New Delhi: The London Court of International Arbitration (LCIA) is to set up an India chapter in New Delhi, providing a more “cost-effective” and “efficient” solution to Indian and international companies, who usually go overseas to international arbitration forums to settle disputes.
LCIA India will be established on Saturday in the presence of Chief Justice of India K.G. Balakrishnan and Union minister for law and justice H.R. Bhardwaj. It will be the first time that any of the international arbitration forums will be opening its own offices in India.
While there is no data readily available, industry insiders maintain that most disputes are being referred to such international arbitration forums. According to Farhad Sorabjee, partner at J Sagar and Associates, Mumbai, in the last decade, at least 90% of the contracts with a foreign party involved have been “consistently” moved to international forums such as those in Singapore, Paris or London.
Senior counsel Dushyant Dave, president of the LCIA Asia Pacific Users’ Council, who is spearheading the launch of the India chapter, says the move will bring relief to Indian businessman who often go overseas seeking “effective” arbitration forums such as LCIA, London; International Arbitration Forum, Singapore; Hong Kong International Arbitration Centre; and the International Council of Arbitration, Paris.
Dave says, “Over the last 50 years, arbitration has lost credibility in India. The ad hoc systems (of Indian arbitration) have remained as plagued as the regular legal system has been by procedural delays.”
He explains that Indian arbitration has been conducted mostly by retired judges, “who by their very nature are trained to decide in a procedural manner”.
LCIA India, he says, will work to create a pool of arbitrators, with experts from various fields, besides those from the legal fraternity.
“With arbitration in India, the problem is not the rules, but the way in which arbitration proceedings get conducted,” says Sorabjee, though he maintains that even lawyers are responsible for the delays.
He says that LCIA is “highly used as it is lot cheaper for international arbitration”, and adds that it has a good reputation among foreign companies and they “may be more inclined to use LCIA India”.
“It is a dynamic move, but one will have to see how it finally pans out,” Sorabjee adds.
In India, the Indian Council for Arbitration—allied to the Federation of Indian Chambers of Commerce and Industry—and the International Centre for Alternative Dispute Resolution—promoted by the Indian government—conduct arbitrations.
Sorabjee adds that most companies have been using international arbitration forums to escape intervention by Indian courts. The Indian Arbitration and Conciliation Act, 1996, states that it is applicable only to domestic arbitration and parties can challenge Indian arbitration proceedings in courts. But in recent judgements such as the 2003 verdict in Oil and Natural Gas Corp. Ltd vs Saw Pipes Ltd (now know as Jindal SAW Ltd), the Supreme Court said it had the power to intervene in international arbitration proceedings on grounds of national interest.
LCIA, maintains Sorabjee, is not as well-known as the International Chamber of Commerce’s International Court of Arbitration. The opening of an India chapter would improve its visibility in “a dynamic and developing market like India”.
Matthew Gearing, partner at Allen and Overy Llp., Hong Kong, who specializes in international arbitration and is a co-chair of LCIA’s Young International Arbitration Group, says that India lacks a truly international arbitration institution, unlike some other Asian countries.
“Arbitration is being used increasingly by Indian parties who contract with foreign investors, but there has been a trend of intervention by Indian courts in the international arbitration process. Excessive court intervention has been criticized by arbitration lawyers and by many parties, who prefer the arbitral process to be relatively autonomous. One of the aims in setting up by the LCIA of its India chapter is to effectively spread the word on international arbitration techniques and to help bring international best practices to India,” he adds.
Gearing feels, however, that “foreign investors will continue to try to agree (on) a place of arbitration with an Indian party outside India as it tends to reduce the risk of intervention by the Indian courts”.