New Amendments Proposed to Arbitration Law to Strengthen Institutions and Improve Previous Reforms

[Devina Srivastava is a 3rd Year, BBA LL.B. (Hons.), student at Symbiosis Law School, Pune]

In July 2017, a committee chaired by retired Supreme Court judge, Justice B.N. Srikrishna, submitted its report suggesting measures for improving arbitration in India by strengthening institutional arbitration and amending the Arbitration and Conciliation Act, 1996 (‘the Act’) to remove ambiguities persisting since the introduction of Arbitration (Amendment) Act, 2015 (the ‘2015 Amendment’). The report was consistent with the Government’s agenda of making India a global arbitration hub. Giving effect to the one of the Committee’s recommendations, the Cabinet proposed the  New Delhi International Arbitration Centre Bill, 2018 in January 2018 for the establishment of an independent and autonomous regime of institutional arbitration by effecting a transfer of the existing International Centre for Alternative Dispute Resolution to the Government of India as the ‘New Delhi International Arbitration Centre’.

While the said Bill is currently pending in Parliament, the Cabinet on 7 March 2018 approved a new Arbitration and Conciliation (Amendment) Bill, 2018 to be introduced in Parliament to give effect to other recommendations of Justice Srikrishna Committee. The press release published by the Ministry of Law and Justice indicates that the Bill will focus on building institutional support for arbitration by establishing a new body, the “Arbitration Council of India” to grade arbitral institutions, develop guidelines for the accreditation of arbitrators and promote the use of arbitration and alternative dispute resolution (‘ADR’). It also proposes much-awaited clarifications to the 2015 Amendment, such as amendments with respect to the controversial 12-month time limit for tribunals to render awards and the application of the 2015 Amendment to arbitration proceedings that commenced before the 2015 Amendment came into effect. It is useful to discuss the reforms proposed by the new Bill to understand the changing landscape of arbitration law in India.

Proposed Amendments to the Arbitration and Conciliation Act, 1996

Establishment of the Arbitration Council of India: The Bill provides for creation and incorporation (as a body corporate) of an independent council, namely the Arbitration Council of India, to grade arbitral institutions and accredit arbitrators by laying down norms. It shall take all such steps as may be necessary to promote and encourage arbitration, conciliation, mediation and other ADR mechanisms. The Council shall evolve policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration.

The Bill will also provide for the composition of the Council. The Chairperson will be a Judge of the Supreme Court or the Chief Justice or Judge of any High Court or any eminent person. An eminent academician shall also be a member, in addition to other government nominees.

2. Confidentiality of All Arbitral Proceedings Except the Award: A new section 42A is to be inserted to the Act, imposing a duty of confidentiality on arbitrators and arbitral institutions in respect of the arbitral proceedings in India, save for the award itself.

The proposed bill will also provide that the Arbitration Council of India has to maintain an electronic repository of all arbitral awards. A natural inference is that the awards will be published in some form or the other. This seems to be an important reform as this will give rise to questions such as whether the Bill will provide for the redaction of party names and confidential information from awards, whether the names of the arbitrators will be published and whether such a regime would be mandatory or whether parties will be able to opt out.

3. Protection of Arbitrator for Acts/ Omissions Done in Good Faith: A new Section 42B is proposed to be inserted that protects an Arbitrator from legal proceedings for any action or omission done in good faith in the course of arbitration proceedings.

Speedy Appointment of Arbitrators: In case parties require assistance in appointing an arbitrator, they will be allowed to approach arbitral institutions specifically designated for this purpose by the Supreme Court or the High Court, without approaching the court in this regard. This is a significant step towards strengthening institutional arbitration and reducing the heavy burden on courts. In a recent case, the Supreme Court has already exercised its power under section 11 of the Arbitration Act, asking the Mumbai Centre for International Arbitration to appoint an arbitrator in an international dispute between Sun Pharmaceutical Industries Ltd and Falma Organics Ltd.

5. Clarity on Application of 2015 Amendment: Ambiguity has persisted regarding whether the 2015 Amendment applies to existing arbitrations and arbitration-related court proceedings that commenced before the amendments came into effect. Various High Courts have given conflicting judgments in this regard. The new Bill brings clarity by proposing to insert a new section 87 to the Act that will provide that unless parties agree otherwise, the 2015 Amendment will not apply in case of arbitral proceedings that commenced before the 2015 Amendment came into effect. Further, the 2015 Amendment will also not apply in case of court proceedings arising in relation to such arbitral proceedings, irrespective of whether such court proceedings commenced prior to or after the commencement of the 2015 Amendment. This means that the 2015 Amendment shall apply only to arbitral proceedings that commenced on or after the commencement of the 2015 Amendment and to court proceedings arising out of or in relation to such arbitral proceedings.

6. No 12 Month Time Limit for International Arbitration: The time limit of 12 months for issue of award by the arbitral tribunal contained in the 2015 Amendment was considered to be very restrictive. Though the said time limit was extendable by six months with the parties’ consent, it posed certain problems in case of international arbitrations where courts had to interfere for non-completion of proceedings within the time provided. The new Bill proposes to amend section 29A(1) of the Act by excluding ‘international arbitration’ from the scope of the timeline. Thus, the timeline of 12 months from the completion of pleadings by the party shall be applicable for other arbitrations.

The reforms proposed by the new Bill seem to be a progressive step in the direction of developing India as a hub for arbitration. The proposals of the Bill are expected to strengthen the framework for institutional arbitration in the country by establishing the Arbitration Council of India and providing clarity on various issues that emerged after the enactment of 2015 Amendment. This is a much-needed reform in the arbitration landscape of the country.

Though several recommendations of the Srikrishna Committee Report such as recognition of emergency arbitration, establishment of a specialist arbitration bar and developing hearing venues still await coming into effect, one can conjecture that considering the Government’s constant focus and determination towards developing the arbitration regime in India, it will not be long before further advancements are incorporated in the Arbitration Act. After all, the time is ripe for reform of arbitration law in India.

– Devina Srivastava