The recent Ordinance promulgated by the President has ushered in significant amendments to the Arbitration and Conciliation Act, of 1966, aiming to modernize and enhance India’s dispute resolution mechanism. The amendments primarily focus on addressing key issues related to the arbitration process, making it more efficient, time-bound, and aligned with global standards. The Ordinance introduces changes such as the establishment of an Arbitration Council of India, which will play a pivotal role in the accreditation of arbitral institutions and arbitrators. It also introduces provisions for the creation of an electronic case management system, promoting transparency and expediting the arbitration process. Additionally, the Ordinance seeks to streamline the process of appointing arbitrators, ensuring quicker resolution of disputes. By bringing these changes, the government aims to make arbitration a preferred mode of dispute resolution in India, attracting international businesses and investors.
The impact of these amendments on India’s dispute-resolution mechanism is expected to be profound. The reforms are designed to make arbitration more robust, reducing the backlog of cases and instilling confidence in both domestic and foreign stakeholders. The establishment of the Arbitration Council of India is a significant step towards standardizing and regulating arbitration practices, which could elevate India’s standing in the global arbitration community. The incorporation of technology through the electronic case management system is poised to make the arbitration process more transparent, accountable, and time-effective. Overall, these changes are anticipated to contribute significantly to improving India’s dispute resolution mechanism, making it more competitive, efficient, and attractive for resolving commercial disputes.
Tag: Dispute Redressal Mechanisms and Institutions.
Decoding the Question:
- In the Introduction, try to define arbitration and alternative dispute resolution.
- In Body, highlight the major changes in the Arbitration and Conciliation Act, of 1966.
- Conclude with its significance in promoting India as a hub of institutional arbitration.
Answer:
Arbitration is a method for settling disputes privately, but its decisions are enforceable by law. An arbitrator is a private extraordinary judge between the parties, chosen by mutual consent to sort out controversies between them. Arbitration Law in India is primarily contained in the Act of 1996. To make arbitration a preferred mode of settlement of commercial disputes and making India a hub of international commercial arbitration some major amendments were introduced in the year 2015 and 2019.
Major changes brought in the Arbitration and Conciliation Act, of 1966 through the recent Ordinance:
| Clauses | Original text | Amended text |
| Relevant court for domestic and international arbitration matters: | The relevant court for all arbitration matters would be a principal civil court or a high court with original jurisdiction. | In the case of international arbitration, the relevant court would only be the high court having original ordinary jurisdiction. |
| Applicability of certain provisions to international commercial arbitration: | Provisions related to interim orders by a court, order of the arbitral tribunal, appealable orders, etc. only applied to matters where the place of arbitration was India. | These provisions would also apply to International commercial arbitrations even if the place of arbitration is outside India. This would apply unless the parties agreed otherwise. |
| Powers of Court to refer a party to arbitration if agreement exists: | Under the Act, if any matter that is brought before a court is the subject of an arbitration agreement, parties will be referred to arbitration. | The power of referral is to be exercised by a court even if there is a previous court judgment to the contrary. The Court must refer the parties to arbitration unless it thinks that a valid arbitration agreement does not exist. |
| Interim order by a Court: | The Act states that a party to arbitration may apply to a court for interim relief before the arbitration is complete. | The Ordinance amends this provision to specify that if the Court passes such an interim order before the commencement of arbitral proceedings, the proceedings must commence within 90 days from the making of the order, or within a time specified by the Court. Further, the Court must not accept such an application, unless it thinks that the arbitral tribunal will not be able to provide a similar remedy. |
| Public Policy as grounds for challenging an award: | The Act permits the court to set aside an arbitral award if it is against the public policy of India. This includes awards affected by (i) fraud or corruption, and (ii) those in violation of confidentiality and admissibility of evidence provisions in the Act. | The Ordinance modifies the ambit of violation of public policy to only include those awards that are: (i) affected by fraud or corruption, (ii) in contravention of the fundamental policy of Indian Law, or (iii) conflict with the notions of morality or justice. |
| Appointment of arbitrators: | The Act permits parties to appoint arbitrators. If they are unable to appoint arbitrators within 30 days, the matter is referred to the court to make such appointments. | The Ordinance states that, at this stage, the Court must confine itself to the examination of the existence of a valid arbitration agreement. The ordinance introduces a provision that requires an arbitral tribunal to make its award within 12 months. This may be extended by six months. |
Arbitration and Conciliation Act, 1966 and Improvement in India’s Dispute Resolution Mechanism:
- The amendment will ensure that all stakeholder parties get an opportunity to seek an unconditional stay on enforcement of arbitral awards where the arbitration agreement or contract is “induced by fraud or corruption”.
- The Ordinance deleted the 8th Schedule of the Arbitration and Conciliation Act, 1996 which contained the necessary qualifications for accreditation of arbitrators.
- The 8th Schedule of the Act faced criticism that the conditions prescribed in the law came in the way of India getting the benefit of having foreign arbitrators.
- The amendment will ensure that all the stakeholder parties get an opportunity to seek an unconditional stay of enforcement of arbitral awards where the underlying arbitration agreement or contract or making of the arbitral award is induced by fraud or corruption.
The Government of India’s focus with the amendment is clearly on promoting India as a hub of institutional arbitration for both domestic and international arbitrations. Institutional arbitration in India has been beset by several factors hindering its progress, and the causal nexus has resulted in Indian parties favoring international institutional arbitrations for the resolution of their dispute, an issue that the 2019 Bill seeks to remedy.
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