IFSCA Plans Independent Arbitration Centre to Boost GIFT City's Global Competitiveness

The Problem: Dispute Resolution Gap at GIFT City

The Gujarat International Finance Tec-City, known as GIFT City, houses India's only International Financial Services Centre. Regulated by the IFSCA, it was set up to attract global financial services and bring offshore financial activities to India. However, businesses operating out of GIFT City must approach commercial courts for dispute resolution, and the lack of an independent arbitration centre is a key demand of reinsurers located there.

Narendra Kumar Bharindwal, president of the Insurance Brokers Association of India (IBAI), said that compared with the Dubai International Financial Centre (DIFC) and Singapore, GIFT City has no independent arbitration centre. "The move is likely an attempt to position GIFT City as a competitive rival to major global financial hubs such as Dubai and Hong Kong. Such an institution will be crucial for GIFT City's success as an international financial hub," he added.

What IFSCA Is Proposing

The IFSCA plans to set up an independent arbitration centre in GIFT City to improve the ease of doing business and strengthen dispute resolution in India's flagship global financial services hub. The proposal is currently under the government's consideration, with IFSCA calling this "the biggest reform that Ifsca is working on and is a key requirement for GIFT City's success as an international financial centre." An expert committee has already been constituted to look into the matter and the government is actively pursuing the creation of the arbitration centre.

The Expert Committee recommended a framework for ADRC that provides arbitration and mediation but is flexible enough to accommodate other alternate dispute resolution mechanisms, including those that may evolve.

Background: The Expert Committee Report

The Expert Committee was set up by IFSCA pursuant to the announcement of the Finance Minister in the Union Budget for FY 2022-23 that "An International Arbitration Centre will be set up in the GIFT City for timely settlement of disputes under international jurisprudence." The Expert Committee on drafting institutional arbitral rules for the International Arbitration Centre at GIFT IFSC submitted its report to the Chairperson of IFSCA on July 16, 2024.

The report proposes amendments to the IFSCA Act, the Arbitration and Conciliation Act, and the Mediation Act to enhance party autonomy, expeditious arbitration, and enforceability of awards.

Expected Impact: Reinsurer Growth

The dispute resolution gap directly affects reinsurers operating in GIFT City. IFSCA estimates that more than 50 global reinsurers could establish a presence in GIFT City over the next two years. An independent arbitration centre would remove a significant barrier to their expansion, aligning GIFT City with the infrastructure available at competitor hubs.

The global alternate dispute resolution services market is projected to be $14.5 billion by 2030, indicating substantial demand for such services internationally.

What Comes Next

The proposal requires government approval to move forward. The government is actively pursuing the creation of the arbitration centre, but no timeline has been announced. The implementation would require legislative amendments to multiple Indian statutes, as outlined in the expert committee's July 2024 report. Once approved, the authority will set up an Alternative Dispute Resolution Centre (ADRC) offering arbitration and mediation services.