Arbitration fails as an alternative dispute settlement tool: SC
“It is unfortunate that arbitration in this country has proved to be a highly-expensive and time-consuming means for resolution of disputes,” said a bench comprising Justice Aftab Alam.
By Sanjay K Singh, ET Bureau |
NEW DELHI: The Supreme Court has expressed concern over the fact that arbitration, which was devised as an alternative dispute resolution mechanism to cut short the judicial litigations lingering for decades and cheaper and more flexible form of adjudication suitable for businesses, has failed to live up to its purpose.
“It is unfortunate that arbitration in this country has proved to be a highly-expensive and time-consuming means for resolution of disputes,” said a bench comprising Justice Aftab Alam.
The apex court’s comments pertained to ONGC’s opposition of arbitration to resolve its row with Norwagian company Dolphin Drilling, which had entered into an agreement to carry out drilling operations for the PSU in the offshore waters of India as allocated by it. “The plea raised by the respondent (ONGC) voices a real problem,” the court said.
The country’s highest profit-making PSU had told the apex court that the arbitration was an expensive proposition. According to ONGC, even though it was liable to bear only half of the expenses of arbitration, the financial burden cast by the arbitration proceedings in terms of fees for the arbitrators and counsel/solicitors and other incidental expenses was quite onerous.
The cost of legal representation and the other costs incurred by the parties for arbitration are not covered in the IIAM Fee Schedule. These are to be borne by the respective parties who take legal service. These expenses can be included in the costs of the arbitration as fixed by the arbitral tribunal in the award.
ONGC and Dolphin had entered into an agreement on October 17, 2003 for ‘charter hire of deepwater drilling rig DP-drill ship ‘Belford Dolphin’, along with services on integrated basis. In terms of the agreement, the Norwagian company was to carry out drilling operations for ONGC in the offshore waters of India as allocated by the PSU. Clause 28 of the agreement contained the arbitration clause.
Though the period of the agreement came to an end on February 13, 2007, on being called upon by ONGC, it continued to provide further services till April 10, 2007 for which it was entitled to be paid additionally on comparable rates under the agreement. According to Dolphin, a number of its invoices were not paid or only paid in part by ONGC and its demands went unheeded. Failing to get any positive response from ONGC, despite demands of invoices and reminders, Dolphin had invoked the arbitration clause under the agreement.
“It is unfortunate that arbitration in this country has proved to be a highly-expensive and time-consuming means for resolution of disputes,” said a bench comprising Justice Aftab Alam.
The apex court’s comments pertained to ONGC’s opposition of arbitration to resolve its row with Norwagian company Dolphin Drilling, which had entered into an agreement to carry out drilling operations for the PSU in the offshore waters of India as allocated by it. “The plea raised by the respondent (ONGC) voices a real problem,” the court said.
The country’s highest profit-making PSU had told the apex court that the arbitration was an expensive proposition. According to ONGC, even though it was liable to bear only half of the expenses of arbitration, the financial burden cast by the arbitration proceedings in terms of fees for the arbitrators and counsel/solicitors and other incidental expenses was quite onerous.
The cost of legal representation and the other costs incurred by the parties for arbitration are not covered in the IIAM Fee Schedule. These are to be borne by the respective parties who take legal service. These expenses can be included in the costs of the arbitration as fixed by the arbitral tribunal in the award.
ONGC and Dolphin had entered into an agreement on October 17, 2003 for ‘charter hire of deepwater drilling rig DP-drill ship ‘Belford Dolphin’, along with services on integrated basis. In terms of the agreement, the Norwagian company was to carry out drilling operations for ONGC in the offshore waters of India as allocated by the PSU. Clause 28 of the agreement contained the arbitration clause.
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Though the period of the agreement came to an end on February 13, 2007, on being called upon by ONGC, it continued to provide further services till April 10, 2007 for which it was entitled to be paid additionally on comparable rates under the agreement. According to Dolphin, a number of its invoices were not paid or only paid in part by ONGC and its demands went unheeded. Failing to get any positive response from ONGC, despite demands of invoices and reminders, Dolphin had invoked the arbitration clause under the agreement.
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