The Arbitration and Conciliation Amendment Act, 20191 introduced to the principal Arbitration and Conciliation Act, 19962, received President’s assent on the 9th August 2019. The amendment was an initiative taken with the aim of making India an Arbitration friendly nation.
As we know that the present era is an era of Alternative Dispute Resolutions (ADR) and with the changing time this method is more preferred. There are various reasons why ADRs are preferred over courts and its proceedings. As ADRs are less expensive and provides a speedy process, they are proved more beneficial to the parties. There are various types of ADRs, Arbitration is one of them. We can also call Arbitration as one of the most organized form of ADRs. Arbitration as a concept is not new in India but its proper organisation is something which we are still trying to achieve. Over a period of time with an increase in burden of cases on the courts, party’s quest of reaching decisions faster in a less expensive way and to maintain peaceful and harmonious proceedings, arbitration as a process of dispute resolution become prominent and it has gained great eminence gradually. And by recognizing this need of the hour, all over the world, efforts have been made to make it more friendly and easy. In this changing world scenario, India is still far behind the international standards and hence this makes India an unfavourable seat for Arbitration. Therefore, this amendment is a step taken in order to try to bridge that gap between the national and international standards and creation of India as a favourable place of Arbitration.
May be the aim and objective of this amendment was to simplify the tasks of Arbitration in the country but when critically analysed it has been noticed that the amendment did not necessarily proved itself as a step ahead.
The amendment introduced various changes and when analysed critically it brings our notice to various loopholes and problems associated with this new amendment in the principal Arbitration and Conciliation Act. Here, in this article I aim to discuss and critically analyse the most important features of this amendment act.
Establishment of Arbitral Council of India
The 2019 amendment establishes a body ‘Arbitration Council of India’ (ACI) which will work for the growth and management of Institutional arbitration in India. The ACI shall also perform the function of grading Arbitral Institutions, recognizing professional institutions that provide accreditation to arbitrators, issuing recommendations and guidelines for arbitral institutions. The ACI is based on the recommendations of Justice B.N. Srikrishna committee.
The amendment introduces Section 11(3)(a) which provides the Supreme Court and High Court the power to designate Arbitral Institutions to the parties when they asked for. The most important point to note is that courts while designating can only refer to those Arbitral Institutions which are accredited by the ACI. Thus, instead of assigning arbitrators the court will step in and assign them Arbitral Institutions. This defies the aim of making Institutional Arbitration independent and keeping it outside government’s as well as judiciary’s purview. As ACI will be a body composed of i) a retired Supreme Court or High Court judge, appointed by the Central Government in consultation with the Chief Justice of India, as its Chairperson, (ii) an eminent arbitration practitioner nominated as the Central Government Member, (iii) an eminent academician having research and teaching experience in the field of arbitration, appointed by the Central Government in consultation with the Chairperson, as the Chairperson-Member, (iv) Secretary to the Central Government in the Department of Legal Affairs, Ministry of Law and Justice and (v) Secretary to the Central Government in the Department of Expenditure, Ministry of Finance – both as ex officio members, (vi) one representative of a recognised body of commerce and industry, chosen on a rotational basis by the Central Government, as a part-time member, and (vii) Chief Executive Officer-Member-Secretary, ex officio (Section 43C(1)(a)–(f))3. Thus we can see from the composition of the body that it is not free and independent of any sort of governmental, judicial and executive control. Hence it limits the autonomy of parties in selecting arbitrators as their choice is limited to only those Arbitral Institutions which are accredited by ACI. The amendment also considerd any foreign Arbitrator to be incompetent under this act and they do not get accreditation from the ACI, hence the amendment sidelines the fully competent arbitrators and institutions only because they do not have accreditation from ACI. Though it has been claimed that the amendment is brought in to bring a major reform in the field of Arbitration in India but through judiciary and executive involvement and by imposing various restrictions government in itself has somehow limited the scope of this reform by selecting and categorising the parties who can actually be a part of it. Such an approach can be called anything but arbitration friendly.
What is the time framework for Arbitral Proceedings?
The act has created certain new provisions regarding the time framework of the arbitral proceedings both in domestic and international cases. Earlier 2015 amendment act provided for a period of 12 months for the completion of arbitral proceedings but this new amendment act introduced a new provision, according to which a period of 6 months would be given exclusively for the completion of the statement of Claim and Defence. The regular 12 month period would be given for dispute resolution as usual. Additionally, on the approval of parties, in certain conditions an extension of 6 months can be given. Thus, extending the total time period to 24 months.
Though this step is taken by keeping in mind the basic aim of arbitration which is speedy proceedings without any delay but it still has certain drawbacks. This provision has bound the parties to complete the proceedings in the given time frame. It doesn’t consider the situation when the issues are bifurcated and more time is needed. It also does not talk about how it will be ascertained that at what stage the statement of Claim and Defense is completed, so proper assessment of those six months which are granted for making the claim is difficult.
If we talk about the issue of timeline regarding the international arbitration cases, this amendment has exempted such cases from any strict timeline and has just provided some non binding guidelines stating “that efforts should be made to carry out the process expeditiously and prime focus should be to complete within 12 months. This provision is quite vague and has quite the drawbacks as it solely leaves it on the parties involved and there is no measure controlling them.
Qualification of Arbitrators
As discussed earlier the amendment entrusted the function of reviewing and grading the arbitrators to the ACI under Section 43D(2)(c). The bill also talks about the qualifications, experiences and norms for accreditation of arbitrators in the Eighth Schedule. The schedule stipulates nine categories of persons who are only qualified to be an arbitrator. The act does not consider foreign registered lawyers and scholars as a candidate qualified enough as an arbitrator. The act here we can see limits the choices of the parties.
This feature of the amendment, acts as a discouragement for foreign parties to select India as a seat for Arbitration, because even after being proficient and erudite, foreign arbitrators are not eligible under this act.
How the new Arbitration Act serves Confidentiality?
The amended act introduces certain provisions regarding the confidentiality matter. But the result which was expected to be gained from its introduction is not achieved.
The committee while making recommendations for this bill provided for a provision supporting the confidentiality of arbitral proceedings and stated that the disclosure should take place only when it is necessary for the performance of a legal duty, to protect or enforce a legal right or when a challenge on the award is placed in front of a court or a judicial authority. Thus as an attempt to comply with the committee’s recommendation, the new amended act came up with an incomplete provision which is not does not exactly consider similar committee recommendations wholeheartedly and it ends up providing guidelines for the complete confidentiality of the arbitral proceedings, with only one exception, when such disclosure is essential for the implementation and enforcement of the award.
Here we can assess the problem is that the new introduced provision takes a very narrow approach, it doesn’t talk about the other scenarios in which also disclosure can be required. There are many conditions other than the one covered under the scope of this act which requires disclosure of award and arbitral proceedings, such as :
- Proceedings under Section 9, 11, 14, 27 and 34 of the Arbitration & Conciliation Act
- In cases when one party wants to initiate criminal proceedings against the other party along with the ongoing arbitration.
- Where one party seeks for an anti-arbitration injunction before the court.
- When the facts are as such as they give rise to a contractual dispute and such disclosure is necessary.
- When the information interests some third party and it is necessary to share the information with them.
All the above mentioned are few of some situations which are necessary for the disclosure of award but act is almost silent in this regard. Though by adopting confidentiality in its measures, India tried to achieve the global standards but the vagueness and unclarity in the act has led to a negative effect here and instead of matching the perfect level of international goal it has led to the creation of some loopholes in the act.
Applicability of 2015 Amendments
The amendment act defines the time framework of the proceedings to which the 2015 amendments will apply. The bill overturned the decision of the Supreme Court in the case of Board of Control for Cricket in India Vs. Kochi Cricket Pvt. Ltd4. The court in that case urged the parliament to re-think the issue of the applicability of the 2015 amendment act and make it retrospective in nature. But the parliament rejected it and by this amendment it has made 2015 amendment provisions strictly prospective in nature in context of Sections 34 and 36 of the act and made it clear that it is only applicable to cases which come on 23 October 2015 and after that.
This amendment led to a fallout of all the petitions which were filed by the parties who got inspired with the decision in the Kochi Cricket case. This has led to a complete disorder as lots of these proceedings are in their advanced stages and this amendment has rendered them all useless. This has led to a sheer waste of money, time and efforts of both, the parties and the courts. And thus this amendment goes against the promises of certainty and predictability which makes arbitration more alluring and preferable over other forms of dispute settlement.
India has not been a very favourable seat of arbitration for dealers around the world. The said amendment was considered to be a step ahead to make India a promising place for arbitration. Thus, the changes were required to be done accordingly but the several loopholes and drawbacks which are left by the new amendment act, even though miniscule can still act as a hindrance and can have a negative impact. The amendment has not justified its aim for which it was introduced on the other hand in some ways it has made the way of arbitration quite more difficult than earlier. It can also be considered as a step forward by the government towards regulating Arbitration. There are a great deal of confusions and intricacies involved in the field of Arbitration the provisions and regulations presiding currently are just not enough for achieving the desired objectives and at present we can only say that for India, there is still a need for a more proper, liberal and advanced law governing arbitration and it still has a long way to go on the path of development for becoming a favourable seat in Arbitration for National and International parties.
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