Under analysis - changing dispute resolution trends in India

Posted: 13/01/2015

Phillip D'Costa, partner in the London office of Pennington Manches, has a particular interest in arbitration and transactional work involving India. Here he considers recent trends and developments in dispute resolution in India.

Are there any developments or trends emerging in India in case management?

One of the key issues contributing to the backlog of cases has been the chronic underfunding of the court system, with many state governments failing to spend the majority of funds allocated for this purpose. India has one of the lowest ratios of judges to population anywhere in the world, with only 13 judges per million people. By contrast, the US has 107 judges per million people and the figure for the UK is around 51 per million.

There is growing judicial support for a national fund to be set up to improve the allocation of resources for the judiciary. This should help to start reducing some of the backlog.

However, some judges have shown a marked willingness to try and deal with cases in a more timely manner. For instance, a case currently before a Bombay High Court judge is expected to reach trial in slightly over a year from its commencement, which, if it happens, would set a healthy precedent.

Indian judges have, in a series of decisions over the past year or so, also shown a marked reluctance to interfere in international arbitral awards.

Have there been any developing trends in alternative dispute resolution, especially mediation?

It was hoped that the Indian Arbitration and Conciliation Act 1996 would provide a speedy alternative for the resolution of commercial disputes. While this has happened, Indian arbitral proceedings, particularly those of an ad hoc as opposed to institutional nature, have tended to be afflicted with the same deficiencies as Indian court proceedings. Arbitration proceedings have seen numerous sittings and multiple adjournments, overly formal proceedings and high fees. Judicial involvement in the selection of arbitrators, and court challenges to awards have tended to see arbitrations stymied for years on end.

Mediation has not been as effective in India as it has in other jurisdictions. This is largely down to two factors:

• the length of time the court process takes improves the position of the paying party and reduces the imperative to settle a dispute on commercial terms - this is because it removes any effective sanction for a party who fails to reasonably settle, the issue of proceedings acts as an extension of time to pay
• costs are not generally recoverable in Indian court proceedings, so a party may be all too happy to allow a case to slip into court proceedings as it is unlikely to have to meet the other party's costs

What is the current position on litigation funding?

Litigation funding is not currently permitted in India.

Are there any considerations regarding dispute resolution that are particular to India, and about which international practitioners should be aware?

Any practitioner involved with dispute resolution in India cannot fail to be aware of the delays endemic in the Indian court process. India has the biggest backlog of cases before its courts of any nation in the world. This backlog stood at a staggering 31.3 million cases as of May 2014. This volume of cases in the system directly impacts on the length of time it takes for a matter to be finally determined. Many of these pending cases were commenced over 20 years ago. Even the Supreme Court had around 63,893 cases pending, approximately 40% of which are over five years old.

These delays have made arbitration an increasingly attractive alternative. However, an ad hoc Indian arbitration will typically take considerably longer than one administered under the auspices of an international body or one seated elsewhere.

Are there any other key developments or trends in this area?

Many of these issues are addressed in the latest White Paper issued by the Law Commission of India, which strongly favours institutional arbitration over ad hoc, and advocates minimal court interference in arbitration proceedings, including at the very outset provisions for the court to delegate its powers of appointment of arbitrators to an external body. It also recommends adverse costs provisions by the adoption of the English Civil Procedure Rules 1998, SI 1998/3132, Pt 44, the process for appointing emergency arbitrators, the introduction of model fees and that specialist divisions are set up to deal with arbitration, as in the case of the Delhi High Court International Arbitration Centre. There is also a proposal to distinguish the seat from the venue, which if enacted is likely to considerably increase the attraction of this process.

This article was published on Lexis®PSL Dispute Resolution in January 2015.

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