In this article, Rangon Choudhury discusses the Indian Arbitration and Conciliation (Amendment) Bill 2018.
Arbitration and Conciliation (Amendment) Bill, 2018
In March of 2018, The Indian Government approved the Arbitration and Conciliation (Amendment) Bill (the “Bill”) to be tabled in Parliament. Designed to reform the present state of institutional arbitration in India and address some of the lacunas found in the 2015 Amendments, (the “Amended Act”), the Bill constitutes the most recent of initiatives India has taken to revamp its arbitration regime and provide the much-needed impetus for domestic and foreign business to build their confidence in India as a seat for commercial dispute resolution. This piece is an attempt to discuss some of the key features of the Bill.
Establishment of Arbitration Council of India
In what appears to be a systemic transformation for institutional arbitration in India, the Bill has endorsed the establishment of an independent statutory body called the Arbitration Council of India (“the ACI”) in Part 1A of the Principal Act. This body will be entrusted with the responsibility of grading arbitral institutions and recognizing institutions that provide accreditation for arbitrators across the country. It shall also have to frame rules and guidelines for the maintenance of uniform professional standards in respect of all matters pertaining to all ADR mechanisms in India.
While this initiative needs to be lauded for ushering in a new era for the growth of arbitral institutions in India and one that will require them to strive for certain objective minimum quality standards, the provisions in the Bill, as they stand raise a few issues. Firstly, it is imperative to define the powers of the ACI and the scope of such powers in the Bill, particularly to ensure that there is no unwarranted encroachment in the functioning of institutions. Secondly, it is noticeable that majority of the members of the Council are to be nominated by the Central Government. While the ACI is envisaged to be an independent body corporate, the role of the Government in making the aforesaid appointments can pose doubts regarding the independence and credibility of the Council, given that the government itself is a party to many arbitrations.
Changes in the pattern of appointment of arbitrators
Continuing with its attempt to increase the participation of institutions in the process, the Bill has introduced amendments to section 11, which deals with appointment of arbitrators. Under the new regime, the parties will have to approach arbitral institutions in the matter of appointments to the tribunal without having to approach the Court in this regard. The Supreme Court and the High Courts shall designate such institutions, based on their evaluation by the ACI. This also obviates the need for parties to file a formal application for appointment in court, thus speeding up the process by taking away some part of the burden from the court. That being said, the proposed deletion of section 11(6)(A) which requires a court seized to examine the existence of an arbitration agreement before proceeding with an application filed under section 11 does create an environment of uncertainty. The omission makes it clear that the courts will no longer review the validity of an arbitration agreement before making an appointment. This begets the question, as to who will do so, if not the courts. This is likely to become even more problematic when a party contests the validity of the arbitration agreement as a response to one party filing an application. Delegating this task to arbitral institutions will require express rules to be formulated in this regard. There is no guidance in status quo as to the scope of an enquiry into an arbitration agreement by an institution.
A rather interesting provision on confidentiality has been introduced for the first time in Indian Arbitration Jurisprudence. The newly introduced section 42A requires that parties and tribunals maintain confidentiality of proceedings, except the award in situations where disclosure of the award is deemed necessary for its enforcement. Considering that confidentiality as a feature of Arbitration is highly valued by parties who seek to protect their trade secrets in arbitration, an express provision imposing a duty of confidentiality is likely to build India’s image as a secure destination for arbitration.
The Bill however also goes on to suggest that the ACI will maintain an electronic repository of all arbitral awards. This provision, in the absence of an explanation, seems ambiguous and raises a few pertinent issues. Firstly, the Bill does not clarify which type of awards will be maintained in the database. It could be either one or all the three possible categories of awards – all awards passed in arbitrations seated in India, awards passed only in domestic arbitrations and awards passed under the aegis of institutions which are being monitored by the ACI. Secondly the implication is that the awards are going to be published in some form. To this extent, the Bill does not clarify whether the published awards will be full awards or sanitized versions, redacting all sensitive information. The Bill also does not clarify if the consent of parties would be sought prior to such publication and whether they will be given an opportunity to opt out of a system. Lastly and perhaps most importantly, the provision seems to be in conflict with the proposed amendment to section 34 of the Principal Act.
Section 26 of the Amended Act
Section 26 of the Amended Act was criticized for failing to clarify the scope of application of the amended provisions, both to arbitration proceedings and to litigation arising out of such proceedings. The atmosphere of uncertainty was further exacerbated when the Delhi, Bombay, and Calcutta High Courts rendered conflicting judgments on the issue. In order to provide clarity on this subject, the Bill has proposed the insertion of Section 87 into the Principal Act. The Bill endorses prospective application of the Amended Act, both in relation to arbitration proceedings and court proceedings arising out of the former. Only with the agreement of the parties does the provision make the Amended Act applicable to proceedings, which commenced before the Amended Act came into force and to court proceedings arising out of such arbitral proceedings, irrespective of whether the court proceedings were initiated before or after the enactment of the Amended Act.
While this provision seems to have solved the confusion generated by the ambiguous wording of section 26, a recent judgment of the Supreme Court in BCCI v Kochi Cricket Private Limited, delivered on March 15, 2018 (a week after the Bill was approved) has added to this saga. The Court ruled that the Amended Act will apply only to those arbitration proceedings initiated after (and not before) its commencement. With regard to litigation arising out of arbitration, the Court observed that the 2015 amendments would apply to all court proceedings filed after the amendments came into effect (October 23, 2015), regardless of when the arbitration was commenced, including pending proceedings that may have been filed prior to the amendments but were pending at the time they came into force.
This ruling stands in conflict with section 87. The Supreme Court directed the Center to consider its judgment while taking the Bill forward. Interestingly, however, section 87 as introduced in the Bill fails to reflect the principles drawn by the Judges in the BCCI case. The Bill has further proposed the omission of section 26 from the Amended Act with effect from 23.10.2015. While section 87 clearly renders the aforesaid judgment nugatory, it remains to be seen what course of action Parliament would eventually take. The issue stands unresolved till then.
On a positive note, the Bill has reconciled the inconsistency between sections 17 (which bestows tribunals with the same powers as that of a civil court in the matter of granting interim relief) and 32(3) of the Principal Act (which states that an arbitral tribunal ceases to exercise jurisdiction once the proceedings before it stand terminated) by restricting the jurisdiction of a tribunal to grant interim measures only during the course of the proceedings. In Section 29A, the Bill has recommended that the time limit of 12 months imposed on arbitrators to draft the award start from the date of completion of pleadings instead of the date of reference to arbitration, as introduced in 2015. This will ensure that arbitrators are not pressurized by strict deadlines and that they are able to hear a case at different lengths depending upon its complexities. The Bill however has suggested the exclusion of international commercial arbitration from the purview of section 29A. While this move can be construed as providing an incentive for foreign parties to have their disputes resolved in India without any time constraints, introducing a different set of timelines for international arbitration suggests discrimination against a purely domestic arbitration. It also presumes that cases are always more complex in the former category than the latter, which may not be the case.
Conclusion
With the enactment of the New Delhi International Arbitration Bill 2018 by the Center and the rapid growth made by the Mumbai International Arbitration Center, the time could not have been more appropriate to provide an organizational structure for the robust growth of institutional arbitration in India. In doing so, the present Bill has also made the Principal Act more airtight by addressing the drawbacks recognized in the earlier amendments made.
While these steps are assured to bring in positive changes to the arbitration landscape of India, there were some notable misses that the Bill ought not to have ignored. Firstly, considering the importance assigned to emergency arbitration and incorporation of rules in this regard by institutions like the ICC and jurisdictions like Singapore, the Bill should have defined provisions relating to emergency arbitration under the definition of arbitral tribunal in the Principal Act. Secondly, the newly introduced Eight Schedule, which deals with the qualifications of an arbitrator, does not include foreign qualified arbitrators within its ambit. This means that such lawyers cannot come to India and act as counsel, even in an international commercial arbitration. This omission is nothing, but counter-productive to the main objective behind the Bill, which is to promote India’s image in the International Arbitration Community.
While it remains to be seen how the Parliament reacts to the Bill and its provisions, India needs to continue breaking new grounds in arbitration if it wants to assert its stamp as an arbitral seat along the lines of London or Singapore or New York in the years to come.
