The creation of an international arbitration centre in Mumbai

Phillip Georgiou, partner at Baker Botts in Hong Kong, and Rajat Rana, associate at Baker Botts in Washington DC, outline the potential impact of the proposed international arbitration centre in Mumbai, explaining that while it might ultimately develop into a viable alternative to centres such as Hong Kong and Singapore, it is still early days and only time will tell if international businesses will confidently utilise this branch of the Indian legal system.

How would the creation of an international arbitration centre in Mumbai affect the regional and global arbitration landscape?

The potential impact of an arbitration centre in Mumbai would depend on whether it would offer a credible alternative to established institutions such as the Singapore International Arbitration Centre (SIAC), the London Court of International Arbitration (LCIA), and the Hong Kong International Arbitration Centre (HKIAC). In addition to not having an international centre of its own, India currently lacks access to the modern, international arbitration institutions that, until recently, were in place. Namely, the recent closure of the LCIA’s representative office in India. The SIAC’s liaison office in Mumbai, meanwhile, does not administer arbitrations but acts more as a marketing resource. As a result, Indian businesses have become accustomed to resolving disputes through arbitral institutions outside India. For example, in 2015, Indian parties submitted the highest number of disputes at the SIAC.

The proposed centre in Mumbai, provisionally called the ‘Mumbai Centre for International Arbitration’ (MCIA), set to open in August 2016, may provide a credible alternative method of dispute resolution for Indian businesses by offering a timely and cost-effective facility for resolving disputes closer to home. Indeed, it is expected that Mumbai’s arbitration centre will attract approximately $5–$10bn of disputed claims which were otherwise going to centres in Singapore and London. Overall, it is possible that the MCIA could have a significant impact on the global arbitration landscape depending, of course, on its arbitral rules, the competitiveness of its fee structure, the quality of arbitrators, and, most importantly, the level of interference by the Indian courts.

What sort of case load is the centre expected to handle?

Once the centre opens in late 2016, it is expected to have the ability to handle an array of cases ranging from small to large commercial disputes.

How does the centre fit in with the wider Indian legal system?

The introduction of the MCIA is aligned with the Indian Government’s recent efforts to make arbitration a preferred method for resolving commercial disputes in the country. The Indian Government promulgated the Arbitration and Conciliation (Amendment) Bill 2015, which was then passed by the Lok Sabha (the Indian Parliament’s lower house) on 17 December 2015 and the Rajya Sabha (the upper house) on 23 December 2015. The objective of the legislation is to promote arbitration as a method of settling commercial disputes by putting in place a modern and arbitration-friendly legislative framework and reducing the level of interference by Indian courts.

The hope of the Indian legislature is that the combination of the legislation and the modern arbitration centre will result in the Indian legal system becoming perceived as a viable alternative for businesses pursuing arbitration seated in India.

Could this increase the volume of arbitration in India?

If the MCIA can meet international standards and adhere to the practices expected by the business community both in India and abroad then we may witness an increase in the volume of arbitration administered by the centre, primarily by redirecting arbitration disputes involving Indian businesses from institutions such as the SIAC.

However, in the past, parties have been reluctant to adopt India as a seat mainly due to the risk of interference by the Indian courts—in the form of disrupting the arbitration process either during the course of the arbitration itself or the enforcement of the arbitral awards. Nevertheless, as discussed earlier, the recent amendments to India’s arbitration law will limit judicial interference, as well as expediting arbitral proceedings seated in India, which could result in an increase in the volume of arbitrations.

What is known about the proposed fee structure?

The MCIA is expected to offer a competitive fee structure. However, the details of the fee structure are not yet publicly available.

The drafting committee, which consists of domestic and international arbitration experts, is currently working on the arbitration rules. The rules have also been reviewed by jurists and leading lawyers including former Supreme Court judge BB Srikrishna, Fali Nariman, and Harish Salve.

What action, if any, should practitioners be taking at this stage?

It is important that arbitration practitioners stay abreast of these developments and advise clients that changes, which may ultimately improve India as an alternative seat for international arbitration, are on the horizon. Moreover, practitioners should carefully review the list of arbitrators selected by the MCIA once it is published as this should provide an indication of the overall standards of the centre.

That said, it is still early days. Until such time as the Indian and international business communities—and their legal advisers—are confident that international arbitration in India is a safe bet, especially when compared to well-established jurisdictions in Asia such as Singapore and Hong Kong, the possibility of the MCIA being regarded in the same light as the world’s leading arbitration institutions is still a long way off.

Interviewed by Stephanie Boyer.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.