Over the last few decades, rapid globalisation of the Indian economy and the resulting increase in competition, combined with rising disputes related to bilateral investment treaties, joint ventures and disputes arising from public-private-partnerships (PPP) has led to a rapid increase in commercial disputes. This, in turn, adds to the load of the already overburdened courts, often resulting in sluggish, ineffectual dispute adjudication (or its absence altogether), and thereby gross negligence of justice.

While arbitration has long been prevalent as a method of dispute resolution, in recent years there has been a significant evolution in arbitration law both globally and in India. This can be attributed to the fact that parties are increasingly resorting to arbitration for settlement of disputes. A recent EY study on arbitration found that nearly 95 per cent of agreements have an arbitration clause, which is essential for referring a dispute to arbitration.

Sectors prone to arbitration The EY study and the Singapore International Arbitration Centre’s Annual Report 2012 show that while arbitration is present in nearly every sector, it is more frequentl in sectors such as trade, construction and infrastructure, general commercial disputes, shipping, and oil and gas.

Recent trends also indicate that financial sector disputes are on the rise, in areas such as private equity, joint ventures, and mergers and acquisitions.

Landmark judgment Recently, the Apex Court overruled its past decision in Bhatia International vs. Bulk Trading SA. The judgment, which is to have retrospective effect — the decision of the apex court only applies to arbitration agreements entered into after September 6, 2012 — substantiates a positive inclination towards arbitration practice in India.

A crucial consequence of the judgment is that Indian courts now have jurisdiction only over arbitrations seated in India. Thus, Indian courts are no longer permitted to award interim reliefs and set aside awards passed in foreign-seated arbitrations. A foreign award can no longer be challenged in an Indian court.

Awards rendered in foreign-seated arbitrations are subject to the jurisdiction of Indian courts only for their enforcement in India. Thus, the execution of awards in India is expected to pick up pace, and proceed in a satisfactory and timely manner.

Evolving arbitration trends While arbitration continues to be a preferred mode of dispute resolution, the fact remains that it is costly and time-consuming. However, the introduction of various practices in local and international arbitration procedures is expected to contribute to increasing their efficacy.

The study indicates that ad-hoc arbitration continues to be the preferred approach in Indian arbitrations. However, there is a gradual inclination towards institutional arbitration due to factors such as established rules of procedure, experienced and qualified panel of expert arbitrators, competence, quality services, and credibility of institutes (such as SIAC, LCIA, and ICC).

The role of expert evidence in complex arbitrations has evolved significantly in recent times. Further, the controversial procedure of ‘hot tubbing’ — the battle of the experts, is particularly gaining recognition. Under this procedure, experts are enabled to challenge each other’s evidence, and can testify at the same time. It also enables lawyers and arbitrators to question them in the presence of other experts, thus rendering the process a lot more effective than the old school method of cross-examination.

Technological tools such as video-conferencing, e-discovery, financial modelling tools, data management systems, ODR (Online Dispute Resolution) and so on will also contribute immensely to successful arbitration practice. E-discovery is growing as a means to reach fair results in complex commercial arbitration proceedings, especially when parties seek significant discovery in disputes that are likely to involve exchange of significant electronically stored information (ESI).

However, arbitrators need to familiarise themselves with technological issues that arise in connection with electronic data, so as to appropriately address issues pertaining to e-discovery. Appropriate use of technology has the potential to take Indian arbitration a long way, but it is not being exploited to its full potential yet.

Third-party funding is still at a nascent stage in India, so its impact is yet to be examined. The EY study indicated that though attempts have been made to fast-track arbitrations in India, their success rate remains at an all-time low, and much more needs to be done.

While it can be concluded that Indian arbitration has taken steps in a positive direction, more is needed to facilitate efficient disposal of disputes.

Ajay Upadhyay, Associate Director, and Urvi Gadhia, Associate, contributed to this article.

The author is Partner and National Leader, Fraud Investigation & Dispute Services, Ernst & Young LLP

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