Ex Ante vs. Ex Post Arbitration: The Approach Towards Institutionalism

Shreeyam Kedia || Student of Campus Law Centre ( shreeyamm.kedia@gmail.com )

Shristy Sinha || Student of Campus Law Centre ( sinha.shristy27@gmail.com )

|| April 15 2023 ||

It’s no secret that the expediency of disposing cases is not the strongest suit of our judiciary. In fact, a recent statement by the incumbent Law Minister, Kiren Rijiju states that the number of cases pending for more than 20 years, as per the data retrieved from the Integral Case Management Information System (ICMIS)^[1] is nearly 6.72 lakh for the district and subordinate courts and around 3 lakhs for the High Courts. Such statistics clearly bring into question the need for alternative measures of dispute resolution. With the passage of time, a plethora of pre litigation remedies have come forth. From mediation to reconciliation, arbitration to negotiation; every such remedy has been budding at its own sweet pace. In India, alternative dispute resolution has been a spoke in the wheel of the larger formal legal system since time immemorial. 

The matter in question is that despite the importance which has been given to these alternative processes, the impact has been less than intended. We try to understand why that is and what can be done to improve the existing system of arbitration by essentially categorising ADR into two groups – ex-ante and ex-post. Increasing the incidence of ex-ante agreements provides an edge over all ex-post processes. While ex-post (settling the conflict after its occurrence) only aims at reducing conflicts which go to court, ex-ante agreements (finding solutions to conflicts before they arise) find their centre in improving the well-being of the people and decreasing the conflicts that arise in the first place. A Study by Steven Shavell quotes certain advantages of ex-ante agreements, how parties tend to adopt ADR more when they lead to mutual benefits. There are certain agreements where ex-ante approach gives improved incentives since having those changes the behaviour of parties in a way that increases joint welfare eventually leading to a more favourable outcome. Further, with such agreements there is no need to wait for a dispute to arise to bring an arbitration action, thus helping decrease the frequency of disputes themselves.

Now, we look at the need for an institutional approach to ADR, especially arbitration. Here, the aim is to establish more formal and standardised arbitration methods. Usually, when disputes reach arbitration, parties do not tend to be cooperative. In such circumstances, an institutionally developed arbitration system can help avoid “the risk of dilatory tactics, which increases delays and costs”^[2]. Further on, an ad hoc approach to arbitration in India has even more disadvantages due to the lack of monitoring. Therefore, a conscious effort must be made to set up institutional arbitration centres and guidelines. There needs to be uniform rules of practice and established norms. In KK Modi v. KN Modi^[3], the court spoke about a certain set of guidelines that helps determine whether parties agreed for arbitration or not. Formalising such guidelines can help establish a clear set of rules which reduces the need for courts to decide on a case-to-case basis. It also provides a better set-up for ex ante arbitration clauses in agreements and contracts.

An extension of the institutional approach lies in the development of infrastructure of the arbitral centres. Research conducted as a part of the Review of the Institutionalisation of Arbitration Mechanism in India by a High level committee in 2017 revealed that Indian arbitral centres have an abysmally low caseload when compared to other countries as a result of misconceptions of high costs and low flexibility. In fact, these institutions are lacking continuous updates in their process and a tech-savvy approach. Indian arbitral centres also often face criticisms of unprofessionalism in arbitrators and an inefficient feedback mechanism which can help improve performance. Moreover, the current number of arbitral institutions is impotent to suffice the volume of arbitrations. There’s also a lack of adherence to timelines on the part of these arbitral centres emphasising on the need for provisions for the same and a need for a cap on per sitting fees of arbitrators.

As we can see, there lies a lukewarm attitude toward institutional arbitration in India. However, it should be noted that the institutional approach is more preferred to ad-hoc arbitration for the reasons that the former renders a fixed framework of rules and accountability of arbitrators that could eventually create potential for the development of arbitral jurisprudence. As such, there comes a need to spread more awareness about the benefits and scope of arbitration and especially of arbitration clauses in contracts to prevent disputes from arising in the first place (i.e., ex ante agreements). The initiative should begin with the legal and business community by training them on how to diversify the horizon of alternative dispute resolution in legal matters.

To Conclude, the aim should be at optimising the number of disputes that arise and thereon, revolving of disputes. In furtherance of this, our suggestions lie in favour of ex ante agreements to reduce the number of disputes that arise in the first place and, create a functional country-wide institutional approach to this process of alternative dispute resolution with more attention on arbitration. The parties themselves know their situations the best and much better than the courts. Therefore, giving them a chance to decide a method for dispute resolution as compared to a complicated, time-consuming legal process can surely offer a wide variety of better solutions.

References:

1. Nearly 6.72L cases pending in district, subordinate courts for over 20 years: Kiren Rijiju (2023) The Economic Times. The Economic Times. Available at: https://m.economictimes.com/news/india/nearly-6-72l-cases-pending-in-district-subordinate-courts-for-over-20-years-kiren-rijiju/articleshow/97583641.cms (Accessed: March 2023). 
2. Law Commission of India, Need for Justice Dispensation Through ADR, etc.: Report No. 222, 2009.
3. Shavell, Steven. “Alternative Dispute Resolution: An Economic Analysis.” The Journal of Legal Studies, vol. 24, no. 1, 1995, pp. 1–28. JSTOR, http://www.jstor.org/stable/724588. Accessed 5 Mar. 2023.
4. Prof. Pillai , K.N.C., V.S., J. and K, V.K. (2008) “ADR: STATUS / EFFECTIVENESS STUDY.” Banglore and Bombay. 
5. K.K Modi vs. K.N Modi AIR 1998 SC 1297
6. Justice Srikrishna, B.N. (2017) “Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India.” High Level Committee by Ministry of Law and Justice, Government of India. 
7. Kumar, V. (2019) Mediation as a profession in modern legal system: An economic analysis, THE IMW POST. Available at: https://imwpost.com/mediation-as-a-profession-in-modern-legal-system-an-economic-analysis/ (Accessed: March 5, 2023). 

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[1] (Nearly 6.72L cases pending in district, subordinate courts for over 20 years: Kiren Rijiju 2023)

[2] Prof. Pillai et al., ADR: STATUS / EFFECTIVENESS STUDY 2008

[3] K.K Modi vs. K.N Modi AIR 1998 SC 1297

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