Compulsory arbitration before litigation requires a lot of ground work before litigation begins

Arbitration as an effective dispute resolution mechanism has gained significant momentum globally. The trend in favor of arbitration, especially in India, has been increasing in recent times, with the government introducing several measures such as introducing arbitration as a pre-litigation tool in some specific area laws, and the first countries to sign it. was one of them. United Nations Convention on International Settlement Agreements as a Result of Arbitration (Singapore Convention). Among these various policy measures, a unified national legal framework for arbitration will provide much needed impetus. Realizing the need for an independent arbitration law, the Ministry of Law and Justice recently published the Arbitration Bill 2021.

The Arbitration Bill is a major step towards establishing a clear framework for the arbitration process in India. The Bill seeks to address various aspects of the core process and principles of arbitration, including issues such as confidentiality, self-determination and volunteerism. It provides a regulatory framework for the practice of arbitration and a mechanism for the recognition and enforcement of arbitration agreements at the national and international level at large.

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An important feature of the Bill is the introduction of a mandatory pre-litigation arbitration process with an opt-out clause. Before initiating a dispute through arbitration as a pre-litigation mechanism, the disputing party is required to take measures to settle the disputes. However, if he so desires, the data subject may “opt out” from the mediation after attending at least one mediation session. This mandatory non-participation arbitration process is no stranger to the Indian context. For example, commercial disputes cannot be brought before commercial courts unless an attempt has been made to resolve the dispute through arbitration, as required by the Commercial Courts Act of 2015.

From a political point of view, one of the main reasons for enforcing the mandatory use of mediation is to ensure that it serves as a wake-up call for the conflicting parties to resolve their differences and reach a timely resolution. , thus ending the disputes at the very beginning. Early dispute resolution, apart from saving cost and time for the parties, will also significantly reduce case updating in an already overloaded judicial system. This mandatory arbitration model has worked with opt-outs in countries such as Italy and Turkey.

Empirical studies in these countries suggest that the withdrawal rate is very high with compulsory arbitration. Furthermore, there appears to be a growing interest among countries in implementing virtual arbitration or compulsory arbitration with an opt-out clause to give the necessary impetus to arbitration as an effective dispute resolution mechanism.

To the extent that proponents are in favor of compulsory use of arbitration, there are also opposing voices.

For them, the notion of compulsory arbitration goes against basic principles; They argue that forcing the parties to arbitrate may result in settlement against their will. Furthermore, when the balance of power between the parties is disproportionate, the prescriptive nature of the process may widen this gap in their position.

This ideology also tries to emphasize that compulsory arbitration prevents equal access to justice as the parties would be better able to resolve some disputes through litigation, as the right to access to courts is also considered a fundamental right of citizens. goes. Furthermore, experience shows that in countries with low levels of arbitration awareness, compulsory arbitration tends to be an empty formality, while still burdening taxpayers’ money.

An emerging question in the Indian context is whether India is ready for compulsory arbitration as a pre-litigation tool. In the absence of empirical evidence, there can be no clear answer to this.

However, the unsatisfactory response to the mandated arbitration under the Commercial Courts Act 2015 is a clear indication that there are sufficient grounds for doubt. There are many grounds for creating awareness of mediation, even more so in the community and private mediation space, before it is offered as a compulsory refuge.

Arbitration Notice: Alternative Methods

The success of compulsory arbitration with opt-out in Italy may have prompted Indian politicians to step down.

But that said, India could have followed the path of countries that have not opted for compulsory arbitration and instead followed the basic principle of maintaining voluntary arbitration. For example, countries such as Ireland, Singapore and Scotland have placed the burden of creating awareness among their clients about arbitration on the legal fraternity as a prerequisite for initiating litigation. Lawyers and advocates must inform the court of this meaning before initiating legal proceedings.

While this certainly cannot be seen as a solution to all problems that may arise, it will address a fundamental concern that is the involvement of the legal community, which will play an important role in the success of the arbitration framework. Not to mention the efforts of the judiciary to promote arbitration, due to which even in complex and long pending disputes, court related arbitration has been quite successful.

However, outside court intervention such as private or community arbitration, the success of arbitration largely rests in the hands of the legal community. The awareness about the importance of arbitration in the judicial fraternity is still very low. In the absence of adequate resources with the required professional experience, with only a few experienced arbitrators in the country, the use of compulsory arbitration would lead to an explosion of cases.

While the establishment of a regulatory body in the form of the Arbitration Board of India would certainly accelerate the growth of arbitration, India should be patient and ensure that arbitration becomes a predetermined mechanism which the parties voluntarily with full knowledge rather than mandatory. Adopt it. appeal to them

(The author is the sponsor of J&M Legal,