Arbitration and Conciliation (Amendment) Bill, 2018: A missed opportunity?

Government's efforts to improve India's rank on the index of ease of doing business and ease of dispute resolution are aimed at improving the business climate of the country. The Arbitration and Conciliation (Amendment) Act, 2015 ("Amendment Act") had amended certain provisions of the Arbitration and Conciliation Act, 1996 and it was a positive step in that direction.

In order to further boost the confidence of domestic and foreign businesses in India and for making India a preferred seat of arbitration, a committee chaired by retired Supreme Court judge B. N. Srikrishna submitted its report suggesting measures for improving arbitration in India by strengthening institutional arbitration and removing certain ambiguities in the Amendment Act.

Taking into account the recommendations of Justice Srikrishna's committee report, the cabinet on March 7, 2018 has approved the Arbitration and Conciliation (Amendment) Bill, 2018 which is yet to be introduced in Parliament.

Salient features of the Bill

Establishment of Arbitration Council of India (ACI): An independent body corporate called ACI to be established for grading and accreditation of arbitral institutions, to promote and encourage arbitration and other alternate dispute resolution mechanisms. ACI would facilitate speedy appointment of arbitrators through designated arbitral institutions by the Supreme Court of India or the High Court, without having any requirement to approach the court in this regard.

Confidentiality of all arbitral proceedings except the award: A new section to be inserted in the Amendment Act, imposing a duty of confidentiality on arbitrators and arbitral institutions in respect of the arbitral proceedings in India, save for the award itself. The Bill will also protect an Arbitrator from legal proceedings for any action or omission done in good faith in the course of arbitration proceedings.

Speedy appointment of arbitrators: In case parties require assistance in appointing an arbitrator, they will be allowed to approach arbitral institutions designated for this purpose by the Supreme Court of India or the High Court, without approaching the court in this regard. This is a significant step towards strengthening institutional arbitration and reducing the heavy burden on courts thereby disposing of the applications in an expeditious manner. In the case of Sun Pharmaceutical Industries Ltd vs Falma Organics Ltd, the Supreme Court appointed Mumbai Centre for International Arbitration to arbitrate disputes in an international dispute between the parties.

Clarity on application of Amendment Act: Uncertainty persisted about whether the Amendment Act applied to existing arbitrations and arbitration related court proceedings that commenced before the Amendment Act came into effect. Various High Courts had given conflicting judgments too in this regard. The new Bill proposes that unless parties agree otherwise, the Amendment Act shall not apply to arbitral proceedings that have commenced before the Amendment Act and to court proceedings arising out of or in relation to such arbitral proceedings, irrespective of whether such court proceedings began prior to or after the commencement of the Amendment Act. It shall apply only to arbitral proceedings commenced on or after the commencement of the Amendment Act and to court proceedings arising out of or in relation to such arbitral proceedings.

Recently on March 15, 2018, the Supreme Court of India in the matter of Board of Control for Cricket in India v Kochi Cricket Pvt. Ltd and others has held that Amendment Act will apply to applications which are pending in various courts for challenging the award and were filed before the commencement of the Amendment Act. For these reasons, the court has directed that the copy of the judgment to be sent to the Ministry of Law and Justice and the learned Attorney General for India so as to incorporate the views taken by the court in the Bill. This judgement would have a major impact on arbitration cases pending in courts.

No Time Limit for International Arbitration: The time limit of twelve (12) months for issue of an award by the arbitral tribunal contained in the Amendment Act was considered to be very deterring. It is proposed under the Bill that the timeline of twelve (12) months will begin from the completion of pleadings by the party in domestic arbitrations. Certain problems modelled in case of international arbitrations, where courts had to interfere for non-completion of proceedings within the time provided. The new Bill proposes to exclude international arbitration from the scope of the strict timeline.

Why has the Government aimed to amend the Bill?

To make the arbitration process in India more user friendly, cost effective and ensuring speedy disposal, the Amendment Act was brought into force. However, seeing the recent judicial precedents worldwide and in order to boost institutional arbitration vis-a-vis ad hoc arbitration and to remove some practical difficulties in applicability of the Amendment Act, the Government of India has proposed the said Bill.

Role of the ACI in making India a hub for International Arbitration

The ACI will maintain an electronic depository of all arbitral awards. The ACI shall also evolve policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. It will also promote, encourage arbitration, conciliation, mediation and other Alternative Dispute Resolution mechanisms.

The Chairperson of the ACI will be a retired judge of the Supreme Court or the Chief Justice, retired Judge of any High Court or any eminent person. An eminent academician shall also be a member, in addition to other government nominees.

Another important aspect under the Bill is that the appointment of arbitrator would be done by an arbitral institutions designated by the Supreme Court of India (in case of international commercial arbitrations) or the High Court (in case of domestic arbitrations).

How does the Bill address current challenges in the system?

In our view, the Bill may pose few practical problems during implementations. We observe that scope of the ACI's powers are not defined under the Bill. Further, there could be a possibility of delays in completing the arbitration, since the Bill proposes that a twelve (12) months period would now begin from completion of the pleadings and not from date of reference of the arbitration.

Certain recommendations of the Report which have not been captured in the Bill are creation of a specialist arbitration benches before various courts, recommendations on introducing the International Bar Association Rules on taking of evidence which would have brought uniformity in rules for recording evidence in arbitration as per the international standards. The report had also had suggested that time limits to challenge an award under the Amendment Act be reduced with a mandatory deposit of seventy five percent of the sum awarded in court.

No doubt the changes proposed by the Bill seem to be another progressive step in the direction of developing India as a hub for arbitration. The proposals made in the Bill are definitely expected to strengthen the framework for institutional arbitration in our country by establishing the ACI. This Bill once again shows seriousness of the government to plug in gaps in the existing Amendment Act which governs the arbitration.

We hope that the proposed changes in the Amendment Act by way of the present Bill and the other recommendations of the report are also considered by the Government soon which will make India an international hub of arbitration catering to international and domestic arbitrations, at par with international standards available.

Devesh Juvekar  is Partner and Dikshat Mehra is Senior Associate with law firm Rajani Associates