Affordable Arbitration: Dream or Delusion?
Updated: May 31
Anshi Joshi, 3rd Year B.A. LL.B (Honours) Student, Maharashtra National Law University-Nagpur
It is often said that “justice delayed is justice denied”, which seems to be coming true seeing the pendency before the Indian justice delivery machinery. The Indian Judiciary has been suffering an enormous pressure under the crores of cases. The Supreme Court, with a strength of 31, has lakhs of cases pending and there are new cases every day.[i] With the ever-increasing litigation in India, the famous saying that justice delayed is justice denied has been materialising. The idea of justice comes along with the idea of access to justice. This overburdening of the cases is not justice making the justice inaccessible but is also severally affecting, slightly decreasing the efficiency of the Indian legal system. This situation is threatening for the stability of the legal system. Therefore, for many years, emphasis on the alternative ways is being laid. There are two significant reasons why Alternative Dispute Resolution (ADR) methods are given prominence these days: (i) The resort taken to other methods will reduce the burden on the shoulders of Judiciary, and (ii) Appropriate methods would be applied as per the need of the dispute. Needless to say, not all disputes are meant for litigation. Disputes like those between husband and wife or among brothers can be resolved by assisted discussions and negotiations, technically called as mediation and negotiation. Still, there is a wide range of disputed that require extensive paperwork and details, and hearings and a complete order and not just a simple arrangement. For such disputes, arbitration exists. Arbitration is structurally similar to litigation. In arbitration, instead of judges, the award is passed by the arbitral tribunal comprised of arbitrators, chosen by the parties as per their convenience and need of expertise in the dispute. Unlike litigation which is governed by procedural codes and court rules, arbitration is mainly governed by the arbitration agreement between the parties and the Arbitration and Conciliation Act, 1996 in India, which is based upon UNCITRAL Model Law of 1985.[ii] Among all the ADR methods, arbitration is procedurally complex most, and somewhat time taking. Although arbitrations deem fit for only a particular type of disputes, it provides parties with the much-required flexibility. Arbitration is now trending even in tier-2 cities as well. The extension of law firm culture has extended the reach of arbitration to corporate established in different parts of the country, be it metropolitan cities or the smaller industries. However, the real question is, whether arbitration is as simple as it seems?
While the outer side of the arbitration brings about the fancy world of flexibility and convenience, but there are other facets to arbitration as well, the most deliberated among them is the cost. The critics of arbitration have used the cost implicit in arbitration as their most significant contention to reject arbitration, as according to them, the cost involved in the arbitration is equivalent to or higher than the cost involved in litigation, thus, making arbitration inaccessible for the masses and reserving its domain for elite classes and corporate mostly. With arbitration, an interesting conundrum exists—either the arbitration can be cheap but time-taking, or quick but expensive. The financial position of the parties, thus, plays a vital role in determining the quality, speed and outcome of the arbitration.
Unlike litigation, arbitration starts right from deciding the venue of arbitration to hiring arbitration lawyer and paying the arbitrators their fees as per the Fourth Schedule of The Arbitration and Conciliation Act, 1996. It depends upon the sum under dispute, and there is an add-on of 25% of the fee payable in the case of a sole arbitrator.[iii]
Further, a cheaper arbitration will have high chances of loopholes being left owing to the technicality, thus, leaving the scope for future disputes on the same or similar issue(s). A cheaper arbitration will also take time, as the procedure will be slow, as there will be no incentive involved for the arbitrator for taking the proceedings on a faster pace. Thus, a cheap arbitration will be slow and somehow reiterate the justice delayed is justice denied. Now, going to the other side of the coin, consider the case where the arbitration is speedy. Arbitration can be speedy for sure, provided that there is a continuous flow of resources. For a continuous flow of resources, the continued flow of capital is required. If the resources are readily available and easily accessible, then the proceedings can be coordinated without lacunae and gaps, and long waiting periods can be avoided. Further, internationally recognised and more skilled experts can be arranged both as arbitrators and lawyers. Again, all of this can be sourced if the parties can afford such expenses. Therefore, the idea of making ADR, specifically arbitration accessible for all is destroyed here, as it gets secluded for the classes who can afford it.
Now the question before the legal fraternity is: how to make arbitration both affordable yet quick. One of the ways could be making arbitration mandatory for a specified category of disputes before stepping into litigation. Further, government-operated arbitration centres having equal resources, budget and footing as courts, and not putting them under the shelter of Supreme Courts and High Courts. Further, the focus and training and exposure sector have to be enhanced, so that awareness spreads in the society, and more and more people resort to it, making it a common practice. In words of Ms Jennifer Kirby, an arbitration which is cheap, fast and sound is nothing less than a Unicorn—imaginary in all the terms, as cheapness and need for speed would make such an arbitration crappy in terms of output.[iv] Therefore, unless efforts are channelised for the purpose of making good, cheap and quick arbitration co-existent, it will not change from a Unicorn to a Derby Race Horse.
[i] https://njdg.ecourts.gov.in/njdgnew/index.php, last accessed on June 29, 2019. (It is the portal which keeps the real time count of cases pending in Indian courts)
[ii] Dipen Sabharwal, Aditya Singh and Sindhu Sivakumar, White & Case LLP, Arbitration in India, https://www.lexology.com/library/detail.aspx?g=72bcbbe3-c139-46f2-b9ce-086394161f41, last accessed on Jun 30, 2019.
[iii] Swati Garg, Nature of Fourth Schedule of Arbitration and Conciliation Act, 1996, available at: https://blog.ipleaders.in/fourth-schedule-arbitration/, last accessed on Jun 30, 2019.\
[iv]Jennifer Kirby, Efficiency in International Arbitration: Whose Duty It Is?, 19 Dec. 2016, available at: https://arbitration.fi/2016/12/19/efficiency-international-arbitration-whose-duty-jennifer-kirby/, last accessed Jun 28, 2019.