The Arbitration & Conciliation (Amendment) Bill, 2018: A Positive Step Forward for Institutional Arbitrations in India

[Utsav Mitra is a B.A., LL.B (Hons.) student at National Law Institute University, Bhopal]

The Arbitration and Conciliation (Amendment) Bill, 2018(“Bill”), proposed to amend the Arbitration and Conciliation Act, 1996 (“Act”), was approved by the Cabinet of Ministers on 7 March 2018 to be introduced in the Parliament. This Bill seeks toencourage institutional arbitration for the effective settlement of disputes, thereby making India a center for robust alternative dispute resolution (ADR) mechanism in the process. The proposed changes to the existing Act are pursuant to the recommendations of the B.N. Srikrishna Committee Report(“Report”) of July 2017. Once the Bill is passed, it is expected to improve institutional arbitration by establishing an independent body of arbitrators to lay down standards, and make the arbitration process more party-friendly and cost-effective, thereby ensuring the speedy disposal of arbitration disputes.

The Bill proposes that the parties to a dispute may directly approach arbitral institutions designated by the Supreme Court of India for cases involving international commercial arbitration. This will help in building trust and confidence amongst the parties, and in the alternative dispute resolution system in India generally. Pursuant to the Report, the New Delhi International Arbitration Centre Bill, 2018 has already been introduced in Lok Sabha in January, 2018 for establishing an arbitration institution, which consists of a chamber for empaneling arbitrators and a training academy for arbitration along with a state of the art research center. This new center has been developed on the lines of the already existing Mumbai Centre for International Arbitration (“MCIA”), and will improve the number of recognized and reputable institutes in India that possess the expertise to resolve international disputes and administer multi-party international arbitrations.

Most importantly, the Bill also provides for the creation of an independent body, namely the Arbitration Council of India(“ACI”) which will grade arbitral institutions and accredit arbitrators by laying down norms and take all such steps as may be necessary to promote and encourage arbitration, conciliation, mediation as well as other ADR Mechanisms in India. For this purpose, the ACI is also mandated to evolve policy and guidelines for the establishment, operation, and maintenance of uniform professional standards with respect to matters relating to arbitration and other ADR mechanisms. Furthermore, the ACI will also maintain an electronic depository of previous arbitral awards that will help settle disputes based on existing jurisprudence. The ACI would be a body corporate, and the chairperson of the ACI shall be a person who has been a judge of the Supreme Court or chief justice or judge of any High Court or any ‘eminent person’, who may be a government nominee or an academician.

The amendment also helps facilitate the appointment of arbitrators by proposing changes to Section 11 of the Act. Now, the designated arbitral institutions can appoint arbitrators even though parties have not chosen the institutional rules in their arbitration clause. The report has also recommended that the appointments should be made without the requirement of the Supreme Court or the High Courts to determine the existence of an arbitration agreement. This helps in making the process to constitute the arbitral tribunal much faster, thereby ensuring efficiency in the arbitral process. This way, the institution designated by the courts are also able to identify and appoint an arbitrator who is best suited to deal with the matter.

Moreover, Section 29A of the Act has been proposed to be amended to exclude international commercial arbitrations from the timeline and to provide that the time limit for arbitral award in other arbitrations shall be within 12 months from the completion of the pleadings of the parties. This will help in relaxing the timeline that was imposed for intricate and complex international commercial arbitrations that are seated in India. The Report had noted that international arbitral institutions have criticized the 12 month timeline set out in Section 29A on the basis that the conduct of the proceeding is best left to the institutions to decide.

Furthermore, a new Section 42A is to be inserted to provide that the arbitrator and the arbitral institutions shall maintain confidentiality of all arbitral proceedings except the award. This statutory recognition of confidentiality is a welcome step which will promote confidence and trust in the arbitral process. The parties to the dispute can rest assured that the sensitive nature of the dispute does not become public till the rendering of the award. On the other hand, Section 42B protects an arbitrator from suits or other legal proceedings for any action or omission done in good faith in the course of arbitration proceedings. This will help arbitrators exercise their functions to the fullest, without any fear of legal proceedings ensuing against them.

Finally, the Report has also brought about clarity to the application of the Arbitration and Conciliation (Amendment) Act, 2015(the “2015 Amendment”) by proposing a new Section 87. This provision has shed some light as to the ambiguities that have persisted in interpreting Section 26 of the Amendment Act in deciding whether the Amendment applies to existing arbitrations and arbitration related court proceedings which have commenced before the Amendment came into effect. This section provides that unless otherwise agreed by parties, the 2015 Amendment, would not apply to (a) Arbitral proceedings that have commenced before the Amendment Act, 2015(b) Court proceedings arising out of or in relation to such arbitral proceedingsand shall apply only to arbitral proceedings commenced on or after the commencement of the Amendment Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings.

Thus, the proposed amendments are a welcome development. Not only does the amendment seek to strengthen the framework for institutional arbitration in India by renewing trust and confidence in the arbitral process through the creation of an Arbitration Council of India, but it also seeks to clarify the ambiguities that have existed in the 2015 Amendment. The proposals to allow the institute to appoint the arbitrators in order to speed up the arbitral process, and to exclude difficult and complex international arbitrations from having their awards rendered in a brief span of 12 months are a welcome and positive step. Moreover, the proposed amendments, by ensuring confidentiality in the arbitral process till the rendering of the award and protecting the arbitrators from any suit or legal proceedings for their bona fide actions during the arbitral proceedings are well reasoned changes that will serve as positive steps towards making India an attractive destination for institutional arbitrations in the near future.  

Utsav Mitra

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