Centre plans to revive IIAC, adds incentives for maritime arbitration and MSMEs

Following amendments in rules for arbitrations involving micro, small, and medium enterprises (MSMEs) in June this year, the IIAC, which is the only arbitration institution directly funded by the Union government, is in the early stages of convening a new chapter of its services, specializing in international maritime arbitration.

"The new centre for arbitration in Mumbai will not be a new body, but more like a branch of the IIAC," said Hemant Gupta, chairperson of the IIAC, and a retired supreme court judge. Both steps taken to incentivize MSMEs as well as parties to maritime arbitrations are to promote institutional arbitration in the country, Gupta said.

Efforts to promote arbitration for out-of-court dispute resolution started before the turn of the millennium, with the institution of the International Centre for Alternative Dispute Resolution (ICADR) and passage of the Arbitration and Conciliation Act in 1995 and 1996 respectively.

Promoting institutional arbitration was a key function of the ICADR. However, a weak case load was a crucial issue with the ICADR, indicating that India was far from adopting institutional arbitration as a go-to dispute resolution method, according to an expert committee report by a panel led by retired supreme court judge B.N. Srikrishna in 2017.

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"…The case load of the ICADR has been 49 arbitration cases since its inception as compared to 343 new cases handled by the SIAC (Singapore International Arbitration Centre) in 2016, 303 new cases handled by the LCIA (London Court for International Arbitration) in 2016, and 966 new cases handled by the ICC (International Chamber of Commerce) Court in 2016," the Srikrishna committee report noted.

Following the committee's suggestions to revamp the ICADR, the central government created the New Delhi International Arbitration Centre in 2019, later renamed the IIAC.

Issue of weak case load

Weak case load, however, remains a problem. Currently, the IIAC is hosting approximately 15 ongoing institutional arbitrations, Gupta of IIAC told Mint, adding that this is a low number.

An email query sent to the ministry of law and justice about these developments remained unanswered till press time.

In June, in a concerted effort to build the IIAC's case load, the government issued fresh rules for arbitration for MSMEs, allowing them to use its services at a discount. A provision of the notified rules said, "No filing fee for Claim or Counter Claim and minimal arbitrator fee (less than the rate specified in the Fourth Schedule of the Arbitration and Conciliation Act,1996) and minimal administration fee payable by parties."

The new rules also provided fast-track arbitration ending in six months from the date the arbitrators were decided by parties, along with a fee waiver for MSMEs desiring legal aid.

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Consequently, the IIAC has decided to focus on maritime arbitration with the same goal of boosting its case load. Globally, maritime arbitration, especially international maritime arbitration is taking off as the shipping industry boomed due to a rise in international trade.

"Putting maritime arbitration into context in the London market, its caseload of, on average, 1,700 new references each year makes up by far the majority (approximately 75%) of London-seated arbitrations commenced annually," a report by the Chartered Institute of Arbitrators, an international training body for international arbitration, said in 2023.

Importance of revival

IIAC's revival assumes importance as India tries to shift from a culture of ad hoc arbitration to institutional arbitration, as suggested by various expert panels and law commission reports. It also aligns with the central government's goal to make India a global arbitration hub.

Law and justice minister Arjun Ram Meghwal told Mint last week the government was in the process of making new rules under the Arbitration Act.

The law ministry also sought data regarding the state's arbitration matters from all other ministries earlier this month after conducting research into global best practices, Mint reported earlier.

IIAC secures a budget via grants demanded from the central government every year in the range of ₹3-4 crore, roughly half of which is for salaries of permanent employees, officials in the IIAC told Mint, requesting anonymity.

All other centres for institutional arbitration in the country are either privately operated, or run by high courts. For instance, the Delhi International Arbitration Centre is operated by the Delhi High Court.

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