Recent actions undertaken by the Supreme Court of India could signal a sea change in India’s approach to international disputes. The Supreme Court recently instructed the Mumbai Centre for International Arbitration (MCIA) to appoint an arbitrator to decide a long-standing international dispute between top drug maker Sun Pharmaceutical Industries Ltd and Nigeria-based Falma Organics Limited. The Indian Supreme Court’s action marks the very first time any Indian court—let alone the country’s highest court—has invoked section 11 of the Arbitration and Conciliation Act of 2015 (the “Act”) by asking an independent body, here the MCIA, to appoint an arbitrator in a dispute.
The case concerns a dispute regarding a 2004 distribution agreement. In 2014, Sun Pharmaceuticals asked the Court to appoint an arbitrator to decide the dispute. The Court denied the request and, in August 2015, sent the parties to mediation. Although the parties reached a settlement in principle around February 2016, the parties failed to effect such settlement and, on January 9, 2017, Sun Pharmaceuticals once again the Court for an arbitrator appointment to resolve the dispute.
Under Section 11 of the Act, if a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other party, the appointment can be made, upon request of a party, by the Chief Justice or any person or institution designated thereby. Here, the parties were to report to the MCIA on July 10, 2017, to have MCIA appoint their arbitrator.
Prior to the MCIA’s involvement, the majority of Indian-related arbitrations in India took place on an ad hoc basis. This resulted in a lack of uniform standards and predictability with respect to the cost-effectiveness, efficiency, and outcome of many arbitral proceedings. Additionally, based on these circumstances, India began to face criticism from arbitral practitioners for its lack of credible arbitral institutions, muddled notions of public policy, needless judicial intervention, and lack of a dedicated arbitration bar. In spite of these issues, the number of India-related arbitrations continued to increase steadily in recent years, calling for a solution.
The MCIA, which launched less than one year ago, in October 2016, was India’s first arbitration tribunal and was specifically set up to provide investors with a stable, cost-effective manner to handle this increasing number of India-related arbitrations. Additionally, Prime Minister Narendra Modi appears to be promoting a culture of institutional arbitration through his “Make in India” Campaign.
Although there appears to be a concerted effort to move forward to both keep Indian-related arbitrations in India and to build the MCIA as a global platform for the resolution of international disputes, practitioners remain skeptical. Some practitioners note that a large number of the MCIA arbitrator pool consists of retired High Court and Supreme Court Judges. This may affect the arbitral proceeding before them. However, section 29A of the 2015 Act stresses fast-track arbitrations, providing only 12 months for arbitrators to render an award. Accordingly, it remains unclear whether Mumbai will be the next hotbed of international dispute resolution.