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Arbitration and Conciliation (Amendment) Act 2019 August 13, 2019 The Arbitration and Conciliation (Amendment) Act 2019 (the “2019 Amendment Act”) was passed by the both houses of parliament in the monsoon session of parliament and notified in the official gazette on 9 August 2019. The 2019 Amendment Act makes several important amendments to the extant provisions and introduces new provisions that would further enhance the efficacy of this method of dispute resolution. Significantly, it provides for the establishment of an Arbitration Council of India tasked with the responsibility of grading arbitral institutions whom parties would approach for appointment of arbitrator(s), thereby reducing the burden on Courts. Arbitrators will now be accredited by professional institutes based on their qualifications and experience. The Amendment Act also provides for best practices, such as a fixed time period for filing of the statement of claim and defence, confidentiality of arbitration proceedings and protection of arbitrators from actions taken in good faith. Moreover, it corrects the ambiguity with respect to the applicability of the Amendment Act of 2015 by clarifying that the Amendment Act of 2015 will apply only to arbitral proceedings commenced on or after 23 October 2015 and to court proceedings arising out of or in relation to such arbitral proceedings only. The key amendments under the 2019 Amendment Act are as follows: The Supreme Court and High Courts to designate arbitral institutions graded by the ACI : In case of an international commercial arbitration, the arbitral institutions designated by the SC will, on an application made by a Party, appoint arbitrator(s). In case of other arbitrations, the arbitrator(s) will be appointed by arbitral institutions designated by the High Court. Where there are no arbitral institutions in the jurisdiction of the High Court, the Chief Justice of that High Court may maintain a panel of arbitrators for discharging the functions of an arbitral institution. [Insertion of sub-section 3A to section 11] Establishment of Arbitration Council of India (ACI) as an independent body to take measures to promote and encourage arbitration, conciliation, mediation and other ADR mechanisms and maintain uniform professional standards for all such matters. The ACI will,
amongst other functions, grade arbitral institutions based on criteria such as infrastructure, quality and experience of arbitrators, completion of arbitral proceedings within time limits etc., recognise professional institutes for accreditation of arbitrators, maintain an electronic repository of all arbitral awards. [Insertion of Part IA]. The qualifications, experience and norms for accreditation of arbitrators have been specified in a new Eighth Schedule Time limit for statement of claim and defence : The statement of claim and defence shall be completed within six months from the date on which the arbitrator(s) receive notice of their appointment. [Insertion of sub-section 4 to section 23] Confidentiality of proceedings: The arbitrator, arbitral institutions and parties to the arbitration are required to maintain confidentiality of all arbitral proceedings except the award, if its disclosure is necessary for the purpose of implementation and enforcement. [Insertion of section 42A] Immunity for arbitrator : No suit or other legal proceedings shall lie against arbitrator(s) for act done or intended to be done in good faith under the Act. [Insertion of Section 42B] Applicability of Amendment Act, 2015: Unless parties agree otherwise, the Amendment Act 2015 shall not apply to Arbitral proceedings which have commenced before the commencement of the Amendment Act of 2015 and to 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 Amendment Act of 2015. It shall apply only to Arbitral proceedings commenced on or after the commencement of the Amendment Act of 2015 and to court proceedings arising out of or in relation to such Arbitral proceedings. [Insertion of section 87 and omission of section 26 of the Amendment Act, 2015] Section 29A [Time limit for arbitral award] amended : The arbitral award shall be made within 12 months from the completion of the pleadings of the parties (and not from the date the arbitral tribunal enters upon the reference) for arbitrations other than International commercial arbitrations. Where an application for extension of period for making an award is pending under sub-section (5) of section 29A, the mandate of the arbitrator shall continue till the disposal of the said application. In case the Court orders reduction of fees of the arbitrator on finding that the delay in making the award was due to reasons attributable to the arbitrator, the arbitrator shall be given an opportunity of being heard before the fee is reduced. Section 17 [Interim measures ordered by the Tribunal] amended to restrict its operation only to applications made by a party during the arbitral proceedings and not at any time after making of the award but before its enforcement.
make the independence and impartiality of arbitrators questionable. Further, the non-inclusion of foreign legal professionals qualified to be arbitrators could discourage foreign parties wishing for their arbitration to be seated in India, who would want an arbitrator from a neutral country to be on their panel. A detailed set of rules governing the working of the Council could resolve ambiguities associated with this provision. The 2019 Amendment Act overrules the Supreme Court’s decision in BCCI vs Kochi Cricket [1] and seeks to clarify the applicability of the 2015 Amendment Act. This will cause delay as all pending court proceedings in relation to arbitrations that had commenced prior to 23 October 2015 will be relegated to pre-amendment Act scenario. The legislature has not dealt with the status of thousands of pending petitions where courts have refused to grant a stay under the amended Section 36, nor is there clarity regarding what provisions in the 2015 Amendment Act would have a retrospective application considering they may be clarificatory, declaratory or procedure as held in the BCCI decision. Footnote [1] Where it was held that the 2015 Amendment Act was prospective and would apply to: (a) arbitral proceedings commences on or after 23 October 2015; and (b) arbitration-related court proceedings filed on or after 23 October 2015, even where the arbitral proceedings were commenced before the amendments came into force. ……………………….ARBITRATION AMENDMENT 2019 On August 9, 2019, the President of India gave his assent to the amendments to the Arbitration and Conciliation Act, 1996 (‘Act’) and the same has been published in the Official Gazette of India. Some of the key highlights of the Arbitration and Conciliation (Amendment) Act, 2019 (‘Amendment Act’) are set out below: i. Arbitral Institution Section 1(ca) has been introduced to define an ‘arbitral institution’ as an arbitral institution designated by the Supreme Court or a High Court under the Act. ii. Appointment of Arbitrators under Section 11 The Amendment Act empowers the Supreme Court (in the case of an international commercial arbitration) and the High Court (in cases other than international commercial arbitration) to designate arbitral institutions for the purpose of appointment of arbitrators. Such arbitral institutions will be graded by the Arbitration Council of India (discussed below). Where a graded arbitral institution is not available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of the arbitral institution. In the absence of a procedure to appoint an arbitrator or failure of such procedure under the agreement, the appointment will be made by the arbitral institution designated by the Supreme Court or the High Court, as the case may be. The application for appointment of an arbitrator will be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party. The arbitral institution will determine the fees of the arbitral tribunal and the
manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule to the Act. iii. Arbitration Council Part 1A has introduced the concept of an Arbitration Council of India (‘Council’), which will be established by a notification by the Central Government, and will have its headquarters in Delhi. The composition of the Council will include a Chairperson who is a Judge of the Supreme Court/ Chief Justice of a High Court/Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, who will be appointed by the Central Government in consultation with the Chief Justice of India. The other Members of the Council will include an eminent arbitration practitioner and an eminent academician. The ex-officio Members of the Council will include the Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice and Secretary to the Government of India in the Department of Expenditure, Ministry of Finance or their respective representatives not below the rank of Joint Secretary. One representative of a recognised body of commerce and industry will be a part time member. The Council will, inter alia, promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanisms and for that purpose, will frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. The Council will also frame policies governing the grading of arbitral institutions and arbitrators and recognise professional institutes providing accreditation of arbitrators. iv. Grading of Arbitral Institutions and Arbitrators The Council will make grading of arbitral institutions on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations, in such manner as may be specified by the regulations under the Act. The qualifications, experience and norms for accreditation of arbitrators will be such as specified in the Eighth Schedule to the Act. v. Timelines under the Amendment Act
- Completion of pleadings: Section 23 has been amended to state that the statement of claim and defence must be completed within a period of six months from the date the arbitrator or all the arbitrators (as the case may be) received notice, in writing, of their appointment.
- Arbitral award: In cases other than international commercial arbitration, the award will be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings. In the case of international commercial arbitrations, the award may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings.
- Extension of time: Where an application for extension of time is pending, the mandate of the arbitrator will continue till the disposal of the said application. vi. Amendment to Section 34 Section 34 of the Act replaces the words “furnishes proof that”, with “establishes on the basis of the record of the arbitral tribunal that”, to clarify that the parties must rely on the record before the arbitral tribunal alone at the time of challenge of an award.
On August 9, 2019, the President of India gave his assent to the amendments to the Arbitration and Conciliation Act, 1996 ('Act') and the same has been published in the Official Gazette of India. Some of the key highlights of the Arbitration and Conciliation (Amendment) Act, 2019 ('Amendment Act') are set out below: i. Arbitral Institution Section 1(ca) has been introduced to define an 'arbitral institution' as an arbitral institution designated by the Supreme Court or a High Court under the Act. ii. Appointment of Arbitrators under Section 11 The Amendment Act empowers the Supreme Court (in the case of an international commercial arbitration) and the High Court (in cases other than international commercial arbitration) to designate arbitral institutions for the purpose of appointment of arbitrators. Such arbitral institutions will be graded by the Arbitration Council of India (discussed below). Where a graded arbitral institution is not available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of the arbitral institution. In the absence of a procedure to appoint an arbitrator or failure of such procedure under the agreement, the appointment will be made by the arbitral institution designated by the Supreme Court or the High Court, as the case may be. The application for appointment of an arbitrator will be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party. The arbitral institution will determine the fees of the arbitral tribunal and the
manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule to the Act. iii. Arbitration Council Part 1A has introduced the concept of an Arbitration Council of India ('Council'), which will be established by a notification by the Central Government, and will have its headquarters in Delhi. The composition of the Council will include a Chairperson who is a Judge of the Supreme Court/ Chief Justice of a High Court/Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, who will be appointed by the Central Government in consultation with the Chief Justice of India. The other Members of the Council will include an eminent arbitration practitioner and an eminent academician. The ex-officio Members of the Council will include the Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice and Secretary to the Government of India in the Department of Expenditure, Ministry of Finance or their respective representatives not below the rank of Joint Secretary. One representative of a recognised body of commerce and industry will be a part time member. The Council will, inter alia, promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanisms and for that purpose, will frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. The Council will also frame policies governing the grading of arbitral institutions and arbitrators and recognise professional institutes providing accreditation of arbitrators. iv. Grading of Arbitral Institutions and Arbitrators The Council will make grading of arbitral institutions on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations, in such manner as may be specified by the regulations under the Act. The qualifications, experience and norms for accreditation of arbitrators will be such as specified in the Eighth Schedule to the Act. v. Timelines under the Amendment Act Completion of pleadings: Section 23 has been amended to state that the statement of claim and defence must be completed within a period of six months from the date the arbitrator or all the arbitrators (as the case may be) received notice, in writing, of their appointment. Arbitral award: In cases other than international commercial arbitration, the award will be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings. In the case of international commercial arbitrations, the award may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings. Extension of time: Where an application for extension of time is pending, the mandate of the arbitrator will continue till the disposal of the said application. vi. Amendment to Section 34 Section 34 of the Act replaces the words "furnishes proof that", with "establishes on the basis of the record of the arbitral tribunal that", to clarify that the parties must rely on the record before the arbitral tribunal alone at the time of challenge of an award.
Arbitration and Conciliation Amendment Act, 2019 passed in Lok Sabha (1st August 2019) and Rajya Sabha (19th July 2019). Thereafter, it received the assent of the President on 9th August 2019. The 2019 Amendment Act epitomizes different suggestions made by the High Level (Committee) shaped under the Chairmanship of Justice B N Srikrishna, Retired Judge, Supreme Court of India which presented its Report on 30 July 2017. The Committee was created by the Central Government to overcome certain difficulties/challenges with respect to the Arbitration and Conciliation (Amendment) Act (“2015 Amendment Act”) and bring in more institutional arbitration as opposed to ad hoc arbitration as prevalent in the country. The 2019 Amendment Act further addresses measures to make the arbitration system more amenable, with a clear focus to make the process simpler and thereby making India the center point for international arbitration. The 2019 Amendment Act is focused on simplifying the process and empowering institutional arbitration by establishing a self governing body namely the Arbitration Council of India (Section 43A). In this article, I shall critically analyse the key provisions of the Amendment Act 2019. Important points of the Amendment Amendment of Section 11 and Insertion of Section 43- Establishment of Arbitral Council of India Section 11 and Section 43 (Part 1A) of the 2019 Amendment Act establishes the Arbitral Council of India (ACI). This institution was primarily created for the following activities: Grading of arbitral institutions and arbitrators Formulation of policies relating to Arbitrations Training with respect to Arbitrations Maintaining an electronic depository of the awards made in India Promotion of ADR Section 11 relates Appointment of Arbitrators in a proceeding. Previously, Appointment of Arbitrators in a proceeding would be done by the HC or SC. However, the 2019 Amendment Act mandates that the Arbitral institutions (designated by the SC in case of international arbitration and
HC in case of any other arbitration) would appoint the arbitrators, when an application is made for the appointment of arbitrators. Creation and composition of Arbitral Council of India An Arbitral Council will be created and it will consist of SC/HC judge, arbitration practitioner, academician, Ministry of Law and Justice Secretary, Ministry of Finance Secretary, Member of a recognized body of commerce and a Chief Executive Officer. Amendment of Section 17:Restriction on interim reliefs Section 17 has been amended to restrict the arbitral tribunal to provide any interim relief only during arbitral proceedings. Previously, the arbitral tribunal could provide interim relief post award. Any interim relief post award now has to go via Court under Section 9. This streamlines the arbitration process. Amendment of Section 23: Clear timelines for submitting the statements of claim defence An amendment has been made to Section 23 stating that the statement of claim and defence has to be completed within six months of the arbitrators being appointed. Earlier, there were no time lines with respect to the submission of statement of claim and defence. This will certainly fast track the process of arbitration as now there are clear and stipulated timelines. Amendment of Section 29A: Revised timelines Prior, the time limit for arbitration was twelve months from the appointment of the arbitrators. It however could be extended by six months by the consent of both parties. If further extension was required, courts were to be approached with appropriate reasons seeking extension. As per the amendment, the time limit for the arbitration has now been moved from the appointment of arbitrators to the completion of the pleadings. Hence, six months additional time has been provided per the amendment to this section. Amendment of Section 34 in order to simplify the arbitration proceeding An amendment has been made to Section 34 wherein the requirement of “furnishes proof that” has been substituted with “establishes on the basis of the record of the arbitral tribunal that”. This simplifies the arbitration proceeding, wherein previously the proceedings were conducted as a civil suit with respect to framing of issues, presentation of evidence etc. Now, the proceedings will be conducted per the documentation provided to the arbitral tribunal. Amendment of Section 36 to discourage unnecessary litigation The amendment to Section 36 brings about an important change to the arbitration proceedings. Previously, whenever an award was appealed before a Court, the said appeal would grant an automatic stay to the award, thereby delaying the implementation. This amendment allows an appeal under Section 34 to proceed however there would be no stay on the enforcement of the award. This discourages unnecessary litigation which defeats the purpose of arbitration. Insertion of Section 42A and Section 42B These two Sections 42A and 42B was inserted by the 2019 Amendment Act.
Reiterating the concern that the majority of appointees to the Arbitration Council of India would be from the Government of India, the creation of a repository which would be under the Council’s control would be highly untenable. Exposure of business secrets, coercion, are some of the concerns that the investors will have while considering arbitration as a dispute mechanism. 2020 Arbitration Ordinance and its impact There has been an Ordinance issued to deal with the difficulties raised by the 2019 Amendment. Primarily, the Eight Schedule has been done away with. Moving forward, the qualifications would be decided by the regulations decided by the ACI. Secondly, any arbitral award which was arrived at due to fraud or corruption can now be challenged (irrespective if the arbitral proceeding is before the 2015 Amendment Act). Conclusion The 2019 Amendment Act is a welcome amendment to the Arbitration and Conciliation Act 1996. It brings about streamlining of the arbitral proceeding which would result in speedy disposal. Also, the creation of the Arbitral Council of India would assist in reducing the burden of the pending legislation in India. The 2019 Amendment Act falls short on various aspects as mentioned above. The 2020 Ordinance is a step in the right direction. However, the primary concerns are not yet addressed. That being said, the Arbitration and Conciliation – Amendment – Act, 2019 is an ongoing attempt by the Government of India to make the country an international arbitration hub, which streamlines proceedings benefitting in quick disposal.
