Introduction
Every time a new amendment to an Act is introduced, it brings with itself a fresh set of regulations. The Arbitration & Conciliation (Amendment) Act, 2019 (“the 2019 Amendment”) is one astounding example of the same. What makes this act stand out is the fact that it adds on to the already existing provisions and gives new additions such as the setting up of the New Delhi International Arbitration Centre, and the promulgation of the Arbitration Council of India. With the act in force, several erstwhile concepts have been modified, replaced or even struck down; some new concepts have been drawn in with much emphasis on the peculiarity of present ADR scenario of our country.
In India, the industry-specific disputes as adjudicated by The Singapore International Arbitration Centre (“SIAC”), accounted for 33.20% of Trade disputes, 12.30% of Shipping/Maritime disputes, 11.90% of Construction disputes, 15.70% of Commercial disputes, 17.90% of Corporate disputes, 0.4% of Insurance disputes and 8.50% other disputes as arose.
The arbitration clause in contracts governing the Oil and Gas sectors and the Insurance and Construction sectors are on a rise with as much as 95% of these contracts including an arbitration clause. At the SIAC, India and China have been the highest contributors for cases in 2017 and the annual report states that the aggregate sum in dispute for all new case filings amounted to $4.07 billion (Rs. 2878.7 Crore) The important point to note here is that Indians, to get the disputes adjudicated, go all the way to the east, adding on to their economy and not to their own nations’, because of better infrastructure, ease of understanding of laws and other benefits, while India on the other hand, is a beginner when it comes to the conundrums of getting Arbitration as a source of dispute resolution.
The recent amendment to the Arbitration and Conciliation Act, 1996 (“the Arbitration Act”) is a step taken to bring a change in this scenario and the amendment is seeking to create an institution in India which can be sought for adjudication of disputes, in a cost-effective and a better manner, without looking towards the east. But this amendment has glaring loopholes which will make it a clear case of two steps forward and one step back. The most important addition being the setting up of an Arbitration Council which will be the guardian of Arbitration in India.
The Arbitration Council of India
The 2019 Amendment, introduces a Part I-A to the Arbitration Act[1], which is the ‘Arbitration Council of India’ and which gives the power to the Central Government to establish the Arbitration Council of India (“the Council”) by an official notification in the Gazette of India.
The principle of “ease of doing business” has been seeing a lot of light. So, to transform India into a “global hub for arbitration”, a speedy and effective system of Alternative Dispute Resolution was required. Hence, the government, taking the stance of an arbitration-friendly government, notified the Arbitration Council, which shall have the duty to take all such measures as may be necessary to promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanism and for that purpose to frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration.
The introduction of arbitral institutions is through the introduction of the Council which, in terms of the provisions of the 2019 Amendment, has been seen as the premier arbitration regulator which will perform numerous functions for promoting, reforming and advancing the practice of arbitration in the country. In furtherance of this goal, the Council has been given powers inter-alia for grading arbitral institutions, recognizing professional institutes providing accreditation of arbitrators, maintaining a repository of arbitral awards made in India.
This move is inspired by the aim to promote arbitration as a viable alternative dispute resolution mechanism in India along with placing India as an arbitration friendly jurisdiction on the globe. The central body envisaged under the Amendment Act consists of representatives from not only the legal field but also representatives from the industrial and commercial sectors in an attempt to develop arbitration in a business-friendly manner. The body corporate structure of the Council envisaged under the Amendment Act is entrusted with wide responsibilities. Among others, these include framing policies for governing the grading of arbitral institutions, developing a mechanism for accreditation of the creditors and providing norms for conduct of arbitrations. As such, in furtherance of the objective of promoting arbitration in the country, the Council is aimed as a guiding and standard setting body in the field of arbitration. This move is likely to ensure a dedicated and experts-guided regulation of arbitration and reduce the scope of judicial intervention in terms of setting standards/guidelines for the conduct of arbitration while adequately accounting for the interests and concerns of India Inc. with respect to arbitration.
The composition of the Council shall be, a retired Supreme Court or High Court judge, appointed by the Central Government in consultation with the Chief Justice of India, as its Chairperson; An eminent arbitration practitioner nominated as the Central Government Member; An eminent academician having research and teaching experience in the field of arbitration, appointed by the Central Government in consultation with the Chairperson, as the Chairperson-Member; Secretary to the Central Government in the Department of Legal Affairs, Ministry of Law and Justice and; Secretary to the Central Government in the Department of Expenditure, Ministry of Finance – both as ex officio members; one representative of a recognised body of commerce and industry, chosen on rotational basis by the Central Government, as a part-time member, and a Chief Executive Officer-Member-Secretary, ex officio. The Council is hence entrusted with the grading of arbitral institutions on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations.[2]
Criticisms
The implementation of these objectives seems difficult as the provisions governing the council are vague. A glaring problem of the council is its perceived impartiality or its lack thereof. The members are nominated or appointed the Centre or are ex officio members by way of distinctive features in their position in ministries. The Council is certain to study the grading of arbitration institutions and accreditation of arbitrators. The government’s involvement in several arbitrations would make the independence and impartiality of arbitrators, who will be subject to accreditation by the council, questionable. Further, foreign legal experts’ exclusion from the list of those qualified to be an arbitrator will exclude many distinguished attorneys who in any other case appear as arbitrators for dispute resolution in India. Their non-inclusion could discourage overseas parties wishing for their arbitration to be seated in India, who would want an arbitrator from a neutral country to be on their panel.
Another major drawback of this scheme is that it limits party autonomy in international arbitration through governmental and court interference. The regulation of the institutionalization of arbitration in India and the policy framing for grading of arbitral institutions will be done by the Council. The truth remains that the court’s choice in designating an arbitral institution could be limited by way of the options presented to it via the Council. Consequently, the choice of a foreign party appearing before the Supreme Court and looking for appointment of an arbitrator will be limited to institutions which have a Council accreditation and to such arbitrators who may be on the panel of such arbitral institutions. The court can be equally handicapped in designating an ungraded institution – which has global popularity for its facilities and quality of offerings and which just wants to establish its local workplace in India, without going via the administrative hurdles of being graded by the Council.
Conclusion
The 2019 Amendment, albeit aimed at institutionalizing the arbitration scene in India, leaves the discretion in the hands of courts and the executive to decide who gets to be a part of this reform. Another problem associated with this governmental control over the institutionalization process is the nepotism, red-tapism, lack of objectivity and lack of transparency in the grading process. A foreign party often prefers to stay away from an arbitration regime with a significant degree of court or governmental interference. However, it is nonetheless a welcome move by the government to acknowledge that institutional arbitration is the only way ahead to attract foreign parties to include India as the seat in their arbitration agreements.
– Utkarsh Trivedi is a 3rd-year law student at the National Law University of Odisha
[1] Section 43A-43M, The Arbitration and Conciliation Amendment Act, 1996.
[2] Section 43C, The Arbitration and Conciliation Amendment Act, 1996.
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