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Written by Kian Ganz Monday, 08 June 2009 19:20

India needs to enhance its arbitration offerings and overhaul its courts’ processes to give its backlog of cases any chance of closure before the year 3000.

A trip to the neo-Gothic ­Bombay High Court is an entertaining experience that should be on every visiting lawyer’s travel itinerary. Once past the sandbagged machine gun emplacements outside, loosen your tie and spend a few hours wandering about open-air corridors between throngs of locals, hundreds of offices with unfathomable purposes and court rooms filled beyond bursting point.

Also spare a thought for the unfortunate litigants, who will most likely not find the experience as enjoyable.

The running joke in India goes that, if you litigate here, your sons and daughters will inherit your dispute.

According to a client memo from Amarchand & Mangaldas & Suresh A Shroff & Co, the huge backlog in the Indian courts means that resolving disputes could take between five and 15 years. Or longer. It is hardly what one would call swift justice.

But a little more than a month ago the London Court of International Arbitration (LCIA) opened in Delhi, smelling an opportunity. While it is not the first international arbitration body to enter India, hopes are high that it will be a successful alternative to settling disputes if it plays its cards and gets its message right.

Long road to justice

Stephenson Harwood litigation and ­arbitration partner Kamal Shah jokes that he would definitely advise clients to go through the Indian courts if their strategy was to “delay the whole process and make sure the other side never gets a judgment”.

“If it’s simply a money claim it takes an endless period of time, and a negotiated settlement is always better,” argues Mumbai litigation partner MP Bharucha of Bharucha & Partners.

Unsurprisingly, out of the Indian cases that go to court, the overwhelming ­majority get settled, relates Khaitan & Co litigation partner Chakrapani Misra.

Taking cases to court and then settling them is not the most effective use of court time and is one explanation for the backlog, which approaches 30 million cases. More than 50,000 of these linger in the Supreme Court, the figure having increased by more than 10,000 in the past two years alone.

By some estimates, clearing the backlog at the present rate would take more than a century.

Arbitration is, of course, an alternative route. The dispute resolution mechanism has a long lineage in India, although its recent history is less proud.

Arbitration finds parallels in India’s age-old Panchayat system of settling ­disputes in villages. This was first codified in the Bengal Regulations in 1772, while the latest statute formalising Indian ­arbitration processes was the much-lauded Arbitration and ­Conciliation Act 1996.

The majority of arbitrations in India now take place as ad hoc arbitrations with ­arbitrators and rules agreed between the parties.

Essex Court Chambers’ Ian Hunter QC is currently sitting as an arbitrator on a large domestic arbitration in Mumbai, which was taken out of the Indian courts after the ­parties were both fed up with the progress. “I don’t remember a case better argued,” he says about his current ad hoc arbitration.

Then again, with three highly experienced English QCs ­presiding over proceedings, it is no wonder that top advocacy is required. And ­presumably deep pockets to pay for it all.

“Most of the [ad hoc] arbitrators here on the scene are ex-judges, who fortunately or otherwise carry a lot of baggage,” Gujarat-based independent litigator Devan Parikh relates, in a paradigm of understatement.

Khaitan’s Misra argues that ad hoc ­arbitration is certainly popular, but in terms of effectiveness it is 50-50. He believes the system needs to be improved to make ­arbitration more popular.

It is not just a problem of marketing, but the costs also need to be driven down.

“Until now many arbitrators who sit in on ad hoc arbitrations are very old, retired judges who are still bogged down by the system they were used to,” says Norton Rose arbitration associate Sherina Petit. “The whole system is fraught with delays.”

“They don’t know how to control the process,” complains another arbitrator less charitably. “They see it as making more money for their pensions.”

On top of that comes a lack of oversight, adds Bharucha. “In an ad hoc arbitration,” he says, “if a party is bloody-minded, he doesn’t appoint his nominee, and then you wait a fair amount of time in trying to appoint the arbitrators.”

Another concern on the growing list is scheduling. “There are only a handful of good judges that people would like to appoint as arbitrators,” says Bharucha. Although still faster than litigation, it can therefore often take six months or longer to find a mutually convenient date in half a dozen packed diaries.

The Satyam effect

But there is a shadow that looms larger.