Economy – Industrial Sector – Arbitration in India: Article Analysis
- Arbitration in India is gaining importance given the over-stressed judicial system with the huge pendency of cases. With a lot of commercial disputes, it’s necessary to have a proper arbitration mechanism in place for faster resolution of issues.
- Arbitration in India is governed by the law of arbitration in India which states that the for adopting the arbitration as a dispute resolution mechanism an agreement to that effect should be signed between the disputing parties. The parties can either opt for a separate arbitration agreement to be signed between them or include an arbitration clause in the main contract between the parties.
- Arbitration is the act of dispute settlement through an arbitrator, i.e. a third party, who is not involved in the dispute. It is an alternative dispute settlement mechanism, aiming at settlement outside the court.
Importance of Arbitration
- It minimizes the court intervention.
- It brings down the costs of dispute settlement.
- It fixes timelines for expeditious disposal.
- It ensures the neutrality of arbitrator and enforcement of awards.
- Having an arbitration law encourages foreign investments to a country. It projects the country as an investor friendly one having a sound legal framework and ease of doing business.
- Having an arbitration law facilitate effective conduct of international and domestic arbitrations raised under various agreements
Mechanism of arbitration in India
- The Act is based on the 1985 UNCITRAL (The United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976.
- In 2015, Arbitration and Conciliation (Amendment) Act was enacted to improve the arbitration in India.
- The Lok Sabha on August 10, 2018 passed the Arbitration and Conciliation Bill (Amendment) 2018, which provides for time-bound settlement of disputes as well as accountability of the arbitrator.
About Arbitration and Conciliation Bill (Amendment) 2018:
Setting up of Arbitration Council of India
- The bill seeks to establish an independent body called the Arbitration Council of India (ACI) for the promotion of arbitration, mediation, conciliation and other alternative dispute redressal mechanisms.
The council’s functions would include
- Framing policies for grading arbitral institutions and accrediting arbitrators.
- Making policies for the establishment, operation and maintenance of uniform professional standards for all alternate dispute redressal matters.
- Maintaining a depository of arbitral awards (judgments) made in India and abroad.
Composition of the ACI
- The council will consist of a Chairperson who is either a Judge of the Supreme Court or Chief Justice or Judge of any High Court or any eminent person with expert knowledge in conduct of arbitration.
- The other members will include an eminent arbitration practitioner, an academician with experience in arbitration and government appointees.
Relaxation of time limits
- Under the 1996 Act, arbitral tribunals are required to make their award within a period of 12 months for all arbitration proceedings. However, the amendment bill has proposed to remove this time restriction for international commercial arbitrations.
Completion of written submissions
- Currently, there is no time limit to file written submissions before an arbitral tribunal. The amendment Bill requires that the written claim and the defence to the claim in an arbitration proceeding, should be completed within six months of the appointment of the arbitrators.
Confidentiality of proceedings
- The bill provides that all details of arbitration proceedings will be kept confidential except for the details of the arbitral award in certain circumstances. Disclosure of the arbitral award will only be made where it is necessary for implementing or enforcing the award.
Applicability of Arbitration and Conciliation Act, 2015
- The bill clarifies that the 2015 Act shall only apply to arbitral proceedings that started on or after October 23, 2015.
Appointment of arbitrators
- As per the provisions of the Arbitration and Conciliation Act, 1996, parties are free to appoint arbitrators.
- However, in case of disagreement on an appointment, the parties could request the Supreme Court or the concerned High Court or any person or institution designated by such Court, to appoint an arbitrator.
- Under the Bill, the Supreme Court and High Courts may now designate arbitral institutions, which parties can approach for the appointment of arbitrators.
- For international commercial arbitration, appointments will be made by the institution designated by the Supreme Court and for domestic arbitration, appointments will be made by the institution designated by the concerned High Court.
- In case there are no arbitral institutions available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators to perform the functions of the arbitral institutions.
Types of arbitration in India
- Ad-hoc Arbitration can be defined as a procedure of arbitration where a tribunal will conduct arbitration between the parties, following the rules which have been agreed by the parties beforehand or by following the rules which have been laid down by the tribunal, in case the parties do not have any agreement between them.
- Institutional arbitration refers to the administration of arbitration by an institution in accordance with its rules of procedure. The institution provides appointment of arbitrators, case management services including oversight of the arbitral process, venues for holding hearings, etc.
- Presently there are over 35 arbitral institutions in India, which are domestic, international arbitral institutions, arbitration facilities by PSUs, trade and merchant associations, and city-specific chambers of commerce and industry. Many have their own rules and some follow the arbitration rules of the UNCITRAL.
- Indian institutions that administer arbitrations have an increasing popularity but insufficient workload. Many arbitrations involving Indian parties are administered by the international arbitral institutions such as the Court of Arbitration of the International Chamber of Commerce (“ICC Court”), the Singapore International Arbitration Centre (“SIAC”) and the London Court of International Arbitration (“LCIA”).
Challenges faced by institutional arbitration in India
- In addition to the above-mentioned negatives of Institutional arbitration, following are the challenges of the institutional arbitration in India.
- Issues relating to administration and management of arbitral institutions.
- Perceptions regarding arbitrators and expertise issues relating to resources and government support, lack of initial capital, poor and inadequate infrastructure, lack of properly trained administrative staff, lack of qualified arbitrators, etc.
- Issues in developing India as an international arbitration seat.
To address the challenges and shortcoming of the Institutional arbitration, a High-Level Committee (HLC) to Review the Institutionalisation of Arbitration Mechanism in India under Mr Justice B N Srikrishna was constituted in 2016. The committee submitted its report on 3 August 2017. Its recommendations include:
- Justice B.N. Srikrishna committee was constituted to prepare a road map to make India a hub of international arbitration.
- It recommended the creation of the post of an ‘international law adviser’ (ILA) to advise the government on international legal disputes, particularly BIT disputes.
- Creation of an inter-ministerial committee (IMC), with officials from the Ministries of Finance, External Affairs and Law for better managing BIT disputes was also called for.
- It also mentioned the possibility of establishing a BIT appellate mechanism and a multilateral investment court.
- It recommended hiring of external lawyers and appointing counsels having expertise in BITs to boost the government’s legal expertise.
- It called for the creation of designated fund to fight BIT disputes.
What are the steps by Government to make India an Arbitration Hub?
- The government of India is committed for speedy resolution of commercial disputes, and to make India an international hub of arbitration and a centre of robust ADR (alternative dispute resolution).
- This mechanism will cater to international and domestic arbitration, at par with the global standards available.
- The ADR mechanism has evolved over the years and has resulted in yielding better and time-effective outcomes as compared to the conventional option of filing the dispute before the courts.
- ADR has also become a favourable tool for the resolution of disputes without further burdening the already overburdened judicial system of our country, and has emerged as an aid to improve the financial health of the country.
- India has constituted a 10-member High Level Committee under the chairmanship of a retired judge of the Supreme Court for making reforms in dispute resolution mechanism.
- The suggested reforms will lessen the burden of the judiciary, and provide a fillip to the development agenda of the government.
Source: Financial Express, PIB and PRS