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The article analyses relevant concerns around the recent amendments to the Arbitration and Conciliation Act, 1996 with respect to foreign lawyers.
The Arbitration and Conciliation (Amendment) Act, 2019, (2019 Amendment) which came into effect on August 9, 2019, brought about significant changes to the Indian arbitration regime. Amongst other key developments, the newly inserted Part IA has introduced institutional arbitration in India along with a system of ‘grading’ of arbitral institutions by a body appointed under the Arbitration and Conciliation Act, 1996 (Arbitration Act), i.e., the Arbitration Council of India (ACI).
While most of the recent amendments have been notified by the Central Government and have come in force with effect from August 30, 2019, Part IA has not yet been notified. However, it is only a matter of time before that is done.
This article is an attempt to analyse (and perhaps clarify) the current status of foreign lawyers in India seated international commercial arbitration. Further, this article also attempts to examine the impact of the current legal position on virtual hearings, held in India seated international commercial arbitration.
Under Section 29, Section 30 and Section 33 of the Advocates Act, 1961, as amended (Advocates Act), only Advocates enrolled under the Advocates Act are permitted to practice law in India.
However, Section 32 creates an exception by virtue of which, despite the prohibition contained in Section 29, Section 30 and Section 33 (and other provisions of Chapter IV) of the Advocates Act, any court, authority, or person may permit any person, not enrolled as an Advocate under the Advocates Act, to appear before it or him/her, in any particular case. This exception is often referred to as grant of a “special dispensation” in other jurisdictions.
In Bar Council of India v. A.K. Balaji and others, (2018) 5 SCC 379, the Supreme Court of India held that (a) as a general rule, it is not correct to hold that there is “absolutely no bar to a foreign lawyer from conducting arbitrations in India” ; (b) it may be possible for a foreign lawyer to conduct an arbitration in India if such arbitration “is governed by the rules of an institution or if the matter otherwise falls under Section 32 or 33” of the Advocates Act; provided the Code of Conduct, if any, applicable to the legal profession in India is followed; and, (c) the Government of India or the Bar Council of India may frame appropriate rules in this regard. [See paragraph 45 and 48 of A. K. Balaji’s Case]
While generally, foreign lawyers are barred from acting as counsel in India seated international commercial arbitration even on a fly-in-fly-out basis, it appears that a foreign lawyer might be in a position to at least appear and plead (if not act) in an India seated (i) institutional arbitration, the governing rules of which permit a foreign lawyer to do so, or (ii) an international commercial arbitration under the Arbitration Act, if special dispensation under Section 32 of the Advocates Act has been granted by the tribunal.
The Advocates Act does not have extra-territorial application. A question that arises is whether the prohibition under the Advocates Act can apply to a foreign lawyer who has not entered India but is only participating through video conference for the purpose of appearing and pleading in an India seated ad hoc international commercial arbitration? I believe that the answer to this question is unclear.
One could rely on the principle laid down by the Supreme Court in Bhagwandas Goverdhandas Kedia v. M/s. Girdharilal Parshottamdas, AIR 1966 SC 543, a case relating to contracts inter absentes, made telephonically or tele-visually, to argue that the foreign lawyer is deemed to be present in India, since the tribunal seated in India is able to hear his or her voice instantaneously.
Even if I am not attempting to definitively answer that question here, in the case of participation through video conferencing, whether during the COVID-19 pandemic or even otherwise, this shadow of doubt could be entirely obviated under Section 32 of the Advocates Act, if the tribunal grants dispensation to such foreign lawyers to address the tribunal through video conferencing.
Since the introduction of the Arbitration and Conciliation (Amendment) Bill 2018, which laid the foundation of the 2019 Amendment, there has been a growing concern regarding the status of foreign lawyers acting as arbitrators in India.
Lord Peter Goldsmith QC, while delivering the Key Note Address at the Nani Palkhivala Arbitration Centre’s 11th International Arbitration Conference in 2019, said that the changes contemplated by this Bill with respect to foreign lawyers could “set back the cause of Indian arbitration by many years, perhaps a generation” and that “would appear at a stroke to prohibit the appointment of foreign lawyers as arbitrators in Indian seated arbitrations - because you would have to be an Indian advocate to qualify.”
However, this confusion has been demystified since then, as explained in the subsequent paragraphs.
First, Section 43-J in Part IA of the Arbitration Act has introduced certain norms for accreditation of arbitrators, which are elaborated in the corresponding Eighth Schedule. It is correct that that the Eighth Schedule leaves out foreign lawyers for the purpose of accreditation but, (a) this criteria can be modified by the Central Government from time to time; and, (b) there is no requirement under the Arbitration Act that only accredited arbitrators can act as arbitrators in India.
Second, with the introduction of Section 11(3A) and Section 43-I, the Supreme Court of India or the High Courts would now be able to designate arbitral institutions, graded by the ACI, which will in turn make default appointment of arbitrators, rather than the courts making such default appointments themselves.
Further, Section 11(1) of the Arbitration Act provides for the appointment of a person of any nationality as an arbitrator. Similarly, Section 11(9) of the Arbitration Act provides that arbitral institutions designated by the Supreme Court may appoint an arbitrator of any (neutral) nationality other than the nationalities of the parties in an international commercial arbitration, where the parties belong to different nationalities.
To conclude: (a) the 2019 Amendment does not defeat the autonomy of parties to an arbitration agreement to appoint arbitrators in ad hoc arbitrations nor does it impact institutional arbitrations seated in India; and, (b) even non-accredited arbitrators could be a part of arbitral institutions accredited by the ACI and be appointed as arbitrators through such institutions. This would be an area to be governed by the rules of the respective arbitral institutions.
Recently, Honourable Justice Indu Malhotra clarified the “misapprehension and misconception” around the controversial Eighth Schedule, during a Lecture organised by the MBA Academy, Madras Bar Association in April 2020, by stating that “...the Eight Schedule lays down the minimum qualifications which an arbitrator must possess, only with respect to Indian arbitration practitioners and has no application whatsoever to any foreign arbitration practitioner. The Law Minister has also recently clarified, in no uncertain terms, that the provisions of the Eighth Schedule are not applicable to foreign arbitration practitioners.”
Therefore, the omission (inadvertent or by choice) of foreign lawyers from the list in the Eighth Schedule has no bearing on the appointment of foreign lawyers as arbitrators in India seated international commercial arbitrations.
Overall, India remains a progressive and evolving jurisdiction for international commercial arbitration. Despite superficial concerns aired in some quarters, India does allow foreign lawyers to engage in India seated international commercial arbitration, albeit in a more regulated manner than one would have hoped for a couple of years ago.
The author is Avni Sharma, an Advocate based in New Delhi, whose practice is focussed on a wide range of commercial litigation and domestic as well as international commercial arbitration. She also reads as a Junior in the Chambers of Gaurav Pachnanda, Senior Advocate.