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Dispute resolution strategies for India need a rethink in the wake of changes to the arbitration regime

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Naresh Thacker and Sumit Rai explain

Indian businesses have traditionally been trigger happy when it comes to commercial disputes. They could afford to be this way, as the time taken from initiation of a dispute to a final decision on it has typically been at least three years. A robust dispute resolution strategy has not been necessary and strategies could evolve as the dispute progressed.

Arbitration as a last resort?

This situation has been altered by two key changes to the Arbitration and Conciliation Act, 1996, brought in by the Arbitration and Conciliation (Amendment) Ordinance, 2015: (1) a strict timeline of 12 months (extendable by mutual agreement to 18 months) to make arbitral awards, introduced by way of a new provision, section 29A; and (2) the introduction of a cost-follows-event regime or loser pays principle, including a clarification that all related costs (including travel, lodging, etc.) may be recoverable. Costs recoverable are not only with respect to arbitrations but also all court applications arising out of an arbitration.

Over the years, it has become difficult to find a commercial contract without an arbitration clause. Arbitration is now the default choice for dispute resolution in India, not only for international commercial contracts but also domestic commercial contracts.

Yet many disputes need time to evolve and take shape before parties can effectively take a position before an adjudicating body such as an arbitral tribunal. In addition, in the life of a dispute parties often find ways to mutually halt an arbitration so as to explore a settlement.

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Naresh Thacker is a partner and Sumit Rai an associate partner at Economic Laws Practice. The information provided in the article is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided above.