Fine-tuning India’s arbitration aspirations

India’s issues with pending commercial cases and their reduction through an enhanced alternative dispute resolution (ADR) system have long been a high-priority agenda of the government. A significant push towards achieving this objective was through the two-pronged approach of implementing the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, alongside the introduction of substantive changes to the Arbitration and Conciliation Act, 1996 (the Act), through the passage of the 2015 amendment.

The September 5,2016, NITI Aayog circular requiring public sector undertakings to deposit 75 per cent of an arbitration award while challenging it, further highlighted the nation’s stance on quickening the dispute resolution process and aiding in efficient realisation of arbitral decisions. Taking the baton further, the recent report of the high-level committee, led by Justice B N Srikrishna, to review the institutionalisation of the arbitration mechanism in India (the report) has now made a further attempt at highlighting some of the remaining issues with India’s ADR framework. Tasked with identifying roadblocks on the development of the Indian arbitral landscape, the report highlights issues of judicial interpretation of arbitral laws and the excessive involvement of courts as key areas for improvement in the international and domestic arbitration regime.

Hailing the promotion of institutional arbitration as a must for the advancement of alternative dispute resolution, the committee has suggested changes that will reverse the trend of approaching foreign institutions and the preference of ad-hoc arbitration into a more standardised and sustainable framework. The recommendations range from creating of a Strengthening of arbitral institutions

Establishment of Arbitration Promotion Council of India (APCI) to grade arbitral institutions, accredit arbitrators and maintain electronic depository of awards

Creating specialist arbitration bar and Bench

Revamping of International Centre of Alternative Dispute Resolution (ICADR) specialist arbitration bar and Bench to facilitate knowledge building and better selection of members to the formation of the Arbitration Promotion Council of India (APCI), which is to be a statutory body responsible for grading arbitral institutions and accreditation of arbitrators.

“Grading arbitral institutions and accreditation of arbitrators are steps in the right direction. However, the government must be careful not to over regulate the space in a manner that would be contrary to the basic essence of party autonomy in arbitrations,” says Sitesh Mukherjee, partner, Trilegal.

The report suggests revamping the practically defunct International Centre for Alternative Dispute Resolution (ICADR) by infusion of funds and changes to its governance structure by involving domain experts, will add credibility and respectability to Indian arbitration. The committee has also proposed appointing of the Department of Economic Affairs as the designated representative of the government in existing Bilateral Investment Treaty (BIT) arbitrations, some of which have long been a thorn in India’s attempts at an effective resolution of international disputes (Cairn, Vodafone, etc). The report has also called for establishing a post of international law adviser to supervise and coordinate the government’s strategy in BITs and preparing of dispute prevention strategies.

The committee has also suggested critical amendments to the Act, including clarifications on contentious issues about the non-applicability of the 2015 amendment to those arbitrations that had commenced before its introduction. The addition of a non-obstante clause in the provisions of appeals (Section 37 and Section 50) is another change that will limit the use of appellate provisions in other laws, including the Commercial Courts Act. “Legislative clarifications to the Act are always welcome. They streamline the way the arbitration framework operates and lower litigation on unsettled issues,” adds Mukherjee.

Further proposals include a limitation on the powers of arbitral tribunals to make interim orders after pronouncing an award (Section 17) and changes to the timelines provided under Section 29A, while also limiting its application to domestic arbitrations alone. Suggested amendments to the provisions of setting aside an arbitral award (Section 34) also include the removal of the mandatory one-year period for disposing of an application and the requirement of ‘furnishing proof’ to receive an appropriate remedy. The recommendation to provide immunity to arbitrators and the introduction of draft rules of procedure are also steps to making the arbitral framework more comparable to the traditional destinations like London and Singapore. “The model rules of procedure will bring standardisation to institutional arbitrations in India. The move will improve the quality of such arbitrations, while also reducing the time taken and costs involved,” says Tejas Karia, partner, Shardul Amarchand Mangaldas.

The suggested change to Section 11 to allow designated arbitral institutions to appoint appropriate arbitrators without the prior sanction of the court on the existence of an arbitration agreement is also aimed at quickening the Indian arbitral process. Same goes for the proposal to allow courts to refer parties to arbitration on a prima-facie conclusion of a valid arbitration agreement in terms of an international convention (Section 45). Other recommendations include the recognition of emergency arbitration awards and changes to the culture of arbitration in India through efficient legislative and policy based reactions to changing circumstances. According to Karia, the recommendations of the committee will bring in more international commercial arbitrations to India and aid in furthering the government's vision of making the country a global arbitration destination.