Arbitration Is Not Just for the Rich

When a retired Chief Justice recently said "arbitration is for the rich," the statement inevitably raised eyebrows. On the face of it, it reiterates an understandable concern that many share, namely that arbitration, particularly in commercial cases, appears pricey and distant from the ordinary litigant and even though the comment perhaps contains a partial truth on occasions, it cannot be sustained as a general proposition.

In reality, such a statement misses the numerous attempts in recent times to make arbitration accessible, efficient and available for a variety of businesses, not merely the largest multinationals or most affluent parties.

Merely to describe arbitration as a rich man's solution is to forget the larger context. Arbitration, particularly in commercial affairs, has developed in India as an integral component of modern legal architecture. It is not ideal, but it provides functionality that numerous firms, small and medium-sized enterprises, opt for because it suits their practical requirements. Time, control, neutrality and privacy are not indulgences. They are necessities for conducting a stable business within a competitive economy.

Let us examine closely the facts, the myths, and the reforms that demonstrate how arbitration, instead of being a privilege of the affluent, is slowly emerging as a viable alternative for a larger section of society.

Why Do People Believe Arbitration Is Only for the Rich?

This perception tends to arise from viewing the most publicised cases. Cross-border commercial cases, investor-state arbitrations and cases involving enormous amounts of money tend to be heard in institutions such as the International Chamber of Commerce or the London Court of International Arbitration. Arbitrators in such cases tend to be veteran professionals who bill by the hour, and legal representation tends to involve costly foreign firms. Of course, such cases seem expensive and inaccessible to common people.

Though this perspective addresses just one corner of the world of arbitration. It is as if all legal issues are being addressed by high-end lawyers in the Supreme Court, and nothing is being addressed by the district courts, legal aid offices and state tribunals that resolve millions of cases annually. Arbitration also has several levels, and much of it occurs in India through domestic channels or in an ad hoc manner at much more manageable expenses.

Cost Versus Value: A Fair Comparison with Court Litigation

It is right that there is a cost to arbitration. The fees of arbitrators, the charges of institutions and lawyer fees, in case parties opt for representation by counsel, are all real considerations. But it should be asked what costs are being purchased for the price. One of the most significant handicaps in Indian court litigation is delay. Cases may take years, and often decades, to be finally decided. In commercial disputes, such a delay could damage business, tie up capital, and interfere with planning.

Arbitration, on the other hand, is intended to produce results quickly. Parties can select arbitrators familiar with the subject area, impose time limits for hearings and awards, and circumvent the perpetual adjournments common in courtrooms. If parties opt for arbitration, they are opting for an efficiency investment. For a company, particularly an expanding one, the capacity to settle a dispute in a year or two rather than ten years is not a luxury. It is essential.

It is also noteworthy that in litigation, unforeseen expenses end up mounting. Long processes imply constant court visits, increasing lawyer fees and lost productivity. Arbitration, even if it entails initial expenses, may prove to be cheaper in the long term.

How Arbitration Has Become More Accessible in India

India has gone a long way in the last ten years to popularise arbitration as a mainstream means of dispute resolution. The Arbitration and Conciliation Act has been revised repeatedly to introduce more transparency, greater efficiency and ease of use. The courts have also started to actively favour arbitration by reducing interference and accelerating the appointment of arbitrators.

Most importantly, there has been the emergence of local arbitral institutions that offer affordable services. Facilities such as the Delhi International Arbitration Centre, Mumbai Centre for International Arbitration and others in Bangalore, Hyderabad and Chennai now offer institutional assistance at affordable prices. They offer professional arbitrators, transparent fee structures and efficient case management that ensure timely resolution. These facilities are not only for multinational companies. Most small and medium enterprises, startups, and even individuals are opting to avail themselves of these platforms for commercial disputes, particularly in contracts where they do not want court proceedings.

Also, the legal fraternity is gradually developing a culture such that even individual lawyers and arbitrators are handling smaller cases with fee caps. Even in certain industries like construction, consumer goods and IT, arbitration provisions are being drafted with definite cost-sharing arrangements and timeliness provisions so that parties with limited means are also able to gain.

Why Businesses Still Prefer Arbitration?

The advantage of arbitration is not merely speed, but also a sense of control that it provides to the parties. In court, a party cannot control who the judge will be, how fast the case will proceed or how much privacy they will get. Arbitration provides parties with the option to decide the procedure, choose an impartial arbitrator with subject-matter expertise and settle issues in confidence. This is particularly significant in business transactions where reputation, trade secrets and established relationships are involved.

For example, if two companies quarrel about service quality or payment late, they might not wish to litigate and tarnish their relationship in the public eye. Arbitration provides a means of settling the issue discreetly, with lesser formality and greater elasticity. Even a small business handling a supplier or a customer might like this route if it is inserted into their agreement from the start.

In addition, awards in arbitration are simpler to enforce overseas. If there's a disagreement between an Indian exporter and a foreign purchaser, a court order from India might not be enforceable within the purchaser's nation. However, an arbitral award, due to the New York Convention, will likely be recognised in more than 160 nations. Therefore, arbitration is a realistic option for companies of all sizes.

How Can The General Public Use Arbitration?

Arbitration as an alternative dispute resolution mechanism has been progressively recognised and encouraged under various legal frameworks to ease the burden on courts and provide efficient justice to the general public.

It is interesting to note that Section 89 of the Code of Civil Procedure, 1908, also emphasises the role of Alternative Dispute Resolution, including arbitration, conciliation, and mediation, as viable tools to amicably settle disputes, thereby reducing litigation costs and delays.

Judicial pronouncements further affirm arbitration's significance for the layperson; for instance, in the landmark case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc., the Supreme Court ruled that arbitration should be construed as a speedy, cost-effective, and final resolution mechanism that benefits all parties, including ordinary citizens.

Moreover, the increasing inclusion of arbitration clauses in consumer contracts and commercial agreements reflects their widespread acceptance as a means whereby individuals and small businesses can seek redress without resorting to protracted court proceedings.

Such legal provisions and judicial endorsements substantiate arbitration's vital role in democratizing access to justice and empowering the general public with a practical, efficient means to resolve disputes.

Closing the Gaps Without Discarding the Process

Naturally, there are issues. Arbitrator charges are not regulated across the board. Delays can still occur in ad hoc arbitrations when there is disagreement on appointments. Lawyers bring some courtroom attitudes with them into arbitration, slowing it down and costing it more money than it needs to. But these are issues to be fixed, not excuses for eliminating the system.

Most of these problems can be rectified by more precise laws, robust institutional backing and greater sensitisation of businesses and lawyers. In fact, what India requires is not the diminution of arbitration but its extension. It ought to cover more small and medium enterprises, startups, regional law firms and even cooperative societies. Arbitration in India is going to be about streamlining the process, developing straightforward model clauses and making fee structures affordable. It must not be relegated to something only for the rich.

To suggest arbitration is for the rich is to ignore the extent to which it has become a part of the quotidian texture of commercial life. As with any legal mechanism, it has its weaknesses, but it is also highly promising. The developments over the last ten years reveal a definite intention to make arbitration more transparent and equitable. Courts, too, have finally started treating arbitration with the seriousness that it deserves, allowing parties to utilise it with more confidence.

Instead of declaring arbitration to be a sole remedy, we must recognise it to be what it is — a malleable, fluid system to which we can and should extend its inclusivity. Instead of questioning whether arbitration is reserved for the wealthy, we must question how it can become more accessible and reasonable to everyone else. That is a goal worth working toward, not just for lawyers and judges, but for anyone who believes in faster, fairer and more efficient dispute resolution.