This article has been authored by Sushmita Choudhary, a student pursuing BBA LLB from New Law College, Bharati Vidyapeeth Deemed University. This article discusses the formation of the ACI as proposed by The Arbitration and Conciliation (Amendment) Act, 2019 by giving it a holistic approach.
Table of Contents
Introduction
India aspires to be a jurisdiction that is arbitration-friendly. Every time a new amendment an act is introduced, it arrives with a fresh set of regulations. The Arbitration and Conciliation (Amendment) Act, 2019 was introduced in Rajya Sabha by Mr Ravi Shankar Prasad, Minister for Law and Justice on 15.07.2019. The bill was initially called the Arbitration and Conciliation (Amendment) Bill, 2018, which was pending before the Rajya Sabha after being passed by the Lok Sabha, however, the Lok Sabha was dissolved. Subsequently, it was introduced with minor changes by the Minister of Law and Justice in the Rajya Sabha on 15.07.2019 and was passed by Rajya Sabha on 18.07.2019. It seeks to amend the original Arbitration and Conciliation Act of 1996. The 2019 Amendment Act includes various recommendations made by the High-Level Committee chaired by Justice B.N. Srikrishna, a retired judge of the Supreme Court of India.
Key amendments of the Act
- One of the most important amendments is the introduction of the Arbitration Council of India is to encourage arbitration, conciliation, mediation and other forms of alternative dispute redressal mechanisms. This is going to be talked about thoroughly in this article.
- Another key amendment is the amendment to Section 11 of the Arbitration Act which inter alia provides for the appointment of the arbitral institutions by the courts when parties disagree upon the appointment of arbitrators. This would help in decreasing the backlog of cases in the courts and will reduce its burden to a certain extent.
- By the amendment of subsection (1) of Section 29A, the time period allotted for International Arbitrations to pass an award for all the arbitration proceedings within 12 months has been removed. However, the tribunals must attempt to finish the international arbitrations issues within 12 months. For other arbitrations, the upper time limit has been changed from the entry date upon the reference of the tribunal to the completion of the pleadings of parties.
- Section 42A has been inserted into the Act which provides for confidentiality of arbitration proceedings. The arbitration proceedings ought to be kept confidential by the arbitrator and the arbitral institution except for implementing or enforcing the award which is necessary.
- In the Amendment Act, immunity has been provided under Section 42B to the arbitrators for any act or omission made in the course of the proceedings, if the act or omission was done in good faith. This means they shall not be subject to a suit or legal proceedings for anything done bona fide during the proceedings.
- By insertion of Section 87 to the Amendment Act has clarified a long-standing ambiguity of the prospective or retrospective applicability of the 2015 Amendment Act. It is clarified under Section 87(b) that the applicability of 2015 Amendment Act prevails only for arbitral proceedings which have commenced on/after October 23, 2015.
About the ‘Arbitration Council of India’
Part 1-A introduced to the Arbitration Act empowers the central government to establish the Arbitration Council of India as an independent government body.
Functions
According to the act, the main functions of the arbitration Council would be as follows:
- Framing policies for grading arbitral institutions and accrediting arbitrators
- Making policies for the establishment, operation and maintenance of uniform professional standards for all alternate dispute redressal matters
- Maintaining a depository of arbitral awards (judgments) made in India and abroad.
Chairperson
The Act says that the ACI will be headed by the Chairperson who will be appointed by the Central Government in consultation with the Chief Justice of India. The chairman should be from the following categories:
- Chief Justice of a High Court or
- A judge from the Supreme Court or
- A judge from a High Court or
- An eminent person with expert knowledge of arbitration.
Members
Qualifications for membership:
- Eminent practitioners of arbitration (full-time member).
- Eminent academicians in the field of arbitration (full-time member).
- Secretary to the GOI in the Legal Affair, Ministry of Law and Justice or his representative not below the rank of Joint Secretary (ex officio).
- Secretary to the GOI in the department of Expenditure, Ministry of Finance or his representative to a minimum rank of Joint Secretary (ex officio).
- A Chief Executive Officer/a Secretary (ex officio).
- One representative from a recognised body of Commerce and Industry- chosen on a rotational basis.
- One overseas practitioner with substantial knowledge and experience in arbitration.
Head office
The Council’s head office shall be situated in Delhi. The council with prior approval of the central government may establish its offices other than Delhi.
Tenure
The chairperson, as well as the members, shall hold office for a term not more than 3 years from the date of their joining. For the chairperson, the maximum age limit is 70 years and for the members, it is 67 years.
Chief Executive Officer
He shall be responsible for all the day-to-day administration of the Council. The qualifications required, appointment and several such terms and conditions shall be in order as prescribed by the Central Government. The CEO has to perform functions as may be prescribed by the Central Government.
Removal of a member
Removal of a member of the Council for Arbitration may take place under the following cases:
- If he is an undischarged insolvent, or
- If he has engaged in any paid employment during his term of office (except part-time member), or
- If he has been convicted for an offence, which involves moral turpitude in the view of the Central Government, or
- If he has acquired some financial or other interest which is likely to affect the prejudice of his functions as a member, or
- If he has abused his position
- If he has become mentally or physically incapable to carry out his functions as a member.
No member shall be removed on the grounds (4) and (5) unless the Supreme Court on the recommendations of the Central Government has held upon inquiry that the member ought to be removed on such grounds.
Recommendations of Sri Krishna Committee
Following the 2015 amendment, the Central Government set up the high-powered committee chaired by Justice Sri Krishna. The committee had various recommendations for the Act. Fortunately, these recommendations were put into flesh and blood by the 2019 Amendment Act. However, many recommendations that were actually beneficial for boosting arbitration were not incorporated in the Act. Instead, some amendments that were antithetical to the idea of propagation of arbitration were added to the Amendment Act. Some recommendations which I came across are as follows:
- It was suggested that model rules of procedure in domestic arbitration be inserted by making an amendment to Section 9 of the Act. These model rules just like other soft laws in the realm of arbitration would help in guiding the parties to the arbitration. However, this recommendation was not inserted in the 2019 Amendment Act.
- Section 2(1)(c) which lays down the definition of the term ‘arbitral award’ was suggested to also include ‘emergency awards’. Interestingly, this important amendment was recommended by both Justice Shah and Sri Krishna committee but likewise, it was overlooked.
- In order to encourage India to be an arbitration hub in the world, it is important to involve legal professionals, both arbitrators and advocates. The idea was to invite foreign participation in major Indian cities like Mumbai, Delhi and Kolkata. That’s why the committee recommended amending the Advocates Act which lays down qualifications for an arbitrator in India. Instead, Schedule 8 was added to the Act which is quite contrary to this idea.
Analysis of the Arbitration Council of India
The amendments were made to transform India into a global hub of arbitration by establishing an independent body. This body will lay down standards that are international in nature to enable a cost-effective, user-friendly and speedy system of arbitration.
Appointment of arbitrators
The Arbitration Council shall have the duty to promulgate arbitration, mediation and other alternative dispute resolution mechanisms. Under the Amendment Act, the Supreme Court and High Courts may now designate arbitral institutions. It may decide which parties can approach for the appointment of arbitrators. For instance, in the case of international commercial arbitration, the Supreme Court will designate an institution which will appoint the arbitrators. In case of domestic arbitration, the concerned High Court will designate an institution for the appointment of arbitrators. In case there is the unavailability of an arbitral institution, the Chief Justice of the concerned High Court may form a panel of arbitrators to carry out the functions of the arbitral institutions. This will lessen the burden of the courts.
Qualifications
The Amendment Act aims to make India an arbitration-friendly country globally. However, the question arises as to whether a foreign legal professional can act as an arbitrator or not given the addition of Schedule 8 to the Act. This Schedule lays down the qualification of the arbitrator who is to be chosen for the council which is governed by the Advocates Act, 1961. The parameters are that the person should be at least one of the following:
- An advocate under the Advocates Act or,
- Chartered Accountant or,
- Cost Accountant, Company Secretary or,
- Officer of Indian Legal Service or,
- An officer with a law/engineering degree having ten years of experience or,
- An officer having senior-level experience of administration in the central or the state government.
Therefore, a plain reading of this suggests that the person to be chosen as an arbitrator should be an Indian national. This means that foreign arbitration professionals cannot perform arbitrations in India which makes the dream of India being a global arbitration hub a distant one. The exclusion of foreign legal experts will exclude many prominent attorneys from appearing in any dispute resolution in India. Also, it can discourage foreign parties wishing for their arbitration to take place in India who would prefer an arbitrator from a neutral country.
In the case of Bar Council of India vs A.K. Balaji and Ors, the Hon’ble Supreme Court passed the judgement that foreign lawyers/firms are not entitled to practice law in India be it the litigation side or non-litigation side unless they satisfy the conditions of the Advocates Act, 1961 and the Bar Council of India Rules.
Intervention of government
The composition of this Council seems problematic given the private nature of arbitral institutions. The involvement of the government in the regulation of arbitrators and arbitral bodies contravenes the idea of arbitration. For in many cases, the Government of India may be a party to the arbitration. An arbitration conducted under a ‘government-administered’ council where the government is also a party depicts a clear case of conflict of interest and lies against the principles of natural justice as there may be an element of bias present. The courts’ choice in designating the arbitral institutions may be limited given the Council’s power of grading such institutions. The courts can be disabled from designating an ungraded institution of great potential and acclaimed popularity for its facilities of offerings which want to remain independent and sustain without going through administrative barriers of being graded by the Council.
Paradox of section
In an International Commercial Arbitration, parties may move to Indian Courts under Section 11 of the Act for appointment of an arbitrator in case they are having disagreements regarding the same. According to clause 9 of Section 11 of the Act, the appointed arbitrator should not belong to the nationality of either of the parties. If the panel of arbitrators consist only of Indian nationals, the question arises how will the court appoint an arbitrator of a different nationality?
Conclusion
The 2019 Amendment Act makes an attempt at removing some of the difficulties that were imposed by the 2015 Amendment Act during the conduct of arbitration and court proceedings. Formation of the ACI, An increased role of arbitral institutions, separate time frame for ending the pleadings, immunity provided to the arbitrators are all positive changes which should encourage India to be an arbitration-friendly nation. However, there are some lacunae present in the current Act especially regarding the formation of the Arbitration Council of India as discussed in this article. The implementation of this Amendment Act would ultimately be the key to its failure or success.
References
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