Finance Minister Arun Jaitley today made out a strong case for BRICS nations developing their own arbitration mechanism to cut reliance on redressal centres in developed nations whose awards at times tend to be loaded against developing countries.
Speaking at a conference on 'International arbitration in BRICS', he said faster growth will return to emerging economies once the world emerges out of the current slowdown and the dispute resolution mechanism should be now perfect as trade between countries grows.
"Many countries fear, and have been suggesting, that the awards emerging out of these arbitration are at times loaded against the emerging economies. Therefore, need has been felt to develop parallel arbitration centres across the world. Let alone London, let alone Paris, now we see Singapore emerging as an emerging arbitral centre," Jaitley said.
"Therefore, for BRICS nations to resolve trading disputes which may arise out of BRICS nations, it is extremely important that we have to develop a mechanism."
Jaitley suggested that the BRICS countries should set up a task force comprising officials and experts to discuss and then set up an appropriate mechanism where these nations can have arbitral centres of their own.
"And hopefully, if we are able to evolve and develop that capacity, eventually those centres will also become centres of great international acceptability even with regard to the non-BRICS nations as far as arbitral abilities are concerned," he said.
Talking about rationale behind companies going for international arbitration, he said they fear an institutional bias and hence look for a neutral forum for applicability of law.
"The experience over the years has been that some centres did monopolise a bulk of international arbitrations, they developed capacities, they created arbitrators of stature, they created a set of international lawyers who could practise from one jurisdiction to other. Therefore, those jurisdiction tended to have a big share in international arbitration," he said.
The emerging economies of Brazil, Russia, India, China
and South Africa mostly follow the UNCITRAL model law on international commercial arbitration.
According to Jaitley, it is essential that the dispute resolution mechanism is absolutely fair, detached from local commitments, to ensure free and fair trade.
"As the world slowly emerges from the current economic crisis, trade which has shrunk will come back in a bigger way. Growth will return to the world and faster growth will return to emerging economies. Therefore inter-se trade and trade related issues will necessarily involve the dispute resolution mechanism which we need to now perfect, and we need to prepare ourselves for that," the finance minister added.
He laid a premium on credibility of arbitrators to develop this mechanism.
Jaitley further said the challenges posed by economic slowdown continue to haunt the global economy and the emerging economies, pre-dominantly the BRICS ones, will have to shoulder the responsibility of driving global growth.
The BRICS nations will have to evolve and put forth a common agenda for growth and the key is to develop local capabilities to deal with the challenges that lie ahead, he suggested.
Law Secretary Suresh Chandra spoke about the need for regional cooperation on arbitration. A positive debate on setting up a common framework for arbitration among BRICS nations will help bring down cost of arbitration and develop trust among investors and jurisdictions, he said.
(REOPENS DEL 35)
Jaitley called for larger economic and trade cooperation among the BRICS member nations for achieving higher growth in a globally challenging environment.
The minister called for not only free trade but also fair trade.
Earlier, speaking on the occasion, Economic Affairs Secretary Shaktikanta Das said that despite the global economy facing various challenges, it is the emerging economies that are driving growth globally.
Das said India, in its Model Draft of Bilateral Investment Treaty, has a provision that international investors have to first exhaust the option of local judicial system at least for five years before going for international arbitration.
According to a Finance Ministry statement, the first technical session of the conference was held on the subject 'Arbitration and Dispute Resolution: Focus BRICS Countries'
In the first session, a Brazilian panelist said there is a need for interaction between the legal fraternity from BRICS countries to discuss the ground realities and challenges.
Additionally, as a speaker from China pointed out, there are many arbitral institutions and one more by BRICS may not solve the emerging issues, especially considering the differences in historical legal systems of the countries, which may impede making of a common framework.
"The suggestion was that it would be more beneficial to have arbitration rules for BRICS countries rather than an institution," the statement said.
It said in second thematic session on 'Dispute Settlement and Enforcement of Treaty Awards', some panelists said there is some lack of clarity on enforcement of investment awards, like in China and India.
