The Arbitration landscape in India is on the brink of transformation with the new draft bill of the Arbitration Act proposing to introduce significant amendments. By introducing strict timelines, establishing a robust framework for institutional arbitration and limiting judicial intervention through the Appellate Arbitral Tribunal alongside expansion of the Arbitration Council of India’s powers and responsibilities, these proposed amendments seek to enhance speed, efficiency and efficacy of dispute resolution. However the question persists– will these changes improve the arbitral landscape or introduce new challenges?
This article critically examines the proposed amendments to the Arbitration and Conciliation Act, 1996 (hereinafter ‘Act’). By analyzing these proposed changes, it assesses their potential impact on the efficiency and effectiveness of dispute resolution in India delineating whether they represent a progressive transformation or pose challenges to the arbitration landscape.
Introduction of Emergency Arbitrators
The incorporation of Emergency Arbitration has been long overdue in the Indian Arbitral landscape. The Hon’ble Supreme Court in Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Ors1. had concluded that an Emergency Arbitral Order in case of domestic seated arbitrations would be recognized & enforceable U/S 17 of the Act while Emergency Arbitral Orders rendered in foreign seated arbitrations being unenforceable U/S 17 of the Act would require parties to approach the court under Section 9 or file a fresh suit under the Civil Procedure Code, 1908. The new Section 9A provides for appointment of Emergency Arbitrators who can grant interim relief prior to the constitution of the arbitral tribunal. Section 9A seeks to recognize emergency interim orders issued in both domestic and foreign-seated arbitrations. Emergency Arbitrators can not only provide timely remedy but also reduce reliance on court intervention for urgent matters. Conversely, emergency arbitrators may increase the overall cost & time taken in dispute resolution, causing unwarranted delay in the absence of clear guidelines. Moreover, their effectiveness will depend on the clarity of rules and procedures governing their appointment and functioning, as laid down by the Arbitration Council of India.
With the Arbitral Tribunal being empowered to confirm, vacate or modify an Emergency Arbitrator’s Orders, questions regarding when and on what grounds the Tribunal’s interference would be warranted, remain unanswered. Additionally, the proposed amendments are silent on the recognition of interim orders passed in a foreign-seated arbitration and the grounds, if any, on the basis of which courts can refuse to enforce emergency orders passed in a foreign-seated arbitration. There is also no provision for appeal against emergency interim orders, although the arbitral tribunal is empowered to confirm, modify or vacate them.
Introduction of Appellate Arbitral Tribunal (AAT)
Section 34A of the Act proposes constitution of an Appellate Arbitral Tribunal (AAT) to handle applications regarding setting aside arbitral awards. However, the term Appellate Arbitral Tribunal has not been defined nor has any provision detailing its constitution been incorporated. The draft proposal only empowers arbitral institutions to appoint the AAT, presumably at the request of the parties. The AAT is set to entertain only matters that are not already pending before the Court. Given the primary role of the AAT is to deal with set-aside petitions U/S 34 of the Act, the rationale behind naming it an appellate authority remains unclear. The AAT intends to limit judicial intervention and reduce burden on courts, but making recourse to AAT optional for parties might undermine the very intent of its conceptualization. Moreover, if ambiguities regarding its constitution and functioning are not addressed, AATs could end up further delaying the adjudication of set-aside applications while also increasing costs associated with arbitration.
Role of Arbitration Council of India
The role of the Arbitration Council of India (ACI) U/S 43D of the Act is proposed to be expanded to – recognize arbitration institutions, set criteria for their recognition, determine fees payable to arbitrators, lay down model arbitration agreement, establish protocols for virtual arbitration hearings and provide training to arbitrators, frame rules and norms for conduct of proceedings, among others. The aim is to standardize procedures and streamline arbitration proceedings. However, reliance on ACI to regulate various aspects of arbitration, right from determining the conduct of arbitrators to fee determination, raises concerns regarding its capability to effectively fulfill its mandate, given that the ACI has not been constituted since its conceptualization in the 2019 amendment to the Act.
Setting of Timelines
The draft bill seeks to prioritize timely resolution of disputes by imposing stringent time limits for referring parties to arbitration, raising objections regarding the arbitral tribunal’s jurisdiction, for making arbitral awards, and preferring appeals, amongst other things.
The draft bill proposes a 60-day time limit for the court to dispose applications U/S 8 of the Act seeking court intervention in referring disputes to arbitration, to reduce procedural delays and ensure speedy dispute resolution. However, the proposed amendment fails to account for lapse of the time limit so prescribed and do not provide for any extension thereof, overlooking the reality of courts burdened with case pendency.
As per the proposed amendment, applications raising objections under Sections 16(2) or 16(3) of the Act challenging an arbitral tribunal’s jurisdiction are to be considered a preliminary issue and decided within 30 days from the date of their filing, unless the tribunal decides to determine the same at a later stage upon duly recording reasons in writing. Though the prescribed time limit seeks to promote an aggressive approach towards dispute resolution, concerns remain: Can the tribunal justify indefinite extensions based on reasons cited by it? What constitutes valid grounds for such extensions, what doesn’t? Allowing repeated or unwarranted extensions risks turning this exception into a norm, ultimately undermining the purpose of the stipulated timeline. If extensions are granted for inappropriate reasons or without stringent scrutiny, the time limit may lose its efficacy, rendering the entire provision ineffective and counterproductive.
To minimize cases of prolonged uncertainty in the finality of arbitration proceedings and prevent courts from being used as mechanisms to endlessly delay dispute resolution, the proposed amendments also prescribe that appeals U/S 37 of the Act be filed within 60-days of the date of receipt of the order/award being challenged. While the primary objective of prescribing time limits in arbitration proceedings is to enhance procedural efficiency and expedite dispute resolution, implementing distinct timelines rather than a unified, overarching timeline for concluding the proceedings could inadvertently undermine this goal. Having fragmented time limits risks causing inordinate delays, potentially prolonging the overall duration of the process. Conversely, a comprehensive timeline—establishing a definitive deadline for the conclusion of proceedings from their inception — would be more effective in achieving expedience.
Farewell to Conciliation, Settlement through Mediation
The amendment proposes removing Conciliation as an alternative dispute resolution mechanism altogether to promote arbitration as the primary method of dispute resolution, specifically, institutional arbitration. Further, the amendment formally recognizes mediation as a means of dispute resolution U/S 30 of the Act, omitting conciliation. If parties during the arbitration proceedings, through mutual consent come to a resolution, the same is set to be recorded as a mediated settlement agreement, enforceable in accordance with the provisions of Mediation Act, 2023. The recognition of mediation as a settlement mechanism can facilitate amicable resolution of disputes effectively.
Conclusion
The proposed amendments to the Arbitration Act reflect a bold vision for streamlining and modernizing India’s arbitration framework. However, their success hinges on addressing the gaps in implementation and resolving ambiguities that could inadvertently hinder the very objectives they aim to achieve. The balance between novelty and practicality will ultimately determine whether these amendments serve as a game-changer or a misstep in the evolution of India’s dispute resolution landscape.
References
- 2021 SCC OnLine SC 557.
