In simple words, arbitration is the act of dispute settlement through an arbitrator, i.e. a third party, who is not involved in the dispute. It is an alternative dispute settlement mechanism, aiming at settlement outside the court.
Arbitration in India is regulated by the Arbitration and Conciliation Act, 1996. The Act is based on the 1985 UNCITRAL (The United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976. In 2015, Arbitration and Conciliation (Amendment) Act was enacted to improve the arbitration in India.
The 2015 amendments tried to ensure quick enforcement of contracts, easy recovery of monetary claims, reduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration, so as to encourage foreign investment by projecting India as an investor friendly country having a sound legal framework and ease of doing business in India.
In addition to the above-mentioned negatives of Institutional arbitration, following are the challenges of the institutional arbitration in India.
- Issues relating to administration and management of arbitral institutions.
- Perceptions regarding arbitrators and expertise issues relating to resources and government support, lack of initial capital, poor and inadequate infrastructure, lack of properly trained administrative staff, lack of qualified arbitrators, etc.
- Issues in developing India as an international arbitration seat. To address the challenges and shortcoming of the Institutional arbitration, a High-Level Committee (HLC) to Review the Institutionalisation of Arbitration Mechanism in India under Mr Justice B N Srikrishna was constituted in 2016. The committee submitted its report on 3 August 2017.
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