Libertatem Magazine

Arbitration Bill, 2018 faces critics backlash

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The Arbitration and Conciliation (Amendment) Bill, 2018 has received severe criticisms since it failed to address several key questions that arose when Arbitration & Conciliation (Amendment) Act, 2015 was introduced “to make arbitration a more preferred mode of settlement of disputes.”

Inception of changes in A & C Act, 1996

The idea of achieving a certain degree of confidence amongst international business institutions and to ameliorate any kinds of negativity associated with the realm of Arbitration in India a proposal was made to amend the provisions of Arbitration & Conciliation Act, 1996 to “review the institutionalization of arbitration mechanism in India and revamp the traditional ad hoc arbitration culture, thus pushing India to become an international arbitration hub.” Justice (Retd.) B. N. Srikrishna headed the High Level Committee set up to review the process of Arbitration in India and the changes required in order to modify and modernise certain areas of the 1996 Act.

Srikrishna Committee proposed a number of measures aimed at revamping and modernising the age-old Arbitration process prevalent in our country. The Committee advised the formation of an independent Arbitration Council that would act as a guiding force and also help in “grading of arbitral institutions present in the country. It was hoped that grading these institutions and designation of cases on the same basis would encourage these institutions to advance in terms of their infrastructure, facilities and services.” The grading system was proposed to “not [be] made mandatory for recognition and enforcement of award made by these institutions” in order to ensure that it does not undermine the autonomy of the arbitrary parties and in future may not be responsible in breeding corruption and questioning the Council’s legitimacy.

The Committee also recommended the setting up of a specialist Arbitration Bar and Specialist Bench that could help in reducing the costs, delay and do away with ambiguity in judgments. It has the potential to revolutionise the Indian Arbitration system much in the way it has worked in countries like Switzerland, France, and UK where specialist arbitrators dedicate themselves only to arbitration proceedings. This would have led the way in improving the quality of the proceedings and could also be the impetus needed in providing training in arbitration law to students and interested lawyers. Furthermore, a specialist bench could be considered for resolution of disputes in case of international arbitration cases and provide more credibility to the whole process.

The creation of a standing committee that can liaison with the government in reviewing the arbitration strategies of our country and to advise on the lacunae existing in the system was also proposed by Srikrishna Committee. It was suggested that the standing committee could take up reviewing and researching on the arbitration practices around the globe and could guide in setting up a better, much more effective and efficient arbitration system for our country. The committee suggested that to ensure speedy proceedings and reduce backlogs the Supreme Court and High courts should ensure appointing arbitrators from accredited arbitral institutions under Section 11 of the Act. In case of urgency in matters of arbitration proceedings the Committee proposed for setting up of emergency arbitrator even before the tribunal is formed and suggested amendments to Section 2 of the Act.

Srikrishna Committee recommendations not reflected in the Bill

The Arbitration and Conciliation (Amendment) Bill, 2018 that has already received approval in the Lok Sabha without any hitches and is awaiting approval from the Rajya Sabha in the ensuing winter session failed to adhere and address key issues that have been highlighted by the Srikrishna Committee in their report. Many concerns raised by the Committee and solutions proposed were deliberately ignored in the current Bill which has the experts perplexed and hence it has drawn severe flak from various concerned parties. Some practitioners have been actively resisting the passing of this Bill, including by starting a petition as they claim that the current Bill will only serve to undermine the progress and “undo the many years of development the arbitration landscape in India has witnessed.”

The troubling aspect of the formation of the Arbitration Council of India (ACI) was that it is being created as a regulatory body and not as an autonomous authority serving as a grading agency. The Chairperson of the Council is said to be selected by the government with consultation with Chief Justice of India but as government is a primary litigant in so many cases one cannot expect unbiased opinions from such a Council composed of government nominees. According to some reports, “power and the functions to be performed by the body are drastically different to what was proposed” in the Srikrishna Committee report. The Committee recommended specialist Arbitration Bar and Specialist Bench as well as the formation of a standing committee has all been ignored and no such measures are likely to be seen in the future in the arbitration arena of our country.

Further revisions done in the 2015 amendment Bill seems to be with the time limit. While the 2015 Bill proposed that all cases to be disposed of within a 12 month period which could only be extended to 18 months maximum was judged to be impossible as there could be many instances of interventions such as one or both parties approaching courts with grievances regarding the proceedings, filing of counterclaims and parties may amend their pleadings at a later date. So, the 2018 Billseeks to change the start date of this time limit to the date on which pleadings are complete, and exempt international commercial arbitration from the ambit of this time limit.” A problematic concept as there is no clear delimitation when a certain pleading is completed with overlapping counterclaims and different pleas sometimes impinging upon the whole process.

The Bill introduces a wide ranging confidentiality statute (Section 42A) except “where the disclosure is necessary for the implementation and enforcement of the award.” This does not bode well as it failed to mention the outcome in situations where arbitration proceedings are taken to courts under Section 9, 11, 14, 27 and 34 of the Act where a party may wish for anti-arbitration injunctions or chose to bring a third party in the process. The Bill also includes certain stipulations in arbitrators selection barring foreign legal professionals from acting “as arbitrator in an India seated arbitration, [and proposing] arbitrator shall be conversant with the Constitution of India” which only serves as a roadblock in parties ability to choose their own “arbitrator, is sacrosanct subject to manifest issues such as conflict of interest.”

Opposition to the Bill: impact and opinions

Independent experts and legal practitioners are all of the same opinion that the 2018 Bill in its current form is a disaster as it failed to achieve the objective of the amendments which is “to promote institutional arbitration by creating an independent, statutory body to govern the entire process of Arbitration in India right from the stage of appointment of arbitrator” as mentioned in the foreword of the current Bill. It is alleged that the Bill in its present form is “likely to do more harm than good to India’s reputation as a seat of arbitration. It will particularly deter foreign players from seating their arbitrations in India. It is therefore imperative that the Bill be sent to a Standing Committee for a thorough review.”

It is doubtful that the government would initiate further introspection with regard to the controversial provisions of the Bill as it had already passed the approval of the Lok Sabha in its current form. The approval from the Rajya Sabha is also a certainty considering bills passed by the Lok Sabha hardly met any opposition in Rajya Sabha and then the President’s assent is a done deal as well in most cases. The government facing severe criticisms over a lot of matters, embroiled in legal disputes and the opposition pressure in the coming election year has hardly had enough motivation to review and assess the shortcomings in this Bill. The recommendations of Srikrishna Committee on reforming institutional arbitration in India is indeed laudable but much of their efforts remained unfruitful.Nevertheless, the whole process of overhauling our archaic arbitration system and to try to reform it with a view to develop more systematic and modern approaches to arbitration in the country is a commendable challenge which the Bill has fulfilled in some of its finest points like insertion of Section 42Bwhich aims to protect the Arbitrator or arbitral tribunal from being dragged into unnecessary legal proceedings by the parties for any action or omission done in good faith.” The hope, thus, remains that in this case there will be an exception and Rajya Sabha will take into account the objections raised and propose for the recommended changes in consonance with Srikrishna Committee recommendations.

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