Proposed Amendments to the Indian Arbitration and Conciliation Act 1996

The arbitration regime in India is primarily governed by the Arbitration and Conciliation Act, 1996 (“Act”). On 10 August 2018, the lower house of India’s bi-cameral parliament (Lok Sabha) passed the Arbitration and Conciliation (Amendment) Bill, 2018[1] (“Bill”). The Bill now has to, inter alia, be passed by the upper house (Rajya Sabha) before it becomes law and amends the Act. However, substantial changes to the Bill are not expected at this stage. In its current form, the Bill seeks to introduce key changes which may impact international arbitrations seated in India, which we discuss below.  

Key changes: international arbitrations (seated in India)

Appointment of arbitrators: designation of arbitral institutions

Currently, Section 11(2) of the Act provides that the Supreme Court shall appoint arbitrators in cases where inter alia, a party fails to appoint an arbitrator or two appointed arbitrators fail to agree on the third arbitrator (in relation to a panel of three arbitrators). However, the Bill seeks to introduce a new section 11(3A) by which the Supreme Court has the power to designate arbitral institutions who in turn shall appoint the arbitrators. In addition, currently, when the court has to appoint an arbitrator, it can only examine the existence of the arbitration agreement (section 11(6A)) and the right to appeal against an order appointing an arbitrator is restricted (section 11(7)). The Bill seeks to remove these restrictions which creates potential for satellite litigation and delays around the appointment of arbitrators.              

Arbitration Council of India: independence issues and excluding foreign practitioners

The Bill (section 10, inserting new part IA) seeks to establish the Arbitration Council of India (“Council”) for inter alia, encouraging arbitration and framing policy for the establishment, operation and maintenance of uniform professional standards with respect to arbitration. However, all the members of the Council will be appointees of the government of India. This may raise issues of independence and conflict of interest since the government is substantially involved in litigation (and increasingly arbitration) across India. The Bill also envisages (i) entrusting the Council with the responsibility for recognising professional institutes providing arbitrator accreditation; and (ii) providing for arbitrators’ qualifications and experience. Notably, the purpose of this accreditation has not been clarified and the prescribed qualifications have the effect of excluding foreign qualified lawyers as arbitrators for any Indian seated arbitrations.

Reduced timeframe: statements of claim and defence

Under the existing Act, the statement of claim and defence are to be served in the timeframe agreed by the parties or as determined by the tribunal. However, the Bill inserts a provision to the effect that the statement and defence are to be completed within a period of six months from the appointment of the arbitrator(s). This provision seems to be well intended in terms of improving the efficiency of the arbitral process. However, it is unclear whether it applies to counter-claims or responses to counter-claims and any relevant amendments. In complex international claims, this time frame could be very inadequate. 

Confidentiality: conflicting provisions

The Bill proposes new provisions on confidentiality. They require the arbitrator, arbitral institution and parties to the arbitration agreement to maintain confidentiality of all arbitral proceedings except where the disclosure of the award is necessary for its implementation and enforcement (and circumstances for disclosure in such scenarios appear to be limited). The Bill also proposes the creation of a depository of all arbitral awards made in India. It is unclear how these provisions will operate together.  

Applicability of the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”)

The Act was amended by the 2015 Amendment, after which controversy erupted before the Indian courts as to whether the 2015 Amendment applied to existing arbitral and court proceedings.  Now, the Bill clarifies that the 2015 Act shall apply only to arbitral proceedings commenced after the date of the 2015 Act alone and not to court proceedings.

Conclusion

The Bill seems theoretically well-intentioned and introduces several provisions in an attempt to improve the arbitration regime in India. However, in practice, certain proposals seem unclear and could lead to more satellite litigation around the enforcement of arbitral awards and in relation to challenges and appeals to orders appointing arbitrators. Until satellite litigation and the time taken to enforce an award are reduced, India may continue to face difficulties in reaching its aim of increasing its prominence as an arbitration centre in Asia. The Bill seeks to improve the procedural efficacy of arbitrations. However, steps must also be taken to increase the efficiency of the challenge and enforcement procedures in India.

 

[1]    Bill No. 100 of 2018.

Akshay Sewlikar would like to thank Ali Amerjee for his assistance in the preparation of this article.