Court interference not top reason companies avoid arbitration; costs, delays rank higher: CORD’s Vikas Mahendra

High and unpredictable costs, prolonged proceedings and a lack of accountability among arbitrators are greater deterrents for companies considering arbitration than court interference, CORD co-founder Vikas Mahendra said on Friday

Mahendra was presenting findings from an exercise in which the Centre for Online Resolution of Disputes (CORD) spoke to in-house counsel about whether they used arbitration and, if not, what discouraged them.

Among those who said they would use arbitration only for some disputes, around 73 per cent cited high and unpredictable costs. Around 60 per cent cited its long and uncertain duration, while 54 per cent pointed to a lack of accountability among arbitrators.

Court interference ranked fourth, Mahendra said.

“We go to all of these arbitration conferences across the world, and there's a lot of judge bashing, and they say court interference is the number one reason why people don't want to do arbitration. In our community, they say, that's actually number four.”

Mahendra was speaking at an event organised to launch CORD’s Arbitration Rules 2.0 in New Delhi on September 4. Titled From Access to Trust: An Evening on Democratising Institutional Arbitration for All Disputes, the event was held at the IIC Annexe.

Supreme Court judge Justice Manmohan delivered the keynote address. Former Supreme Court judge Justice AK Sikri delivered the inaugural address, while former NITI Aayog CEO Amitabh Kant also spoke.

Mahendra moderated a roundtable comprising former Himachal Pradesh High Court Chief Justice Rajiv Shakdher; Senior Advocate Gourab Banerji, President of the Arbitration Bar of India; former Bharti Airtel Group General Counsel Vijaya Sampath; Aditya Birla Fashion and Retail General Counsel Jyothi V K; and Avnit Singh Arora, Director in the Department of Legal Affairs.

Mahendra said only 10 per cent of the in-house counsel CORD spoke to were willing to use arbitration for all their disputes. Twenty-five per cent said they would not use it for any dispute.

He also said limited recourse against erroneous awards deterred companies from choosing arbitration. Around 35 per cent of those consulted cited corruption among arbitrators as a concern.

“Corruption of arbitrators was identified by approximately 35% of them as the reason why they don’t want to do arbitration.”

The number of in-house counsel consulted and the methodology adopted were not disclosed at the event.

Mahendra said the findings showed a gap between how arbitration was discussed at professional conferences and how it was viewed by the businesses expected to use it.

“People seem to talk about how it's a magic pill, it can solve all evils.”

Banerji described the findings as “quite depressing” and said the arbitration community was operating in an echo chamber. He called for introspection by both arbitrators and lawyers.

Banerji said corruption was incidental and that the larger concerns related to competence, incentives and accountability. He also flagged the need to train retired judges transitioning into arbitration.

“There is a degree to which self-regulation just doesn't seem to have worked.”

Sampath said arbitration required a “radical transformation”. She highlighted delays beginning with the appointment of an arbitrator and continuing through the proceedings, challenges to the award and its enforcement.

She also questioned the quality and neutrality of some awards.

“Sometimes they are so one-sided, it can't even be printed on two sides of the paper.”

Sampath said uncertainty over when proceedings would finally end was a major concern for companies.

“Not that I like litigation more, but I like arbitration less.”

Jyothi said companies needed transparent dispute resolution systems to maintain trust with vendors, franchisees and other stakeholders. She called for technology-based preventive support to help smaller vendors understand contractual obligations before disputes arose.

Justice Shakdher suggested anonymously evaluating arbitral awards to create a graded pool of arbitrators. Concealing the names of arbitrators during the assessment could allow experts to evaluate their work objectively, he explained.

Earlier, Justice Manmohan said arbitration had long been perceived as an elitist mechanism accessible mainly to multinational and large corporations. He called for its democratisation through faster, cheaper and technology-enabled institutional arbitration.

He noted that CORD proposed to focus on disputes below ₹5 crore and ordinarily complete proceedings within six months. He also welcomed its framework restricting the use of artificial intelligence for evaluating evidence or making substantive decisions in awards.

Justice Sikri said online dispute resolution should not be treated merely as an accommodation introduced during the COVID-19 pandemic. It should develop into a settled system in which suitable disputes ordinarily begin online, he said.

Kant said online dispute resolution should encompass dispute avoidance and containment, besides resolution. He called for transparent use of AI and multilingual, mobile-first systems.

CORD CEO and co-founder Deepika Kinhal said the institution had resolved around 8,000 disputes over the past five years.