Arbitration as an institutional dispute resolution process has immense credibility and legitimacy attached to it due to its likeness to the traditional court system. However, there are numerous corrective measures that are desirable to make this as an efficient process in the Indian scenario. Therefore, the aim and the object behind the recent changes brought in the Arbitration and Conciliation Act, 1996 ("the principal Act"), have been to provide a fast-tracked resolution process while giving the necessary institutional backing to undertake the requisite function of adjudging disputes better.
With the aforementioned aim, certain amendments to the principal Act have been made, the first of which was in year 2015 and thereafter another in the year 2019. The latest amending Act which gained the force of law on August 9, 2019 has stemmed from the recommendations made by the high-level Committee under the chairmanship of Justice BN Srikrishna.
The following are the important changes that has been brought forth by the Arbitration and Conciliation (Amendment) Act, 2019 ("2019 Act"):
Arbitration Council of India (ACI)
- The foremost significant change brought through the 2019 Act has been the introduction of Part I A in the principal Act for the establishment and incorporation of an independent body called the Arbitration Council of India (ACI).
- The ACI will have the dual role of a regulator and an institution promoting arbitration, mediation and other such dispute redressal mechanisms while its functions1 will be of:
- Framing policies and reviewing the grading of arbitral institutions
- Recognizing Institutes that provide accreditation of arbitrators;
- Making policies for the establishment, operation and maintenance of uniform professional standards for all alternate dispute redressal matters;
- Providing exchange of views for creating a platform to make India a robust centre for domestic and international arbitration and conciliation;
- Promoting institutional arbitration by strengthening them; and
- Maintaining a depository of arbitral awards made in India and abroad etc.
- The ACI members would consist of a Chairperson who will either be (a) Judge of the Supreme Court; or (b) Judge of a High Court; or (c) Chief Justice of a High Court; or (d) an eminent person with expert knowledge in conduct of arbitration appointed by the Central Government in consultation with the Chief Justice of India. Other ACI members will include an eminent arbitration practitioner, an academician with experience in arbitration, and senior government appointees.
- Although arbitration as a dispute resolution process is a private mechanism where regulation ideally should be less, but such a measured supervision may help develop the whole mechanism in a planned and organized manner so as to resolve disputes efficiently.
- The term "arbitral institution" means an institution which has been designated so by the Supreme Court or a High Court under the Act.
- For the appointment of arbitrators, the 2019 Act bestows the Supreme Court and the respective High Court of the states with the power to designate arbitral institutions which have been graded by the ACI3. For the aforementioned provision, the ACI will make the grading of arbitral institutions on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for the disposal of domestic or international commercial arbitrations, in the specified manner.4
- With respect to the States and High Court jurisdictions where no graded arbitral institution are available, in such cases the Chief Justice of the concerned High Court can refer an arbitrator from a panel of arbitrators that the High Court maintains, for discharging the functions and duties of arbitral institution. Further, any such reference made to the arbitrator is deemed to be an arbitral institution and the arbitrator so appointed by a party would be entitled to the prescribed fee at the specified rate5.
- While appointing such arbitrators, the arbitral institutions will fix the fee of the arbitrators as per the IV Schedule of the Act however, the same shall not be applicable for international commercial arbitration and in arbitrations where parties have pre-determined the fees as per the rules of the arbitral institution.
Timelines of Arbitration Proceedings
- The principal Act had denoted a period of twelve (12) months for fully concluding an arbitration proceedings, where the above said period was calculable from the date of formation of the Arbitral Tribunal till the final award. The time period was further extendable by the respective parties jointly by six (6) months and if more time was required then only the Courts could extend the same. The downside of this was that majority of the time in the 12-month period was taken up by parties trying to complete their pleadings which left a very short time for completion of the rest of the arbitration process.
- The changes brought forth by the 2019 Act in essence relaxes the said timelines, first by prescribing that the completion of pleadings, which involves filing of Statement of Claim (SOC) and the Statement of Defence (SOD), should be effectively concluded within a period of six (6) months from the date of appointment of the tribunal6. And secondly, by giving more time for adjudication of the dispute by calculating the 12 months period from the date of completion of pleadings by the parties7.
- The 2019 Act also gives an exemption to the international arbitrations seated in India from the timelines of the principal Act.
- As per proviso to Section 29 A (1)8 and with respect to the timelines for international arbitrations, the 12 months' timeline for international arbitration is not mandatory or binding. The language "an endeavour should be made to dispose of the matter within a period of twelve months." suggests, reference to the above timeline should be as a guide for the parties and arbitrators to ensure that the arbitration process is complete and arbitral award is passed in 12 months' time. Therefore, as against international arbitration the timelines are to be mandatorily followed only in the cases of domestic arbitration.
Confidentiality of proceedings
The 2019 Act, provides that all details of arbitration proceedings will be kept confidential except for the details of the arbitral award that too only in certain circumstances. Disclosure of the arbitral award will only be made where it is necessary for implementing or enforcing the award. Therefore, by such a change India now joins the list of countries that keeps arbitration proceedings confidential.
Applicability of Arbitration and Conciliation (Amendment) Act, 2015
For weeding out the lacunae, the 2019 Act clarifies that the provisions of the 2015 amending Act will only apply to the proceedings which started on or after October 23, 2015. This has effectively overruled the position as laid down by the Supreme Court in the case of BCCI v. Kochi Cricket Private Limited9
Disqualification of Foreign Arbitrators
The 2019 Act prescribes certain pre-stated qualifications for arbitrators and by the virtue of VIII Schedule foreign lawyers, foreign Charted Accountants and foreign cost accountants are excluded from the categories of eligible persons to be appointed as arbitrators for India seated arbitrations. The requirements as to the qualifications of arbitrators are welcome, however, it might run the risk of foreign parties not wanting to have their arbitrations seated in India as they would not be able to appoint foreign legal professionals of their own.
The provisions for setting up of the ACI and designation of Arbitration institutions amongst others are yet to be notified and remains to be brought in force by the Government. As and when that happens the effective amendments of the 2019 Act such as providing a fast-tracked, timely concluded process, with confidentiality of the parties and reduced judicial interventions, is a positive step towards making India a hub for international arbitration. The only pre-condition being, implementation of the changes brought forth by the 2019 Act to the full letter and spirit of the law particularly with respect to to the establishment of ACI and its functioning.
1. Section 43D(2) under Part IA of the Arbitration and Conciliation Act, 1996
2. Section 2 (1) ca) of the Arbitration and Conciliation Act, 1996
3. Section 11 (3A) of the Arbitration and Conciliation Act, 1996
4. Section 43-I under Part IA of the Arbitration and Conciliation Act, 1996
5. Section 11 (3A) of the Arbitration and Conciliation Act, 1996
6. Section 23 (4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of their appointment.
7. Section 29A (1) - The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23
8. Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.
9. (2018) 6 SCC 287
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