finance
On July 16, 2024, the Expert Committee responsible for drafting institutional arbitral rules for the International Arbitration Centre at GIFT IFSC presented its report to the Chairperson of the International Financial Services Centres Authority (IFSCA). Led by Dr. M. S. Sahoo, the Committee was established following the Finance Minister's announcement in the 2022-23 Budget to create an International Arbitration Centre in GIFT City, aimed at promoting timely dispute resolution under international law. After conducting seven meetings, the Committee examined the frameworks of prominent arbitration bodies, such as SIAC, SICC, HKIAC, LCIA, and DIAC, while engaging with global dispute resolution experts.
The Committee made several key recommendations summarized below:
These recommendations support the Government of India's objective to position GIFT IFSC as a hub for global financial and technological services, facilitating effective dispute resolution for international businesses and investors. The comprehensive report is available on the IFSCA website.
GIFT City is India's inaugural International Financial Services Centre (IFSC), providing a range of financial services including capital markets, insurance, and banking. The Government aims to establish this centre as an innovation hub elevating financial services beyond conventional boundaries. Financial products vary by jurisdiction, influenced by the robustness of institutions supporting contract enforcement and dispute resolution. A reliable dispute resolution mechanism is critical for fostering confidence among businesses and investors, ensuring prompt and equitable outcomes.
There is a significant global shift toward Alternative Dispute Resolution (ADR) over traditional judicial systems, with numerous Indian entities seeking ADR services internationally. A pivotal ruling from the Supreme Court of India now permits Indian parties to pursue arbitration in foreign venues, emphasizing the need to foster a competitive ADR environment domestically.
The Committee suggests utilizing four existing statutes: the IFSCA Act, 2019; Arbitration and Conciliation Act, 1996; Mediation Act, 2023; and Special Economic Zones Act, 2005, with limited modifications. Recommended amendments would develop an ADR framework specifically designed for GIFT City.
The Committee advised adjustments to Sections 3(i) and 3(y) of the Mediation Act to exempt IFSC mediators from MCI regulations, allowing for customized guidelines for international commercial mediation.
The proposed framework should stipulate that both domestic and international parties may select IFSC as the arbitration seat while retaining the flexibility to choose relevant laws, thereby preventing restrictions on contract enforcement. The framework may include a proposed 6-month timeline for award issuance or options for document-only arbitration.
Key provisions will entail:
A gradual enhancement of the judiciary is proposed, starting with a dedicated bench in the Gujarat High Court for ADR matters, eventually leading to the establishment of a distinct IFSC International Court with powers akin to a High Court. Concerns about jurisdictional conflicts between the proposed IFSC International Court and the Gujarat High Court have been raised by stakeholders.
The ADRC will be established as a Section 8 company under the Companies Act, 2013, ensuring independence and the avoidance of conflicts of interest. Governance will include a Board of Directors, an International Advisory Council, and an Executive Council to oversee operations.
The ADRC will autonomously manage its procedures, continuously adapting its rules and guidelines to reflect evolving practices, prioritizing innovation, efficiency, and adherence to international standards.
The Committee recommends an immediate start to the ADRC establishment while concurrently pursuing the necessary statutory amendments. A marketing strategy will include outreach efforts such as workshops and seminars, capitalizing on the presence of prominent ADR professionals to showcase the centre’s capabilities.
Additionally, a centralized database should be implemented to track ongoing cases, enhancing accountability, along with streamlined visa processes for foreign ADR professionals to facilitate their contributions to GIFT City’s dispute resolution framework.