Arbitration & Enforcement

According to the latest World Bank annual ratings, India is ranked 63 among 190 economies in the ease of doing business. The rank of India improved to 63 in 2019 from 77 in 2018. In 2018, India ranked 186 among 189 countries regarding enforcement of contracts.

27 April, 2022 Article
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According to the latest World Bank annual ratings, India is ranked 63 among 190 economies in the ease of doing business. The rank of India improved to 63 in 2019 from 77 in 2018. In 2018, India ranked 186 among 189 countries regarding enforcement of contracts; the three countries worse than India were Timor-Leste, Angola, and Bangladesh. The resolution of contracts and enforcement of Contracts is a severe challenge faced by and the Govt has been making serious efforts to change the abysmal scenario of timely dispute resolution and enforcement of contracts. In the area of business, trade, and commerce, new laws have been introduced and some current laws have been changed over the past several years. The main goal of many of these changes or new laws has been to raise India’s formerly dismal ranking in the World Bank’s Ease of Doing Business Rankings. Commercial arbitration aims to rely on the expertise of impartial arbitrators Instead of getting lost in the maze of legal proceedings. Despite numerous legal reforms, policy changes and new legislations the country is still ranked 63 out of 190 countries regarding enforcement of contracts.

The debate around law and ease of doing business in India has been dominated by reforms in Labour laws and bankruptcy statutes. However, there is a need to focus the discussion on sectors and issues where the performance of India has been abysmal and is enormous scope for improvement. The Indian Judicial system is very slow in the resolution of disputes and their enforcement. The civil justice system has been heavily criticised for its delays and propensity for conflicts throughout the years since it has been considered a significant obstacle to the enforcement of contracts. The lack of Judges and infrastructure has burdened the system creating a backlog of cases in millions. The multiplicity of legislations, regulations, and regulating authorities have created an atmosphere defeating their primary resolution purpose. Frequent legislative changes and retrospective effects without public consultation bring new disputes on taxing, finance, etc. The senior supreme court Advocate Aman Lekhi highlighted the absurdities of multiple agencies and regulations and said, “the multiplicity of the regulatory authority, this is, this is a very, very important point and has to be addressed, apart from the fact that there has to be some kind of cohesion in so far the dealing is concerned because this patchwork creates a gridlock of chaos because of the competing authorities exercising the jurisdiction at different points of time on an understanding which is not necessarily unanimous in creating basic disharmony in the system.’

Another serious issue that must be focused on is how international arbitration can resolve enforcement-related topics in the civil justice system. The changes in some statutes have been highly revolutionary, like the amended definition of court for international commercial arbitration for foreign awards to provide a better enforcement mechanism for foreign awards. Earlier, these procedures required going to the district court, which was time-consuming. To reduce litigation and speed up the process, the State should also be realistic and organise a committee to bring the contract forms, the standard forms of contract, engineering contracts, construction contracts, and all types of contracts in compliance with international standards. The training of Judges and arbitrators shall be promoted. Rajeev Goswami, Head Legal, Vedanta Limited, while discussing the changes in the arbitration model in India. While criticizing the previous model, he appreciated the changes due to regulations. He said,’ Earlier there was no clarity in the market, as such, how the international commercial arbitration will work in India. Still, clarity has also been brought in through the amendments and Supreme Court judgments. Similarly, the seat and venue also created a lot of confusion. So, lots of chaos have been already cleared by the judiciary as well as also by the legislative amendments, which have been very, very, I’ll say, encouraging for creating a better arbitration atmosphere.

Regulatory challenges to arbitral awards need immediate concern if India has to improve its standing in the enforcement of contracts. Institutional arbitration is the only option to improve the efficiency and efficacy of the entire dispute settlement process. It has been observed that parties’ attitude is a hurdle in enforcing the award. Instead of lengthy litigations and challenging the arbitration agreement, arbitration award, or the enforcement of an award in the court, the parties entering into agreements shall ensure that they are willing for arbitration and do not treat it as just another litigation. The question of challenging foreign awards in the name of public policy shall also be reviewed. Tejas Karia, Partner, Head- Arbitration, Shardul Amarchand Magaldas & Co, highlighted the issue of public policy and the limited role of courts. He said,’ the court has to enforce the award as if it’s the decree of the Court and the grounds for challenge and reducing, of course, if there has been a shift towards the definition of public policy. With the amendment, we have now curtailed, to a great extent, the interpretation issues, and the courts are now following the regime of less interference in the arbitration process and trying to intervene only when there is a clear case of patent illegality domestic awards and for international commercial arbitration.’

Recommendations:

The panelists deep-dived into multiple issues surrounding cryptocurrencies and made the following recommendations:

  • For Unsuccessful Resistance to the enforcement of an award, there shall be an actual cost to the party
  • The arbitration shall not be treated as another litigation, which is costly, lengthy and cumbersome
  • There shall be institutional and professional drafting of contracts which will minimise the disputes in the beginning
  • The Judges, Arbitrators, and Lawyers have to be trained to act professionally 
  • The industry, Lawyers, Courts, and the regulating agencies have to change their attitudes towards arbitration to ensure it is not time-consuming and is cost-effective
  • Laws shall not be amended now and then 
  • There shall be stability and predictability in policy and regulations
  • Instead of relying on preliminary evidence under the evidence act, there should be a legal provision that Data collected by Data agencies shall be taken as evidence
  • There has to be a shift from traditional players of dispute resolution to new players who are more professional and understand technicalities.
  • Institutional arbitrations are to be promoted as they are doubtful to be challenged in courts 

 

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