Not another law

New legislation for dispute resolution may not be the best way to move infrastructure projects stuck in courts

The prime minister's directive to the Planning Commission, to draft a new legislation for setting up an institutional mechanism to resolve disputes in public contracts, may not be the best answer to a pressing problem. Indeed, creating a new law may even be seen as a convenient way of sidestepping the failures of the bureaucracy and the prevailing dispute resolution systems. The proposal for this draft law stems from the large number of infrastructure projects stuck in the courts, which are seen to be responsible for the decline in investment and growth. The solution, according to the PMO, lies in setting up a dedicated institutional mechanism, on the lines of the tribunal system, and eliminating litigation up to the high court.

This proposal provokes several concerns. To begin with, it ignores the inefficiencies of the project authorities, which often delay administrative and implementation procedures relating to PPPs. Two, in bypassing judicial delays faced at the high-court level by going down the tribunal route, it fails to acknowledge the troubles inherent in the tribunal system itself. Three, doing away with quasi-judicial arbitration mechanisms comes at the cost of improvements in what has emerged as a moderately successful alternate dispute resolution mechanism in India in the recent past. Four, drafting a new legislation does not wish away the reality of the bureaucratic and administrative incapacities that will likely beset even this new arrangement.

There are other possible solutions. For instance, currently, mediation and arbitration are the accepted modes of resolving disputes arising from PPP contracts. One concern with this arrangement is that there are significant delays from the time of the dispute arising to the moment when a settlement or decision is finally reached. An ideal situation would be to create a specially equipped institutional mechanism, such as panels of mediators and arbitrators specialised in handling disputes involving big-ticket public contracts, within the existing mediation and arbitration systems. That is, this institutional set-up can be achieved without recourse to a new statutory arrangement, under existing law. Such a set-up, which must be endorsed by both sets of parties, can also be given the flexibility to operate under its own rules regarding timelines and procedures. It requires merely a contractual promise by the private and public sector parties to PPPs to approach this specialised set-up.

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