Although arbitration as an alternate dispute resolution mechanism was initially packaged as a speedy, convenient, less expensive and swifter process, the reality has turned to be quite the contrary as propounded by the OM.
Such a view stems from the meticulous gathering of data (in terms of number of on-going arbitrations, arbitrator’s fees, number of sittings, claim and counter-claim, Awards faced, challenges made, etc.), recent developments like the Mediation Act, 2023 and Court decisions, clubbed with experience down the years, which necessitated a re-examination of the arbitration in totality.
The expected benefits of arbitration have been crusaded against the actual experience where:
Arbitration is taking longer time besides being very expensive.
Reduced formality of judicial procedure is leading to wrong decisions, perceptions of wrong doing and collusion, closed door setting/ lack of transparency, impropriety of arbitrators and little accountability for wrong doings/ decisions.
Benefit of finality of decisions or reliving burden on Courts has not been achieved – instead layers of litigation added.
Unrealistic claims and counter-claims are filed.
Commercial and sensible practical approach kept in backseat due to presence of arbitration clause.
The arbitration experience is further made complicated and far from its desired aim when one of the parties is a government entity or agency. Notably, the system of decision making for a government entity involves accountability – the need to act fairly without arbitrariness. As such, it leads to multiple levels of scrutiny in decision making. Often acceptance of an adverse Award when judicial avenues are not exhausted is deemed improper, affecting the theory of finality of Award. Such decision becomes all the more difficult at the altar of varying decisions for similarly placed contractors who are not involved in the arbitration. The most crippling handicap faced by the government entities and its undertakings affecting arbitration is the transferable nature of posts of officers – personal knowledge of the new officer in place “may not be as deep as of the opposing private party.”
Source: Barandbench
