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Liberalisation step 1? Gov’t to allow foreign lawyers to arbitrate in India by amending Act, perhaps via ordinance

The arbitrators are coming...
The arbitrators are coming...

Commerce ministry joint secretary Sudhanshu Pandey told a US-Indian delegation today that the government would seek to pass an amendment to the Arbitration and Conciliation Act this session that would allow foreign lawyers to come to India to act for their clients in arbitrations.

A delegation from the Indian National Bar Association (INBA), consisting of secretary general Kaviraj Singh (managing partner of Trustman & Co), secretary law firms section Sumes Dewan (founder Lex Favios) and member Rajat Malhotra (Khaitan & Co Delhi partner) met with Pandey today, confirmed Singh and Dewan by telephone.

The US India Business Council (USIBC) director and legal counsel Amy Hariani also attended the meeting, they said.

“It’s a very major step… They are trying that it is passed within this session in the parliament, otherwise they will issue an ordinance,” said Singh. He noted that under the reform plans foreign lawyers would be allowed to fly to India and represent their clients on arbitrations in India – something which had been prohibited under the Advocates Act and several judgments until now.

Singh said that earlier in the week he had also met with law minister DV Sadananda Gowda, who had also confirmed that the cabinet had approved the draft bill.

On 16 July PTI reported that the cabinet had deferred the decision to amend the arbitration act  in order to encourage foreign companies to invest in India by fixing timelines for settling commercial disputes and capping arbitration fees. A senior minister reportedly said that the issue would be taken up the following week by the cabinet.

We have reached out to Pandey and Gowda for comment by email. Dewan and Hariani could not be reached for comment.

Dewan commented: “I am pleased that the government is allowing first step in arbitration proceedings here, that would be a first step to allowing foreign law firms to do business here.”

Dewan said that this was “more of a first step” towards liberalisation but that Pandey did not specify a timeline for the rest of the liberalisation process. Beginning with arbitration was a less controversial than allowing foreign lawyers to set up law firms here, because the International Chamber of Commerce (ICC) and others were conducting arbitrations in India, which makes “the country a hub for international arbitration”, Dewan said.

Many previous governments had hoped to make India a regional hub for arbitration, but Singapore and Hong Kong have stolen a march on India in those stakes due to a largely unfavourable regulatory and judicial landscape in India.

The Society of Indian Law Firms (Silf) had proposed an up-to seven-year timeline for the entry of foreign law firms into India, after certain restrictions on lawyers were lifted domestically in areas such as advertising and partnership structures.

SILF president Lalit Bhasin told Legally India last week that discussions around the entry of foreign law firms were now a “very obsolete subject”. “Now we have already taken a position that we are in favour of a phased, sequential entry of foreign firms over the next five to seven years,” he said.

Bhasin told Legally India today when asked about the arbitration act amendment: “There is nothing new. The arbitration amendment, it was actually sent to the president (a month ago) to be passed by way of an ordinance. The president had refused that, because president had said what is the urgency. So obviously now they have to bring it in the form of a bill.”

Bhasin said that this had happened last month when parliament was not in session. “People are expecting this ordinance because some amendments are required in arbitration law, based on the law commissions recommendations, that’s what parliament will do now.”

When asked about whether the draft bill would also allow foreign lawyers to practise in Indian arbitrations, Bhasin declined to comment.

The 16 July PTI reported stated:

According to the amendments, the arbitrator deciding on a commercial dispute will have to clear the case within a nine month time-frame. The arbitrator will be free to seek an extension from the high court. But in case of further delays, the high court will be free to debar the arbitrator from taking up fresh cases for a certain period. This is a crucial amendment to the arbitration law as many foreign companies are said to be hesitant to do business in India because of long-drawn litigations.

Another amendment puts a cap on fee of arbitrator. The arbitrator will also have to spell out if there is a conflict of interest in the case he or she is taking up. Sources in the government said some former judges, who are into arbitration, were opposed to the strict timeline and the clause putting a cap on fee.

The government wanted to promulgate an ordinance on the arbitration law. It was cleared by the cabinet on29 December 2014 but it was never sent to the President for his approval.

A year ago, two Supreme Court judges had called for foreign lawyers to be allowed to arbitrate in India.

Photo by Gbloquendox00black

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