Arbitration and Conciliation Amendment Act, 2019- A Critical Analysis

Arbitration and Conciliation Amendment Act, 2019- A Critical Analysis

Author: Divya Bothra, VITSOL, Chennai.

Abstract

The legal framework surrounding, The Arbitration and Conciliation (Amendment) Act, 2019 came into force in India. The changes in Amendment Act, 2019 has stepped in to promote institutional arbitration in India and to make India a hub of domestic and international arbitration by facilitating the resolution of commercial disputes by arbitration making India an arbitration-friendly jurisdiction. The Indian legislature had initiated the Arbitration and Conciliation (Amendment) Act, 2015, which received the assent of the President of India on December 31^st, 2015 and that came into force on October 23^rd, 2015 with significant changes to the Arbitration Act and the initial step taken to amend the Arbitration and Conciliation Act, 1996 to provide speedy and effective resolution of disputes through arbitration or conciliation. The article shares an overview of the Arbitration and Conciliation (Amendment) Act, 2019 by discussing the role of domestic and international arbitration. The article explains the establishment of the Arbitration Council of India with a view of the amendment act that broadly deals with various aspects and features of Indian arbitration. In this context, it indicates the effects of arbitral proceedings that commenced before the 2015 amendment act. It likewise illustrates the matter of Hindustan Construction Company by applying the 2019 amendment act. It also discusses the impact on businesses, in general, inserting the 2019 amendment act while proposing the necessary reforms and future concerns.

INTRODUCTION:

The Indian arbitration has observed a paradigm shift in current years, ere to The Arbitration and Conciliation (Amendment) Act, 2019. The amendment act, 2019 amends the Indian Arbitration and Conciliation Act,1996. the amendment act was further promoted to strengthen and to make the arbitration process a user-friendly, cost-effective and time bound. On 15th July 2019, The Arbitration and Conciliation (Amendment) Act, 2019 was introduced in Rajya Sabha by the Minister of Law and Justice of India, Mr Ravi Shankar Prasad. On 18^th July 2019, the Rajya Sabha had passed the bill to Lok Sabha without any discussion or debate.

On 1^st August 2019, the Lok Sabha has passed The Arbitration and Conciliation (Amendment) Act, 2019 which aimed at making India an international arbitration hub. The Parliament receives the President’s assent. On 9^th August 2019, the President of India Shri Ram Nath Kovind gave its assent for The Arbitration and Conciliation (Amendment) Act, 2019. The changes in Amendment Act, 2019 has stepped in to promote institutional arbitration in India and to make India a hub of domestic and international arbitration by facilitating the resolution of commercial disputes by arbitration making India an arbitration-friendly jurisdiction.

ROLE OF DOMESTIC AND INTERNATIONAL ARBITRATION

DOMESTIC ARBITRATION

A domestic arbitration is concerned with arbitral proceedings that are solely national or domestic issues that takes place in India. In other words, it means that all aspects of the arbitration proceedings are related to a single jurisdiction that is related to the subject matter of the case or a cause of action that arise out of dispute are all governed by the Indian Law. For instance, the nationality of the parties, the subject matter of the contract, the place of performance of the contract and the facts that arise from the cause of action from the dispute will all relate to the same jurisdiction. For the settlement of disputes, the domestic arbitration is an attractive option.

INTERNATIONAL ARBITRATION

An international arbitration, on the other hand, takes place either within India or outside that is abroad depending on the cases that involve foreign origin relating to the parties or matter related to a dispute which will attain beyond the borders of a single jurisdiction. In India, the international law takes place in the same procedure as domestic arbitration. When at least one of the parties involved is a resident or domiciled outside India then the arbitration become ‘international’. The law applicable in the arbitration can either be Indian Law or Foreign Law depending on the subject matter on the terms of the contract and the rules of conflict of law.

ESTABLISHMENT OF INDEPENDENT BODY- ARBITRATION COUNCIL OF INDIA (ACI)

The Arbitration and Conciliation (Amendment) Act, 2019 seeks to establish by a notification by the central government as an independent body called the Arbitration Council of India (ACI) In the field of arbitration, the amendment act, 2019 introduces regulatory mechanisms and provides for adding Part 1A (section 43A to section 43M) to the Act, which makes the provision of the constitution which is designated as the Arbitration Council of India (ACI) and it also authorizes the Central Government to establish the ACI by an official gazette notification (Section 43B). The council shall take the required measures for the council will, inter alia for the promotion of arbitration, mediation, conciliation, and other alternative dispute redressal mechanisms. To ensure the satisfactory levels of arbitration and conciliation the Council of India shall frame policies and guidelines for grading the arbitral institutions and also for the resolution of the establishment, operation, and maintenance of uniform professional standard in respect of matters relating to arbitration[1].

The composition of the council consists of a Chairperson who is a Judge of a Supreme Court or a Judge of High Court or a prominent person who is having knowledge, skill and experience in the conduct or administration of the arbitration. The Central Government appoints the Chairperson in consultation with the Chief Justice of India. The other members of the council include two Full-time Members from among with an eminent arbitration practitioner and academicians.

THE KEY FEATURES OF INDIAN ARBITRATION

APPOINTMENT OF ARBITRATOR:

The amendment act 2019, the function of appointment of arbitrator proposes a procedure by arbitral institutions that the Supreme Court of India is designated specifically in international commercial arbitration while the High Court are designated to arbitral institutions for appointing arbitrators within their respective jurisdiction in cases of domestic arbitration. Within the 30 days from the date of service of notice on the opposite party, the arbitral institution is mandated to dispose of an application of appointment of the arbitrator.

RELAXATION OF TIME LIMIT FOR ARBITRAL AWARD

The time limit for the completion of arbitral proceedings by 2015 Amendment Act was 12 months with the consent of the parties it can extend to 18 months from the date the arbitral tribunal enters upon. The filing of the statement of claim and defence by the 2019 Amendment Act should be done within 6 months from the date of service of written notice to the arbitrator (section 23). The 2019 Amendment Act (section 29A) seeks to change the start date of this time limit of passing an award on which statement of claim and defence are completed by parties.

CONFIDENTIALITY

The 2019 Amendment Act has introduced a provision on confidentiality in the Indian regime. The act provides that the details of the arbitral proceedings will be kept confidential except in certain case disclosure of the details is necessary for the implementation and enforcement of the arbitral award.

The provisions under the Arbitration and Conciliation (Amendment) Act, 2019 are yet to be notified before the Indian courts. It is interesting to see how provisions such as appointment of arbitrators, the time limit for conducting arbitration, confidentiality pans out in actual practice. If the 2019 amendment act is followed in letter and spirit, could lay the proposal for India to finally emerge as a hub of arbitration.

EFFECTS OF ARBITRAL PROCEEDINGS INTRODUCED BY AMENDMENT ACT 2015.

The Arbitration and Conciliation (Amendment) Act 2019, has introduced a provision that the Amendment Act 2015 will only have prospective effect i.e. it will be applicable only to arbitral proceedings commenced after the effective date on or after 23^rd October 2015, only such court proceedings that are in relation or rising out of arbitral proceedings (section 87), irrespective of whether such proceedings were initiated prior to or after 23^rd October 2015.

CASE- BOARD OF CONTROL FOR CRICKET IN INDIA (BCCI) V. KOCHI CRICKET PRIVATE LIMITED (2018) 6 SCC 287

The apex court in the aforementioned case, the Supreme Court observed that Section 87 which was sought to be added by the legislature and spoke of applicability of 2015 Act, As amended under section 36, the observations of the Supreme Court should be considered as regards to the applicability of enforcement of a domestic award. The former regime of enforcement of domestic award specified an automatic stay of domestic awards until the Section 34 proceedings had been decided. Therefore, the operation of section 87 should be decided accordingly, as the Supreme Court advised the legislature. The 2019 Amendment (section 87) as mentioned above overruled the position laid down in BBCI case and the 2015 Amendment Act would apply 2015 provided that (unless the parties agreed otherwise).

BCCI v. Kochi Cricket Private Limited (Supra), Section 87 was ultimately inserted in the 2019 Act, was largely contrary to the observations of the Supreme Court.

Consequently, the position which emerged was that: –

The 2015 Act will not apply to arbitral proceedings commenced before 23 October 2015. Therefore, the position on no automatic stay of enforcement of a domestic award under Section 36 as amended by the 2015 Act reverted to the position under the Act.

Effectively, position laid down by the Supreme Court in BCCI v. Kochi Cricket Private Limited (supra) was diluted.[2]

MATTER OF HINDUSTAN CONSTRUCTION COMPANY V UNION OF INDIA

In the recent case of Hindustan Construction Company v. Union of India, the Apex Court on November 27, 2019, struck down Section 87 introduced by the 2019 Amendment Act, as unconstitutional for being arbitrary and re-established its position as laid down in the BCCI case. The Apex Court’s decision in Hindustan was a right approach so as to provide the successful award holders with the results of their award by way of security and not letting any automatic stay impasse the execution for several years. To sum it up, Apex Court’s purpose in Hindustan case was to give the benefit of the 2015 Amendment Act to all arbitrations qua court proceedings, regardless of whether they commenced before, or after October 23, 2015. This decision of Hindustan by Apex Court is a welcome development in the Indian arbitration regime[3].

WILL THERE BE IMPACT ON BUSINESSES IN GENERAL?

The Arbitration and Conciliation (Amendment) Act 2019 has been a matter of debate, the amendment act 2019, where the position of the provision (section 87) was overruled in the case of BCCI judgement of the Supreme Court. This indeed has resolved certain issues that related to the applicability of the amendment act 2015.

Nevertheless, regardless of the BCCI judgement, the government has amended the law inserting the section 87, it has been found in the arbitrary case of Hindustan. However, time will only tell how this will function in actual practice, since in cases where parties have applied to withdraw their deposit whereby applying the BCCI rule, certain deposit orders may have to be made again and the automatic stay of award regime would no longer be there and enforcement proceedings can continue. With the automatic stay regime now removed an arbitral award-holder can enjoy the benefits of his award and not have to wait for several years of litigating before enjoying the profits of his award[4].It is evident that the Amendment Act 2019, clearly aims at removing the difficulties which were confronted during the conduct of arbitral proceedings and the court proceedings that take place under the Amendment Act 2015. The necessary changes should expectantly give confidence to the international community towards an arbitration-friendly India.

CONCLUSION

The mission of the Amendment Act 2015 was to make India an arbitration-friendly jurisdiction and the 2019 Amendment Act has stepped in furtherance in reaching that goal. The establishment of the independent body ACI under the 2019 Amendment Act, is an interesting proposal and if it is executed in its true spirit, it may usher India to become one of the globally competent jurisdictions for arbitration.

The enactment of the Amendment Act 2019 would be the key to its success or failure. The delegation of appointment of arbitrators to designate within 30 days is also a step at reducing the involvement of court and delay in arbitration. The introduction of provisions such as the appointment of arbitrators, time limit for conducting arbitration, confidentiality is also a step towards making India a more arbitration-friendly jurisdiction. The development of an arbitration hub involves the implementation of laws, rules, and regulations; development of competent institutions; availability of conducive infrastructure for Arbitrations. But since the Government has taken these steps for conducive laws to support Arbitration, it could be reasonably expected that other factors may to fall in place sooner than later.

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