Five reasons why CDR is ailing in South India: Highlights of CPPR’s report

Five reasons why CDR is ailing in South India: Highlights of CPPR’s report

Aditya AK

The Centre for Public Policy Research (CPPR), Kochi, recently released a report titled Assessment of Commercial Dispute Resolution (CDR) in South India.

The report aims to highlight the shortcomings of the CDR environment in the states of Karnataka, Kerala and Tamil Nadu. The data was arrived at after consulting entrepreneurs, industrialists, practitioners, lawyers and academicians from the three states. The study was undertaken with support from the British Deputy High Commission in Chennai.

CPPR’s report contains some interesting facts and figures. For instance, the court-annexed mediation centre in Bangalore has a success rate of 64%, while its counterpart in Kerala has an average success rate of 27.7%. Tamil Nadu has the highest adoption of dispute resolution among the three states, while Kerala has the least.

One of the chapters analyses the issues affecting CDR in South India. They are:

  1. Companies pick ad-hoc arbitrators over institutional methods

This is largely because ad-hoc systems offer more flexibility with parties putting emphasis on the trust factor. Ad-hoc systems are generally perceived to have better control over the process compared to institutional mechanisms. Moreover, court-assisted dispute resolution is not preferred in private matters as it relies heavily on court referrals.

  1. Reluctance to go for mediation

Nearly 75% of the companies mentioned that they had arbitration clauses inserted in the agreement with parties. Less than half of them had mediation clauses, with very few opting for hybrid modes of dispute resolution like Med-Arb. This fact, the report states, portrays the larger intent of the parties to opt for a stronger dispute resolution mechanism, which is mandatory and binding.

  1. Tendency to challenge proceedings in courts

There is also a tendency for the parties, who have reached a settlement agreement or arbitral awards passed against them, to pursue the matter before courts. Even at the stage of appointment of arbitrators, parties were not able to select arbitrators of their choice and ended up in courts. The report states that Indian courts had been liberal in hearing such applications, which thereby question the credibility of the dispute resolution process.

  1. Lack of expertise

The respondents seemed to be of the opinion that those in charge of the dispute settlement process lack the requisite experience. The report states,

“While judges and lawyers, who lead the dispute resolution process, tend to be conversant with law, they are discreet in the case of subject matters involving technical issues.”

The facts that the London Court of International Arbitration (LCIA) has no Indian arbitrators, and that less than 3% of the Singapore International Arbitration Centre (SIAC) arbitrators are from India, are a reflection of this.

  1. Costs, delay, ineffective case management

Litigation will be preferred to CDR methods, as the cost is considerably lesser. Further, the cost imposed by arbitrators is often arbitrary and undetermined, leading parties to opt for institutions which follow a scheduled fee structure. The parties favour international arbitration centres like SIAC, owing to the effective administrative structure and clarity on cost structures, states the report.

Another factor is the delay in the process, right from the appointment of arbitrators to initiating the arbitral process to time taken for final award.

As regards improving case management, the report suggests the introduction of provisions like emergency arbitrators, summary proceedings, Med-Arb, etc, will help institutions attract more matters.

The report also makes a number of suggestions based on the views of the respondents. These include changes to Part III of the Arbitration and Conciliation Act, 1996, trying out Med-Arb, and compliance of government entities with dispute resolution norms, among others.

Read the report:

Bar and Bench - Indian Legal news