The Arbitration and Conciliation (Amendment) Bill, 2018 of India

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The Arbitration and Conciliation Act, 1996, of India (the ‘Act’) was amended by the Arbitration and Conciliation (Amendment) Act, 2015 (the ‘Amended Act’) in order to make arbitration process user friendly, cost effective and ensure speedy disposal and neutrality of arbitrators. But as the Amended Act’saw the light of the day, it faced several practical difficulties. In order to rectify these problems, the Government of India has appointed a High Level Committee under the Chairmanship of Justice B. H. Srikrishna, Retired Judge, Supreme Court of India, to submit a Report on suggested reforms in the Amended Act. Based on the recommendations of this Committee, the Arbitration and Conciliation (Amendment) Bill, 2018 is now ready to be tabled before Indian parliament. The major reforms proposed are briefed below:

Establishment of an independent body: the Arbitration Council of India

As per the Bill, a new independent body known as the ‘Arbitration Council of India’ (the Council) will be set up that will “grade” institutions involved in alternative dispute resolution on commercial issues and come up with regulations for effective arbitration. This Council will be headed by a retired SC judge or a retired chief justice of a HC or an eminent person with experience in administration of arbitration. A new part (Part IA) has been proposed under this Bill who will deal with provisions related to the Council.

Grading

The Council will grade the arbitral institutions on the basis of infrastructure, quality and calibre of arbitrators, performance and compliance of  time  limits  for  disposal  of  domestic  or  international  commercial  arbitrations.

Frame Policy and Guidelines

The Council is obliged to take all necessary measures to promote and encourage Alternate Dispute Resolution (ADR). In doing so, the Council can frame policy and guidelines for the establishment, operation, and maintenance of uniform professional standards in respect of all matters relating to arbitration.

Time limit for arbitral award

One of the practical difficulties with the Amended Act was the short time limit of 12 months for concluding the whole of arbitration proceedings which is inclusive of award making, which triggers from the date when an arbitrator enters into reference. In practical scenario, 12 months is a short time considering that much of the time is consumed by parties in competing pleading post arbitrators entering reference. The arbitrator is then, left with almost no or very less time for other stages of arbitration like recording evidence, etc. This results in extension applications in High Courts. The Bill proposes that the arbitration would deem to be triggered from the date when pleadings are complete excluding International Arbitration from this restricted timeline. The proposed amendment is given below:

6.In section 29A of the principal Act,—

(a) for sub-section (1), the following sub-section shall be substituted, namely:—

“(1) The award in matters other than international commercial arbitrationshall be made within a period of twelve months from the date of completion ofpleadings under sub-section (4) of section 23.”;

Confidentiality

A new section 42A is proposed to be inserted to provide that the arbitrator and the arbitral institutions shall keep confidentiality of all arbitral proceedings except award. Further, a new section 42B protects an Arbitrator from suit or other legal proceedings for any action or omission done in good faith in the course of arbitration proceedings. The sections are reproduced below:

42A. Notwithstanding anything contained in any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall keep confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purpose of implementation and enforcement of award.

42B. No suit or other legal proceedings shall lie against the arbitrator for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.”.

But it is not clear whether the confidentiality remains even when the proceedings have progressed to the Court under Section 34 of the Act in case the Court requires the parties to produce the arbitration related material in the proceedings before the Court.

Confusion regarding retrospective effect of the Amended Act

A new section 87 is proposed to be inserted, to clarify that Section 26 of the Amended Act, is applicable only to the arbitral proceedings which commenced on or after 23rd October 2015 and to such court proceedings which originate from such arbitral proceedings. The proposed Section is given below:

“87. Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 shall—

(a) not apply to—

(i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;

(ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;

(b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015

and to court proceedings arising out of or in relation to such arbitral proceedings.”.

Section 26 of the Amended Act is as follows:

26. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.

Comment

It is interesting to note that recently, the Supreme Court of India, in  Board of Cricket in India v. Kochi Cricket Pvt. Ltd. And Ors. [SLP (C) Nos. 19545-19546 of 2016] dealt with the interpretation and applicability of Section 26 of the Amended Act in relation to: (a) arbitration proceedings; and / or (b) legal proceedings in connection with such arbitration proceedings. The court relied upon the plain meaning of the section and scheme of the Act to hold that the Amendment Act prospectively applied to (i) arbitral proceedings that have commenced on or after commencement of Amendment Act & (ii) court proceedings which have begun after commencement of the Amendment Act.

In this case, the Supreme Court of India has expressed its concern over the proposed Section 87 in following lines:

The immediate effect of the proposed Section 87 would be to put all the important amendments made by the Amendment Act on a back-burner, such as the important amendments made to Sections 28 and 34 in particular, which, as has been stated by the Statement of Objects and Reasons, “…have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act”, and will now not be applicable to Section 34 petitions filed after 23rd October, 2015, but will be applicable to Section 34 petitions filed in cases where arbitration proceedings have themselves commenced only after 23rd October, 2015.

Another important question that requires attention is appointment of Arbitrators. If the Council will appoint arbitrators then Section 11 of the Act which deals with the appointment of arbitrators will become ineffective.

 

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