India’s Attorney General R. Venkataramani has indicated that the Arbitration and Conciliation Act, one of the country’s key out-of-court dispute resolution laws, needs “more insight.” This statement, made on Thursday, hints at potential amendments to the Act in the near future. When asked whether the Arbitration Act, which has been amended by the Union government at least thrice to date, requires an overhaul, Venkataramani responded, “I will not call it an overhaul, but it needs an insight.”
India’s out-of-court dispute resolution laws, including the Arbitration and Conciliation Act, the Mediation Act, and the Commercial Courts Act, play a crucial role in enhancing ease of doing business in the world’s fastest growing economy. These laws aim to reduce the backlog of pending lawsuits, which often burdens the judicial system.
The attorney general’s statement follows a controversial advisory issued by the finance ministry. This advisory directed central and state governments, as well as public sector enterprises, to avoid engaging in arbitration for disputes exceeding ₹10 crore. The advisory, issued on July 3rd, encouraged government litigants to opt for mediation instead, citing the high costs and extended timeframes associated with arbitration.
Currently, the pendency of lawsuits poses a significant challenge in Indian courts. This situation has led to a growing demand for alternative dispute resolution (ADR) mechanisms like arbitration and mediation, offering a potential solution. “There are over 50 million pending cases in Indian courts, and the government is a litigant in 70% of these cases,” stated Lalit Bhasin, president of the Society of Indian Law Firms, on Thursday. These statistics are supported by data from the National Judicial Data Grid (NJDG), a government website that tracks the pendency of lawsuits in various courts across India.
Earlier this year, the Union government launched a new national litigation policy. This initiative aims to assess the status of pending lawsuits involving the central government and develop a strategy to reduce associated costs. The attorney general’s views on the Arbitration Act align with the law minister’s vision to establish India as a prominent arbitration hub. In his inaugural address after assuming office in June, Law Minister Arjun Ram Meghwal highlighted the preference of parties seeking arbitration and mediation to resolve disputes in London and Singapore. “Why should they go there when they can do it here?” he emphasized in his speech.
The law ministry has identified reducing pendency and encouraging corporate participation through improved ease of doing business as key priorities. Ease of doing business is a crucial indicator of economic development, as previously highlighted in the Doing Business Report (DBR) by the World Bank. The DBR, which was last published in 2020, ranked countries based on their ease of doing business score. This score factored in the efficiency of contract enforcement within an economy. Essentially, a country with faster dispute resolution processes tends to have a higher ease of doing business score.
Speaking at an event in the national capital on Thursday, Venkataramani emphasized the need for an institute focused on the intersection of law and economics. “There should be a national institute of law and economics, which will be a central institution,” he said. This institute, according to Venkataramani, would play a vital role in optimizing the legal framework to enhance the economy and accelerate India’s progress towards becoming a developed nation.
