INDIAN COUNCIL FOR ARBITRATION

ABSTRACT

The Arbitration and Conciliation (Amendment) Act of 2019 in India introduced significant changes aimed at enhancing arbitration processes and establishing the Arbitration Council of India (ACI) to promote alternative dispute resolution. Key modifications include empowering courts to appoint arbitral institutions, revising timeframes for award rendering, ensuring confidentiality, and granting immunity to arbitrators. The ACI, headed by a chairperson chosen in consultation with the Chief Justice of India, is tasked with promoting arbitration, setting professional standards, and providing training. However, concerns arise regarding restrictions on foreign arbitrators, government intervention in arbitration, and potential conflicts of interest. Despite these challenges, the ACI transform India’s arbitration landscape, fostering efficient dispute resolution and bolstering confidence in alternative methods.

KEYWORDS

Arbitration and Conciliation (Amendment) Act, 2019, Arbitration Council of India (ACI), Arbitrators

INTRODUCTION

India strives to be an arbitration-friendly jurisdiction. Every time a new amendment or act is enacted, it comes with a new set of regulations. Mr Ravi Shankar Prasad, Minister for Law and Justice, introduced the Arbitration and Conciliation (Amendment) Act, 2019, in the Rajya Sabha on July 15, 2019. The law was originally titled the Arbitration and Conciliation (Amendment) Law, 2018, and it was pending before the Rajya Sabha after being passed by the Lok Sabha; however, the Lok Sabha was dissolved. The Minister of Law and Justice then proposed it in the Rajya Sabha with minor revisions on July 15, 2019, and the Rajya Sabha passed it on July 18, 2019. It attempts to alter the original Arbitration and Conciliation Act of 1996. The 2019 Amendment Act incorporates several recommendations provided by the High-Level Committee, which is chaired by Justice B.N. Srikrishna, a retired Supreme Court of India judge[1].

KEY MODIFICATIONS TO THE ACT

One of the most significant improvements is the establishment of the Arbitration Council of India, which promotes arbitration, conciliation, mediation, and other forms of alternative dispute resolution processes.
Another significant change is a revision to Section 11 of the Arbitration Act, which will allow courts for the appointment of arbitral institutions where parties disagree on the appointment of arbitrators. This would help to decrease the backlog of cases in the courts and lessen its burden to a certain extent.
The amendment to subsection (1) of Section 29A eliminates the specific timeframe of 12 months for International arbitration to render an award in all arbitration proceedings. Instead, tribunals are now required to make efforts to conclude international arbitration matters within 12 months. Additionally, for other arbitrations, the time limit has been revised from the initiation of tribunal reference to the completion of parties’ pleadings.
Section 42A of the Act has been included to ensure the confidentiality of arbitration procedures. The arbitrator and the arbitral institution should keep the arbitration proceedings confidential, except for the required implementation or enforcement of the ruling.
Section 42B of the Amendment conduct grants arbitrators immunity for any conduct or omission committed during the proceedings if done in good faith. This means they will not face a lawsuit or legal action for anything done in good faith during the proceedings.
The addition of Section 87 to the Amendment Act has resolved a long-standing question regarding the prospective or retrospective applicability of the 2015 Amendment Act. Section 87(b) clarifies that the 2015 Amendment Act applies solely to arbitral proceedings beginning on or after October 23, 2015[2].

ARBITRATION COUNCIL OF INDIA

Part 1-A of the Arbitration Act authorizes the central government to form the Arbitration Council of India as an independent government body. The Act states that the ACI shall be led by a Chairperson selected by the Central Government in conjunction with the Chief Justice of India. The chairperson should come from the following categories:

Chief Justice of a High Court or
A judge from the Supreme Court or
A judge from a High Court or
An eminent person with expert knowledge of arbitration[3].

The chief executive officer will be in charge of all aspects of the Council’s daily operations. The qualifications required, appointment, and other terms and circumstances must be in order as prescribed by the Central Government. The CEO is required to undertake functions as prescribed by the Central Government[4].

DUTIES AND FUNCTIONS OF THE ARBITRATION COUNCIL

According to Section 43D of the Arbitration and Conciliation Act of 1996, the Arbitration Council of India must take all necessary steps to promote and encourage arbitration, mediation, conciliation, and other forms of alternative dispute resolution, as well as develop policies and guidelines for the establishment, operation, and maintenance of uniform professional standards in all aspects of arbitration. According to the act, the main functions of the Arbitral Council are as follows:

1. Implement procedures that govern arbitral institution rating.

2. Recognise professional institutes that provide mandates to arbitrators.

3. Hold arbitration training, workshops, and courses in partnership with law firms, law schools, and arbitral institutes.

4. Organise workshops, training programs, and other events in partnership with legal schools and firms.

5. Provide recommendations to the central government.

6. Make recommendations regarding the Arbitral Council of India’s staffing, training, and infrastructure.

7. Such other functions as the central government may specify[5].

MEMBERS

Qualifications for Membership:

Eminent practitioners of arbitration (full-time member).
Eminent academicians in the field of arbitration (full-time member).
Secretary to the Government of India in the Legal Affairs, Ministry of Law and Justice, or his representative with at least the rank of Joint Secretary (ex officio).
Secretary to the GOI at the Department of Expenditure, Ministry of Finance, or his representative to at least the rank of Joint Secretary (ex officio).
A Chief Executive Officer or a Secretary (ex officio).
One person from a recognized Chamber of Commerce and Industry is appointed on a rotating basis.
One international practitioner with extensive knowledge and expertise in arbitration[6].

The Council’s head office would be located in Delhi. The council, with the prior sanction of the central government, may establish offices outside Delhi.

TENURE

The chairperson and members will serve for a term of no more than three years from the date they join. The chairperson’s maximum age is 70 years, while the members’ maximum age is 67[7].

REMOVAL OF A MEMBER

Removal of a member of the Council for Arbitration may occur in the following circumstances:

If a member is an undischarged insolvent, has been engaged in any paid employment during his term of office (except part-time member), or has been convicted of a moral turpitude-related offense, they may be barred from serving.
If he has acquired a financial or other interest that is likely to prejudice his functions as a member, or
If he abused his position.
If he has become mentally or physically unable to perform his duties as a member[8].

No member shall be removed on the reason mentioned in the 2^nd point unless the Supreme Court, on the suggestion of the Central Government, has determined after an inquiry that the member should be removed on those grounds.

RESIGNATION OF THE MEMBERS OF ACI

According to section 43F[9] of the Arbitration and Conciliation Act, 1996, the chairperson or full-time or part-time member of ACI may resign from his office by giving written notice to the central government. However, until the central government permits him to do so, the chairperson or full-time member shall continue to hold office until the expiration of three months from the date of receipt of such notice or until a person appointed in his place enters the office, whichever happens first.

HOW TO REGISTER FOR ARBITRATION WITH THE INDIAN COUNCIL OF ARBITRATION

The parties must first file a written application with the registrar requesting arbitration. The Registrar, when deemed appropriate, may deny the request for reasonable reasons. Such grounds will be subject to judicial review. Along with the application request, the following are required:

The names and addresses of the disputing parties.
Statement of the claim, supporting facts, and remedy or remedies sought, together with other elements of the claimant’s case.
Original or duly attested copies of the arbitration agreement, any contract or agreement arising from or in connection with the dispute, and any other relevant documents or information.
Registration fee: INR 1000.
Where the arbitration has been ordered by a court, provide a certified copy of the court’s order[10].

Following the 2015 amendment, the Central Government established a high-powered committee led by Justice Sri Krishna. The committee made many recommendations for the Act. Fortunately, the 2019 Amendment Act made these proposals a reality. However, the Act does not include many recommendations that would have been advantageous in increasing arbitration activity. Instead, some anti-arbitration modifications were included in the Amendment Act[11].

ANALYSIS OF THE ARBITRATION COUNCIL OF INDIA

The reforms were made to make India a worldwide arbitration hub by establishing an independent body. This body will establish international standards to provide for a cost-effective, user-friendly, and fast arbitration system.

APPOINTMENT OF ARBITRATORS

The Arbitration Council is responsible for establishing arbitration, mediation, and other forms of alternative dispute resolution. The Amendment Act allows the Supreme Court and High Courts to select arbitral institutions. It may determine which parties can seek the appointment of arbitrators. For example, in the event of international commercial arbitration, the Supreme Court will nominate an organization to choose arbitrators. In the case of domestic arbitration, the concerned High Court will designate an institution to choose arbitrators. In the absence of an arbitral institution, the Chief Justice of the relevant High Court may appoint a panel of arbitrators to perform the tasks of the arbitral institutions[12]. This reduces the burden of the courts.

QUALIFICATIONS

The Amendment Act intends to make India a more arbitration-friendly country globally. The insertion of Schedule 8 to the Act raises the question of whether a foreign legal expert can act as an arbitrator. This Schedule specifies the qualifications of the arbitrator who will be chosen for the council, which is governed by the Advocates Act of 1961. The requirements state that the person must be at least one of the following:

An advocate under the Advocates Act or,
Chartered Accountant or,
Cost Accountant, Company Secretary or,
Officer of Indian Legal Service or,
An officer with a law/engineering degree having ten years of experience or,
An officer having senior-level experience in administration in the central or the state government[13].

As a result, a straightforward interpretation of this suggests that the arbitrator should be an Indian national. This means that foreign arbitration professionals are unable to conduct arbitrations in India, making India’s aspiration of becoming a global arbitration hub a distant reality. The barring of foreign legal professionals will prevent many notable solicitors from participating in any dispute resolution proceedings in India. It may also discourage foreign parties who want their arbitration to take place in India and would prefer an arbitrator from a neutral country.

In the case of Bar Council of India vs A.K. Balaji and Ors,[14] the Hon’ble Supreme Court ruled that foreign lawyers/firms are not permitted to practice law in India, whether on the litigation or non-litigation side, unless they meet the requirements of the Advocates Act, 1961, and Bar Council of India Rules.

INTERVENTION BY THE GOVERNMENT

The composition of this Council is problematic given the private character of arbitral tribunals. The government’s participation in the control of arbitrators and arbitral bodies undermines the concept of arbitration. In several circumstances, the Government of India may be a party to the arbitration. An arbitration conducted by a ‘government-administered’ council in which the government is also a party demonstrates an obvious conflict of interest and violates the principles of natural justice because there may be an element of bias involved.

CONCLUSION

The Amendment Act of 2019 seeks to alleviate some of the problems that the Amendment Act of 2015 generated in the conduct of arbitration and court procedures by allowing and empowering the government to establish an independent body of the Arbitration Council of India. The ACI has its headquarters in Delhi and can open other offices in other locations with the agreement of the central government. ICA is currently not just India’s leading arbitral institution, but also one of Asia Pacific’s most prominent arbitration centers, handling over 400 domestic and international arbitration cases each year. Arbitration is the future of India, and it is expanding at an incredible rate. The Arbitration Council will undoubtedly be a game changer in the realm of alternative dispute resolution. It aids in the resolution of numerous issues, including the evaluation of arbitral institutions, policy formulation, and identifying the credentials of arbitrators and arbitral institutions. This ensures that the ADR work is done successfully and efficiently. It will undoubtedly encourage parties to resolve their disputes via ADR remedies.

[1] iPleaders, https://blog.ipleaders.in/critical-analysis-arbitration-council-india/#Tenure (last visited Feb. 18, 2024).

[2] iPleaders, https://blog.ipleaders.in/critical-analysis-arbitration-council-india/ (last visited Feb. 17, 2024).

[3] iPleaders, https://blog.ipleaders.in/all-about-the-arbitral-tribunal/ (last visited Feb. 15, 2024).

[4] WritingLaw, Arbitration Council of India – Composition, Functions, and More (writinglaw.com) (last visited Feb. 17, 2024)

[5] WritingLaw, https://www.writinglaw.com/arbitration-council-of-india/ (last visited Feb. 14, 2024).

[6] iPleaders, https://blog.ipleaders.in/critical-analysis-arbitration-council-india/ (last visited Feb. 17, 2024).

[7] iPleaders, https://blog.ipleaders.in/critical-analysis-arbitration-council-india/#Tenure (last visited Feb. 18, 2024).

[8] WritingLaw, https://www.writinglaw.com/arbitration-council-of-india/ (last visited Feb. 14, 2024).

[9] WritingLaw, https://www.writinglaw.com/arbitration-council-of-india/ (last visited Feb. 14, 2024).

[10] iPleaders, https://blog.ipleaders.in/rules-of-arbitration/ (last visited Feb. 17, 2024).

[11] iPleaders, https://blog.ipleaders.in/critical-analysis-arbitration-council-india/#Tenure (last visited Feb. 18, 2024).

[12] PRS legislative research, The Arbitration and Conciliation (Amendment) Bill, 2019 (prsindia.org) (last visited Feb. 15 2024).

[13] iPleaders, https://blog.ipleaders.in/critical-analysis-arbitration-council-india/#Tenure (last visited Feb. 18, 2024).

[14] iPleaders, https://blog.ipleaders.in/critical-analysis-arbitration-council-india/#Tenure (last visited Feb. 18, 2024).

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