India: Cabinet Approves Changes To The Arbitration & Conciliation Act, 1996: Independent Body To Be Setup To Promote Institutional Arbitration

Last Updated: 9 March 2018
Article by Naval Sharma and Saket Satapathy

As a part of Government of India's continuing efforts to encourage institutional arbitration, reduce court intervention in arbitration and make India a thriving  center of Alternative Dispute Resolution (ADR) practices, the Union Cabinet has on 7 March 2018 approved the Arbitration and Conciliation (Amendment) Bill, 2018 ("Amendment Bill").

This Amendment Bill has been drafted keeping in mind the recommendations put forward by the Report of the High-Level Committee under the Chairmanship of Justice B. H. Srikrishna, Retired Judge of the Supreme Court of India.

One of the most significant changes sought to be introduced by the Amendment Bill is the creation of an independent body namely the Arbitration Council of India ("ACI") which will grade arbitral institutions and accredit arbitrators by laying down appropriate norms. The ACI will also take steps to promote and encourage arbitration, mediation and conciliation and evolve policy and guidelines for the establishment operation and maintenance of uniform professional standards in respect of all matters relating to arbitration and ADR mechanism.

The ACI will be a body corporate and its Chairperson will be an individual who has been a Judge of the Supreme Court or Chief Justice or Judge of any High Court or any other eminent person.

The other significant changes that are sought to be brought by the Amendment Bill are as below:

Sl. No.

Position under the amended Arbitration & Conciliation Act, 1996 ("A&C Act")

 

Position after the Amendment Bill is passed

  1.  

Speedy Appointment of Arbitrators:

The A&C Act empowers the Supreme Court (in case of international commercial arbitrations), or the High Court (in case of domestic arbitrations) or a person or institution designated by such court to appoint an arbitrator pursuant to an application under         §11 of the A&C Act.

It is further provided that the Supreme Court or the High Court shall only examine the existence of an arbitration agreement when considering an application under §11(4), (5) or (6).

§11 will be amended to provide that the appointment of arbitrator(s) under the   provision shall only be done by arbitral institution(s) designated by the Supreme Court (in case of international commercial arbitrations) or the High Court (in case of all other arbitrations) for such purpose.

It is not clear if the arbitral institutions will be exercising judicial or administrative powers, however the Courts will certainly no longer be required to examine the existence of a valid arbitration agreement.

  1.  

Extension of Time Limit for Completing Arbitration:

§ 29(A) imposes a time

limit of 12 months (extendable by a further 6 months by consent of the parties) for completion of

arbitral proceedings. If arbitral proceedings are not completed within the 18-month period, the

mandate of the arbitral tribunal stands terminated unless on an application made by the parties,

the court extends the time period.

The Amendment Bill proposes to amend §29 (A) (1) by excluding International Arbitration.

In addition, the Amendment Bill provides that the time limit of one year for completion of arbitral proceedings will be calculated from the date on which pleadings in the arbitration are completed.

This is a significant change as it was being increasingly seen that the one year period to be calculated from the date of constitution of the tribunal was proving to be insufficient for the purposes of completing arbitrations.

  1.  

Confidentiality:

The A&C Act does not contain any provision expressly providing for confidentiality of arbitral

proceedings.

In the absence of such a provision, parties have to fall back on any confidentiality clause in the arbitration agreement or the arbitral rules of the administering institution.

A new §42A is proposed to be inserted to provide that the arbitrator and the arbitral institutions shall maintain the confidentiality of all arbitral proceedings except the award.

  1.  

Immunity for Arbitrators

 

The A&C Act currently does not contain any provision for protecting the arbitrators for acts done in good faith during the course of the arbitration proceedings.

 

The Amendment Bill proposes to add a new §42B to protect an Arbitrator from any suits or other legal proceedings for any act or omission done in good faith during the course of arbitration proceedings.

  1.  

Applicability of the 2015 Amendment Act:

§26 of the 2015 Amendment Act governs the applicability of the 2015 Amendment Act.

This  provision provided that the 2015 Amendment Act applies:

  1. to arbitral proceedings

commenced prior to 23 October 2015 (the date of commencement of the 2015 Amendment Act)

where parties agree to that effect; and

  1. in relation to arbitral proceedings commenced on or

     after 23 October 2015.

There has been a lot of controversy surrounding the prospective application of the A&C Act, particularly §36 which deals with execution of arbitration awards.  Different High Courts have issued conflicting judgments on the issue and the Supreme Court of India is currently seized of the matter. 

A new  §87 is proposed to be inserted to make the following clarifications:

Unless parties agree otherwise, the 2015 Amendment Act shall apply only to arbitral proceedings commenced on or after the commencement of the 2015 Amendment Act and to court proceedings arising out of or in relation to such arbitral proceedings.

The amendment if passed by the Parliament will put to rest all controversy surrounding the prospective Application of the A&C Act.

The measures introduced in the Amendment Bill are a continuing and a concerted effort on behalf of the Government of India to promote arbitration and institutional arbitration. 

The Amendment Bill introduces some important changes for dealing with practical difficulties in the applicability of the A&C Act. The provisions clarifying the prospective application of the A&C Act and increasing the time limit available to arbitrators to complete arbitration are significant. The proposal to constitute the ACI as a body to supervise and promote arbitrations in India is also significant and is likely to have a long term impact on the institutional arbitration landscape which has seen some difficulty in taking off.

The Amendment Bill approved by the Cabinet is expected to be introduced in the Parliament shortly for approval of both houses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Naval Sharma
Saket Satapathy
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