Concerned by the increasing commercial disputes between public sector enterprises (PSEs), government departments and private parties, the government has proposed the resolution of issues through arbitration and conciliation.
It feels that strategies must be found for swifter resolution of disputes to be able to lower the burden on the courts and provide for expeditious resolution of disputes. The initiative to encourage an alternative dispute redressal for commercial contracts over Rs 1 crore by PSEs has been taken by the cabinet secretariat, which was asked by the Prime Minister’s Office to build consensus on the issue.
A committee of secretaries would take a final decision on the issue on January 1. The law ministry has elicited responses on the issue from the finance, power, petroleum, commerce, telecommunication, urban development and rural development ministries, along with departments of information technology and public enterprises.
As a step in this direction, it has been suggested that a model arbitration clause should be inserted in all contracts above Rs 1 crore to enable them to resolve their disputes through alternative dispute redressal (ADR) methods.
“If a dispute arises out of or in connection with this contract, or in respect of any defined legal relationship associated therewith or derived there from, the parties agree to submit that dispute to arbitration under International Centre for Alternative Dispute Resolution (ICADR) Arbitration Rules, 1996. The authority to appoint the arbitrator(s) shall be the International Centre for Alternative Dispute Resolution (ICADR)," the model arbitration clause states.
Apart from this, a model conciliation clause has also been proposed on similar lines. ICADR would provide administrative service in accordance with ICADR arbitration and conciliation rules.
Mahanagar Telephone Nigam Limited has already introduced model and conciliation clauses in some of the contracts it has entered into, which provide for resolution of disputes arising from such contracts through the ICADR.
The government amended the Arbitration and Conciliation Act, 1940 in 1996 on the lines of the United Nations Commission on International Trade Law model law on international commercial arbitration.