Changes in the Indian arbitration landscape: Another step in the right direction

The arbitration landscape in India has undergone extensive reform in recent times. The Arbitration and Conciliation (Amendment) Act 2015 (Amendment Act) made progress, and we commented on this in our January 2016 publication. Now, three years later, the Union Cabinet has cleared the Arbitration and Conciliation Act (Amendment) Bill 2018 (Amendment Bill) proposing further amendment to arbitration law in India. The Amendment Bill is about to be scrutinized by parliament. Its aims match those of the earlier Amendment Act, namely to ensure that arbitration becomes a speedy, efficacious and economical method of resolving disputes. Additionally, the 2018 Supreme Court decision in BCCI v Kochi Cricket Pvt Ltd (BCCI) and the New Delhi International Arbitration Centre Bill 2018 (NDIAC Bill) pave the way for a more arbitration-friendly India..

The positives:

The amendments in the Amendment Bill predominantly stem from the recommendations of the Report of the High Level Committee to Review the Institutionalisation of Arbitral Mechanism in India (also known as the Srikrishna Committee Report). They foster a more pro-arbitration environment in India. The amendments call for the creation of an independent Arbitration Council of India (ACI) to grade and accredit arbitral institutions, and promote arbitration and other ADR mechanisms. The amendments would enable ACI recognised arbitral institutions to appoint arbitrators, thereby avoiding the current requirement that arbitral appointments be made by the Indian courts. Other amendments comprise the introduction of a default confidentiality provision and a provision of immunity to arbitrators for their actions or omissions in good faith during the arbitral proceedings.

Certain provisions in the Amendment Bill are responsive to criticisms of the Amendment Act. The twelve month timeline in the Amendment Act for making an arbitral award created controversy, because of the perceived difficulty of working within this period in many international commercial arbitrations. The Amendment Bill aims to rectify this by excluding international commercial arbitration from this requirement. It also changes the commencement of the timeline from the date of the ‘constitution of the tribunal’ to the date of ‘completion of pleadings’.

The Amendment Bill introduces a new provision to the effect that the Amendment Act will only operate if the arbitration was commenced after 23 October 2015, whether in the context of the arbitration or in the context of any litigation related to the arbitration. That is inconsistent with the recent BCCI judgment in which the Supreme Court held that, while the Amendment Act only applies to arbitrations if they are commenced after 23 October 2015, it will apply to court proceedings commenced after the date on which the Amendment Act took effect, even if they arise out of or are in relation to arbitral proceedings commenced prior to the Amendment Act taking effect. The court said that this was to counter the ‘sheer unfairness’ of applying the unamended provisions and because the provisions in the Amendment Bill would ‘put all the important changes made by the Amendment Act on a back-burner’. Only time will tell whether parliament votes in favour of the Amendment Bill’s prospective approach or whether it decides that this approach should be reconsidered in the light of the judgment of the Supreme Court.

Steps have also been taken to develop an international arbitration centre in India. The NDIAC Bill was put before the lower house of India’s bicameral parliament by the central government in January 2018. This proposed establishing the New Delhi International Arbitration Centre (NDIAC) to encourage investors in India to resolve their disputes in India instead of the currently preferred arbitration centres in London, Singapore and Hong Kong. The NDIAC Bill aims to replace the outdated approach of the International Centre for Alternative Dispute Resolution (ICADR) by providing greater autonomy for administrative and financial decision making. While it does not set out a procedural framework for settlement of disputes, a key weakness of the ICADR, it purports to establish a chamber of arbitration with a permanent panel of arbitrators and an arbitration academy to develop arbitration in India through training and research – a further step in the right direction.

The negatives:

The Amendment Bill, like the Amendment Act, is also unable to completely eliminate several issues prevailing in Indian arbitration. To an extent, it creates further areas of contention. For example, ‘completion of pleadings’ is not a set point in time. Pleadings can be amended and filed at many different stages, which makes the phrase a possible cause of satellite disputes. Also, the ACI and its powers are intended to encourage arbitration in India. Yet, the press release indicating that the Chairperson of the ACI could be a judge or government nominee has generated concern amongst some commentators. Where the Indian government is a party to arbitral proceedings, there may be problems relating to conflicts and allegations of bias.

Ultimately, like any other new statutory instrument or amendment, the Amendment Bill will be subjected to critical review. This does not necessarily mean that it has not achieved its aims. Whatever its deficiencies, the Amendment Bill is to be welcomed as another step in the right direction, towards a more supportive approach to arbitration in India.

Authors
Sherina Petit, Partner and Head of India Practice, Norton Rose Fulbright
Nakul Dewan, Barrister, 20 Essex Street and Advocate, High Court, Delhi
Nosherwan Vakil, Advocate, High Court, Mumbai
Khawaja Akbar, Trainee Solicitor, Norton Rose Fulbright