With an eye to make India an arbitration hub, the union cabinet on Wednesday approved a number of amendments to the Arbitration and Conciliation Bill, 2015 to make the resolution of commercial disputes less time-consuming with an option of fast-tracking the process.
However, the draft bill or the Press Information Bureau (PIB) press release did not mention an amendment or ordinance to explicitly allow foreign lawyers to practice in Indian arbitrations, which last month commerce ministry Sudhanshu Pandey had told a US-Indian delegation was on the cards.
The cabinet approved the a series of amendments based on the recommendations of the Law Commission and inputs from other stakeholders to ensure that every arbitration was completed within 12 months, a period extendable by another six months.
Thereafter any further extension would be granted by the court only on being satisfied to existence of sufficient grounds. However, such an extension would be accompanied with reduction in the fee of the arbitrator if it comes to the conclusion that the delay was attributable to the acts of the arbitrator.
There is also an incentive provision where an arbitrator may get an additional fee if an award is made within six months. But this would be subject to parties to the arbitration agreeing to extend monetary appreciation.
The amendments approved also provides for fast track arbitration - wherein the arbitration award will be given in six months’ time.
In a proposed amendment to ensure neutrality, there would an amendment to section 12 of the bill, mandating the arbitrator to “disclose in writing about existence of any relationship or interest which may give rise to justifiable doubts about his neutrality”. Any person in the position of conflict of interest would be ineligible to be appointed as an arbitrator.
Another significant proposed amendment to section 36 says that a challenge to the arbitration award before the court would not halt its implementation unless the court put its execution on hold. Coupled with this, another proposed amendment mandates that court will dispose it off within one year.
In yet another significant proposed amendment, section 11 says that an application for appointment of an arbitrator shall be disposed of by the high court or Supreme Court as expeditiously as possible and should be decided within 60 days.
Section 31A is proposed to be added to govern the “cost regime” of the arbitration that would be applicable to both to arbitrators as well as related litigation in court with the intention of avoiding “frivolous and meritless” litigation.
The amendment to section 17 would empower the arbitral tribunal to grant all kinds of interim measures which the courts are empowered to grant and would be enforceable in the same manner as court orders.
The Press Information Bureau (PIB) press release summarised the “salient features” of the bill as:
(i) In order to ensure neutrality of arbitrators, it is proposed to amend Section 12 to the effect that when a person is approached in connection with possible appointment of arbitrator, he shall disclose in writing about existence of any relationship or interest of any kind, which is likely to give rise to justifiable doubts. Further, if a person is having specified relationship, he shall be ineligible to be appointed as an arbitrator.
(ii) Insertion of a new provision that the Arbitral Tribunal shall make its award within a period of 12 months. Parties may extend such period up to six months. Thereafter, it can only be extended by the court, on sufficient cause. The court while extending the period may also order reduction of fees of arbitrator(s) not exceeding five percent for each month of delay, if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal. If the award is made within a period of six months, arbitrator may get additional fees if the parties may agree.
(iii) It is proposed to insert a provision for fast track procedure for conducting arbitration. Parties to the dispute may agree that their dispute be resolved through fast track procedure. Award in such cases shall be given in six months period.
(iv) Amendment of Section 34 relating to grounds for challenge of an arbitral award, to restrict the term ‘Public Policy of India” (as a ground for challenging the award) by explaining that only where making of award was induced or affected by fraud or corruption, or it is in contravention with the fundamental policy of Indian Law or is in conflict with the most basic notions of morality or justice, the award shall be treated as against the Public Policy of India.
(v) A new provision to provide that application to challenge the award is to be disposed of by the court within one year.
(vi) Amendment to Section 36 to the effect that mere filing of an application for challenging the award would not automatically stay execution of the award. Award can only be stayed where the court passed any specific order on an application filed by the party.
(vii) A new sub-section in Section 11 to be added to the effect that an application for appointment of an Arbitrator shall be disposed of by the High Court or Supreme Court as expeditiously as possible and an endeavour should be made to dispose of the matter within 60 days.
(viii) A new Section 31A is to be added for providing comprehensive provisions for costs regime. It is applicable both to arbitrators as well as related litigation in Court. It will avoid frivolous and meritless litigation/arbitration.
(ix) Section 17 is to be amended for empowering the Arbitral tribunal to grant all kinds of interim measures which the court is empowered to grant, under Section 9 and such order shall be ‘enforceable in the same manner as if it is an order of Court.
Apart from above, amendments in Sections 2(1)(e) , 2(1)(f)(iii), 7(4)(b), 8(1) and (2), 9, 11, 14(1), 23, 24, 25, 28(3), 31(7)(b), 34 (2A) 37, 48, 56 and in Section 57 are also proposed for making the arbitration process more effective.
Background:
The Government of India has under its consideration proposals for making Arbitration a preferred mode for settlement of commercial disputes by making it more user-friendly and cost effective. This will lead to expeditious disposal of cases. The Govt. of India is committed to improve its legal framework relating to Arbitration. The Law Commission of India in its 246th Report has recommended various amendments in the Arbitration and Conciliation Act, 1996, so that India may become a hub of International Commercial Arbitration. The Law Commission has also submitted a Supplementary to Report No. 246 on