Why Arbitration is the Preferred Dispute Resolution Method for Corporates

In the convoluted world of global commerce, where transactions and agreements are of intricate nature, the rise in corporate disputes is an inevitable consequence. Traditional courtroom-based litigation methods, often mired in procedural delays and burdened by escalating costs, tend to be either a cumbersome or rather an ineffective instrument for resolving these intricate disputes hastily. This article posits that arbitration offers a distinctively better mechanism for corporate dispute resolution, in terms of effectiveness, flexibility, and, to some extent, confidentiality. Moreover, the burgeoning field of artificial intelligence (AI) can further amplify these inherent advantages for a far better dispute resolution process.

The upper hand of Arbitration in the Realm of Corporate Disputes:

Arbitration, a cornerstone of alternative dispute resolution [‘ADR’], empowers parties to resolve their disputes outside the often-onerous confines of conventional court litigation.

A few key advantages of Arbitration in resolving Corporate Disputes are as following:

1. Expedited Resolution:?Arbitration is a much more expeditious process than courtroom litigation, resolution is done within months rather than the years typically associated with court proceedings. Most of the arbitral proceedings are completed within a year, this virtue of time efficiency enables corporate houses to mitigate the disruption caused by longstanding disputes and allocate resources more effectively.

2. Cost Containment:?When it comes to the expenses incurred in corporate dispute resolution, arbitration turns out to be far more cost-efficient. Arbitration substantially reduces the financial burden of dispute resolution compared to the often-exorbitant costs of traditional courtroom litigation.?As the parties can resort to streamlining procedures as per their need and also minimize the need for extensive pre-trial discovery which in turn leads to cost efficiency.

3. Procedural Flexibility and Party Autonomy:?One of the most distinctive features of arbitration is the degree of control and leverage it provides to the disputing parties. They can tailor the arbitral process to their specific needs, including the selection of arbitrators, defining the applicable procedural rules by which they wish to be governed, and determining the venue of the proceedings.

4. Enhanced Confidentiality:?Ensuring maintenance of confidentiality is paramount in many corporate disputes, as it often involves sensitive business information and the reputations are often at stake. Arbitration facilitates an option for a private forum for dispute resolution, shielding sensitive information from public and unwanted parties, unlike the open nature of court proceedings.

5. Preservation of Business Relationships:?It is not a disputed fact that the adversarial nature of legal battles fought in courtrooms can result in often irrevocable damage to business relationships. Arbitration, on the other hand, ensures an amicable resolution is achieved by methods of negotiation and collaboration, and mutually acceptable solutions, which further aids in preserving valuable commercial relationships, particularly crucial for ongoing or long-term contractual arrangements.

6. Specialized Adjudication:?Arbitration gives autonomy to the disputing parties to select arbitrators with specialized knowledge and experience in the relevant industry. This ensures that decisions are rendered by individuals with a nuanced understanding of the specific technical, financial, and commercial intricacies of the dispute, in contrast to generalist judges who may lack such specialized expertise.

The Indian legal landscape provides robust support for arbitration. The Hon’ble Supreme Court, in landmark cases such as Centrotrade Minerals & Metals Inc v. Hindustan Copper Ltd., (2017) 2 SCC 228, has affirmed the principle of ‘party autonomy’ in shaping the arbitral process.?Party autonomy has been described by the Hon’ble Supreme Court as the ‘backbone’ of arbitrations.

Similarly, in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2016) 4 SCC 126, the Hon’ble Supreme Court described party autonomy as the ‘brooding and guiding spirit’ of arbitrations, highlighting its fundamental role in the arbitral process. This autonomy extends to the selection of arbitrators, the determination of the applicable law, and the seat of arbitration.

The Transformative Potential of AI in Arbitration:

Artificial intelligence is all set to revolutionize the landscape of dispute resolution. AI-powered tools are transforming the traditionally laborious and costly process of document review and analysis. By leveraging machine learning algorithms, these tools can intelligently identify key evidence and discern patterns within vast datasets, significantly streamlining the discovery process and reducing the expense associated with manual review. Platforms like Kira Systems, Logikcull, and Relativity are already being deployed to automate document review, enabling legal teams to focus on higher-level strategic analysis.

Predictive analytics, driven by AI, offers a powerful tool for assessing case strength and potential outcomes. By analyzing historical arbitration data, including arbitrator decisions, award amounts, and case characteristics, AI algorithms can generate predictions about the likely outcome of a pending dispute. This capability empowers parties to make more informed decisions regarding settlement negotiations or the pursuit of a case, fostering a more strategic and cost-effective approach to dispute resolution.

Smart contracts, self-executing agreements with terms encoded in computer code, offer the potential to automate various aspects of the arbitral process. From the payment of fees and the secure storage of documents to the automated enforcement of awards, smart contracts can improve efficiency, minimize the likelihood of human error, and promote greater transparency. Platforms like ‘Clause and Agrello’ are developing advanced smart contract solutions for dispute resolution.

Furthermore, AI-powered platforms are facilitating the rising acceptance of virtual hearings and online dispute resolution (ODR). These platforms offer streamlined communication, secure document sharing, and real-time translation capabilities, mitigating travel costs and logistical challenges, particularly advantageous in the context of international arbitration. Platforms like ‘Modria and SquareTrade’ are at the forefront of ODR innovation.

Embracing the Future of Dispute Resolution: A Concluding Perspective:

Evidently, arbitration is clearly a better alternative to litigation for settling corporate disputes, providing an advantageous blend of efficiency, flexibility, confidentiality, and enforceability. According to a survey, Majority of the corporations questioned believe that the arbitration landscape in India looks optimistic (43% have specifically said that the situation of arbitration in India seems either hopeful or extremely optimistic). Accordingly, of the firms having arbitration experience, 82% responded that they would continue to use arbitration in the event of future disagreements. Further, of the remaining respondents with no experience with arbitration, 46% were ready to use arbitration in the future.

The growing integration of AI further reinforces these advantages, promising a more streamlined, cost-effective, and efficient dispute resolution process. This will be very crucial considering the contemporary and evolving nature of global economy and commercial landscape expansion, requiring adoption of innovative approaches like arbitration and leveraging the transformative power of AI. Businesses seeking efficient and effective dispute resolution strategies can do so by proactively incorporating arbitration clauses into their contracts and embracing technological advancements in the dispute resolution process.