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Since the Government of India facilitates the business group with Commercial Courts, commercial Division and Commercial Appellate Division of High Courts Act. 2015, majority of the companies in India have started resorting to Arbitration rather than litigation for the resolution of future disputes. Most of them confirmed a dispute resolution clause in contracts entered by their company. Companies generally indicated a flexible approach towards negotiating arbitration clauses. However factors such as law governing the arbitration, seat of arbitration and language primarily drive the negotiation.

Arbitration remains a preferred dispute resolution mechanism, despite certain loopholes and shortcomings in the arbitration environment in India. Still it has become a practice being carried out by these companies in holding arbitration in isolation or in combination with other dispute resolution mechanisms like mediation, conciliation, negotiation etc. Speed, flexibility and confidentiality are the major factors that make arbitration the most preferred dispute resolution mechanism.

Mediation may provide a suitable alternative since it is less expensive, flexible, allows greater participation of the parties and provides solutions beyond formal legal remedies. So far as business groups in India desire greater certainty that while reaching settlement, there shall be effective enforcement so as not to revert the same prolonged civil suit which they were trying to evade. Hence they prefer arbitration to mediation which is quite meek so far as it is not enforceable similar to arbitral awards.

Institutional arbitration is yet to be widely used by companies in India. Majority of the companies that experienced arbitration preferred ad hoc arbitration over institutional arbitration. Further, companies with no prior experience of arbitration also indicated a preference for ad hoc arbitration. In developed countries, institutional arbitration is preferred type of arbitration owing to presence of variety of institutions, proper administration of the proceedings offered by such institutions, uniform rules and procedures of the institute, absence of the interference from the country’s legal system and arbitration friendly infrastructure available in such countries.

Companies that had experience in alternative forms of dispute resolution (other than arbitration) admitted doing so in accordance with their organizational policy, particularly with respect to disputes relating low value contracts whre the arbitration would be a cost effective option. Alternatively, they continued to follow traditional litigation for previously executed contracts that did not provide for arbitration in the event of dispute.

Although majority of the companies opted for arbitration due to various benefits, not all had a satisfactory experience.

The level of dissatisfaction to substantial for arbitration seated in India as compared to arbitration seated outside India. The dissatisfaction may be attributed to the following blockades that hinder an efficient arbitration process in India.

·         Lack of uniformity in the procedures and treatment of arbitral awards has been an acute problem for parties adopting arbitration to resolve disputes.

·         The arbitration award should be binding without recourse to challenge irrespective of the seat of arbitration. There is an immediate need for tightening of grounds to challenge an award in India. The appeal episode may escalate the cost and time of arbitration proceedings to be treated in a similar fashion as litigation.

·         As there is no pre-determined rules and procedure in an ad hoc arbitration, there is no prescribe time limit within which the arbitration proceeding must be completed, it makes arbitration a less attractive mechanism for dispute resolution.

·         Constitution of the arbitral tribunal is a time consuming activity and treated to be the prior factor in extending the arbitration proceedings.

·         The time and cost of the proceedings is also affected significantly when deficient parties take advantage of the loopholes in the procedures and the proceedings lack the requisite level of professionalism.

·         Arbitrator’s fee was among the top three factors that companies attributed to the cost of the arbitral proceedings. Other factors included solicitors/law firms’ and counsel’s professional fees.

·         In case of ad hoc arbitration in India, there is a small club of seasoned arbitrators that companies can choose from. This causes a delay in the arbitration process due to lack of availability of such arbitrators. Such administrative hurdles increase the cost of the proceedings significantly, making it a more expensive proposition as against litigation.

As India has been emerging as a business nation, automatically the tendency encountering with the augmentation of commercial disputes has become a concurrent factor. But the unfortunate thing is that the practice of dispute resolution method in the form of Arbitration has lagged behind. Arbitration in India is bitten by bugs and it is not free from the loopholes and shortcomings. Hence efforts shall be undertaken to encourage Arbitration as a cost effective and swift arrangement for the settlement of commercial disputes in India has become the inevitable need and the claim of the hour.

 India has continuously tried to amend its legislation regarding arbitration to meet the nations’ needs and its growing market. If India implements these changes to regulate these major issues, it can be a preferred international arbitration destination. Though such changes are already underway and may take years to fully develop, they are worth the effort and time. These changes will create more interest in India as a country, both economically and financially. Further, it will increase India’s legal credibility, something that has always been under strict scrutiny and criticism.