The government is working towards making the investor-state dispute settlement mechanism more robust by implementing a framework including party autonomy, neutrality and legal certainty while setting up the proposed international arbitration centre at the GIFT International Financial Services Centre (IFSC).

Finance Minister Nirmala Sitharaman, in her budget speech on February 1, 2022, had proposed to set up an international arbitration centre at GIFT IFSC in due course.

“The proposed International Arbitration Centre to be established by IFSCA aims to provide a robust framework for International Commercial Arbitration, including party autonomy, neutrality, legal certainty and expeditious resolution of disputes,” said Praveen Trivedi, Executive Director of IFSCA.

The high-level committee that had been constituted to review the institutionalization of Arbitration Mechanism in India had emphasized the need for creating international arbitration-friendly laws including regulations for third party funding for improving the setting for arbitration in India.

“Dispute funding is a rapidly growing market which is presently estimated to be exceeding $ 10 billion,” said Kritika Krishnamurthy, Director of Bridge Policy Think Tank. “Therefore, a regulatory framework enabling such funding can give India a competitive advantage over other financial centres that have already implemented regulations on third party funding.”

A complete independent dispute redressal structure in IFSCA with rules that are attractive to investors and other financial subjects coupled with special incentives has unlocked doors for India as a country to become a global dispute resolution centre.

Shreyas Mehrotra, Dispute Resolution Partner of AK & Partners said, IFSCA’s International Arbitration Centre can become the hub of all international disputes especially in Asia if the government makes sufficient pragmatic changes to existing dispute resolution laws to make it more lucid and predictable for disputants.

The budget has also proposed to allow the setting up of world-class Financial Institutions and Universities free from domestic regulations under IFSCA. This will give a further boost to human resources development and expansion in GIFT IFSC.

The development comes at the time when the Union Government has already released a draft bill on mediation in an attempt to promote mediation as an alternate dispute resolution mechanism.

“Setting up an arbitration institution is not a brick-and-mortar business. It calls for credibility, which is a hard-won prize. To attract a noticeable workload, we would also be well advised to widen the ambit of ‘international arbitration’ to include wholly or majority-owned subsidiaries of foreign companies,” said Sumeet Kachwaha, Founding Partner, Kachwaha & Partners. “Currently, the definition of international commercial arbitration excludes India incorporated subsidiaries (including wholly-owned subsidiaries) of foreign companies arbitrating in India.”