The Arbitration and Conciliation Amendment Act, 2019; A Critical Analysis.

The Arbitration and Conciliation (Amendment) Act, 2019 was introduced in the Rajya Sabha. This follows the Arbitration and Conciliation (Amendment) Bill, 2018 which was passed by the Lok Sabha on 10 August 2018 and was pending before the Rajya Sabha. However, the 2018 Bill lapsed as the 16th Lok Sabha was dissolved. The same 2018 Bill, albeit with a few minor changes, has now been passed as the 2019 Bill. The 2019 Act continues to retain the shortcomings of the 2018 Bill and would significantly hamper the progress made towards the growth of arbitration in the country.

Importance of the Arbitration and Conciliation Amendment Act, 2019

The Arbitration and Conciliation Amendment Act, 2019 has been seen as a breakthrough for Indian Arbitration as it will make India a global player in the world of arbitration by creation of a separate council to overlook all arbitration related disputes, an exhaustive list to choose an arbitrator and a fastidious and expedited arbitration proceeding. All of these are analyzed below;

1. Globalising India in the World of Arbitration

The 2019 amendment plans to make India an International Arbitration centre by giving facilities for the settlement of commercial disputes of foreign parties. The Law Minister of India has expressed that India can be a focal point of international arbitration as it has enough qualified lawyers, who have the expertise and preparing facilities so that India does not acknowledge colonialism in the field of arbitration, but become modernised in the field of dispute resolution. He said that the best accomplishment would be when Indian arbitrators are looked for dispute settlement and India becomes a centre of international arbitration.

2. Updating Standards

The amendment expects to make the arbitration of magnificent quality, presenting obligation on the Arbitration Council of India, which has been set up as an administrative body under Part 1A of the Amendment Act, to hold trainings, workshops, courses, outline strategies, rules and update standards to guarantee good degree of arbitrations, arbitral institutions and the arbitrators.

3. A separate Council for arbitrator related disputes

Currently for appointment of Arbitrators for any dispute as well as to resolve the dispute, the parties need to approach the Supreme Court or the High Court. With the colossal excess of cases, the courts are anyway overburdened. A viable Arbitration Council of India will share this weight of and facilitate quick appointment of arbitrators. This would further help quick resolution of disputes outside the court.

4. An exhaustive and accessible list to choose an arbitrator

The parties can choose their own arbitrator and this decision is sacrosanct to the arbitration process. The process of picking an arbitrator of choice isn't outlined by the nine broad criteria as given in the provisions of the Act. The list is broadly phrased and incorporates the choice of arbitrators from advocates, chartered accountant, cost accountant, company secretary, a person with technical knowledge and experience etc.

5. To expedite the arbitration proceedings

The Act provides for the statement of claim and defence to be finished within half year from the date the arbitrator receives the notice of appointment. This will expedite the whole procedure of arbitration. Earlier, parties would set aside a great deal of effort to present their pleas. This time can be effectively utilized for arbitration proceedings.

A Critical Analysis

The New act has been seen as a development in the field of Arbitration which the government has been trying to boost, but it has come with a new host of problems. The author has listed a few of the criticisms:

1. Who can be appointed as an Arbitrator?

The Eighth Schedule of the Arbitration and Conciliation Amendment Act, 2019 provides that a person will not be qualified to be an arbitrator unless he is/ has been: (i) an advocate within the meaning of the Advocates Act, 1961 having ten years of practice experience as an advocate; (ii) a chartered accountant within the meaning of the Chartered Accountants Act, 1949 having ten years of experience; (iii) a cost accountant within the meaning of the Cost and Works Accountants Act, 1959 having ten years of experience; (iv) a company secretary within the meaning of the Company Secretaries Act,1980 having ten years of experience; (v) an officer of the Indian Legal Service; (vi) an officer with law degree having ten years of experience in the legal matters in the Government, autonomous body, public sector undertaking or at a senior level managerial position in private sector; (vii) an officer with engineering degree having ten years of experience as an engineer in the Government, autonomous body, public sector undertaking or at a senior level managerial position in the private sector or self-employed; (viii) an officer having senior level experience of administration in the Central Government or State Government or having experience of senior level management of a public sector undertaking or a Government company or a private company of repute; or (ix) a person having educational qualification at degree level with ten years of experience in a scientific or technical stream in the fields of telecom, information technology, intellectual property rights or other specialized areas in the Government, autonomous body, public sector undertaking or a senior level managerial position in a private sector, as the case may be.

The aforementioned schedule likewise endorses general standards applicable to arbitrators, including the following:

a. The arbitrator must be fair-minded and nonpartisan and abstain from going into any money-related business or other relationship that is probably going to influence unbiasedness or may sensibly make an appearance of inclination or predisposition among the parties;

b. The arbitrator must be acquainted with the Constitution of India, principles of natural justice, equity, common and customary laws, commercial laws, labour laws, the law of torts, making and enforcing the arbitral awards, domestic and international legal system on arbitration and international best practices; and

c. The arbitrator ought to be equipped for proposing, prescribing or composing a contemplated and enforceable arbitral award in any question which precedes him for adjudication.

The glaring issue with this section and the qualification is that a foreign scholar or a foreign registered lawyer or a retired foreign officer is comprehensively precluded to be an Arbitrator under the 2019 Amendment. For clear reasons, foreign parties will be disheartened to settle on Indian institutional arbitration where the choice of candidates as their potential arbitrators is limited by nationality, the likelihood of lack of experience and specialization – both academic and professional – in handling international arbitrations.

2. Confidentiality of the Arbitration Proceedings.

The arbitrator, the arbitral institution and the parties to the arbitration agreement must keep up the privacy of every single arbitral proceeding with the exception of the award where its disclosure is important with the end goal of usage and requirement of the award.

The ICC as of late updated its Note to Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration, effective 1 January 2019 in which it expressed that all awards made as from 1 January 2019 might be published, no less than two years after their notification, in view of an opt-out procedure. As per the opt-out methodology, any party may at any time object to the publication of an award, or request that the award be sanitized or redacted. In such a case, the award will either not be published or be sanitized or redacted as per the parties' agreement.

This shows at the outset that India's practise in publishing the award is in accordance with globally set up arbitral institutions. The legislators by not giving an opt-out plan of the disclosure settlement under Section 42-A have missed the opportunity to give the clarity to the result of an award in terms of its publication. The choice of the necessary disclosure of an award hasn't been given to any authority and subsequently is dubious.

3. Timely conduct of proceedings

As per the newly introduced Section 23(4), the statement of claim and defence shall be completed within a period of six months from the date of appointment of the arbitrator(s) and as per Proviso to the amended Section 29(1), the award in the matter of international commercial arbitration may be made as expeditiously as possible with an endeavour to deliver it within 12 months from the date of completion of pleadings under Section 23(4).

While it is a welcome step, but it might prompt clashes with the rules of an international arbitration customs as it neglects the procedural angles inalienable to a complex international arbitration. In International Arbitration, the Arbitrators routinely hold a case management hearing, and after consultation with the parties, issue an order on the procedural timetable for the fruition of pleadings, the conduct of hearings and so forth.

In any case, if Section 23(4) confines a tribunal from being in control of its procedures, at that point it might be difficult to adequately lead complex multi-party arbitrations including enormous documents, where it might be practically impossible to finish pleadings in a half year. Similarly, the autonomy of parties to decide on a more flexible procedural schedule will be severely limited. In particular, the parties will consistently be careful about the fate of an award where the time requirements under Section 23(4) are not carefully abided.

Conclusion

The 2019 Bill, much like the 2018 Bill, is laden with numerous issues and glaring irregularities with the legal precedent. Further, the 2019 Bill proposes several changes, for example, creation of a government regulator through the ACI, which has no precedent in any arbitration-friendly jurisdiction.

While the point of the 2019 Bill is to advance arbitration, and fortify institutional arbitration in India, the proposed changes to the Arbitration and Conciliation Act, 2019 may constrain India to make two strides back as an arbitration-accommodating jurisdiction.

The changes brought about in the Amendment Act will definitely bolster the Arbitration scenario in our country but the loopholes and lacunae need to be weeded out so that problems do not arise leading to India facing embarrassment in the global arena. While a portion of these issues might be settled after some time through decisions of the court, it is wise to determine these ambiguities at this phase to abstain from investing significant legal energy and assets. Further, foreign parties may not be inclined to seat their arbitrations in India, till the time these issues are resolved.