Consider the irony: many lawyers agree that India’s justice machine has all but collapsed but Indians generally believe deeply in Indian courts. Similarly, many lawyers agree that privatised justice (also known as arbitration) has all but collapsed in India but clients generally believe they provide an exciting opportunity to transcend the logjam that is Indian courts. Perhaps this is why the Cabinet recently approved an amendment to the Arbitration Act imposing a cap on arbitrator’s fees.
That should tell you something. More significantly, the same amendment also prescribes that no arbitration can run for longer than 18 months without a special court-approved extension. That amendment should tell you a great deal more about what is going on in the world of arbitration.
Given my widely publicised view that Indian arbitrations run an extraordinary risk of turning into a farce, any initiative that clears the logjam is music to my ears. Clearly, not everyone sees it the same way because these changes have come in for a fair bit of criticism.
Fees and flexibility
First, there is the problem of arbitrator fees. Critics argue that it will be hard to provide competent arbitrators if we don’t pay them well. I can’t quite seem to cut through the arithmetic of this objection. . If it takes 30 hearings to decide a case, every presiding arbitrator scoops up at least ₹10-15 lakh for the service rendered in any arbitration. I ask myself if it would be very hard to persuade a retired judge to pick up this kind of money on a salary of ₹1 lakh for a month’s work.
More significantly, experts are unhappy that an inflexible 18-month deadline has been set for all cases, regardless of complexity. But if we schedule just one hearing a week in even the most complex of cases, we can run more than 75 hearings in 18 months. Just as easily, we can set aside four days for arbitration every month and achieve the same result. If you can’t resolve a problem in 18 months, you will very likely not resolve it at all. I have seen complex infrastructure construction cases decided with the help of a few witnesses and no more than 20 days of hearings. I have also seen simple cases of breach of contract run for a decade over 150 plus hearings. In my 35 years of experience, it is almost never about the case. It is almost always about the incentives of those running the case, and that means client, bench and bar.
Dovetailed into this objection is alarm over the availability of legal skills in a time-limited environment. In popular perception, too much work is chasing too few skilled lawyers. Critics argue that if you push the pace of arbitration and don’t ‘accommodate’ the best lawyers, you will force them to choose between arbitration and court work, and they will pick the latter. As a result, you will run your arbitrations on the back of second best skills. I couldn’t agree less.
Of skill and delays
For one, bear in mind that 90 per cent of High Court lawyers these days know zilch about trial work. Intensive knowledge of our evidence law (and especially cross-examination skills) started to go extinct in the upper echelons of our lawyer community’s pecking order in the late 1980s and early 1990. As our courts got clogged and time-to-decision for cases went from a few years to a few decades, the final decision in cases became academic. During this same period in our economic history, commercial life speeded up and business time horizons shortened.
Lawyers have been compelled to transform into ‘interim order’ artists, a kind of Two Minute Noodle Vakaalat, by which we tried to extract ‘stay orders’ from courts knowing that these interim measures would last the best years of the rest of our lives. Skill sets shifted, heralding the rise of the movie star magician court counsel commanding seriously silly appearance fees. Be that as it may, the fact is that today, nine times out of ten, my colleagues have to make lists of cross-examination questions for my lead court counsel because I can’t trust him to make up his own questions. Of course there are brilliant exceptions. It doesn’t bother me that frequent hearings will lead court counsel to cease attending arbitrations.
These court counsels are very busy with their interim order artistry anyway: what I need is a new generation of lawyers to bring back the golden age of trial court practice. This would be a huge improvement over the current situation, where the law encourages parties to double cross the other; he who comes up ahead has a huge advantage, because the courts will take a lifetime to help the guy who got ripped off.
Bear in mind that this amendment is not the final word on the subject. The law provides that this period of 18 months can be extended by the Supreme Court.
Without a time limit
That said, consider the consequence of not having a time limit. We like to appoint retired judges as arbitrators because we don’t trust anyone else. Most don’t retire till they are in their sixties and they are considerably older before they have a track record of running efficient arbitrations.
We can then recommend them to clients. Bear in mind that you can change your lawyer anytime you want, but you can’t change your arbitrators. If you are going to allow an arbitration to run for a decade, the arbitrator you have at the end of the decade is not the same arbitrator you hired. The law has never been successfully used to stop the ravages of time, and advancing years.
The real problem is not the reality of aging: it lies in the psychology of objection-baazi. Culturally, we Indians are masters of obfuscation: suppressing facts and pushing agendas under convoluted spin. By such means, we carve out exceptions to rules and before you know it, the exception has become the rule.
Our best salvation as a society lies in having rules with no built-in exceptions whatsoever. So let us have a time limit to arbitration and if someone gets it in the neck because he needed more time, too bad, because right now, everyone is getting it in the neck.
Originally Published on October 8, 2015 in Hindu Business Line