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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Global | Publication | April 2015
Far-reaching changes to India’s Arbitration and Conciliation Act are expected to be passed by the Indian government in the next few months. This crucial development demonstrates the government’s commitment to drastically reducing the timescales for resolving commercial disputes in India, making India a more attractive place to do business.
Amendments to the Arbitration and Conciliation Act 1996 (the Act) were first approved by the Union Cabinet in December 2014, in the form of an ordinance. However, the ordinance was withdrawn before it received presidential assent and the amendments were put before Parliament. Although Parliament was due to pass the amendments during a budget session in late February 2015, turmoil relating to the controversial Land Acquisition Bill has pushed developments back to a later session.
The amendments are based on the recommendations of the Law Commission of India in its Report No. 246. The recommendations seek to speed up and improve the arbitration process. The exact amendments to the Act have not been revealed to the public, so an in-depth analysis must wait. However, Sadananda Gowda, the Minister of Law & Justice, has revealed that “… most of the recommendations of the Law Commission have been accepted. While some have been incorporated in the law itself, some of the recommendations will be used while framing rules.”
The Law Commission first proposed extensive amendments to the Act on August 6, 2014. It sought to address the significant problems that “plague the present regime of arbitration in India”. This was not the first attempt to modernise Indian arbitration law. Support for change has grown in recent years, and the proposed amendments to the Act come at a time when both the government and the judiciary are seeing the benefits of a pro-arbitration stance in India.
The Act – which was based on the UNCITRAL Model Law and designed to cover both international and domestic arbitration – has long been considered ineffective because it contains various ambiguities which have led to problems with the timing and cost of arbitrations and the enforcement of arbitral awards. The Law Commission spells out the issues in the following terms:
The Act has now been in force for almost two decades, and in this period of time, although arbitration has fast emerged as a frequently chosen alternative to litigation, it has come to be afflicted with various problems including those of high costs and delays, making it no better than either the earlier regime which it was intended to replace; or to litigation, to which it intends to provide an alternative.
The changes put forward seek to deal with these issues. We can look to the contents of the Law Commission report to shed some light on what we can expect to see in the amended Act. The Report’s key proposals focus on the following
The proposed changes go some way to achieving the Law Commission’s desire for fairness, speed and economy in resolution of disputes and fit within the government’s aim – repeatedly highlighted by Prime Minister Narendra Modi – to attract maximum foreign investment by improving the ‘ease of doing business’ in India. The Report reads very much like a bill, leaving little to be done by the government; therefore we expect and hope to see an amended Act that is nearly identical to the Report.
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