The aim of GIFT City is to be a global nerve center for modern financial and technology services. As the presently sole operational IFSC, the GIFT City offers a range of tax advantages that are competitive when compared with global IFSCs like Singapore’s, Dubai’s and London’s. GIFT City IFSC offers banking, capital markets, insurance, bullion and aircraft leasing within its special economic zone. It is also home to foreign university campuses. And it is fast emerging as a new metropolis located near Ahmedabad, the main city in the state of Gujarat.

A missing piece of the GIFT City IFSC was its own dispute resolution mechanism. Presently, the GIFT City IFSC operates under the general court and dispute resolution system. An IFSC like GIFT City needs an international standard court and an efficient arbitration system. The nearest examples of a separate court and arbitration center for an IFSC are Dubai’s DIFC courts and DIAC arbitration center. Therefore, creating a truly effective dispute resolution center is important to complete the IFSC system.

The IFSCA Committee

India’s Union Budget for 2022–2023 proposed the creation of an International Arbitration Centre (IAC) to be set up in GIFT City. In May 2023, the Indian government through the IFSCA formed a committee (IFSCA Committee) to design a new dispute resolution mechanism in the form of an arbitration center for all IFSCs. The IFSCA Committee comprised a number of legal, financial and administrative experts. Its mandate was to create a road map for a GIFT International Arbitration Centre (GIFT IAC). The IFSCA Committee consulted internationally and domestically on the design of a new dispute resolution system. The IFSCA Committee submitted its report in July 2024. The opportunity to create a global standard dispute resolution center is based on the IFSCA Committee’s estimated global market for alternative dispute resolution of US$14.50 billion.

While considering the scope of the proposed GIFT IAC, the IFSCA Committee focused on an appropriate dispute resolution approach that would offer a range of tools to resolve disputes including arbitration. This led to the idea of expanding GIFT IAC to include multiple dispute resolution methods. The IFSCA Committee’s publicly available report recommends a framework for an IFSCA-wide Alternative Dispute Resolution Centre (ADRC). The goal of the IFSCA Committee’s recommendations is to have a carveout for IFSCs in existing Indian legislation, such as the International Financial Services Centre Authority Act of 2019, the Arbitration and Conciliation Act of 1996, the Mediation Act of 2023 and the Special Economic Zones Act of 2005. Specific amendments required to statutes are detailed in the IFSCA Committee report.

Committee's key recommendations

The IFSCA Committee’s report hopes that the ADRC can have a carveout as an offshore jurisdiction from the proposed Arbitration Council of India (ACI) and the Mediation Council of India (MCI) under the Arbitration and Conciliation Act of 1996. Both the ACI and MCI are on the Indian statute books but not yet enforced. ACI and MCI are intended to be countrywide regulators for arbitration and mediation in India. The IFSCA Committee recommends that the IFSCA be given authority to make regulations under existing statutes for ADRC issues that apply to IFSCs.

The IFSCA Committee’s report undertakes a detailed survey of best practices followed by leading arbitral institutions globally. The key parameters studied were: cost, speed, impartiality, finality, confidentiality and procedural flexibility. The choice of the parties to decide upon the applicable law for contracts and disputes was accepted by the IFSCA Committee. The IFSCA Committee noted the governmental and legislative support in promoting arbitration in many Asian jurisdictions. Further, its report notes the rise of third-party funding of arbitration across major international arbitral seats and the value of predictable case management on the lines of international seats.

A novel proposition by the IFSCA Committee is a dedicated High Court, styled as an IFSC International Court for all the Indian IFSCs. The seat court for the ADRC would be the IFSC International Court. The path to an IFSC-specific High Court is sought to be implemented in phases. In the first phase, a dedicated bench of the Gujarat High Court would oversee IFSC-related matters, followed in Phase II by the IFSC International Court. Though the IFSC International Court would be of High Court status, it would not have writ or criminal jurisdiction. In Phase III, international judges would be permitted to sit in the IFSC International Court, but this phase would need a constitutional amendment. The ADRC is planned as a global center for international arbitration, hence its design is not limited to IFSC-related disputes alone. A dedicated High Court for IFSC would be a definite signal to the international business community of a fresh start for international dispute resolution in India.

Party autonomy will be at the heart of the ADRC. The parties – Indian or foreign – will be free to choose their governing law and the law of the arbitration when choosing the IFSC to be the arbitration seat. As a global seat for arbitration, any arbitration would have to be an international commercial arbitration under India’s Arbitration and Conciliation Act, 1996.

The ADRC plans procedural innovations like time lines for procedural steps. For example, a set-aside challenge to an award should be brought in 21 days from receipt of the award. The court considering a set-aside challenge should dispose of the challenge within 90 days from the written pleadings being filed. Third-party funding will be explicitly permitted. The majority of the IFSC Committee was opposed to regulating ADR professionals and annexed a draft of proposed ADRC’s rules for arbitration and mediation, along with a draft code of ethics for dispute resolution professionals.

The IFSCA Committee’s report also recommends that the visa and work pass system for foreign lawyers be streamlined, and that foreign practitioners should be allowed to represent clients in arbitrations and related court proceedings. The IFSCA Committee also recognized the need for agreements to enforce cross-border judgments through bilateral or multilateral agreements and reciprocal enforcement of foreign judgments.

Conclusion

The proposed ADRC’s success will ultimately be determined by the speed with which it is created and the sustained support it receives from government, companies, practitioners and the judiciary. Business needs a stable and a predictable regulatory regime for dispute resolution. The ADRC certainly has features that can make it a competitive and impactful arbitral seat if all the proposals in the IFSCA report are implemented in the near future.

Client Alert 2024-189