Paradigm Shift: What Arbitration and Conciliation Amendment Bill, 2019 means for arbitration in India

A causal nexus has resulted in Indian parties favouring international institutional arbitrations for resolution of their dispute. The 2019 Bill seeks to remedy this.

Paradigm Shift: What Arbitration and Conciliation Amendment Bill, 2019 means for arbitration in India
The government aims to develop Delhi as a hub for international arbitration.

By Saurabh Bindal

Arbitration is the most popular form of alternative dispute resolution, a fact which is attributable to the close resemblance it shares to the court-system, thus rendering it with a higher degree of legitimacy. That coupled with the promise of confidentiality and a sense of autonomy for the parties has ensured arbitration a key position. When contrasted with traditional dispute resolution, arbitration offers certain advantages such as inter alia time efficiency, cost effectiveness, reasonable control of the parties over the proceedings, confidentiality, highly bespoke process, challenge to the award on limited grounds.

Arbitration has gained importance as a credible alternative in recent years. In part, the same can be attributed to growing international trade and the need for a mechanism that deals with disputes in a quick and efficient manner. The growing emphasis on arbitration is essential for a country like India where the number of pending cases in various courts is staggering.

With an aim to make India a commercial arbitration hub and reduce the intervention of courts, the Government introduced amendments to the Arbitration and Conciliation 1996. The first set of amendments came in year 2015 and a bill is passed in 2019 to further amend the Act. The Arbitration and Conciliation (Amendment) Bill, 2019 stems from the recommendations made by a high-level Committee under the chairmanship of Justice BN Srikrishna.

The 2019 bill aims to establish an independent body, namely the Arbitration Council of India (‘ACI’) that will frame policies, provide grading of arbitral institutions, and oversee the timely and cost-effective disposal of arbitration cases. Other important features of the 2019 bill include provisions to facilitate prompt appointment of arbitrators through designated arbitral institutions by the Supreme Court or the High Court, completion of arbitral proceedings within 12 months from completion of pleadings and strict implementation of confidentiality obligations towards arbitral institutions, arbitrators and parties during the pendency of arbitral proceedings.

Primarily, the amendments have focused on the areas mentioned below:

Establishment of the ACI

The ACI has been created by virtue of Section 43B of the Amendment Bill, 2019. The statutory body is to be chaired by a judge of the Supreme Court, or the Chief Justice of a High Court or an eminent person, having special knowledge and experience in the conduct of arbitration.

The insistence of the Section on the eminence and knowledge of the persons chosen to be Members of the ACI is significant as it is a contributory factor to establishing an impressive standard for dispute resolution bodies in India. The commitment of the Government to improving and standardising institutional arbitration in an effort to bring it to par with global norms is highlighted in the provision relating to functioning of the ACI.

Including training, workshops, forum for exchanges and promotion of institutional arbitration as function of the statutory body reiterates the fact that the Government recognises the need of imparting knowledge about arbitration in the country in order to further legitimise arbitration’s claim as a viable alternative to court-litigation.

Also noteworthy is the grading of arbitral institutions envisioned under the Amendment Bill of 2019, including parameters such as infrastructure, quality and calibre of arbitrators, performance and compliance of international commercial arbitrations, all being factors pertinent to the growth and acceptance of institutionalised arbitration in the country. A separate schedule stipulates the qualifications, experience and norms required to be accredited as an arbitrator. The schedule embodies the basic principles of fairness, impartiality, knowledge and intellectual competence that would be required of a capable arbitrator. It also details the requisite experience that a person must possess in order to qualify as an arbitrator. The attention given to setting forth rigorous norms for both arbitrators and arbitral institutes is evident.

In addition to envisaging norms related to establishment, operation and maintenance of professional standards, ACI has also been entrusted with the task of maintaining an electronic depository of all arbitral awards.

Amendment to Section 29A of the Act

A significant amendment in the Arbitration and Conciliation Act, 1996 is amendment to Section 29 A which required completion of all the arbitral proceedings within one year of the arbitral tribunal being constituted. The above could be extended till up to 6 months by the parties’ agreement. The purported aim of such provision was to fix the issue of lengthy arbitration proceedings, but the timeline prescribed under Section 29 A was responsible for creating more difficulties than for resolving the issue of prolonged proceedings. From the time of the arbitrator entering into reference, the completion of pleadings takes up a substantial amount of time, thus making it extremely arduous for the arbitrator to record evidence, hear arguments and render an arbitral award, all within the time frame of 12 months.

The Amendment Bill, 2019 seeks to rectify the above by amending Section 29 A so that the time period of 12 months commences from the date of completion of pleadings and has also excluded International Commercial Arbitration from the ambit of the section.

This amendment will have the overall impact of making India more agreeable as a place to conduct arbitration proceedings as the above is a step forward in tackling time-efficiency, which sometimes becomes the decisive factor for the parties involved.

Introduction of Section 42A and 42B

Section 42A of the Amendment Bill, 2019 lays down the conditions of confidentiality to be extended to the arbitrator, the arbitral institution, and the parties to the arbitration agreement in all matters of arbitration proceedings, save for wherever disclosure may be necessary.

The above provision is a welcome change as the principle Act, and the Amendment Act in 2015 were not forthcoming on the issues of confidentiality. Confidentiality of arbitration proceedings is a hallmark of international arbitration tribunals and is enshrined in the rules of almost all such international tribunals, forming one of the fundamental reasons why they remain the preferred destinations of parties and arbitrators alike.

Introduction of Section 87

Section 87 of the Amendment Bill, 2019 has been added to lay rest to the confusion created by the Amending Act of 2015 with regard to applicability of the Act of 2015 to court proceedings that were result of arbitrations but had been invoked before the amending act came into force. The above is an appreciated clarification, as various conflicting judgments had ensued in the wake of the Amending Act of 2015.

While India, by its latest Arbitration and Conciliation (Amendment) Bill, 2019 has sought to tackle the problem of a lack of specialised arbitrators, the problem extends further. In India, it has been noted that arbitration is inextricably tied with court litigation, a relation which might hint at the lack of specialisation and subsequently, a considerably limited number of arbitrators. Again, the establishment of the ACI as proposed in the Amendment Bill, 2019 should prove a handy tool in overcoming this hurdle.

The Government’s focus with the 2019 Bill is clearly on promoting India as a hub of institutional arbitration for both domestic and international arbitrations. Institutional arbitration in India has been beset by a number of factors hindering its progress, and the causal nexus has resulted in Indian parties favouring international institutional arbitrations for resolution of their dispute, an issue that the 2019 Bill seeks to remedy.

Saurabh Bindal is an Advocate by profession with deep interest in the information technology sector. Views expressed are the author’s own.

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