The Indian legal system is plagued by the issue of backlog and pendency of cases. The challenges are only exacerbated by the ever-growing economy. The solution for this was supposed to be Arbitration.
The Arbitration and Conciliation Act 1996, which was replaced by the Arbitration Act 1940, was enacted to provide to the parties with an alternate way to effectively settle their conflict in a time-bound manner.
Unfortunately, the Act of 1996 wasn’t successful in meeting its desired objective. This led the legislation to rise to the occasion and revamp the entire framework of arbitration law in India.
Consequently, major amendments were introduced in the 1996 Act, in 2015, in order to make it speedy and to prevent the intervention of the court. However, even with the 2015 Amendment emerged certain practical difficulties, including the unreasonable timelines envisaged in its scope.
After due consideration and deliberation, the legislature while focusing on addressing these implementation-related issues, proposed the Arbitration and Conciliation (Amendment) Bill, 2018. The Cabinet of Ministers approved the Bill on March 7, 2018.
HIGH ON INTENT
One of the most notable changes that were anticipated by the bill was to alter the mode of appointment of an Arbitral Tribunal (AT).
The Bill focuses on to get further than other attempts made in the past in limiting judicial intervention, by proposing to have ATs appointed by Arbitral Institution in the event parties fail in order to appoint their arbitrators or do not grasp a mechanism for their appointment in the agreement.
The same power was earlier vested with the Chief Justices of the High Courts, in cases of domestic arbitration or Supreme Court for the international arbitration.
The Bill, however, happens to lack in clarity as it does not provide whether an AT appointed by an Arbitral Institution would then be bound by the Institution’s procedural rules.
This might also impinge on party autonomy as it might amount to imposing Arbitral Institution specifically in cases where parties might have consciously adopted a non-institutional arbitration.
Thus, in this context, the need to include a clear and unambiguous Arbitration Clause in commercial contracts is clearly enhanced.
ARBITRATION COUNCIL OF INDIA
The Bill also proposes for the establishment of a central agency, the Arbitration Council of India (ACI) in order to grade the arbitral institutions and accredit arbitrators by identifying guidelines and policies for the operation, and maintenance of uniform professional standards in respect of all matters that relate to arbitration.
The ACI has been charged with the duty to maintain an electronic repository of all arbitral awards. While this focuses on establishing legal certainty by creating a central database, it is yet to see how the ACI will reconcile this with the provisions of confidentiality.
This Bill seeks to relax the impossible timeline set by the 2015 Amendment, which is also a positive development. The arbitration proceedings, as a result, will now have to be completed with 12 months from the date of the completion of the plea and not from the date on which the arbitrator enters reference.
Based on some experience of few weeks, the proposed timelines provide a more realistic possibility of having their dispute settled through the mechanism of arbitration and will reduce the chances of the parties rushing to courts to seek an extension of timelines.
AT has the power to pass interim measure post-award, which was bestowed by the Amendment of 2015 and has been withdrawn. Parties would have to approach the court if they intend to seek any interim measures once the Award has been passed.
The changes are meant to be applied only to arbitral proceedings commenced on or after the commencement of the 2015 Amendment and to court proceedings as well that arise out of or in relation to such arbitral proceedings.
The Bill mainly aims to reduce the reliance on International Arbitral Institutions by creating an environment within India that would be suited for dispute resolution. If the object of the amendment is achieved, it would boost efficiency while reducing costs at the same time.