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The Arbitration and Conciliation (Amendment) Act, 2019: A Fatal Flaw in Indian Arbitration?
With an objective to make India a hub for domestic and international commercial arbitration, the Arbitration and Conciliation (Amendment) Act, 2019 came into force on August 9th, 2019. Though arbitral tribunals are functioning in India, they are often not chosen by parties to a dispute as they prefer ad-hoc tribunals or arbitration institutions located in countries that have a more uniform set of standards, like Singapore, France and the United Kingdom. The 2019 amendment seeks to change this trend and make India a well-equipped Centre for domestic and international arbitration with its objective minimize the role of courts in order to strengthen institutional arbitration in the country. While the Amending Act has made some significant changes with respect to the need for a fast-track process and brought clarity on the retrospective application of the Act, there are still some lacunae which the Act fails to resolve.
One of the most significant features of the Arbitration and Conciliation (Amendment) Act, 2019 is the establishment of the Arbitration Council of India (ACI) which will be headed by a Chairperson who is either a Judge of the Supreme Court, a Judge of a High Court, Chief Justice of a High Court, or an eminent person with expert knowledge in the conduct of the arbitration, while the other members must include an eminent arbitration practitioner, an academician with experience in arbitration, and government appointees[1]. The ACI is tasked with taking any measure that may be necessary to promote and encourage arbitration, mediation, conciliation and other Alternative Dispute Resolution (ADR) mechanisms and for that purpose to frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration in India[2]. As clearly pointed out, the majority of the ACI is comprised of members who are government appointees and in a country with a reputation of bureaucracy, this composition is simply another masterminded plan to introduce government administration and regulation in the arbitration process, and this goes against the very nature of arbitration and the objectives sought to be achieved by the 2019 amendment[3].
The next concern with the 2019 Amendment is the grading and accreditation of Arbitral Institutions (AI) by the ACI. India currently has over 35 Arbitral Institutions with varying quality and the ACI is responsible for grading these Institutions based on criteria such as infrastructure, quality of arbitrators, performance, compliance with time limits, and resolution rate. While this was done with the intent of creating a more efficient system of arbitration, the Amendment fails to provide a precise scale of grading and an exhaustive list of factors to be considered in the process of accreditation and grading. Without a system for grading, this provision creates an undesirable atmosphere for parties consideration arbitration in India as they will not be able to make an informed decision. Furthermore, as per the 2019 amendment, if parties are unable to appoint an arbitrator, the High Courts and Supreme Court have the power to designate Arbitral Institutions, accredited by the ACI, to act as the appointing authority[4]. This provision was inspired by the International Arbitration Act in Singapore and Hong Kong’s Arbitration Ordinance but unlike the two which have one designated authority for appointment - Singapore International Arbitration Centre and Hong Kong International Arbitration Centre, respectively, the 2019 Amendment in India does not limit the number of AIs that a court can designate; the only criteria being accreditation by the ACI[5]. There is also no clarity on whether foreign arbitral institutions like the Singapore International Arbitration Centre and Hong Kong International Arbitration Centre should be registered with the Courts in India to be designated as recognized AIs. Once again the Act allows for interference by the courts which can only lead to foreign parties being hesitant to include India as a seat for arbitration.
Another provision that has invited criticism is the exclusion of international commercial arbitration from the 12-month limit[6] imposed by the Amendment for the resolution of the dispute and pronouncement of the award. It seems like a huge mistake for an Act with the objective of making India more appealing for international commercial arbitration to exclude the process from a compulsory time limit of 12 months as this doesn’t emphasize speedy resolution which is the main attraction of arbitration[7].
The 2019 Amendment introduces Section 42A that states that confidentiality must be maintained at all times during an arbitration proceeding unless the enforcement of an award requires disclosure of some information[8]. This absolute provision on confidentiality has the protentional of being an additional flaw as it fails to take into consideration suggestions by the B.N Srikrishna Committee and also situations where disclosure may be necessary.
As per the principle of ‘party autonomy’ in the process of arbitration, parties have the freedom to choose their arbitrators but the 2019 Amendment introduces a provision disqualifying Foreign lawyers, Foreign Charted Accountants and Foreign Cost Accounts from the category of persons who are eligible to be appointed as Arbitrators for arbitrations seated in India. This is another move by the Government which will hinder the perception of India as a suitable place for international arbitration as it restricts party autonomy and creates a huge problem for international arbitrations seated in India.
The Arbitration and Conciliation (Amendment) Act, 2019 is the latest amendment to the Arbitration and Conciliation Act, 1996 and it will not be the last reform made to the legal infrastructure governing arbitration in India. Even with all the criticisms thrown at the Amendment and the concern regarding its provisions, it will be interesting to see if the Amending Act will serve its purpose or if it will go down in history as a failed attempt at strengthening institutional arbitration in the country[9].
[1] Ministry of Law and Justice, Arbitration and Conciliation (Amendment) Bill, 2019, PRSIndia, (Sep. 2, 2019, 7:17 PM), https://www.prsindia.org/billtrack/arbitration-and-conciliation-amendment-bill-2019.
[2] Law Senate, The Impact of the Arbitration and Conciliation (Amendment) Act, 2019, Lexology, (Oct. 30, 2019, 8:09 PM), https://www.lexology.com/library/detail.aspx?g=05fa48c5-8d05-40af-a1a4-8f5bba2eaecf.
[3] George Burn, The Arbitration and Conciliation (Amendment) Act, 2019: improving institutional arbitration in India, BCLPlaw, (Oct. 21, 2019, 5:45 PM), https://www.bclplaw.com/en-US/thought-leadership/the-arbitration-and-conciliation-amendment-act-2019-improving-institutional-arbitration-in-india.html.
[4] Arbitration and Conciliation (Amendment) Act, 2019, No. 33, Acts of Parliament, 2019.
[5] Pranav Rai, Proposed 2018 Amendments to Indian Arbitration Law: A Historic Moment or Legislative Blunder?, Kluwer Arbitration Blog, (Nov. 24, 2018, 3:54 PM), http://arbitrationblog.kluwerarbitration.com/2018/11/24/proposed-2018-amendments-to-indian-arbitration-law-a-historic-moment-or-legislative-blunder-2/.
[6] Maneck Mulla, Salient Features of the Arbitration and Conciliation (Amendment) Bill, 2019, Mondaq, (Sep. 18, 2019, 9:07 PM), https://www.mondaq.com/india/Litigation-Mediation-Arbitration/845782/Salient-Features-Of-The-Arbitration-And-Conciliation-Amendment-Bill-2019.
[7] Payel Chatterjee, The Arbitration and Conciliation (Amendment) Act, 2019 – A New Dawn or Sinking into a Morass?, Mondaq, (Jan. 7, 2020, 1:17 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/880568/the-arbitration-and-conciliation-amendment-act-2019-a-new-dawn-or-sinking-into-a-morass.
[8] AZB Partners, Arbitration and Conciliation (Amendment) Act, 2019 – Key Highlights, Mondaq, (Aug. 27, 2019, 3:15 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/840292/the-arbitration-and-conciliation-amendment-act-2019-key-highlights.
[9] Shubhiksh Vasudev, The 2019 Amendment to the Indian Arbitration Act: A classic case of one step forward two steps backward?, Kluwer Arbitration Blog, (Aug. 25, 2019, 9:19 PM), http://arbitrationblog.kluwerarbitration.com/2019/08/25/the-2019-amendment-to-the-indian-arbitration-act-a-classic-case-of-one-step-forward-two-steps-backward/.
- Arbitration
- Arbitration and Conciliation (Amendment) Act, 2019
- Criticism
