New Amendments in Arbitration and Conciliation (Amendment) Act

Introduction:

The world has witnessed a substantial upsurge in the international economic trade of nations for a few decades. The arbitration may be called a by-product of this duel since disputes almost always accompany commerce, competition, trading, benefits etc. Rapidly globalizing the economy and thereby companies, competing for expansion and profits, caused a hasty load of arbitration cases for already burdened courts of India.

Such continuous load led to notoriously slow adjudication of commercial disputes which severely raised the need for an alternative dispute resolution mechanism. It became crucial for companies doing business in India as well as companies of India.

Arbitration and History:

Arbitration is essentially the instrument of resolving disputes between two entities without the need of the court of law but by the intervention of a third-party (or person, called Arbitrator). Its prerequisites are that the parties in dispute must submit their confidence in the arbitrator and acceptance to abide by his decision. The arbitration is an inexpensive, expeditious, safer and thus contented way in such anguish.

The Arbitration and Conciliation Act, 1996:

The Arbitration and Conciliation Act, 1996, was ratified to establish an effective and speedy dispute resolution framework to inspire confidence in the dispute resolution system. This encourages assurance amongst international investors and thereby contributes to the national economy.

The Act is an inclusive piece of legislation crafted on the lines of the United Nations Commission on International Trade Law (UNCITRAL) Model Law. It consists of two major parts –

a) conducting arbitration in India and enforcing the awards, and

b) enforcement of foreign awards (to which the New York Convention or the Geneva Convention applies).

The concept of institutional arbitration is slowly spreading and coming into practice in India; perhaps arbitration is mostly practiced on ad hoc basis as of now. The advantages of institutional arbitration are expected to be appreciated eventually.

The Arbitration and Conciliation (Amendment) Act, 2019:

The Arbitration and Conciliation (Amendment) Act, 2019 (“The Amendment Act”) amends the Indian Arbitration and Conciliation Act, 1996, which came into force from August 2019 while aiming at putting India on the global map in arbitration proceedings and making India an international arbitration hub. The Amendment Act contains provisions for domestic and international arbitration and defines laws for conciliation proceedings.

The Amendment Act: Key Highlights

Composition of the Arbitration Institution: Arbitration Council of India:

The Amendment Act provided for establishing Arbitration Council of India (ACI) - an independent body - to promote arbitration, conciliation and other alternatives of dispute redressal. The chairperson of the ACI is to be appointed in consultation with Chief Justice of India. The ACI would be responsible for framing and governing policies for grading arbitral institutions, accrediting arbitrators, policies related to the establishment, operation and maintaining Uniform Professional Standards (UPS) for alternate dispute redressal matters.

It would also be responsible for sustaining a depository of arbitral awards made in India and/or abroad. According to Section 43B of the amendment, the ACI will have succession and a common seal, with defined power to acquire, hold and dispose of property, both movable and immovable.

Qualifications and Experience of Arbitrators:

The amendment act specifies with great details about a person qualifying to be an arbitrator. The schedule also clarifies general norms applicable to arbitrators.

Arbitral Institutions and Arbitrators: Appointment of Arbitrators under Section 11:

As per the Amendment Act, the Supreme Court and High Courts may designate arbitral institutions. For domestic arbitration, the concerned High Court will appoint the institution. An application for the appointment of a domestic arbitrator is required to be disposed of within 30 days, and international arbitration matters should be disposed of within 12 months.

Timelines under the Amendment Act:

There have been significant amendments in Section 23, especially in the areas of completion of pleadings, Arbitral award and Extension of time with respect to enforcing timelines of actions. The Amendment Act has amended Section 29A of the Arbitration Act. Under the amended section, all parties must file their claim and defense statement within 6 months from the date of receipt of notice of appointment of arbitrators. Upon completion of pleadings, arbitration is required to be completed within 12 months therefrom, extendable by another 6 months by mutual consent of the parties.

If arbitration is not completed within 18 months from the date of completion of pleadings the court's permission is required for the arbitration to continue. Additionally, while any application for extension of timeline is pending before the court, the mandate of the arbitrators has specifically been allowed to continue

Amendment to Section 34 and 45:

Critical amendment to Section 34 has been made to clarify that the parties must rely on the record before the arbitral tribunal alone at the time of challenge of an award. Likewise, under Part II of Section 45 has been amended by replacing the words "unless it finds" with "unless it prima facie finds" to bring better opportunities of justice.

Confidentiality of the Arbitration Proceedings:

The amendment act draws specific light on the confidentiality aspect of the proceedings. Every party to the proceedings, such as the arbitrator, arbitral institution and parties to the arbitration agreement must maintain the confidentiality of all arbitral proceedings except the award, which is necessary to be disclosed for implementation and enforcement of the same.

Conclusion:

We see that the globalization of the Indian economy and its economic reforms as consequences demanded the existence of effective dispute resolution mechanisms to rapidly settle commercial disputes. The Arbitration and Conciliation Act, 1996, was devised to achieve this. An examination of Indian arbitration divulges that arbitration as an institution is still evolving. The Arbitration and Conciliation (Amendment) Act, 2019 may be called as making more misses than hits in the process; perhaps, it indeed is a significant step in the right direction to become a global arbitration hub.

By: Dushyant Tiwari
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on 07 February 2020
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