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India to encourage arbitration

Published: 14 Feb 2018

India is fast developing as a favorite destination for foreign investors to invest and conduct business in India. In the World Bank’s latest annual Ease of Doing Business report, India ranked 100th compared to previous year’s 130th, which is a significant improvement in the rankings.

However, the image and perception of India being a difficult country in terms of enforcement of contracts still needs to go long.  

To improve the Ease of Doing Business sentiment further, the Indian Government is mulling radical reforms in certain rigid and outdated laws. The objective is to make the existing laws more compatible, adoptable and accessible to the foreign investors for doing business in India.

Such reforms are also likely to include amending the prevailing laws to effectively handle the existing challenges and meet the expectations placed on these laws.

In this context, Indian Government is planning to amend the Indian Arbitration and Conciliation Act, 1996 to ensure the speedy disposal of disputes through arbitration. The rationale behind this decision is to make the existing laws flexible enough to encourage more contractual parties to take up the arbitration as the medium for resolution of domestic and international disputes.

In this regard, poor track record of International Centre for Alternative Dispute Resolution (ICDAR) in New Delhi in resolving disputes through arbitration as it conducted 22 arbitrations in 23 years is also contributed to the decision to amend the arbitration law. ICDAR is provided with all required amenities such as money and land, but miserably failed to create awareness among the contractual parties highlighting the significance of arbitration as a dispute resolution mechanism.

The following are the most important proposed amendments to arbitration laws:

·    Formation of a promotion council and a dedicated band of lawyers to contest arbitration cases.

·    Resolution of dispute through arbitration initiated by any accepted third party, decision evolved in such arbitration will be final and binding on the parties.

It is a welcome measure to amend the existing arbitration laws with the objective of strengthening arbitration mechanism in the country and transform the nation into arbitration hub at international level.

It is hoped that the proposed amendments to the arbitration law will encourage contractual parties to take up arbitration as medium for dispute resolution and accommodate speedy resolution of disputes arose under various domestic and international contracts through arbitration process.

Research and inputs by Paruchuri Baswanth Mohan

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 Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at bhumesh.verma@corpcommlegal.com.

Bhumesh Verma

Firm: Corp Comm Legal
Country: India

Practice Area: Contract

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