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Arbitration is gaining widespread popularity on account of its speed, neutrality and confidentiality. But in certain situations, litigation remains the best option, argues Sonal Godhwani of Aditya Birla

The purpose of international commercial arbitration is to keep dispute resolution out of the courts. Often, foreign investors do not trust the impartiality of local tribunals in India. This and other fears associated with litigation – a lack of familiarity with procedures and the differences in cultural approach and language – make court proceedings an unattractive option for most foreign investors.

Sonal Godhwani
Sonal Godhwani
Aditya Birla

Arbitration is therefore often favoured as an alternative method of securing impartial justice. It depoliticizes the settlement of investment disputes and promotes mutual confidence between the parties.

Various tests can be used to determine whether international arbitration is a feasible alternative to litigation. For example, in situations where one party to a contract has greater bargaining power than the other, the contract tends to be one-sided. In these circumstances, arbitration may be preferable as the courts will generally interpret the contract strictly.

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This article was jointly written by Sonal Godhwani and Devangee Ganatra from the corporate legal cell at Aditya Birla.

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