Bill offers new lease of life for arbitration in India

By Vivek Vashi and Shreya Ramesh, Bharucha & Partners
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On 26 August, India’s cabinet announced it had approved the Arbitration and Conciliation Bill, 2015, which appears to reflect suggestions and amendments proposed by the Law Commission in its reports of August 2014 and February 2015.

Vivek Vashi
Vivek Vashi

The bill proposes some radical measures to tackle problems such as inordinate delays in hearings, incessant adjournments, mounting costs and fees and, in some measure, conflicting lines of authorities. The numerous amendments to the Arbitration and Conciliation Act, 1996, suggested by the Law Commission and subject to parliamentary approval, could go a long way to rejuvenate the arbitral process in India.

The arbitral tribunal: Proposed amendments to various sections (such as 11, 12 and 14) envisage disclosure by arbitrators of all circumstances and relations that give rise to justifiable doubts as to their independence or impartiality. For clarity, schedules which set out grounds that give rise to justifiable doubts are to be annexed to the act. The disclosures to be made by arbitrators address core concerns, such as the availability of arbitrators, their experience and relations with the parties. While it remains to be seen whether parliament will pass such provisions into law, this signals a progressive and encouraging trend in Indian arbitration.

Speedy proceedings: The bill includes provisions to inhibit the regular seeking of adjournments and appears to encourage the use of video and teleconferencing to meet strict timelines. Further, parties could agree to pay additional fees to the arbitral tribunal on the completion of proceedings within timelines; and courts may reduce arbtitrators’ fees up to 5% per month when timelines are not met on account of the arbitrators’ delay.

Shreya Ramesh
Shreya Ramesh

In addition, several timelines are proposed to be imposed, including a strict timeline of 12 months for passing the award. Parties could extend this timeline by a maximum of six months and any further extensions shall only be granted by a court. Challenges under section 34 would need to be disposed of within one year and applications for the appointment of arbitrators within 60 days. The filing of an appeal would no longer serve as an automatic stay on execution of the award.

Fast-track arbitration: Parties could agree to fast-track proceedings, in which case an award would be passed within six months.

Interim relief: Although section 17 gives an arbitral tribunal the power to pass orders, these cannot be enforced as orders of a court. For this reason, parties must approach a court under section 9 for interim relief. A proposed amendment to section 17 would give the arbitral tribunal powers akin to a civil court in respect of the grant and enforcement of interim relief, as envisaged in the UNCITRAL Model Law, as amended in 2006, and as suggested by the Law Commission.

Appeals against an award: While section 34 sets out a series of grounds which warrant judicial interference to set aside an award, the inclusion of “conflict with the public policy of India” in section 34(2)(b)(ii) has opened the floodgates to conflicting judicial interpretations as to what constitutes public policy. The Supreme Court expanded the scope of interference with an award in cases such as Oil and Natural Gas Corporation Ltd v Saw Pipes Ltd (2003), Oil and Natural Gas Corporation Ltd v Western Geco International Ltd (2014) and Associate Builders v Delhi Development Authority (2014) to include grounds such as: (a) the fundamental policy of Indian law; (b) the interests of India; (c) justice; (d) morality, including patent illegality in the award or contravention of substantive laws of India.

The bill seeks to restrict the grounds of interference under “public policy” to such cases where the award is: (a) induced or affected by fraud or corruption; (b) in contravention of the fundamental policy of Indian law; (c) in conflict with the most basic notions of morality or justice. The implementation of these restricted grounds of appeal may not prove to be effective until they are crystallized in legislation, as the scope of “fundamental policy” would continue to be subject to judicial interpretation.

The bill has also appears to have incorporated amendments to section 48 as set out in the Law Commission’s reports, to exclude patent illegality as a ground to refuse enforcement of an award.

Costs regime: While the specifics remain unknown, it appears that the bill will introduce a new regime to govern costs and, presumably, a cap on the fees payable to arbitrators and arbitration institutions.

The fate of ongoing arbitrations is unclear as the cabinet did not indicate whether it has accepted or rejected the Law Commission’s recommendation of transitional provisions to clarify the scope of the operation of each amendment on ongoing proceedings.

However, given the recent washout of the monsoon session of the parliament and recent reports of a joint session of parliament being convened to pass key legislation in relation to the introduction of goods and services tax, it remains to be seen when the bill will eventually be tabled before parliament.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Shreya Ramesh is an associate.

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