Arbitration, as an alternative dispute resolution mechanism, has gained prominence in the past few decades. It provides a method for resolving disputes outside of courts, offering advantages such as speed, flexibility, and confidentiality. In India, arbitration is governed by the Arbitration and Conciliation Act, 1996, which was significantly amended in 2016 to make arbitration more effective and accessible.

Benefits of the Arbitration Process (which also includes Arbitration under MSMED Act 2006).

• Timely Resolution of Disputes: According to the Act, arbitral proceedings must be completed within 12 months from the date of the constitution of the arbitral tribunal. This was done to prevent delays and ensure quicker resolutions, a concern that was prevalent under the previous provisions.
• Expedited Procedure for Commercial Disputes: The Act allows for faster resolution by limiting the time frame for hearings and the submission of evidence.

Limitations of the Arbitration and Conciliation (Amendment) Act, 2016

• Implementation of Timelines: Although the 12-month timeline for completing arbitration is a welcome reform, it has its challenges. The timeline is often difficult to adhere to, particularly when the case is complex, involves multiple parties, or requires the examination of extensive evidence.
• Limited Enforcement Mechanism: Despite the amendments, enforcing arbitral awards remains a challenge in India. Even though the amendment allows for the expedited enforcement of awards, the issue of non-compliance by parties still exists. Challenging awards for irrelevant grounds and dragginf the case for longer time are quite common.
• Judicial Intervention: Despite restrictions on judicial review, the courts still retain the power to examine issues like public policy violations, the legality of the tribunal’s composition, or procedural fairness, which may result in delays in the enforcement of arbitral awards.
• High Costs: Arbitration proceedings, especially in international cases, can be expensive. Although the 2016 amendment introduces an expedited process for low-value disputes, the costs associated with arbitration, including arbitrator fees, administrative fees, and legal counsel, remain significant.
• Limited Scope for Mediation: The scope for mediation (which can often provide faster and more amicable resolutions) remains limited.

It is always recommended to take advice for drafting the clause o arbitration in the legal agreements and contracts and decide the matters of jurisdiction of arbitral tribunal. Many companies are incorporating Arbitration Clause in there employee / service agreement, which creates hurdles in resolving the disputes and result in diminished image of the company in the market.