At the opening ceremony of the recently conducted Delhi Arbitration Weekend (DAW), former UK Attorney General Lord Peter Goldsmith said that India is closer than ever to becoming an international arbitration hub.
However, opinion is divided on the issue, with some Indian lawyers saying that we are nowhere close to becoming a go-to destination for international commercial arbitration.
So, what are the issues that need to be resolved to make this a reality?
Pallavi Saluja caught up with V K Rajah SC, a Senior Counsel, former Judge of the Court of Appeal of Singapore and former Attorney-General for Singapore, to find out. More recently, he served as the Emergency Arbitrator in the dispute between Amazon and the Future Group.
In his opinion:
“India has made significant purposeful progress over the last decade in putting in place the infrastructure and software needed to make the arbitration landscape here similar to what prevails in other countries that are regarded as having the best international norms. That said, there remains a tremendous amount of work that needs to be done before an Indian city becomes a preferred international arbitration centre, let alone a global centre.
Creating an admired and credible arbitration ecosystem requires a whole-of-country effort. It requires the participation of all stakeholders, in particular, the legislature, the judiciary and the legal profession purposefully moving together alongside.”
In this interview, VK Rajah mulls over how India might become a preferred arbitration destination and in time an international arbitration hub.
Edited excerpts follow.
Involve Indian experts while making legislative changes – establishing a permanent Standing Committee
Meaningful progress has been made through several recent amendments to the Arbitration and Conciliation Act. That said, what the government should put in place is a permanent standing committee of Indian arbitration experts who can continuously make recommendations to update the laws on what can rightly be characterised as “lawyer’s law”.
..one area that the legislature could have done better, and which I have some personal experience with, is in the area of legislation relating to emergency arbitration
For example, one area that the legislature could have done better, and which I have some personal experience with, is in the area of legislation relating to emergency arbitration. The Law Commission in 2016 made recommendations in relation to legislation recognizing and conferring equivalent status to first emergency arbitrators and then to the orders that they make. Subsequently, the Srikrishna Commission made further recommendations to reinforce this. For some impenetrable reason, Parliament did not accept this particular recommendation. This has engendered a great deal of uncertainty on this important area of practice.
The Supreme Court shed considerable light through its decision in the Amazon case, but that was in relation to the recognition of the order made by an emergency arbitrator in a domestic or Indian-seated arbitration. I must declare an interest here, because I was the emergency arbitrator who decided the case.
This continues to be an area of murkiness to Indian practitioners: What if the seat is a foreign-based seat? Will such an order be recognized in its entirety?
Many countries had earlier amended their legislation in a manner aligned with what the Law Commission and the Srikrishna Commission had suggested. It’s a technical area of law that, had it been appropriately addressed in a timely manner, would have enhanced India’s status as a progressive arbitration jurisdiction. It is still not too late.
I also note in the recent legislative amendments there was the intent, following the Srikrishna Report, to create an Arbitration Council of India to police standards. This will inspire confidence in the international community and investors that the government is serious about enhancing standards nationally. However, it is not just the intent, it’s how you communicate the intent.
High Courts with the greatest commercial experience can be designated as arbitration courts
Confidence in the competence, efficiency, consistency and predictability of judicial decision making is a cornerstone of every arbitration hub cum seat. I have been greatly impressed by the sea changes that have taken place since the unfortunate decision in Bhatia International in 2002. Since then, a number of progressive decisions like Enercon have unequivocally ensured that Indian jurisprudence on international arbitration tracks current international practice in recognizing the principle of minimal judicial intervention.
…Confidence in the competence, efficiency, consistency and predictability of judicial decision making is a cornerstone of every arbitration hub cum seat.
I would respectfully say that the perception – and this is not just my perception – is that the Supreme Court of India, in the course of the last decade, has invariably got its jurisprudence right. It has rightly received international accolades for this. However, the same cannot be said of the jurisprudence emanating from all the State High Courts. There is concern that these Courts from time to time make problematic decisions which cause consternation. It is not good for the legal system as a whole that parties have to live with uncertainty until their disputes reach the Supreme Court.
There are some areas that can be immediately improved upon to address these concerns, and I’m glad to see some steps have already been taken. These are my current thoughts. First, having more specialist judges. Second , improving judicial education. Third, I would also suggest that in all important cases, the courts, especially at State level, invite Indian amicus curiae – expert lawyers or advocates who have no interest in the outcome – to assist with their views. Perhaps, the High Courts for the important cases that they hear or cases which appear to break new ground, adopt this practice invariably. If this practice is adopted more often, it would inspire greater confidence that the courts are trying to arrive at better informed decisions.
The next suggestion is the length of the appeal process. It is, I think, currently better in relation to commercial and international arbitration cases than other cases. The more efficient the process is, the more it promotes the ease of doing business in India, and in turn, helps build confidence in the Indian economy, both for Indian businesses as well as foreign businesses. The courts could publish the timelines they take to adjudicate on such matters and religiously observe them.
a few High Courts with the greatest commercial experience can be designated as specialist arbitration courts
To expedite matters, a few High Courts with the greatest commercial experience can be designated as specialist arbitration courts. Only these courts would deal with matters on enforcement and setting aside court decisions because of the existing possibility of the other courts taking wrong turns. The stakes can be very high in such cases, and perhaps it would build international confidence if parties know that only specialist judges hear such matters on a fast track.
What parties are looking for would be first, competency, and secondly, efficiency. Integrity is an uncompromising given, so I’m not going to amplify that.
To sum up, each of the parties in a dispute resolution wants a decision that favours it, but the courts have a responsibility to ensure that their decisions, which may serve as precedents for other parties, is neither over-intrusive nor results in unwarranted problems. This is where the amicus can sometimes make a difference.
Boost institutional arbitration infrastructure
India at the moment has about 35 different arbitration centres. Every other year, different States make it known that they want to create an international arbitration centre. It does not seem to be the best use of national resources to have a number of centres competing with each other in the same markets in trying to establish themselves as international arbitration centre. National interests ought to come before state interests, and the hierarchy of the institutional landscape needs to be carefully assessed.
India at the moment has about 35 different arbitration centres.
Having said that, there’s more than enough work to go around centres in India when it comes to domestic arbitration. One of the critical historical problems in India is ad hoc arbitration. Unfortunately, without credible institutions, there has been no gravitational pull, until recently, towards institutionalising arbitration.
The benefits of institutional arbitration far outweigh any perceived disadvantages. It is also important that arbitration institutions should also be seen as being independent of the courts when it comes to international arbitration, because at the end of the day, the courts are going to supervise and enforce the arbitration. Perception is not unimportant. It is often married to confidence and trust.
Those running these institutions, as well as those supporting these institutions, need to ask themselves some hard questions. How will they define success? How much time will they give for the institutions to achieve this success? The numbers initially, while credibility is being established are going to be small as experiences elsewhere have shown.
Many of the other Asian centres have evolved through initial State support before becoming independent. This support, this nurturing, is probably essential because I can’t see the private sector coming together and putting in the resources to get the Indian international arbitration centres up and running. But it’s also important to preserve a centre’s independence and to wean the institution off State support at some point of time. This is one of the hard conversations that the State, the institution and their stakeholders should be having.
International arbitration institutions should have more Indian representation
Striking changes have taken place in the last 10 to 15 years in the international arbitration space in India. I’m especially impressed by many of the younger lawyers I have interacted with, because the legal profession, and international arbitration in turn, is now attracting some of the best Indian minds. They will be able to compete, with more experience, with the best from anywhere around the world. Many of your national firms have also done exceptionally well, and they have with them many lawyers who have worked overseas and who are aware of what the hallmark for international practice is. They should set their sights high and aim to become counsel of choice for foreign parties and compete with the international firms.
Having said that, there are still discrete areas where Indian lawyers may not have sufficient expertise. For example, in complex areas of intellectual property. I’ve no doubt that within the next decade or so, a number of Indian lawyers will evolve into global thought leaders and hold thought leadership positions in global arbitration institutions. That would be a positive development because it will lead to greater diversification and representation of views. It will be in the interest, not just of India, but of Asia and Africa, to be better represented in institutions and institutionalized arbitration.
International arbitration in India was largely being practiced at an intermediate level even up to a decade ago. There was, among some arbitrators and counsel, a lack of understanding of international arbitration practices and norms. Happily that has now fundamentally and irreversibly changed. There are now a substantial number of Indians who are more than competent and conversant in international practices and standards. Greater recognition needs to be accorded to them. These arbitrators and counsel possess genuine expertise and admirable bandwidth.
I am pleased to learn that on February 11, 2023, the London Centre for International Arbitration (LCIA) had its Indian Conference and made the India Promise, stating that more appointments and recognition would be given to Indians. The only aspect of this that continues to trouble me is why this step took so long. It’s time that international arbitration institutions update their software in terms of what available talent exists in India and elsewhere in Asia, because there needs to be a better appreciation that the system works best when there’s not just gender diversity but, as equally important, geographical diversity. The latter seems to have taken a back seat to gender diversity. This could be because the voices in this corner have not been adequately amplified. I emphasise, however, that representation should be based on merit and not just on gender or geography. So, this is another change I expect to accelerate and if it does not, more geographic activism will inevitably follow. Such changes will benefit some of the best minds in Indian arbitration over the next decade or so. To establish thought leadership, younger as well as more established Indian practitioners ought to have greater visibility in international fora and publish widely on Indian as well as international issues, thereby increasing their mind share and thought space in international arbitration.
Specialised courses in Indian law schools/ Raising the Bar
At the moment, there are no credible LL.M. or postgraduate courses offered within India which Indians might turn to. As a result, many of them go either to the US, UK, or to Singapore. This presents a financial hurdle for those with insufficient means, and creates a barrier for entrants to this area of law. It’s in India’s national interest that a few universities offer these courses domestically.
The universities could also partner with credible foreign universities and offer joint degrees. So, immediately they get both the talent pool of expertise as well as the credibility. It benefits India too, because not only will your students be able to get the experience within India at lower cost, it may, over time, even attract people from outside India. There should be an ambition, that you develop thought leaders, in the many diverse fields of international arbitration. It may take 10 to 20 years, but in the larger time continuum, this is a very short space of time. In a smaller country, in cities like Singapore and Hong Kong, it is of course much easier to execute these ideas. But in India, because your policy makers change, sometimes there’s no consistent application in implementing these plans. This is why I emphasized that it’s important to have a structure. Once you have that structure, of the Arbitration Council and or some other umbrella body that oversees the ecosystem, you can ensure that progress is being consistently and continuously made. I think that it is critical you also create guardrails to ensure you progress purposefully on the chosen path even when personalities change.
Opening up of the legal sector
A key feature of all the current arbitration hubs is a liberal legal sector. There is for now, I understand a great deal of concern both within and without the Indian legal fraternity about this as Indian law firms need more time to strengthen themselves. This is understandable and must not be overlooked in the pursuit of national interests.
I would suggest that different pathways be created by amending your laws to allow Indian law firms with the aspirations and the wherewithal to do so to become internationally competitive
VK Rajah on opening up of foreign law firms
For now, instead of opening up the Indian legal sector to international law firms as some other countries have done, I would suggest that different pathways be created by amending your laws to allow Indian law firms with the aspirations and the wherewithal to do so to become internationally competitive. Allow them to build skill sets and offerings that cannot be developed organically by employing foreign lawyers with specialist expertise. Say for example, in the areas of international arbitration, in intellectual property, privacy law, cyber law, oil and gas and so on. These firms should be enabled to compete for international work from international clients. Meaningful liberalisation can come later when your legal sector is internationally competitive. Your national interests always come first.
India will find its own path
In my view, India will surely find its own path. There’s no point just looking at Singapore, Hong Kong, or London and trying to replicate what they’ve done there, because each city or centre has different attributes. But you must have a deep understanding of how these leading common law seats have achieved and eventually cemented their status.
So, I think this has to be taken step by step, but it’s going to take 10, 15, 20 years. If you look at the progress that Singapore and Hong Kong have made, and the time and the paths they have taken, it’s taken them over two decades to achieve their current status. Perhaps India can do it faster within a decade, but that will require sustained effort, commitment and uncompromising support from all the stakeholders working with and for each other in the national interests.
If you look at the progress that Singapore and Hong Kong have made, and the time and the paths they have taken, it’s taken them over two decades to achieve their current status.
While no country has more than a single city that has established itself as a powerhouse in international arbitration, it is possible that India may be the exception. These are my reasons. First, if India maintains its current economic trajectory it will be the world’s third biggest economy within a decade. It has a bigger population than Europe and is beginning to reap its population dividend in producing on an industrial scale vast numbers of talented legal professionals. India’s cities have different strengths and its key cities cater to different markets and industries. Geographically, it is almost at the mid-point of Asia and African continents. Second, the huge amount of ad hoc arbitration will give a few of your institutions, if they manage their work with efficiency and transparency, unique opportunities to build trust and confidence. This will be a good platform to take the next step to regionalise and, perhaps for a couple or more institutions, to then internationalise. Third , it is also plausible that some centres may attract specialist work and or regional work in certain areas because of the presence of their peculiar expertise in handling certain genres of work. It is possible that the Delhi, Mumbai and Hyderabad centres, all of which have made good starts, evolve in this direction. However, this will not happen serendipitously. Nurturing and supporting these centres is critical.
In short, an international arbitration hub cannot materialise by simply waving a legislative wand and or by a putting up a magnificent building and opening its doors to all. It requires all the key stakeholders to work together over a lengthy period of time to build confidence and trust in first defining the legal architecture and then putting in place and maintaining the essential hardware, software and heartware.