The Indian legislature has in the last few years been at pains to promote India as a hub for international arbitration. The first step in that direction was the promulgation of the Arbitration and Conciliation (Amendment) Act 2015 (2015 Amendment), which was aimed at reducing the interference of courts in arbitration proceedings.
To promote the same objective, the Arbitration and Conciliation (Amendment) Act 2019 (2019 Amendment) was notified on 9 August 2019 but is yet to come into force. The primary purpose of the 2019 Amendment is to promote institutional arbitration rather than the strong inclination in India in favour of ad hoc arbitration or arbitral institutions located abroad. The 2019 Amendment was based on the recommendations of a high-level committee constituted by the government to review the institutionalisation of arbitration in India. The committee suggested several reforms, however, the 2019 Amendment falls short in various respects.
The committee recommended establishment of an arbitration council with representatives of all stakeholders to grade (but not regulate) arbitral institutions in India. This was supposed to be an autonomous body keeping in mind the principle of party autonomy, which is the cornerstone of arbitration. Although a council has been set up by the 2019 Amendment, the government has retained control, in that the council is to be comprised of a chairperson and other members who may be eminent arbitration practitioners, government appointees or academics to be appointed by the central government. This is contrary to the recommendations. Further, the council is not only responsible for grading arbitral institutions and conducting training, but is also empowered to frame regulations and policies. The committee recommended that the council also act as a depository of arbitral awards made in India, with access given only to courts for awards under challenge. While the council has been mandated to maintain such a depository, its purpose has not been spelt out. Despite the committee laying emphasis on the need for better infrastructure for arbitration, this aspect has been completely ignored in the 2019 Amendment.
The 2019 Amendment also attempts to give statutory recognition to the position that a challenge to an arbitral award must be on narrow grounds and only on the basis of the record before the tribunal. While the scope of review must necessarily be narrow, such a provision may open the floodgates for parties to compel courts into going into evidence and entail a review of the merits, which is impermissible.
Another area of concern is that under the 2019 Amendment for a legal professional to be appointed as arbitrator, they must be recognised as an advocate under the Advocates Act 1961 and therefore must be a citizen of India. Not only is this requirement contrary to international practice but it is also divergent from the express provisions of the Act and will stifle the growth and popularity of India as an arbitration hub.
In the case of Board of Control for Cricket in India v Kochi Cricket Pvt Ltd & ors , the Supreme Court of India has observed that ‘the government [would] be well advised in keeping the aforesaid Statement of Objects and Reasons in the forefront’. The benefit of the amended provisions, therefore, ought to have been made available to parties even in relation to proceedings that may have commenced prior to the amendments. However, a new section 87 has been inserted by the 2019 Amendment, which stipulates that the 2015 Amendment will not apply to proceedings commenced before the coming into force of the 2015 Amendment (including court proceedings initiated post the 2015 amendment in relation to pre-2015 amendment arbitrations). As a result, for arbitrations commencing in different time periods, different law is applicable and benefits such as the restricted scope of public policy, as well as the compressed timelines available under the 2019 Amendment, are not available to all.
That is not to say that the 2019 Amendment is meaningless in its entirety – a number of amendments are an improvement on the prevailing situation.
The unamended statute prescribed a time limit of 12 months within which tribunals were required to deliver their final award. This time could be extended by the consent of parties by a further six months; thereafter time could be extended only by the national courts. While this was a welcome step, it led to an increase in the burden of cases before the national courts. The 2019 Amendment has sought to address this issue by increasing the existing prescribed time period to 18 months while prescribing (i) a period of six months for completion of pleadings and (ii) a further period of 12 months from when pleadings are completed for the award to be given. Another welcome change is that the provision applies to only domestic arbitrations and no timeframe for international commercial arbitration is prescribed.
The 2019 Amendment has also introduced measures to preserve the integrity of arbitration proceedings. It expressly provides that arbitration proceedings are confidential except where disclosure of the award is necessary for the purpose of implementation and enforcement. Further, arbitral tribunals have now been given immunity akin to that enjoyed by courts and no legal proceedings against arbitrators for any action made in good faith or in exercise of their duties are permitted.
Appointment of arbitrators will now be undertaken by an institution appointed by the Supreme Court (for international commercial arbitrations) and the High Court (for domestic arbitrations). This amendment is a positive step towards reducing court interference in arbitrations.
Suffice to say that while the 2019 Amendment is well intentioned, it has not, in certain respects, been completely thought through. To quote Steve Jobs, co-founder of Apple: ‘Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.’ We can only hope that the legislature revisits the 2019 Amendment sooner rather than later.