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One of the aspects of the Arbitration Amendment Act 2015 is on the reference to the “Regime For Costs” under Section 31A of the amended Act.

Some of the Judicial professionals have not been happy with the “Model Fee” as suggested in the fourth schedule which is reproduced here below.

THE Fourth SCHEDULE (See sections 11(14))

Note:—
In the event, the arbitral tribunal is a sole arbitrator, he shall be entitled to an additional amount of twenty-five per cent on the fee  payable as per the table set out above

The above is a “Model” fee structure and the High Court may modify it to the extent required as indicated in the section as under:

(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.’’

However, it can be implied that without a specific enhancement granted by the Court, the schedule fee may be considered as the “Upper Limit” of what the law considers as “Reasonable”.

We may also note that the schedule mentions that if the Arbitral Tribunal is a sole arbitrator, he shall be entitled to an additional 25% of fees. This confirms that what the schedule represents is the total fees that has to be shared by all the members of the Arbitration Panel.

Some of the major Arbitral Instutions  in India used to specify a schedule of fees in their rules and indicate that the scheduled fees would be applicable to each of the members of the Arbitration Panel. This used to discourage the parties in going for multi member Arbitration Panel which is good to enhance the credibility of the Panel. Now that the schedule mentions that the fees mentioned in the schedule is for the total panel, it actually encourages setting up of a multi member panel for all arbitrations.

However, if any Arbitrator or an Arbitration panel decides to charge a fee lower than what is specified, there is no reason for any Court to object.

One should appreciate that today there may be some lawyers who charge lacks of rupees as fee for their appearance but Judges do function under a fixed salary basis. But the salary regime does not incentivise quick disposal of cases and few judges who quickly dispose off cases are actually frowned upon.  The Arbitration fee regime is however based on “Per Case” basis and if an arbitrator can handle multiple cases, he will make reasonable money as compared to a Judge. In case of small ticket arbitrations where the fee may be low, the arbitrator has to complete the arbitration in one or two sittings or without any oral hearing so that his remuneration would  more than compensate for the time, effort and expertise he brings into the proceedings.

It may also be noted that the amended act provides that Arbitrations should be completed within 1 year unless an extension is agreed upon by the parties (upto 6 m0nths)  or granted by a Court and if an arbitrator completes an arbitration within 6 months, he can claim an additional fee with the consent of the parties at the time of appointment.

Another interesting aspect of the Amendement is that if a Court is extending the time allocated for an Arbitration and the reasons for the delay is attributable to the Arbitrator/Panel of Arbitrators, the Court may reduce the remuneration by 5%.

Thus the Act now incorporates a fixed time for completion of arbitration and a possible incentive for early completion and a possible disincentive for delays caused by the Panel. This is superimposed with a model fee structure which could define an upper limit for the fees.

These measures have not been to the liking of some of the Arbitrators who are presently active but are considered as a “Consumer Friendly” move of the Government and reasonable in the context of reducing the cost of dispute resolution in general.

The business community should welcome these moves.

Naavi

Alternate Dispute Resolution (ADR) focusses on delivery of justice free from the complexities caused by the age old processes under which “Litigation” system works in our Courts.

An attempt to improve the litigation process has always been at the heart of any judicial reforms. One example for such attempt is Information Technology Act 2000 (ITA 2000) which introduced the system of Adjudication, as an “Enquiry” process and both Adjudicator and the Cyber Appellate Tribunal were freed from the procedural binding of the Civil Procedure Code while conferring the powers of the Adjudicator and the Cyber Appellate Tribunal equivalent to a Civil Judge.

The system of ADR introduces a whole new paradigm of Dispute Resolution where all desirable innovations can be introduced by an Arbitrator or an Arbitral Institution. No doubt that even these innovations can be challenged, but such objections are difficult to sustain unless it was proved to unfair. In the light of the systems like ODRGLOBAL.IN where the proceedings are recorded and would be available for proving whether the proceedings were conducted in a fair manner or not, objections on the ground of unfair treatment of one of the parties would be almost impossible.

We can therefore say that ADR in general and the unique process used by entities such as ODRGLOBAL.IN in particular, provides for innovation on the party of the Arbitrator that is within the legal process but would provide better convenience, quicker completion and lower cost. The Arbitrator should however take care that the provisions of Arbitration and Conciliation Act 1996 as amended in 2015 (ACA-1996/2016) should be followed diligently. We shall therefore examine some of the key requirements of the Act as regarding the conduct of the proceedings.

The parties to an arbitration first agree on the choice of the Arbitrator (or an arbitral institution which may finally appoint an arbitrator) and a process for appointing them right in the agreement. Once an Arbitrator is appointed to the satisfaction of the parties, the responsibility for the fair conduct of the proceedings pass onto the Arbitrator.

According to section 18 of the ACA-1996/2015, it is the responsibility of the Arbitrator to treat all parties with equality and give full opportunity to present their case. The Arbitrator is neither bound by the Code of Civil Procedure 1908 nor even the Indian Evidence Act as long as the principle of fairness can be proved.

In order to avoid any charge of improper procedure it is desirable that the Arbitrator follows a structured procedure which is also made known to the parties. This is done by arbitral tribunals by developing a set of “Rules of Arbitration” which is applicable to all arbitrations conducted under the aegis of the tribunal by its members.

Such procedure includes the following principal issues

1. How Place of Arbitration is fixed
2. How notices are served and acknowledged
3. How Counsels participate
4. How documents are exchanged
5. How the hearings are held
6. How arguments are presented
7. How witnesses are produced
8. How costs are split
9. How much time is allocated
10. How the award is delivered etc.

Where the parties usually live in different places and the Arbitrator is located in a different place, the choice of the Place of arbitration itself can be a point of contention since it does impose an extra cost of time and money on outstation parties. Unless both parties are located in the same town or they adopt the neutral venue as in the case of an ODR (Online Dispute Resolution) process, the choice of any town is bound to add an element of cost.

Some times, “Experts” are sought to be brought in as “Witnesses” and “Expert Counsels” are sought to be appointed if the subject matter of dispute needs technical or subject matter expertise for satisfactory resolution. If such experts are to travel and stay in the place of arbitration, the party using their services have to meet such costs. In small ticket disputes, these influence directly on the delivery of justice and the ability of the parties to have a satisfactory resolution.

Similarly, the number of hearings in which different parties need to assemble at a particular place multiples the cost unless solutions are found to either rotate the place of hearings between cities convenient to different parties or use of ODR is resorted to.

Also the procedure by which notices are delivered without loss of time and integrity and without providing excuses to any parties to claim non receipt is also a point to be considered while designing the procedure.

While the Arbitrator may be neutral to the way the costs are split between the parties which is a matter to be settled in the contract, he may define his fees as well as the cost of administration, cost of the meeting place to be paid if it is hosted by the Arbitral Institution, cost of travel and stay of the Arbitrator etc. and load it first onto the person who invokes the Arbitration and later based on the award.

If an Arbitrator wants to act as an independent entity not affiliated to any Arbitral Institution, then he needs to develop his own set of Arbitration rules which are reasonable and suit both the convenience of the parties as well as the requirements of the ACA-1996/2015.

In this context, it may be of interest for readers to study the “Model Rules of ODR” that are being formulated by the Global Forum of ODR Professionals working with ODRGLOBAL.IN which needs to be not only in conformity with ACA-1996/2015 but also the Information Technology Act 2000/8 as also the principles of the UNCITRAL Model Law on Arbitrations under development.

The Arbitrators can make use of the Model Rules as a template and tweak them with modifications that they find it necessary for their own Arbitration proceedings. If properly constructed, conveyed to the parties and consent obtained, the risk of the awards being challenged can be substantially reduced and the objective of fair and quick justice delivery which is the core theme of ADR will be realized.

Naavi

Arbitration and Mediation are often spoken off in the same breath as if the two are closely related. Though Arbitration and Mediation belong to the family of “Alternate Dispute Resolution” (ADR), it is to be recognized that the processes are widely different and requires different skills. All Arbitrators donot make good Mediators and need to accept the situation and live with it.

Where as in a Mediation, the intervening neutral party namely the Mediator tries to bring about a settlement between the disputing parties by using his “Behavioural Analysis Skills”, without the legal authority to issue a mandatory order, an Arbitrator has the authority given to him by the parties themselves to issue a binding award.

There is a third type of ADR process called Conciliation which is similar to Mediation but where the Mediator is a person with some authority and respect and therefore can nudge the parties to come to a settlement though his legal authority is not more than that of a mediator.

An Arbitration is more suitable when the disputes are likely to have legal issues to be interpreted. Mediation/Conciliation is more suitable when the issues to be settled are technical in nature or involve emotional issues.

When a legal practitioner is called upon to assist in a Mediation process as a Counsel or act as a Mediator, the legal practitioner has to understand the nature of the dispute and whether he should accept a role in the resolution.

When we try to resolve an “Emotional” issue through a judgement of a Court, even if the judgement is given by an authoritative Court, the parties may end up dissatisfied. Similarly issues in which lot of technicalities are involved may easily be mis-interpreted even by experienced Judicial authorities.

If the objective of “Dispute Resolution” is to bring about an amicable settlement or what we call as a “Win-Win” outcome, there is a need to explore the Mediation and Conciliation options more than Arbitration and Litigation.

An advocate by nature is trained to look at issues from the point of view of a legal provision and earlier Court decisions. Similarly, when a Judge acting as an Arbitrator looks at a dispute, his primary focus again is on what the law says.

Mediation on the other hand works on bringing about a settlement between the disputing parties in a fair manner without any party being mislead about their rights or not being given a fair opportunity to assert their rights.
Some times a resolution which both disputants agree upon may not find a direct provision in law or it may even appear to be different from an earlier Court decision. A trained advocate would find it uncomfortable in accepting it as a proper resolution even when it is the informed choice of the parties.

The Mediator as well as any advocate who participate in Mediation to assist the parties should be able to fully digest this difference between the litigation and arbitration process on the one hand and Mediation on the other and discharge their responsibilities.

In behavioural science, there is a term called “Role Set”. It is a tendency to behave in a set role pattern even when the person has moved onto to a different role responsibility. In a simple example, when a subordinate “clerk” is promoted and pushed into a decision making “Officer” role, he often continues to behave more like the Clerk than an officer, He often is reluctant to take decisions, and expects some body else to take the decision which he may efficiently implement. This has nothing to do with inefficiency but because of a habit formed in the earlier role with which he is comfortable. But in an organizational environment, this “Role Set” behaviour is dysfunctional since any person promoted to a higher responsibility fails to get over his behavioural traits of the previous position and therefore becomes less effective than what he should otherwise be.

In the same manner when a good Judicial person or a Good lawyer moves into a Mediation room, they may have a tendency to replay their litigation experience and bring in the known CPC procedures and Case laws to settle the mediation. They may not realize that their role in the mediation should be only to maintain an informed decision making environment in which the disputing parties come to a settlement in a manner which will retain their friendly relationship with which they entered into the earlier contract so that they can move on in life after resolution as if the dispute is a thing of the past.

There is no doubt that this is difficult for established advocates to appreciate and accept that a “Win-Win” solution is better in mediation than a “Win-Lose” situation which is the average norm in litigations.

It is for this reason that subject experts and non advocates become more effective Mediators as we see in the field of “Marriage Dispute Resolution”. In an emotionally charged situation such as a “Divorce”, it is the spirit of reconciliation which is a better option to be invoked rather than what is the “right” under law. Successful divorce advocates are therefore more “Counsellors” than advocates and should be able to switch roles easily.

Though business disputes need not be as emotional as a divorce, Advocates and Mediators who engage in Mediation must consciously avoid the “Role Set” problem and be able to think differently.

Probably, Mediators or Advocates in Mediation need to undergo a “Behavioural Training” to understand the problems of “Role Set” and how to overcome them.

Naavi

Naavi’s initiative to develop ADR and ODR professionals across India by creating citywise community of interested persons has been opened through the website www.ujvala.in.

The website provides for registration of members and showcasing their profiles. It is intended that the members would be provided with an opportunity to share their knowledge through the blog and periodical web meetings and webinars.

Though the website is mainly meant for advocates who want to specialize in taking up Arbitration related cases and also act as arbitrators if they so desire, professionals who have specific expertise in other domains who can act as Arbitrators or Mediators may also register as members.

More information is available on the website.

Naavi