Arbitration is understood to be a speedier and more effective alternative as compared approaching a court in the event of a dispute – but is it really serving the purpose? Many foreign investors have been disillusioned with the speed and efficacy of arbitration proceedings in India. Indian businessmen have equally found arbitration proceedings unsuitable for fulfilling the promise of speedy and affordable dispute resolution. How can you make arbitration quicker and more effective?
This post will provide a relatively unconventional ‘hack’ to speeding up your arbitration, since delays in arbitration proceedings pose a critical problem to the efficacy of arbitration itself.
Before we get there, let’s look at a typical arbitration clause, which is seen in the vast majority of commercial contracts (contracts with foreigners also frequently feature a similar clause):
In the case of any dispute or claim arising out of or in connection with or relating to this Agreement, such dispute or claim shall be finally settled by arbitration under the Arbitration and Conciliation Act, 1996. The arbitral tribunal shall comprise 3 members. The Promoters and the Company shall jointly appoint one (1) arbitrator, and the Investor shall appoint one (1) arbitrator. The two (2) arbitrators shall then jointly appoint a third arbitrator.
What is the problem with this clause? Let’s take a basic scenario – what will happen once arbitration proceedings are initiated by a party?
The first step to speeding up arbitration proceedings is to ensure that the other side files a timely reply to your arbitration notice.
How can you ensure that the response will be filed quickly by the other side? Does the clause stipulate mechanisms for speeding up arbitration proceedings? If not, what mechanisms can be included in the clause?
What are the consequences if a party deliberately refuses to comply with the conditions in the arbitration clause?
Arbitration gives parties tremendous freedom and ability to customize their contracts – not to use this freedom effectively can be a waste. Ironically, selectively borrowing ideas from court procedures can be tremendously useful for parties in arbitration. Let’s look at what Arjun Natarajan, a disputes resolution practitioner has to say on this. Arjun has worked extensively on telecom disputes and other commercial litigations – he also has experience in working on international commercial arbitrations under the framework of the International Chamber of Commerce and the International Centre for Dispute Resolution.
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