This article has been written by Nabira Farman, pursuing the Certificate Course in International Commercial Arbitration and Mediation from LawSIkho.
Two prominent players in arbitration in the Asia-Pacific region, namely India and Singapore have passed some crucial amendments in their legislations recently. While in India, the President promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020 on November 4, 2020 to amend the Arbitration and Conciliation Act, 1996, the Principal Act on arbitration in India. While, in Singapore, the Ministry of Law passed the International Arbitration (Amendment) Act, 2020 on December 1, 2020 to bring certain reforms in the International Arbitration Act, 1994. We shall briefly discuss these amendments herein.
Recent Amendments to the Indian Arbitration Regime
The government of India has often adopted necessary changes in the pursuit of making India a favourable place for arbitration. Indian Arbitration law is in consonance with the UNICITRAL Model Law for International Commercial Arbitration. With the passage of time, the Arbitration and Conciliation Act, 1996 has gone through several amendments and ordinances.
The President of India vide a gazette notification released on November 4, 2020 promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020 which brings forth certain amendments in the existing law on arbitration, that is, the Arbitration and Conciliation Act, 1996. Since the Parliament was not in session, the President in accordance with his legislative powers granted under Article 123 of the Constitution of India promulgated the ordinance for the time until the Parliament is back in session. The promulgation brings forth three amends to the Act, adding a proviso to section 36(3), substituting section 43J and omitting the Eighth Schedule from the Act.
Parties aggrieved by the arbitral award pertaining to any of the grounds mentioned in Section 34 of the Arbitration Act can challenge the award and have a chance to get it annulled by a court of law having jurisdiction to do the same. The grounds for setting aside an arbitral award are laid down in Section 36 of the Act. Earlier according to the Arbitration and Conciliation Act, 1996, an arbitral award was automatically stayed as soon as an application challenging the impugned award had been made. However, an automatic stay on the enforcement of award as a result of an application being filed to challenge it, contravenes the very idea behind Arbitration acting as a speedy method of dispute resolution. So, the major overhaul in the Indian arbitration law came in 2015 and ever since that, issue of enforcement of awards has always been in the limelight.
Addition of another proviso to section 36(3) of the Act
Adding another proviso to section 36(3), the ordinance aims to form a mechanism for putting a stay on the arbitral awards while they are challenged under section 34 in case the arbitration agreement or the arbitration clause added to the contractual agreement giving rise to the arbitration process is itself induced by fraud or corruption. Moreover, the proviso also allows such stay on award if the award rendered to the dispute is influenced by fraud or corruption. However, in order to invoke this proviso for stay, the court needs to be satisfied that there is ample evidence that prima facie shows that the above conditions are met.
An award induced by fraud or corruption goes against the public policy of India. Therefore, the arbitrability of fraud has been taken seriously and the amendment solidifies the stance of the Supreme Court in such matters. The winning party to arbitration cannot be benefitted out of an agreement or award coated in the whims of fraud or corruption.
The Apex court in Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd. revisited the essential tests laid down in Rashid Raza v. Sadaf Akhtar and decided whether parties can refer to arbitration where either of the parties allege the presence of fraud in the arbitration agreement. The tests are, “(i) Whether the plea of fraud percolates the entire contract and above all, the agreement of arbitration, rendering it void? Or (ii) Whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain?”
Thus, the ordinance comes as a boon to stakeholders who suffered the vice of fraud or corruption. The law is clear on this point that an arbitral award shall be stayed unconditionally until the challenge to award under Section 34 of the Arbitration Act is disposed of. The only requirement to seek such a stay is to prove the allegation of fraud or corruption. The party alleging such misconduct shall rely on the tests propounded in Rashid Raza (Supra) and Avitel (Supra). Although, the ordinance has attracted criticism for it may delay the process of enforcement of awards, it is germane to understand that enforcement of awards coloured in deceit does more harm than good.
Substitution of Section 43J
The ordinance also aims to respond to all the criticisms that came forward upon the introduction of limits and criteria imposed on the eligibility of arbitrators under the 2019 Amendment Act and thus brings a big change to Section 43J. Section 43J is a constituent of Part 1A of the Amendment Act which has, as of now, not come into force. The ordinance nevertheless aiming to remove doubts and addressing certain concerns regarding the Amendment Act has substituted the provision.
Omitting the Eighth Schedule from the Act
The Amendment Act of 2019 had laid down that the qualifications, experience and norms for accreditation of arbitrators shall be specified in the Eighth Schedule which may be amended by the Central Government in consultation with the Arbitration Council. The ordinance substitutes these specifications of the arbitrators to be as per the regulations, thereby, omitting the Eighth Schedule. The eighth schedule expressly provided in detail all the qualifications a person required in order to be accredited as an arbitrator. It laid down the educational criteria along with the years of experience required to be eligible as an arbitrator. Furthermore, a list of character traits was also specified to be the general norms to be considered while appointing an arbitrator.
These requirements were heavily criticized for being considerate of seniority and not being merit based. Knowledge of the arbitration law was not necessarily required. Most of the educational qualifications required a minimum ten years of experience in the field of advocacy, accountancy, services under the Central Government, etc. Thus, young professionals having exceptional qualifications and interest in serving as an arbitrator were discouraged.
While these conditions were majorly subjective and did not pose a big problem as to exclusion of Indian citizens as arbitrators, it did so for foreign arbitrators. One of the qualifications laid down that the person must be an advocate under the Advocates Act, 1961 and Section 24 of the same act says that only citizens of India can become an advocate under this act. So, in Indian-seated arbitrations, foreign nationals could not appoint an advocate who was not an advocate within the meaning of Advocates Act, 1961. Thus, the issue occurred in International Commercial Arbitrations having the seat of arbitration in India. As India visions to become an arbitration hub for commercial arbitrations around Asia and the world, this legislative drawback pulled it back. The Supreme Court of India in Bar Council of India v. A.K. Balaji clearly said that foreign lawyers are not barred from conducting arbitration proceedings in transnational commercial disputes subjected to arbitration according to Indian law. Thus, the government of India thought to overcome it by omitting such requirements altogether. The present law for appointment of arbitrators shall be done as per the regulations as and when prescribed by the government.
Recent Amendments to the Singapore Arbitration Regime:
Singapore has emerged as a de facto leader in international arbitration in the Asia-Pacific region since the SIAC as an institution has successfully resolved several matters of international arbitration very smoothly. Even for ad hoc arbitrations, many parties situated across borders have considered it as a very viable option to make when it comes to arbitrating their disputes. The legislation that supports the international arbitration framework in Singapore is the International Arbitration Act (Cap. 143A).
On June 26, 2019, Singapore’s Ministry of Law laid down six proposals for amendments to Singapore’s International Arbitration Act (“IAA”) in a consultation paper where it sought opinion from the public on six proposals for amendments to. The Ministry after receiving the public comments has accepted and legislated on two key proposals, namely the appointment of arbitrators in multi-party situations and enforcement of confidentiality in International arbitration. The willingness and steadfast approach of the Singaporean government in keeping pace with the ever-changing arbitration world has proved that it is moving in the direction of becoming the biggest hub of international commercial arbitration in the world.
Making the procedure of conducting arbitration smoother
For all disputes, regardless of the number of parties involved, Section 9A read with Article 11 of the First Schedule of the Act was applied. However, the procedure fell short of appointing arbitrators when it came to multi-party disputes wherein the parties on either side had to jointly nominate their respective arbitrators. Often, conflict arose since the different parties on either side had varied interests that did not align together.
Problems such as parties shifting liability on each other, refusing to engage in the process of constituting a tribunal or refraining from attending proceedings to either delay or frustrate the arbitration. Thus, when any of the parties were unable or unwilling to participate in the appointment of arbitrator, the appointing authority stepped in to appoint one on their behalf. However, this led to an inequality in terms of opportunity given to one party to appoint the arbitrator.
In order to tackle this issue and the risk of inequality, most of the leading arbitral institutions such as the ICC, HKIAC, SIAC and LCIA amended their rules declaring that the institution will take the charge of appointing the entire tribunal if in a multi-party dispute, parties are unable to reach agreement on their arbitrator.
To make procedural issues that arose in multi-party arbitrations feasible and expeditious, the amendment adds a new section 9B in the IAA which lays down a default procedure for the appointment of three arbitrators in the panel where there are more than two parties in arbitrations. The previous procedural framework under section 9A, akin to Article 11 of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), fails to apply when there are multiple claimants or multiple respondents.
However, the amendment does not prejudice the Party autonomy which is the paramount principle in arbitration. These provisions are only applicable where the parties have not expressly decided any proper procedure for the appointment of the arbitrator(s) and are neither able to come to a consensus regarding the appointment. At such a juncture, the provision comes into play to prevent the arbitral process from undue delay.
The section 9B provides for the process of appointment of arbitrators in the very conventional manner in consonance with two-party disputes. Precisely, one or all claimants shall have to nominate one arbitrator jointly at the time of raising a claim for settling the dispute via arbitration and shall inform the respondent(s) of the same. One the other hand the respondent(s) must nominate the second arbitrator jointly within a period of 30 days from receiving the request for arbitration.
The two arbitrators shall then nominate the presiding third arbitrator within 60 days from the date of receiving the respondent(s) request for arbitration. In case this mechanism fails due to non-adherence of either of the parties or the two appointed arbitrators are unable to appoint the third, the appointing authority assumes power to act on this behalf. Thus, when the parties are unable to agree on the choice of arbitrator within the stipulated time frame, acting upon the request of any of the parties, the appointing authority must appoint all three arbitrators according to its own discretion. However, the appointing authority while making the appointments must duly consider all relevant circumstances. The authority also has the power to re-appoint an arbitrator that has been appointed by the parties.
Upholding the Confidentiality concerns of the parties
When the parties to the international arbitration have expressly or impliedly consented to keep the proceedings and other matters related to the matter in confidence, breach of such a promise by the infringing party leads to injury of the aggrieved party. Arbitration is chosen over litigation for many advantages, confidentiality being one of them. It is indeed a rock-solid principle of arbitration. The previous law did not specifically contain any provisions focussing on this aspect and parties were only impliedly duty-bound to respect confidentiality based on common law principles when the laws of Singapore apply, for it being the seat of arbitration.
The recent amendment adds Section 12(j) to the Act which empowers the arbitral tribunal and Singapore’s High Court to enforce confidentiality by passing interim orders where (i) the parties have agreed among themselves in writing either in the arbitration agreement or any other document; or (ii) under any written law or rule of law; or (iii) under the rules of arbitration (institutional or otherwise) which parties have decided to abide by.
Ever since India introduced the Arbitration and Conciliation Act, 1996 giving due regard to the principles laid down in the Model Law, its aim was to promote domestic as well as international arbitration. In the year, the Act saw some incredible changes which showed India’s promising effort to promote arbitration. With the 2020 Ordinance, it again reflects that the comments and criticisms existing on the legislation were paid heed by the government and it is willing to accept the present demands and subsequently adapt the legislation. Albeit, India still has miles to go as there are many other issues to be resolved that arise out of prior amendments or lack of legislative framework. To encourage institutional arbitration in India, the government has already come up with the idea of establishment of Arbitration Council of India but it is yet to be implemented. India’s journey towards arbitration needs a booster which can be seen in future amendments and clarifications made to the Act.
On the other hand, Singapore has primarily acted as a leader when it comes to arbitrative practices in Asia. There have been a series of amendments to the IAA from time to time (in 2001, 2002, 2005, 2009, 2012, 2016, and 2019) reflecting of the needs of the users and keeping up with the innovative interests of the parties in settling disputes via arbitration. The latest amendment is welcomed as it adds to the number of initiatives taken by Singapore government in ensuring that the legislative requirement does not fall short of the competitive arbitration practices. This regularity in approach to provide cutting edge response to latest requirements in arbitration makes it one of the one of the premier seats of international arbitration and thus, it remains a commercially attractive destination for users.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.