The stride to make India a hub for International Commercial Arbitration and to make Arbitration a preferred mode for dispute resolution, led to the first amendment in the Arbitration and Conciliation Act, 1996 (“Act”) on 23.10.15. The amendments made in the Arbitration and Conciliation (“Amendment”) Act, 2015 (“Amendment Act, 2015”) brought commendable changes to tackle several issues such as making arbitration more cost-effective and less time-consuming. It, however, failed to tackle certain fundamental issues such as the importance of institutional arbitration centres in today’s day and age of there being predecessors, playing key role in resolution of disputes through arbitration, such as of International Chamber of Commerce, The London Court of International Arbitration, Singapore International Arbitration Centre, Hong Kong International Arbitration Centre etc. Another pertinent lacuna was the applicability of the Amendment act on Court proceedings initiated prior to 23.10.15
In order to address and tackle the above impediment, New Delhi International Arbitration Centre Bill, 2018 was introduced in the Parliament on 5 January 2018. The Arbitration & Conciliation (Amendment) Bill, 2018 (“bill”) seeks to implement the suggestions made by the High-Level Committee (“HLC”), chaired by Justice Srikrishna. The recommendations intend to firstly, to do away with certain loopholes left unplugged in the first round of amendments in the Amendment Act, 2015, and to further make India a hub for International Commercial Arbitration by promoting Institutional Arbitration. The HLC had inter alia recommended that the International Centre for Alternative Dispute Resolution should be taken over, with a complete restructuring of its governance and further be re-branded as a center of national importance for arbitration.
Amendments proposed in the bill
The core objective of the bill is to promote institutional Arbitration by setting up an independent statutory body to govern all the arbitration matters in India i.e. both domestic and international.
Following are the core changes intended to be brought through the present bill:
Establishment of Arbitration Council of India (“ACI”)
- ACI is to be presided over by a Judge of the Supreme Court or Chief Justice or Judge of any High Court or any other eminent person, which would include eminent academicians etc. and other government nominees as well. It will be entrusted with grading arbitral institutions and accrediting arbitrators. Apart from creating a conducive ecosystem for Arbitration, mediation, and conciliation, it will be given a task of creating and maintaining a depository of all the arbitral awards.
- The HLC recommendations also propose to incentivize institutions who aren’t performing well. The same is intended to promote competition and to meet the expected exponential demand for such institutions.
- For the aforesaid purpose, the ACI will be required to formulate proper norms and guidelines to ensure the establishment, maintenance, and operation, and to further set a standard with respect to all arbitration related matters.
Appointment of Arbitrators to be performed by institutions
Irrespective of whether the parties have opted for an institution’s rule in their agreement, the amendment is set to facilitate the appointment of arbitrators by the respective institutions only. This will lead to minimum court intervention with respect to arbitration proceedings and will further, not only expedite the process of appointment of an arbitrator, but also facilitate in appointing an arbitrator best suited for any given matter.
Timeline for completion of Arbitral proceeding relaxed for both Domestic and Commercial Arbitration
The prior period of 12 months, as per the Amended Act, 2015, for both Domestic and International Arbitration, was found to be less, since the time from the arbitrator entering into reference till the time of completion of pleadings consumes a substantial amount of time, which lead to the Amendment in Section 29A of the Act.
As per the proposed amendment in Section 29A of the Act, the time limit of 12 months for Domestic arbitration matters will start from the date the parties are done with their pleadings.
It shall also effectively exclude all international commercial arbitration matters from a set timeline for making an award.
The proposed amendment will drastically improve the quality of awards, especially with respect to more complex International Commercial Arbitration. The experience from 2015 amendment is evident that it has become a common practice for parties to seek an additional extension of 6 months for completing arbitration proceedings. The change in the time frame from the arbitrator entering into a reference to the completion of pleading will lead to eradicating the extra step.
Confidentiality provision for arbitral proceedings and immunity provision for the Arbitrator
A need was felt to extend the confidentiality provision as available for conciliation proceedings under section 75 of the Act.
- A new section, 42A will be inserted and the same is to ensure and direct that complete confidentiality is maintained for all arbitral proceedings except the part when it comes to the award.
- Section 42B will be inserted to protects an arbitrator from suits or other legal proceedings for any action or omission done in good faith in the course of arbitration proceedings. The same is intended to protect the arbitrators as long as the breach and omission are done in good faith.
Despite the bill providing for confidentiality provision, the same does not contemplate the consequences of the breach thereof.
Amendment Act, 2015 to have prospective effect, unless agreed otherwise by the parties
Introduction of section 87 to clarify the much-disputed issue of whether the Amended Act, 2015 has a prospective or otherwise. Section 87 provides that unless parties agree otherwise, the Amendment act, 2015 shall not apply to the following:
- arbitral proceedings that have commenced prior the coming into force of the 2015 Amendment;
- Court proceedings arising out of or in relation to such Arbitral matters, irrespective of whether they commenced prior to or after the coming into force of the Amendment Act, 2015.
The following is being considered as a welcome relief since there are a host of conflicting judgments throughout the country by various High Courts.
Though the Bill proposes several much-needed amendments, there is still a wide grey area that needs to be addressed by the legislature before the proposed bill can be passed as a comprehensive Act. Some of those issues include – uncertainty about the scope of ACI’s role and its power as the same has not been clearly defined in the Bill; Whether the institutions like ACI will make section 11 of the Act redundant; there is no clarification with respect to Indian parties wanting to opt for foreign seated arbitration while still being bound by the Indian Law; with respect to section 42A, there is no clarification as to what would happen when the proceedings progress to Section 34 and the court requisitions the record of the arbitral proceedings. Hence, further contemplation is required to ensure that the said voids are not left unfilled until the next amendment.