Arbitration & Conciliation (Amendment) Act 2019 – Analysis

The-Arbitration-and-Conciliation-Amendment-Act-2019 upsc

Indian judiciary, according to National Judicial Data Grid Statistics, has about 3 crores pending cases. Due to its slow pace, many prefer arbitration to solve the issues of dispute settlement, monetary recovery, etc. To encourage foreign investments and promote ease of doing business, faster judicial procedures and efficient dispute resolution are essential. Provisions to settle disputes through arbitration are provided in Arbitration and Conciliation Act, 1996. This law was amended twice: in 2015 and during the recent parliament session.

What is Arbitration and Conciliation Amendment Act 2019?

  • Arbitration and Conciliation Amendment Act, 2019 amends the Arbitration and Conciliation Act, 1996.
  • This law has provisions to deal with international and domestic arbitration.
  • This act consists of provisions for conciliation procedures.
  • India through this act seeks to become an international hub for arbitration.

What are the key features of this act?

The key features of this act are as follows:

  • Establishment of Arbitration Council of India: Through this act, an independent body – Arbitration Council of India is established. This body acts as an alternative dispute resolution system by addressing and promoting arbitration, mediation, conciliation. The functions of ACI include :
  1. Maintaining records of all the arbitral awards in India and abroad.
  2. Framing, establishing and maintaining fixed professional standards in the alternative dispute redressal mechanisms.
  3. Grading arbitral institutions and recognizing arbitrators across the country.
  4. ACI must provide the parties involved in the arbitration process with the list of arbitrators to choose from.
  5. Promoting and encouraging arbitration, conciliation and other alternative dispute resolution mechanisms.
  6. It is also in-charge of framing policies and guidelines for the standardization of the arbitration.
  • Appointment of arbitrators: As per the Arbitration and Conciliation Act, 1996, the parties can choose an arbitrator. In case there is a disagreement in this regard, they can request the Supreme Court, or High Court, or any individual or institution to appoint an arbitrator. According to the current amendments, SC and HCs can designate the arbitral institutions. For the international commercial disputes, appointments of the arbitrators will be made by the arbitration institutions designated by the SC. For the domestic level arbitration, it will be made by institutions designated by the HCs. In case of absence of arbitration institutions, the Chief Justices of the respective HCs will maintain a panel of arbitrators to undertake the functions of the arbitral institutions. The appointments of the arbitrators must be done within 30 days.
  • Time limits: As per the Section 29A of the previous act, the arbitral institutions must provide awards within the span of 12 months. The extension of 6 months is given if the parties involved consents. The current amendment of this section seeks to rectify the previous drawbacks of rigid timing by commencing the time period of 12 months after the completion of pleadings. This section has not included the International Commercial Arbitration.
  • Non-disclosure of the arbitrations: The current law’s section 42A and 43B makes it mandatory to keep all the proceedings of the arbitration in private except the details on arbitral awards under exceptional circumstances. Disclosure of the arbitral awards can only be done whenever necessary during the enforcement or implementation of the award.
  • Written submissions: Under the previous law, there weren’t any provisions on time limits for filing written submissions before the arbitral tribunals. Changes have been made in the amended law – written claim and the defence of that claim must be submitted to the arbitration tribunal within six months after the appointment of the arbitrators.
  • Applicability of 2015 Amendment Act: The currently amended law clears the confusion of the previous law through section 87, with regards to the applicability Amending Act of 2015 in the court proceedings that were the result of the arbitration.

Most probable and repeated topics of upsc prelims

What is ACI?

  • ACI is a statutory body headquartered in New Delhi.
  • It consists of a chairperson who is either a judge of the Supreme Court or a chief judge of HC or any other eminent person who has knowledge or experience regarding arbitration proceedings.
  • This chairperson will be appointed by the Central Government in consultation with the Chief Justice of India.
  • The other members may include eminent arbitration practitioners or academicians.
  • The ex-officio members of this council include Secretary of Department of Legal Affairs, Ministry of Law and Justice; Secretary of the Department of Expenditure, Ministry of Finance; and other related representatives not below the rank of Joint-Secretary.
  • There is also the representative from a recognised body of commerce and industry.

Why are the current changes necessary?

  • It reduces the burden on the judiciary: The Indian judiciary is criticized for its large pendency of cases. Alternate measures to resolve disputes are the need of the hour.
  • Increase in the demand for arbitration: With the wake of globalisation, there has been an increasing number of international commercial disputes. Many international companies that have invested in India are opting for international arbitrations in recent times. This is due to the slow pace of the Indian judicial proceedings. If India makes an alternative and efficient arbitration mechanism, it will be easier to resolve the issues within the territory.
  • India – a hub for international arbitration: If the ACI launches necessary training, organising workshops and courses related to arbitration proceedings, India may become the preferred international hub for arbitration.
  • Making arbitration proceedings efficient and fast: the previous law was not efficient despite having provisions to hasten the arbitration proceedings. This is because of the completion of pleadings take up most of the arbitrators’ time. This short time span is not enough to record the evidence, hear arguments and efficiently provide an arbitral award. The whole purpose of the procedure is lost due to the limitation of time. The initiation of the 12 months deadline after the completion of pleading in the amended law makes it more efficient.

Way Forward

  • India’s arbitration is deeply integrated with court litigation.
  • This shows that India does not have the necessary manpower and specialisation with regards to arbitration proceedings.
  • Arbitration Council of India may help overcome these shortcomings and make India a preferred hub for resolving international commercial disputes.
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