesses. In addition, physical and documentary evidence has to be admitted after having put through the rules of evidence. These requirements were not just technical rules, but were formulated after centuries of jurisprudential experience that suggested that certain kinds of evidence were intrinsically unreliable. This in itself begs the question whether the large part of commercial litigations in these major cities are being decided on imperfect truth as facts are not tested through conventional mechanisms.
With the advent of United Nations Commission on International Trade Law (“UNCITRAL”) oriented arbitration regime through the Arbitration and Conciliation Act, 1996 (“1996 Act“) there was a new hope in terms of expeditious remedy, particularly in view of the non obstante clause contained in the Section 5 of the 1996 Act, and the power of an arbitrator to rule on his or her own jurisdiction under Section 16 of the 1996 Act. Sections 5 and 16 of the 1996 Act, in effect, mandated the courts to not interfere in arbitrations. However, ad hoc arbitrations despite of the 1996 Act have failed to deliver timely justice.
Below, I am highlighting some of the advantages, of institutional arbitrations conducted by SIAC. I would like to focus on similar eminent institutions in other blogs. However, in this particular blog, I would like to focus on SIAC and the SIAC Rules, especially in view of the latest amendment to the SIAC Rules by virtue of the International Arbitration Amendment Bill of 2012 (“Amendment Bill 2012“), which has been introduced in March of2012. While the Amendment Bill will address other issues, I will focus only on those aspects of the amendment, which aids an Indian party. Just to put things in perspective, below is the table with the percentage of growth experienced by various arbitration institutions between the period of 2000 and 2009, as discussed in the article Making the Arbitration Experience More Effective For Indian Parties by Ankit Goyal and Vivekananda N,
|
Arbitration Institution |
Percentage of growth in the number of cases |
| International Chamber of Commerce, Paris | 51% |
| International Centre for Dispute Resolution, US | 64% |
| Singapore International Arbitration Centre, Singapore | 208% |
Singapore Arbitration and its advantages
Briefly, I would like to list some of the salient features of a SIAC arbitration that particularly makes the dispute resolution process convenient for an Indian party. I have used SIAC as a paradigm that works well for Indian parties. Other jurisdictions and institutions may be able to replicate the SIAC model and even add better innovations to the SIAC paradigm.
Some of the reasons that have particularly benefited Singapore as a favoured arbitration destination have been due to a result of external factors such a sluggish trial court system. Similarly, although institutional arbitration opportunities have been recognized by other global eminent institutions such as the LCIA and LCIA has manifested in their presence in India, India by far, has failed to offer an internationally recognized arbitration institution. Although, one cannot completely negate the presence of Indian arbitration institution, they simply do not enjoy the same level of global recognition and reputation. This in turn can also transform how an award rendered by Indian arbitration institution would be viewed by an enforcing court abroad.
Even though, by virtue of being a signatory to the New York Arbitration Convention, India shall recognize and enforce all awards rendered in other New York Arbitration Convention signatory countries, India only recognizes and enforces those awards that have been rendered in countries that are listed in official gazette. As a result one of the losing destinations has been Hong Kong, which despite of its geographical proximity cannot render arbitration awards that are enforceable in India. Singapore, has acquired an international arbitration friendly attitude. Courts are non-interfering in nature, and assure impartiality and neutrality when dealing with international parties. The Singapore international arbitration law, which is modelled after UNCITRAL and SIAC Rules was amended to improve expediency and flexibility. In addition, Singapore is also a foreign lawyer and law firm friendly jurisdiction allowing them to freely represent parties in arbitrations.
Emergency Interim Relief and SIAC Expedited Procedure
In July of 2010, the SIAC Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules“) were amended to provide for emergency arbitrator procedure and expedited arbitration procedure. The amendment was aimed at accommodating the urgency and expediency a commercial dispute requires.
Rule 26.2 of SIAC Rules provides for emergency arbitrator procedure. Rule 26.2 permits a party to request appointment of an emergency arbitrator even before a tribunal has been formed. The request under the SIAC Rules has to demonstrate an emergency. The party making the request for an emergency arbitration procedure has to do so simultaneously with a notice of arbitration or soon after filing the notice of arbitration. The SIAC Chairman can accept or reject an application for emergency arbitrator. If the SIAC Chairman accepts a request for an emergency arbitrator, then the deputy of the Chairman will appoint an emergency arbitrator within a day of the receipt of notice of arbitration.
The emergency arbitrator then sets the schedule for considering and passing the order for interim relief. The order is passed within 2 (two) days of the appointment of an emergency arbitrator. The emergency arbitrator’s role extinguishes after passing an emergency order. Unless the parties agree, the emergency arbitrator does not participate in the proceedings once the tribunal is constituted. Once the tribunal is constituted the tribunal reconsiders the emergency order and can choose to modify or affirm or vacate the emergency order. The emergency order loses its force if the tribunal is not constituted within 90 (ninety) days of the order. The order also loses its force if either the claim is withdrawn or the final order is passed. Here is a case study involving two Indian parties embroiled in a dispute. In The expedited and emergency arbitrator procedures under the SIAC Rules – Six months on, how have they fared? an article by Jonathan Leach and Julian Brenholtz it was discussed that,
“Two Indian parties were embroiled in a dispute, where the claimant had issued three bank guarantees to the respondent. The respondent was about to encash the bank guarantees, and the claimant invoked the emergency procedure praying for an urgent interim injunction under SIAC Rules 26.2, precluding the respondent from encashing. The application for the interim injunction was received by SIAC at 9:30 pm, Singapore time. The Chairman of SIAC ruled to treat the applications through the emergency procedure. The emergency arbitrator was appointed the very next day, who within a day fixed a schedule for consideration. Within a week the parties made written submissions, after which a hearing over the telephone was conducted within a week. An interim order was passed a day after the telephone hearing“.
Rule 5.1 of the amended SIAC Rules provides that prior to the full construction of an arbitral tribunal any party may apply to the SIAC in writing requesting that the arbitral proceeding to be conducted by the expedited procedure. Such a request can be made under Rule 5.1 if any of the following criteria is satisfied, (a) if the amount of dispute is less that Singapore Dollar 5 Million (equivalent of United States Dollar 3.8 Million, or (b) parties by agreement want to do so, or (c) in case of exceptional emergency.
SIAC Rule 5.2 vests the power with the Chairman to decide, after taking into account the views of the parties. The expedited procedure will apply if the Chairman deems it applicable within the facts of a case. Here are the salient features of an expedited procedure, (a) the Registrar may shorten any time limits under the SIAC Rules, (b) the case is referred to a sole arbitrator to expedite the proceeding, at the same time the Chairman can decide to refer it to multiple arbitrators, (c) parties also have the flexibility to have the matter decided only on documentary evidence by mutual agreement, otherwise the tribunal shall hold formal hearing where examination by experts and other witnesses will be conducted and summation will be made by counsels, (d) award in an expedited procedure has to be made within six months, however the Registrar in exceptional circumstances has the authority to extend the time, (e) under the expedited procedure, the tribunal is obligated to provide reasons for the award (in a summary form), however the parties in interest of expediency can request that no reasons be given.
An expedited procedure can assist a party with a strong case on merits to get speedy remedy. So if a dispute involves less the Singapore Dollar 5 Million, a party can make an application based on exceptional circumstances and if the request is granted by the Chairman then that party can secure quick disposal even if the other party to the arbitration is reluctant to expedite the hearing.
Amendment Bill 2012
The Amendment Bill of 2012 affects the following four major areas:
- The power of review by a court at any stage the arbitrator’s ruling on its own jurisdiction. The most significant aspect of this particular amendment is that, in addition to a court reviewing the decision of an arbitrator to exercise erroneous jurisdiction the courts can also review a ruling where the arbitrator has held that she does not have the jurisdiction to decide a particular dispute. This approach can further support the arbitration system, in a case where the arbitrator erroneously believes that, she lacks jurisdiction.
- Less formalistic approach where a written arbitration agreement is absent, provisions are being made to find an arbitration agreement by conduct or oral agreement (that has been eventually reduced to writing), this too is a pro arbitration measure that looks at the conduct of parties to see if the parties intended to arbitrate.
- In addition an arbitral tribunal has been specifically empowered to award interest and cost; this provision obviously adds teeth to an arbitral award.
- Lastly the amendment aims to provide the same legal sanctity to an order of an emergency arbitrator as a regular tribunal.
These developments over the course of last decade underscore the significance an institutional arbitration proceeding has acquired in a commercial dispute, where expediency and final determination is of a great value. India or elsewhere, the business people want to do business, instead of loitering around court corridors and arbitration proceedings. At the same time, the commercial relationships can never be completely free from dispute. It is incumbent on the legal community to free the business people to do business, at least by meaningful and fast dispute resolution process. The growth story of SIAC can be clearly traced with advantage of timing, geographical proximity and other external factors, but in view of 2010 amendment to the SIAC Rules and Amendment Bill of 2012, one has to acknowledge how SIAC has constantly stepped in to take positive steps to bridge a vacuum Indian judiciary and alternative dispute resolution mechanisms have left gaping.
Abhishek Singh
Abhishek Singh is a Senior Associate with the Corporate and Disputes Team of PXV Law Partners. He can be reached at abhishek.singh@pxvlaw.com
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