“Institutional Arbitration and its Framework: In Contemporary

Times”
“Abstract”:
Arbitration is the procedure whereby a disagreement or difference among two or more
disputants regarding “their mutual legal rights and liabilities is” alluded to and resolved
judicially and with conditions imposed by the implementation of the “law by one or more
persons (the arbitral tribunal)” rather than by a court of law1. “Arbitration” is a different way
of resolving conflicts, “and it coexists with the legal system”. Parties are free to select the style
of arbitration that they believe is best suited to the facts and situations “of their dispute. This
paper” takes into account about Institutional Arbitration and its framework.

Chapter-1 “Introduction”:

“Arbitration is a nature of alternative dispute resolution (ADR)” in which problems within two
individuals are dwelled outside of the regular judicial system.

“In an arbitration matter, the parties to a disagreement will submit it to one or more individuals
designated as 'arbitrators' or an 'arbitral tribunal,' by whose judgement or award they conform
to be bound. Arbitration is often practised to settle economic disputes, expressly in international
commercial transactions”.

“Institutional Arbitration” is a process in which an operational institution conducts the

procedure of arbitration, with its own set of protocols that serves the purpose, and administrates
the structure to aid with the process.

“The London Court of International Arbitration (LCIA), the International Chamber of

Commerce (ICC), the Dubai International Finance Centre (DIFC), and the Dubai International
Arbitration Centre are examples of common institutions (DIAC)”. There are roughly 1200
organisations worldwide that provide arbitration services, with some focusing on a specific
trade or sector. Precautions should be made throughout the selection process, as certain
institutions may operate under rules that are inadequately designed2.

1
“Butterworths, Halsbury’s Laws of England (4th edition, 1991)”.
2
Out Law Guide, Institutional vs. 'ad hoc' arbitration, PINSENT MASONS (Aug. 12, 2011, 10:56 am),
[Link]
Institutionalizing Arbitration in India is a critical necessity for improving the effectiveness of
India's arbitration system. Everyone is cognizant that thousands of arbitral proceedings are
taking place in India under the ad hoc arbitration system. The “ad hoc arbitration” method
allows the parties/arbitrators to design the arbitration procedure and allows arbitrators to set
their own fees. In certain circumstances, the arbitrators' fees and the time required to conclude
arbitrations were not within acceptable boundaries, and so the system is severely criticised by
India's arbitration community. The Rules of the Arbitral Institutions describe the method that
the Arbitrator and the Institution's Administration must follow when conducting arbitrations.
The Rules also provide a fee calculation that is clear and predicated on the claim's quantum
and work burden. Even while a few arbitral institutions currently offer services in India, the
government's efforts will undoubtedly propel it further3.

Chapter-3 “Institutional Arbitration”:

India's evolution as an arbitration centre has stood on the docket of Indian legislators for quite
a bit. “The Arbitration and Conciliation (Amendment) Act, 2015”4 ("2015 Amendments") to
the “Arbitration and Conciliation Act, 1996”5 ("ACA") seeks to accomplish this goal by
magnifying the expeditious and efficient resolution of disputes through arbitration. Another
measure in this direction was the passage “of the Commercial Courts, Commercial Division”,
and “Commercial Appellate Division of High Courts Act, 2015”6 ("Commercial Courts Act"),
which enables for the expeditious resolution “of arbitration-related court proceedings by
requiring arbitration matters concerning commercial disputes to be heard by commercial
courts/divisions”.

“Advantages of Institutional Arbitration”:

The following are the most significant benefits for individuals who can afford “institutional
arbitration”:

 “The existence of pre-established norms and processes that ensure the arbitration
proceedings” commence on time

3
“Introduction to International Arbitration, ASHURST (MAY 14, 2021), [Link]
and-insights/legal-updates/introduction-to-international-arbitration”.
4
The Arbitration and Conciliation (Amendment) Act, 2015, No. 3, Acts of Parliament, 2016.
5
The Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996.
6
The Commercial Courts Act, 2015, NO. 4, Acts of Parliaments, 2016.
  Administrative help will be provided by “the institution, which will establish a
secretariat or a court of arbitration”.
 “A list of eligible arbitrators” from whom to pick;
 Support in persuading hesitant parties to participate in arbitration; and
 “A well-established format with a track record”.

“Disadvantages of Institutional Arbitration”:

The following are the key drawbacks of “institutional arbitration”:

 “Administrative” expenses for operations and facility usage, which can be significant
if “there is a big sum in dispute - sometimes much more than the actual amount in
dispute”;
 Bureaucratic influence inside the institution, which can cause inefficiencies and extra
expenditures;
 “The parties may be” compelled to answer in unrealistically short time constraints.

“Institutional arbitration” reduces parties and their attorneys the time and effort of selecting the
arbitration method and crafting “an arbitration clause” that the institution provides. Once the
parties have decided on an institution, they can integrate the draught provision from that
institution into their contract. In some cases, they may desire to include other aspects7. These
provisions can be revised at any moment by the institution, based on its experiences
administering arbitrations on a continuous basis, to ensure that there is no incertitude in the
arbitration process.

An institution's board of arbitrators is often composed of specialists from distinct areas of the
globe and a variety of professions. This enables the parties to choose an arbitrator who
possesses the required talent, experience, and competence to deliver a speedy and successful
conflict settlement procedure. Nevertheless, “it should be remembered that the parties just
suggest an arbitrator; it is up to the institution to arrange an appointment, and the institution”
can deny an appointment if it believes the recommended arbitrator lacks the essential
competency “or impartiality”.

“One of the apparent benefits of arbitration is that it gives a final and binding award that cannot
be” challenged. Yet, there is an intrinsic danger that a tribunal's error will not be corrected at a
later point in time. To mitigate this peril, several institutional policies require that the draught

7
OUR LAW, supra note 1, at 4.
award be reviewed before the final award is made. “A disgruntled party” might then file an
appeal with “a second-instance arbitral tribunal, which could affirm, change, amend”, or
reserve the draught judgement. Such an option is not available in less administrative
procedures.

Chapter-4 “Challenges to Institutional Arbitration in India”:

This segment investigates the justifications how some “institutional arbitration is not the”
chosen method of “arbitration in India”, with a special emphasis on (1) misapprehensions about
“institutional arbitration”; (2) A lack of government assistance for “institutional arbitration”;
(3) “a lack of statutory support for institutional arbitration”; and (4) issues with postponements
and exorbitant judicial participation in arbitration proceedings8.

1. Misapprehensions about “Institutional Arbitration”:

There are various misapprehensions regarding “institutional arbitration that” prevail across
parties. One of the factors is connected to expenses. Parties believe institutional arbitration is
significantly quite pricey than ad hoc arbitration, owing mostly to administration costs paid to
arbitral institutions9. This evaluation is generally incorrect because: (a) many arbitral
institutions offer extremely reasonable costs; and (b) using an arbitral institution helps
minimise disagreements over procedural problems, reducing operating costs. and (c) the
expenses of “an ad hoc arbitration” might simply surpass those of an institutional arbitration
due to added “procedural hearings, adjournments, the usage of per-hearing fees, litigation
deriving from procedural flaws in ad hoc arbitrations”, and so on.

Parties frequently assume “that institutional arbitration is rigid because arbitral institutions”
adopt norms that limit the parties' sole control over arbitration procedures. Nevertheless, the
majority of the arbitral institutions in the global arena have attempted to strike a compromise
between institutionalisation and party autonomy; they only maintain topics administered by
“the legality and integrity of operations out of the expanse of party autonomy”.

These fallacies might be the result of a generalized lack of understanding of “institutional

arbitration” and its benefits. This might also be attributed to a failure of effort on the side “of
arbitral institutions” to publicize their operation and amenities, as well as a failure on the part

8
“Nikita Vadrevu, The Concept Of Institutional Arbitration – Need For The Hour, DESIRE (March 25, 2018),
[Link]
9
of attorneys to appropriately counsel parties on the benefits of “institutional arbitration”.
Although when individuals are informed that “institutional arbitration” is a possibility, they
frequently believe that it is only accessible to larger organisations and/or high-value conflicts.

2. A lack of government assistance for institutional arbitration:

One of the causes for India's inadequate institutional arbitration structure is an absence of
adequate state assistance throughout the period. Whereas the current regime “is the most
prominent litigant in India, it may do more in its position to foster institutional arbitration”.
Arbitration provisions are frequently included in the standard terms and conditions of
agreement utilized by the government and public sector undertakings, although these
agreements do not always clearly allow for institutional arbitration.

Some state governments have lately discussed and launched attempts to encourage institutional
arbitration, noting the benefits of being more structured and cost-effective 10. “The Law
Commission of India”11 recommended “that trade and commerce” organisations create
chambers with their regulations.

3. “A lack of statutory support for institutional arbitration”:

“The ACA has been arbitrage-agnostic, with no” measures aimed explicitly at encouraging
institutional arbitration. In comparison, “the Singapore International Arbitration Centre”
("SIAC") is the primary assigning body “for arbitrators under” the “International Arbitration
Act, 1994”12 ("IAA"), which oversees “international arbitrations”.

Indeed, one of the ACA's “provisions, Section 29A, which was” included “by the 2015
Amendments”, is said to have rendered arbitral institutions leery of “arbitrations in India.
Section 29A” establishes severe deadlines for the conclusion of arbitration procedures. This
has been condemned as unreasonably restricting arbitral institutions that specify timetables for
various phases of arbitration processes13. The benefits of such a viewpoint must be examined
in light of India's chronic issue of delays in arbitration.

10
‘Maharashtra readies arbitration policy’, BUSINESS STANDARD (Oct. 5, 2016), “[Link]
[Link]/article/economy-policy/maharashtra-readies-arbitration-policy116101400574_1.html”.
11
246th Report of the Law Commission of India (August, 2014), ‘Amendments to the Arbitration and
Conciliation Act 1996’, [Link] (accessed on 01.11.2021).
12
International Arbitration Act, 1994, No. 23, Acts of Parliament, 1994.
13
“Special Address by Justice A.P. Shah at the Nani Palkhivala Arbitration Centre 9th Annual International
Conference on Arbitration on Current Issues in Domestic and International Arbitration”, (Feb. 2, 2017).
4. Issues with postponements and exorbitant judicial participation in arbitration
proceedings:
Postponements “in Indian courts” and extensive judicial intervention in arbitration processes
have led in India not being preferred as a venue for arbitration, stifling the expansion of
“international arbitration (including institutional arbitration) in India”.

Parties frequently postpone arbitration processes by instituting court proceedings prior to or

“during arbitration proceedings, or at the” phase of arbitral award implementation. Because of
the enormous number of cases pending in “Indian courts, arbitration-related” judicial processes
“take a long time to” resolve.

“The Commercial Courts Act” attempted to address this issue by establishing “commercial
courts at the district level or commercial divisions” within high courts with regular “original
civil jurisdiction”. These business “courts/divisions hear arbitration” cases concerning
commercial conflicts, among other things. A check of the most current “roster of the Bombay
High Court”, for instance, reveals “that commercial division judges” frequently handle cases
other than commercial concerns, including “family law matters, juvenile justice-related”
problems”, and so on14. If commercial division judges are entrusted with evaluating things
apart from business concerns, it will undermine the legislative aim of expediting the resolution
“of commercial cases, including arbitration matters. We also noticed that the rotation policy of
these High Courts applied to commercial division judges. An overly regular cycle may impede
the advancement of proficient “arbitration judges who are abreast in arbitration law and
practice”.

The propensity of Indian courts to regularly interfere in arbitration procedures has also led to
“India's image as a 'arbitration-hostile' jurisdiction. It is widely known that courts in India are”
often interventional when it refers to controlling arbitration processes, perhaps at an early stage
(such as the nomination of arbitrators, referrals of issues to arbitration, or award “of interim
relief) or at the enforcement stage”.15. Despite excellent intentions and arguments, they have
frequently miscalculated the plan of action to follow, achieving justice in the matter at hand
but setting a problematic precedent for the future16. Furthermore, contradictory court precedent

14
Sulabh Rewari and Poorvi Satija, Are Commercial Courts the answer to India’s arbitration woes?, KLUWER
ARBITRATION BLOG (December 25, 2015), [Link]
commercial-courts-the-answer-to-indias-arbitration-woes/.
15
“Shannen Parikh, Obtaining Interim and Permanent Relief in International IP Arbitration, IAM,
[Link]
16
Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105.
on a number of critical issues has added to legal confusion, with serious ramifications for
India's standing as a seat of arbitration.

While measures have been attempted to reduce judicial intrusion, India is still widely regarded
as an arbitration-unfriendly environment.

“Conclusion”:
“The Arbitration Conciliation Act of 2015”17 attempted to help in this respect by establishing
costs and timelines “for arbitration, but the thorn in the flower is that courts” must once again
interfere to determine who is to blame for the failure to fulfil the deadline. Furthermore, the
High Courts have been given the authority to establish regulations for fees and payment
methods, which would result in a lack of standardization since each High Court in various
states throughout India would have their laws. As a result, Institutional Arbitration must be
promoted in India.

Furthermore, efforts can be undertaken to render the decision given “by the Arbitrator
following Institutional Arbitration” available to contest or re-examine only by a
“President/Registrar (Head) of the Institution” to discourage parties from going to court, and
the judgment of the aforementioned agency can be declared definitive and enforceable unto the
“parties, and the parties shall be” assumed to have disclaimed ‘”any right to appeal or review”
in” honour of any decision of the aforesaid agency to any place Furthermore, Court
participation in arbitration proceedings might be sanctioned only if the arbitration agreement
expressly states that it is permitted18.

Thus, instead of making impulsive judgements, “Institutional Arbitrations should be provided

with a green flag with patient expectations as to its outcomes since one thing is certain: if
nations like Singapore and Hong Kong could become Arbitration centres on resilience of
Institutional Arbitrations, so can India. India is on the path to developing trust in its judicial
system, which is a must for any country to become an international arbitration venue”.

The parties' specific conditions and the form of the issue will eventually decide whether
“institutional or ad hoc arbitration” should be used.

17
THE ARBITRATION, supra note 4, at 3
18
Vasudha Tamrakar and Garima Tiwari, Ad Hoc And Institutional Arbitration, LSI,
[Link]