A recent ruling by a commercial court in UK setting aside a USD 11 billion dollar against the Republic of Nigeria, has the whole arbitration community talking. The court held that the arbitration award, which amounted to one-third of the nation's forex reserves, was obtained by fraud and was contrary to public policy.
Arbitration has long been regarded as a viable alternative to traditional litigation, offering parties a quicker and more cost-effective means of resolving disputes. It is crucial, however, that arbitration proceedings uphold the principles of due process and fairness to maintain the integrity of the process and ensure that justice is served. The autonomy of the process, when exercised correctly, allows parties to make well thought out and strategic guidelines to implement reasonable control on the process, timelines, and costs.
Due process in arbitration refers to the fair and equitable treatment of all parties involved in the dispute resolution process. This includes principles of impartiality, transparency, and adherence to established procedures. In the Indian context, the Arbitration and Conciliation Act, 1996 (with all amendments up to date 1) (“the Act”), forms the legal framework that governs these proceedings.
Despite the intention of providing a fair and efficient alternative to litigation, arbitration proceedings in India have faced several challenges. Bias, lack of transparency, and inadequate notice have been persistent issues2. These were discussed in the landmark case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc.3, where it was held that the issue of arbitrator's impartiality and disclosure of conflicts is of paramount importance, and it was emphasized that arbitrators should disclose any circumstances that may give rise to justifiable doubts as to their impartiality.
Transparency is essential to maintain public trust and ensure that the process is open to scrutiny. Accountability is equally important to ensure that all stakeholders are held responsible for their actions during the proceedings. In Voestalpine Schienen Gmbh v. Delhi Metro Rail Corporation Ltd 4. the importance of transparency and fairness in arbitration proceedings was discussed thoroughly to hold that the arbitral process should be impartial and unbiased, and the parties should be provided with full access to the proceedings.
As the landscape of arbitration in India evolves, so does the Act. In BCCI v. Kochi Cricket Pvt Ltd.5, the Supreme Court endorsed the 2015 amendments to the Act which aimed to streamline the arbitration process and make it more efficient and cost-effective. These amendments introduced strict timelines for completing arbitrations, emphasizing the importance of timely resolutions.
Balancing due process with efficiency is often challenging in arbitration proceedings. While due process is essential for a fair resolution, it should not lead to excessive delays or costs. In Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.6 the need to balance efficiency and due process was recognised and it was held that excessive interference from the courts may undermine the essence of arbitration, save for exceptional circumstances.
Any due process can be implemented effectively only through a set of rules. Here, arbitral institutions play a crucial role as they set the rules and standards that arbitrators and parties must adhere to. In Bharat Sanchar Nigam Ltd. v. Motorola India Pvt. Ltd.7the Supreme Court recognised the importance of following institutional rules in arbitration and emphasized that the parties must adhere to the agreed-upon rules and procedures.
Through many more judgements, Indian Courts have from time to time emphasised the need for due process 8 and fairness in arbitration; and importance of transparency and fairness in arbitral proceedings 9. By taking guidance from established principles to enhance due process and fairness in arbitration proceedings, parties would do well to be more conscious and gain from the process, especially as arbitration continues to be a preferred method of dispute resolution process across the globe, including in India.
Footnotes
1. The Arbitration and Conciliation Act, 1996 was first notified on August 22, 1996, vide notification No. G.S.R 375(E), in the Gazette of India, Extraordinary, Part II, sec. 3(i), repealing the Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961). This was followed by the Arbitration and Conciliation (Amendment) Act, 2015 notified on January 1, 2016 and came into effect from October 23, 2015. The most recent amendment was made by the Arbitration and Conciliation (Amendment Act), 2021 (replacing the Arbitration and Conciliation (Amendment) Ordinance, 2020 promulgated by the President of India in November 2020) notified on March 11, 2021 and came into effect from November 4, 2020.
2. In Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc.(2012) 9 SCC 552 the Apex Court held, amongst other things, that Arbitration and Conciliation Act, 1996 was not applicable over arbitrations held outside the territory of India, giving birth to the distinction in seat and place of an arbitration.
3. (2012) 9 SCC 552
4. (2017) SCC OnLine SC 172
5. (2018) 6 SCC 287
6. (2018) 1 SCC 353
7. (2009) 2 SCC 337
8. ONGC Ltd. v. Saw Pipes Ltd. (2003) INSC 236: The Supreme Court in its decision reinforced the need for due process in arbitration and set the standards for enforcement of arbitral awards.
9. SsangYong Engineering & Construction Co. Ltd. v. National Highways Authority of India (2019) SCC OnLine SC 677: In this case, the Supreme Court discussed the importance of transparency and fairness in arbitral proceedings. It highlighted that arbitral awards should be free from bias and that any misconduct by the arbitrator would undermine the integrity of the arbitration process.
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