Arbitration and Conciliation (amendment) act, 2021:A Roadblock or the Road Ahead?

 Arbitration is one of the alternatives for dispute resolution rather than going to court. The neutral adjudicator settles this process and his decision or award is final and binding upon the parties. Arbitration awards have limited rights of review and appeal. These alternative dispute resolutions are friendly in nature. It is time and cost-efficient, flexible, neutral, confidential, and autonomous. 

Governance of arbitration procedures in India was initiated with the passage of the Arbitration Act, 1889. The Arbitration Act 1940 consolidated various laws that dealt with procedural aspects of different kinds of Alternate Dispute Resolution methods.

Governance of arbitration procedures in India was initiated with the passage of the Arbitration Act, 1889. The Arbitration Act 1940 consolidated various laws that dealt with procedural aspects of different kinds of Alternate Dispute Resolution methods. Arbitration (Protocol and Convention) Act, 1937 was part of the consolidation. Thereinafter, significant amendments were made to the principal Act in 1996, 2015 and 2019, which were in line with the developments in international arbitration law. On March 13, 2021, Parliament passed the Arbitration and Conciliation (Amendment) Act, 2021, to amend specific provisions of the principal Act, Arbitration and Conciliation Act 1996.

This article analyzes the amendments made to the principal Act. It also considers various stakeholders’ opinions and the observations made by various Indian Courts on the relevant provisions of the Act before their amendment. The Arbitration and Conciliation Act, 2021 was made with the good intentions of the legislators to make the Indian arbitration center a friendly regime. This aim has been successful to a large extent. 

ARBITRATION AND CONCILIATION (AMENDMENT) ACT: SIMPLIFYING AMENDMENTS

Though they seem inadequate, yet it is important to note that these amendments are made as a measure to control the increasing corrupt practices in achieving arbitral awards. The Amendment Act introduced three amendments to the principal Act.

I. Section 2 of the Amendment Act made an amendment to Section 36 of the principal Act. Section 36 of the Principal Act is related to the execution of arbitral awards.

Section 2(c) of the principal Act defines an arbitral award to include an interim award. Section 36(3) authorizes the Courts to stay the execution of an arbitral award and give in writing the reasons for the same. The proviso to this subsection provides the procedure to be followed by the Court in cases where an arbitral award has been granted in payment of money.

The Amendment Act introduces a clause to this proviso, whereby the Court is authorized stay the arbitral award from being executed when there is prima facie evidence proving that the award itself, or the contract on which such award is based, was influenced by fraud or corruption. The Amendment Act says that this provision will be enforced retrospectively from October 23, 2015.

II. The second amendment made by the Amendment Act, 2021 through Section 3 is in Section 43J of the principal Act, through which the previous provision is substituted by a provision that states:

“The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.”

Section 43J was included to the principal Act by way of the 2019 Amendment Act. The previous provision stated that the qualifications of the arbitrators would be as per those specified in Schedule VIII of the Act.

It also provided some general norms for the arbitrator to accreditation. These norms are as follows:

  1. An arbitrator should have a fair general reputation and integrity and should apply objectives to settle the dispute.
  2. There should not be any conflict of interest that is the arbitrator must be impartial and neutral to both the parties in the arbitration and should avoid entering into any financial business or other relationship that leads to impartiality or might create a situation of partiality or bias amongst the parties. 
  3. There should be any potential conflict by an arbitrator. 
  4. The arbitrator shall have the capacity to suggest, recommend or state the reason and enforce an arbitral award in any dispute, which comes before him for adjudication. 

III. The final amendment discarded Schedule VIII of the principal Act. The ‘Statement of Objects and Reasons’ of the Amendment Act provides that this deletion was made to facilitate eminent arbitrators to participate in Indian arbitration proceedings and ensuring that India is promoted as a ‘hub of international commercial arbitration’.


DRAWBACKS:

India already lags behind when it comes to the enforcement of international contracts and agreements. The Bills can further hamper the spirit of Make in India campaign and deteriorate rankings in Ease of Dong business index.

India aims to become a hub of domestic and international arbitration. Through the implementation of these legislatives changes, resolution of commercial disputes could take longer duration now onwards.

 CONCLUSION

Just like all other legislations, the Amendment Act is not without its faults. One of which is that the amendment to Section 36 adds weight to the already overburdened Indian Courts to rightly adjudge whether or not an arbitral award prima facie consists of elements of fraud.

Discarding the Schedule VIII of the principal Act widened the scope for the appointment of foreign arbitrators and arbitrators across various fields. But it may also lead to appointing incompetent arbitrators. And the same is unfavorable for the parties, Council and Indian Courts, as they will have to verify the arbitrator’s competency again. In which case, the Council and the parties when appointing arbitrators under the amended Act must exercise great caution.

Despite these shortcomings, the truth is that proper execution of the amended provisions will help reduce cases in which parties to arbitration proceedings may be negatively affected by fraud in the arbitral awards. As for the second part of the Amendment Act, whether or not the Council’s regulations will help appoint ideal arbitrators, only time can tell.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

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