Promod Nair.After two aborted attempts, in 2001 and 2010 (surveyed here), the Arbitration and Conciliation Act 1996 (the “Arbitration Act”) has finally been amended. On 23 October 2015, the President of India promulgated an ordinance (the “Arbitration Ordinance”) to bring into force a number of amendments to the Arbitration Act..Despite some significant deviations, the Arbitration Ordinance is largely based on the recommendations of the 246th Report of the Law Commission of India. Many of the changes are welcome and can provide a significant impetus to improving the culture of arbitration in India. If implemented purposively, these amendments will serve to make arbitration in India more efficient and better aligned with international standards..That the changes were introduced via the ordinance route (rather than have amending legislation passed by a deadlocked Parliament) is significant and underlines the urgency attached by the government to making arbitration a more effective and efficient mode of dispute resolution and pave the way for India to be an easier place for doing business, a key policy objective of the current government..However, good intentions alone cannot create good law. The Arbitration Ordinance contains a number of significant shortcomings and omissions which could limit its effectiveness. The purpose of this piece is to analyse some of these shortcomings in the hope that they will be suitably addressed in Parliamentary legislation which should replace the transitory Arbitration Ordinance in due course..Interim Relief.In the post-BALCO arbitration landscape, other than considering applications for enforcement of foreign arbitral awards and agreements to arbitrate, the Indian courts had no jurisdiction to intervene in arbitrations which were seated outside India. Whilst avenues for unwelcome judicial interference were shut off, the all-or nothing approach to judicial intervention meant that Indian courts could not lend their support to arbitrations seated outside India by making interim measures of protection..Coupled with the fact that interim orders made by arbitral tribunals in offshore arbitrations (as well as interim orders made by courts at the seat of arbitrations outside India) are not enforceable in India, this position created substantial difficulties for parties who had chosen to arbitrate India-related disputes offshore. The Arbitration Ordinance has sought to correct this anomaly and has expressly granted Indian courts powers to grant interim relief in support of foreign-seated arbitrations..There are, however, a few important qualifications to this provision and it is in respect of these that difficulties are likely to be encountered..First, this avenue is designed to be available only in cases where the seat of arbitration is a country which is a party to the New York Convention. This is sought to be achieved by providing that an Indian court can order interim measures of protection in respect of an offshore-seated arbitration and if “the arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Ordinance”. However, the Arbitration Ordinance does not have a Part II. The drafters of the Arbitration Ordinance must have intended to refer to Part II of the Arbitration Act and it is necessary that such an intention be properly manifested in the language of the amending law..Further, this option is only applicable to parties to an “international commercial arbitration” with a seat outside India. This means that the protection will not be available to two Indian parties who choose to arbitrate outside. This negative consequence for Indian parties does not seem to have been intended and appears to be a drafting oversight...Linking applications for interim relief to commencement of arbitration proceedings.The Ordinance enables parties to seek interim relief from a court prior to the commencement of arbitration, but stipulates that arbitration should generally be commenced within 90 days of obtaining such interim measures. In Firm Ashok Traders v Gurumukh Das Saluja and a number of other decisions, the Supreme Court has underlined the need for a party making an application under section 9 prior to the constitution of an arbitral tribunal to demonstrate a “manifest intention” to commence arbitration proceedings. The amendment seeks to ensure that such manifest intention is followed up with action within a definite timeframe..Indian courts often make orders on an ad interim or ex parte basis, which may be modified, confirmed or set aside after a more detailed evaluation of the application. It is not entirely clear if the 90-day period should be calculated from the date of the final order or the ex parte or ad interim order. The better approach would be to require the commencement of arbitration proceedings within 90 days of filing of the application for interim measures of protection..Interim measures by the arbitral tribunal.Section 17 has been amended to provide an arbitral tribunal with the same range of powers that are available to a court under section 9 of the Arbitration Act. To give greater purpose to section 17, the Arbitration Ordinance clarifies that once an arbitral tribunal has been constituted, no court should ordinarily entertain an application under section 9..Interestingly, the amended section 17 now provides that a party can approach an arbitral tribunal for interim measures of protection not only during the arbitration proceedings but also after the making of the award but before it is enforced. This means that, under the terms of the amended provision, an arbitral tribunal will retain jurisdiction to order interim measures of protection for quite some time after it makes a final award..However, in terms of section 32 (which has not been amended) of the Arbitration Act, the mandate of an arbitral tribunal will automatically be terminated after the making of a final arbitral award. If it becomes functus officio, it is difficult to see how an arbitral tribunal’s mandate would stand revived to consider an application for interim measures of protection..Furthermore, after a final arbitral award is made, there is little justification for the tribunal to make an order “securing the amount in dispute in the arbitration” or for preserving evidence relating to the subject matter of the dispute etc. These are again drafting errors which require correction..What makes an arbirtration “international”?.Under the 1996 Act, an arbitration involving “a company or an association of individuals whose central management and control is exercised in any country other than India” was included within the definition of an “international commercial arbitration”. This would permit the parties to such a clause to choose a foreign governing law for their contract under section 28..However, in TDM v UEDI the designate of the Chief Justice of India (in a poorly reasoned decision) nullified the express language of the provision and held that an arbitration involving a company incorporated in India would be considered to be a domestic arbitration even if its “central management and control” is exercised in a country outside India..Despite the decision effectively rewriting the plain meaning of section 2(1)(f) of the Arbitration Act, the Law Commission considered it appropriate to further entrench the decision in TDM v UEDI by clarifying that an arbitration involving a company registered in India could never fall within the category of an “international commercial arbitration”..A locally incorporated company, with its central management and control being exercised outside India, would be considered to be an entity with foreign nationality and would likely satisfy the definition of a foreign “investor” for the purposes of numerous Bilateral Investment Treaties that India is a party to..Against this backdrop, to disregard economic reality and the true nationality of such a company is incongruous. The Law Commission’s uncritical endorsement of the flawed TDM v UEDI decision which has also been adopted by the Arbitration Ordinance is not a beneficial change and the better approach would be to reinstate the pre-TDM v UEDI regime on this point..Enforcing agreements to arbitrate.The term “judicial authority” is significantly broader than the expression “court” and was deliberately used in the original Arbitration Act to bring within its scope non-court bodies such as the BIFR, the Company Law Board, Debt Recovery Tribunals and similar institutions. This was designed to ensure that not only courts but also other bodies exercising judicial and quasi-judicial powers enforced agreements to arbitrate and refrained from assuming jurisdiction over a dispute by disregarding an arbitration clause..The Arbitration Ordinance refers to the power of a “judicial authority” to refer parties to arbitration in section 8(1), but inexplicably substitutes the broader term “judicial authority” with the narrower expression of “court” in section 8(2). Clearly, this is tardy drafting which requires tidying up..In examining applications under section 8, a judicial authority is permitted to consider issues such as the existence or validity of an arbitration agreement. However, in dealing with applications under section 11 for appointment of arbitrators, a court is required to confine itself to “the examination of the existence of an arbitration agreement” and cannot consider questions relating to the validity of an arbitration clause..As recognised in SBP & Co v Patel Engineering Ltd, sections 8 and 11 are often closely related and are complementary in nature. Against this background, providing for different standards of judicial review in complementary sections is incongruous..Neutrality and availability of arbitrators.Amendments have been introduced to the Arbitration Act to effectively incorporate by reference the IBA Guidelines on Conflict of Interest in International Arbitration which are widely acknowledged to reflect best practices in ensuring the impartiality and independence of international arbitrators. The IBA Guidelines have adopted a traffic light system of designating situations of potential conflict of interest into red, orange and green whereby:.The Red List is an enumeration of specific situations giving rise to justifiable doubts as to an arbitrator’s impartiality and independence. This list is divided into non-waivable and waivable situations.The Orange List is an enumeration of specific situations that in the eyes of the parties may give rise to justifiable doubts as to an arbitrator’s impartiality or independence.The Green List is an enumeration of specific situations in which there is no appearance of a lack of impartiality and independence and so no conflict of interest exists..If a circumstance falls within the non-waivable Red List, an arbitrator must decline an appointment. If this is not done, the arbitral award would be at serious risk of being annulled for violation of due process and also on public policy grounds. Certain instances which fall within the non-waivable Red List include cases where:.the arbitrator is a manager, director or member of the supervisory board, or has a controlling influence on one of the parties or an entity that has a direct economic interest in the award to be rendered in the arbitration;the arbitrator has a significant financial or personal interest in one of the parties, or the outcome of the case; andthe arbitrator or his or her firm regularly advises the party, or an affiliate of the party, and the arbitrator or his or her firm derives significant financial income therefrom..However, each of these instances of non-waivable conflicts of interest are treated by section 12(5) and the Seventh Schedule of the Arbitration Ordinance as being of a waivable nature. Severe conflicts of interest which would internationally (i) require an arbitrator to decline an appointment, and if not done (ii) render the arbitral award liable to annulment are treated leniently by the Ordinance which adopts a permissive approach to even the most serious conflicts of interest. This position is at odds with the government’s professed objective of modernising the arbitration law and requires a course correction to bring Indian law in this respect in line with international best practices in arbitration..Streamlining arbitral proceedings.Time and fee limits for arbitrations.In order to combat complaints of delays and disproportionate fees fixed by arbitrators for themselves in ad hoc arbitrations in India, India is now probably the only jurisdiction in the world to fix a time limit for arbitration and also the first to fix fees for arbitrators..Under the amendments introduced by the Arbitration Ordinance, arbitration awards must be made within 12 months from the date on which all the arbitrators have received written notice of their appointment. The parties can mutually agree to extend the time period by a further period of 6 months but any further delay will result in termination of the arbitral tribunal’s mandate unless a court extends the time period for “sufficient cause and on such terms and conditions as may be imposed by the Court.”.The Arbitration Ordinance has also introduced a schedule of fees for arbitrators in ad hoc arbitrations..Whilst the intention underlying these amendments are understandable, fixing rigid (and what can often be unrealistic) timelines for the completion of an arbitration can be problematic. It should be possible for a simple contractual dispute involving little or no witness evidence to be resolved in 12 months or less but a complicated construction dispute involving multiple parties (and possibly multiple contracts), tens of complex claims and counterclaims requiring factual and expert evidence and involving millions or billions of dollars in dispute could take substantially longer. The amendment is based on the faulty premise that a one-size fits all approach will work in India irrespective of the nature, complexity and the stakes involved in different disputes..Although well-intended, this amendment could likely result in a situation where (i) a significant number of parties will be forced to line up before the courts for an extension of mandate of arbitral tribunals, or (ii) parties to high-value, complex contracts will simply decide to have these disputes resolved outside India. This could defeat the legislative intention underlying this amendment..A carve out has been expressly provided to ensure that the fee schedule specified in the Fourth Schedule to the Arbitration Ordinance will not apply to institutional arbitration or to international commercial arbitration. However, no similar carve out has been made in respect of time limits for completion of an institutional arbitration seated in India..This will mean that even in respect of, say an ICC or LCIA arbitration seated in India, parties will have to approach courts for extension of an arbitral tribunal’s mandate after the expiry of the 12-month period. This position would result in an unwelcome intrusion into institutional rules and requires urgent correction..The Fourth Schedule provides model fees for arbitrations based on the value of the dispute. It also makes elaborate provisions for amendment of the Fourth Schedule by the Central Government (including laying of the rules before each House of Parliament). Yet, the Fourth Schedule will not have any legal effect by itself and requires to be adopted into rules that are to be drafted by each High Court. It would have been far simpler and more effective to provide legal effect to the Fourth Schedule ex proprio vigore and this would also enable a harmonised regime to be in place throughout India..Important omissions.Enforcement of emergency arbitrator decisions.The Law Commission’s Report recommended that express provisions be inserted in the Arbitration Act to facilitate decisions made by emergency arbitrators. The Arbitration Ordinance does not, however, contain provisions to give effect to this recommendation. This is an important omission that requires fixing. Emergency arbitrator provisions are now to be found in arbitration rules of most of the established international arbitral institutions and they have also been widely used in arbitrations involving Indian parties. Modern arbitration statutes across the world contain specific provisions to enforce decisions of emergency arbitrators and it is essential that India adopt the same approach in modernising its arbitration law and making it state-of-the-art..No time limit for enforcement of foreign arbitral awards.The amendment to section 34 requires a court to decide a challenge to a domestic award within a one year timeframe. However, quite inexplicably, the Arbitration Ordinance has not specified a corresponding timeline for the enforcement of foreign arbitral awards. Against the backdrop of the White Industries decision (where India was held to be in breach of its BIT obligations for the failure of its courts to enforce a foreign arbitration award within a reasonable timeframe), this omission is indeed baffling and requires to be corrected urgently..Confidentiality .Confidentiality is often cited as one of the important perceived advantages of arbitration over litigation, and commercial parties will often opt for arbitration in order to keep the details of their dispute private. In India, confidentiality of proceedings is not expressly recognised or provided for in the Arbitration Act and this is an important omission in the statute.In this regard, it would be useful to derive guidance from the LCIA Arbitration Rules and insert a provision along the following lines into the 1996 Act:.“The parties shall be required as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority.”.It is also possible, in circumstances where an award is challenged before the courts, that non-parties may access the award and relevant documents produced in the arbitration. A potential breach of confidentiality in these circumstances can be prevented by inserting a provision to the following effect:.“An arbitral award or awards, or any materials created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain that are filed in court may only be inspected with the express permission of the court.”.Failure to address the notification hurdle to enforcement of foreign arbitral awards .In acceding to the New York Convention, India has made the reciprocity reservation, whereby India will only recognise and enforce arbitration awards made in another New York Convention State..However, the manner in which India has implemented the reciprocity reservation is not in line with the provisions of the New York Convention. Section 44 of the Arbitration Act imposes a two-fold requirement for the enforcement of foreign arbitral awards in requiring that (i) the award be made in a reciprocating country; and (ii) the reciprocating country must be declared as such by the Central Government by notification in the Official Gazette..Therefore, even if a country is a signatory to the NY Convention, this does not necessarily mean that an award made in that country would be automatically enforceable in India. The language of Section 44 seems to indicate that the award would only be enforceable if the country has been notified by the Central Government as a country to which the NY Convention applies. Only around 50 countries have been so notified by the Central Government thus far..The second condition is not one that is permitted under the New York Convention. Therefore, in order to prevent a situation where Indian is held to be in breach of its international law obligations, it is necessary that section 44 be amended by simply deleting the “notification requirement”..Failure to clarify if the amendments will operate prospectively or retrospectively.Whether, and how, the amendments will affect arbitration agreements entered into prior to 23 October 2015, arbitral proceedings and court actions is a crucial area which has been left substantially unaddressed by the Arbitration Ordinance. This is a topic which requires detailed treatment in itself and will be the subject matter of a future piece on this website..Conclusion.The Arbitration Ordinance is a step in the right direction to reform and modernise Indian arbitration law. However, some of the amendments require finessing and a more thoughtful approach to drafting could have avoided certain inconsistencies which exist amongst different parts of the Arbitration Ordinance. In the normal course, the Arbitration Ordinance should be enacted into law by Parliament in a few months. Before this happens, some serious thought has to go into ironing out a number of these creases and fine tuning the legislation..(Promod Nair (promod.nair@aristachambers.com) is an advocate and the founder of Arista Chambers, a specialist dispute resolution practice.)
Promod Nair.After two aborted attempts, in 2001 and 2010 (surveyed here), the Arbitration and Conciliation Act 1996 (the “Arbitration Act”) has finally been amended. On 23 October 2015, the President of India promulgated an ordinance (the “Arbitration Ordinance”) to bring into force a number of amendments to the Arbitration Act..Despite some significant deviations, the Arbitration Ordinance is largely based on the recommendations of the 246th Report of the Law Commission of India. Many of the changes are welcome and can provide a significant impetus to improving the culture of arbitration in India. If implemented purposively, these amendments will serve to make arbitration in India more efficient and better aligned with international standards..That the changes were introduced via the ordinance route (rather than have amending legislation passed by a deadlocked Parliament) is significant and underlines the urgency attached by the government to making arbitration a more effective and efficient mode of dispute resolution and pave the way for India to be an easier place for doing business, a key policy objective of the current government..However, good intentions alone cannot create good law. The Arbitration Ordinance contains a number of significant shortcomings and omissions which could limit its effectiveness. The purpose of this piece is to analyse some of these shortcomings in the hope that they will be suitably addressed in Parliamentary legislation which should replace the transitory Arbitration Ordinance in due course..Interim Relief.In the post-BALCO arbitration landscape, other than considering applications for enforcement of foreign arbitral awards and agreements to arbitrate, the Indian courts had no jurisdiction to intervene in arbitrations which were seated outside India. Whilst avenues for unwelcome judicial interference were shut off, the all-or nothing approach to judicial intervention meant that Indian courts could not lend their support to arbitrations seated outside India by making interim measures of protection..Coupled with the fact that interim orders made by arbitral tribunals in offshore arbitrations (as well as interim orders made by courts at the seat of arbitrations outside India) are not enforceable in India, this position created substantial difficulties for parties who had chosen to arbitrate India-related disputes offshore. The Arbitration Ordinance has sought to correct this anomaly and has expressly granted Indian courts powers to grant interim relief in support of foreign-seated arbitrations..There are, however, a few important qualifications to this provision and it is in respect of these that difficulties are likely to be encountered..First, this avenue is designed to be available only in cases where the seat of arbitration is a country which is a party to the New York Convention. This is sought to be achieved by providing that an Indian court can order interim measures of protection in respect of an offshore-seated arbitration and if “the arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Ordinance”. However, the Arbitration Ordinance does not have a Part II. The drafters of the Arbitration Ordinance must have intended to refer to Part II of the Arbitration Act and it is necessary that such an intention be properly manifested in the language of the amending law..Further, this option is only applicable to parties to an “international commercial arbitration” with a seat outside India. This means that the protection will not be available to two Indian parties who choose to arbitrate outside. This negative consequence for Indian parties does not seem to have been intended and appears to be a drafting oversight...Linking applications for interim relief to commencement of arbitration proceedings.The Ordinance enables parties to seek interim relief from a court prior to the commencement of arbitration, but stipulates that arbitration should generally be commenced within 90 days of obtaining such interim measures. In Firm Ashok Traders v Gurumukh Das Saluja and a number of other decisions, the Supreme Court has underlined the need for a party making an application under section 9 prior to the constitution of an arbitral tribunal to demonstrate a “manifest intention” to commence arbitration proceedings. The amendment seeks to ensure that such manifest intention is followed up with action within a definite timeframe..Indian courts often make orders on an ad interim or ex parte basis, which may be modified, confirmed or set aside after a more detailed evaluation of the application. It is not entirely clear if the 90-day period should be calculated from the date of the final order or the ex parte or ad interim order. The better approach would be to require the commencement of arbitration proceedings within 90 days of filing of the application for interim measures of protection..Interim measures by the arbitral tribunal.Section 17 has been amended to provide an arbitral tribunal with the same range of powers that are available to a court under section 9 of the Arbitration Act. To give greater purpose to section 17, the Arbitration Ordinance clarifies that once an arbitral tribunal has been constituted, no court should ordinarily entertain an application under section 9..Interestingly, the amended section 17 now provides that a party can approach an arbitral tribunal for interim measures of protection not only during the arbitration proceedings but also after the making of the award but before it is enforced. This means that, under the terms of the amended provision, an arbitral tribunal will retain jurisdiction to order interim measures of protection for quite some time after it makes a final award..However, in terms of section 32 (which has not been amended) of the Arbitration Act, the mandate of an arbitral tribunal will automatically be terminated after the making of a final arbitral award. If it becomes functus officio, it is difficult to see how an arbitral tribunal’s mandate would stand revived to consider an application for interim measures of protection..Furthermore, after a final arbitral award is made, there is little justification for the tribunal to make an order “securing the amount in dispute in the arbitration” or for preserving evidence relating to the subject matter of the dispute etc. These are again drafting errors which require correction..What makes an arbirtration “international”?.Under the 1996 Act, an arbitration involving “a company or an association of individuals whose central management and control is exercised in any country other than India” was included within the definition of an “international commercial arbitration”. This would permit the parties to such a clause to choose a foreign governing law for their contract under section 28..However, in TDM v UEDI the designate of the Chief Justice of India (in a poorly reasoned decision) nullified the express language of the provision and held that an arbitration involving a company incorporated in India would be considered to be a domestic arbitration even if its “central management and control” is exercised in a country outside India..Despite the decision effectively rewriting the plain meaning of section 2(1)(f) of the Arbitration Act, the Law Commission considered it appropriate to further entrench the decision in TDM v UEDI by clarifying that an arbitration involving a company registered in India could never fall within the category of an “international commercial arbitration”..A locally incorporated company, with its central management and control being exercised outside India, would be considered to be an entity with foreign nationality and would likely satisfy the definition of a foreign “investor” for the purposes of numerous Bilateral Investment Treaties that India is a party to..Against this backdrop, to disregard economic reality and the true nationality of such a company is incongruous. The Law Commission’s uncritical endorsement of the flawed TDM v UEDI decision which has also been adopted by the Arbitration Ordinance is not a beneficial change and the better approach would be to reinstate the pre-TDM v UEDI regime on this point..Enforcing agreements to arbitrate.The term “judicial authority” is significantly broader than the expression “court” and was deliberately used in the original Arbitration Act to bring within its scope non-court bodies such as the BIFR, the Company Law Board, Debt Recovery Tribunals and similar institutions. This was designed to ensure that not only courts but also other bodies exercising judicial and quasi-judicial powers enforced agreements to arbitrate and refrained from assuming jurisdiction over a dispute by disregarding an arbitration clause..The Arbitration Ordinance refers to the power of a “judicial authority” to refer parties to arbitration in section 8(1), but inexplicably substitutes the broader term “judicial authority” with the narrower expression of “court” in section 8(2). Clearly, this is tardy drafting which requires tidying up..In examining applications under section 8, a judicial authority is permitted to consider issues such as the existence or validity of an arbitration agreement. However, in dealing with applications under section 11 for appointment of arbitrators, a court is required to confine itself to “the examination of the existence of an arbitration agreement” and cannot consider questions relating to the validity of an arbitration clause..As recognised in SBP & Co v Patel Engineering Ltd, sections 8 and 11 are often closely related and are complementary in nature. Against this background, providing for different standards of judicial review in complementary sections is incongruous..Neutrality and availability of arbitrators.Amendments have been introduced to the Arbitration Act to effectively incorporate by reference the IBA Guidelines on Conflict of Interest in International Arbitration which are widely acknowledged to reflect best practices in ensuring the impartiality and independence of international arbitrators. The IBA Guidelines have adopted a traffic light system of designating situations of potential conflict of interest into red, orange and green whereby:.The Red List is an enumeration of specific situations giving rise to justifiable doubts as to an arbitrator’s impartiality and independence. This list is divided into non-waivable and waivable situations.The Orange List is an enumeration of specific situations that in the eyes of the parties may give rise to justifiable doubts as to an arbitrator’s impartiality or independence.The Green List is an enumeration of specific situations in which there is no appearance of a lack of impartiality and independence and so no conflict of interest exists..If a circumstance falls within the non-waivable Red List, an arbitrator must decline an appointment. If this is not done, the arbitral award would be at serious risk of being annulled for violation of due process and also on public policy grounds. Certain instances which fall within the non-waivable Red List include cases where:.the arbitrator is a manager, director or member of the supervisory board, or has a controlling influence on one of the parties or an entity that has a direct economic interest in the award to be rendered in the arbitration;the arbitrator has a significant financial or personal interest in one of the parties, or the outcome of the case; andthe arbitrator or his or her firm regularly advises the party, or an affiliate of the party, and the arbitrator or his or her firm derives significant financial income therefrom..However, each of these instances of non-waivable conflicts of interest are treated by section 12(5) and the Seventh Schedule of the Arbitration Ordinance as being of a waivable nature. Severe conflicts of interest which would internationally (i) require an arbitrator to decline an appointment, and if not done (ii) render the arbitral award liable to annulment are treated leniently by the Ordinance which adopts a permissive approach to even the most serious conflicts of interest. This position is at odds with the government’s professed objective of modernising the arbitration law and requires a course correction to bring Indian law in this respect in line with international best practices in arbitration..Streamlining arbitral proceedings.Time and fee limits for arbitrations.In order to combat complaints of delays and disproportionate fees fixed by arbitrators for themselves in ad hoc arbitrations in India, India is now probably the only jurisdiction in the world to fix a time limit for arbitration and also the first to fix fees for arbitrators..Under the amendments introduced by the Arbitration Ordinance, arbitration awards must be made within 12 months from the date on which all the arbitrators have received written notice of their appointment. The parties can mutually agree to extend the time period by a further period of 6 months but any further delay will result in termination of the arbitral tribunal’s mandate unless a court extends the time period for “sufficient cause and on such terms and conditions as may be imposed by the Court.”.The Arbitration Ordinance has also introduced a schedule of fees for arbitrators in ad hoc arbitrations..Whilst the intention underlying these amendments are understandable, fixing rigid (and what can often be unrealistic) timelines for the completion of an arbitration can be problematic. It should be possible for a simple contractual dispute involving little or no witness evidence to be resolved in 12 months or less but a complicated construction dispute involving multiple parties (and possibly multiple contracts), tens of complex claims and counterclaims requiring factual and expert evidence and involving millions or billions of dollars in dispute could take substantially longer. The amendment is based on the faulty premise that a one-size fits all approach will work in India irrespective of the nature, complexity and the stakes involved in different disputes..Although well-intended, this amendment could likely result in a situation where (i) a significant number of parties will be forced to line up before the courts for an extension of mandate of arbitral tribunals, or (ii) parties to high-value, complex contracts will simply decide to have these disputes resolved outside India. This could defeat the legislative intention underlying this amendment..A carve out has been expressly provided to ensure that the fee schedule specified in the Fourth Schedule to the Arbitration Ordinance will not apply to institutional arbitration or to international commercial arbitration. However, no similar carve out has been made in respect of time limits for completion of an institutional arbitration seated in India..This will mean that even in respect of, say an ICC or LCIA arbitration seated in India, parties will have to approach courts for extension of an arbitral tribunal’s mandate after the expiry of the 12-month period. This position would result in an unwelcome intrusion into institutional rules and requires urgent correction..The Fourth Schedule provides model fees for arbitrations based on the value of the dispute. It also makes elaborate provisions for amendment of the Fourth Schedule by the Central Government (including laying of the rules before each House of Parliament). Yet, the Fourth Schedule will not have any legal effect by itself and requires to be adopted into rules that are to be drafted by each High Court. It would have been far simpler and more effective to provide legal effect to the Fourth Schedule ex proprio vigore and this would also enable a harmonised regime to be in place throughout India..Important omissions.Enforcement of emergency arbitrator decisions.The Law Commission’s Report recommended that express provisions be inserted in the Arbitration Act to facilitate decisions made by emergency arbitrators. The Arbitration Ordinance does not, however, contain provisions to give effect to this recommendation. This is an important omission that requires fixing. Emergency arbitrator provisions are now to be found in arbitration rules of most of the established international arbitral institutions and they have also been widely used in arbitrations involving Indian parties. Modern arbitration statutes across the world contain specific provisions to enforce decisions of emergency arbitrators and it is essential that India adopt the same approach in modernising its arbitration law and making it state-of-the-art..No time limit for enforcement of foreign arbitral awards.The amendment to section 34 requires a court to decide a challenge to a domestic award within a one year timeframe. However, quite inexplicably, the Arbitration Ordinance has not specified a corresponding timeline for the enforcement of foreign arbitral awards. Against the backdrop of the White Industries decision (where India was held to be in breach of its BIT obligations for the failure of its courts to enforce a foreign arbitration award within a reasonable timeframe), this omission is indeed baffling and requires to be corrected urgently..Confidentiality .Confidentiality is often cited as one of the important perceived advantages of arbitration over litigation, and commercial parties will often opt for arbitration in order to keep the details of their dispute private. In India, confidentiality of proceedings is not expressly recognised or provided for in the Arbitration Act and this is an important omission in the statute.In this regard, it would be useful to derive guidance from the LCIA Arbitration Rules and insert a provision along the following lines into the 1996 Act:.“The parties shall be required as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority.”.It is also possible, in circumstances where an award is challenged before the courts, that non-parties may access the award and relevant documents produced in the arbitration. A potential breach of confidentiality in these circumstances can be prevented by inserting a provision to the following effect:.“An arbitral award or awards, or any materials created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain that are filed in court may only be inspected with the express permission of the court.”.Failure to address the notification hurdle to enforcement of foreign arbitral awards .In acceding to the New York Convention, India has made the reciprocity reservation, whereby India will only recognise and enforce arbitration awards made in another New York Convention State..However, the manner in which India has implemented the reciprocity reservation is not in line with the provisions of the New York Convention. Section 44 of the Arbitration Act imposes a two-fold requirement for the enforcement of foreign arbitral awards in requiring that (i) the award be made in a reciprocating country; and (ii) the reciprocating country must be declared as such by the Central Government by notification in the Official Gazette..Therefore, even if a country is a signatory to the NY Convention, this does not necessarily mean that an award made in that country would be automatically enforceable in India. The language of Section 44 seems to indicate that the award would only be enforceable if the country has been notified by the Central Government as a country to which the NY Convention applies. Only around 50 countries have been so notified by the Central Government thus far..The second condition is not one that is permitted under the New York Convention. Therefore, in order to prevent a situation where Indian is held to be in breach of its international law obligations, it is necessary that section 44 be amended by simply deleting the “notification requirement”..Failure to clarify if the amendments will operate prospectively or retrospectively.Whether, and how, the amendments will affect arbitration agreements entered into prior to 23 October 2015, arbitral proceedings and court actions is a crucial area which has been left substantially unaddressed by the Arbitration Ordinance. This is a topic which requires detailed treatment in itself and will be the subject matter of a future piece on this website..Conclusion.The Arbitration Ordinance is a step in the right direction to reform and modernise Indian arbitration law. However, some of the amendments require finessing and a more thoughtful approach to drafting could have avoided certain inconsistencies which exist amongst different parts of the Arbitration Ordinance. In the normal course, the Arbitration Ordinance should be enacted into law by Parliament in a few months. Before this happens, some serious thought has to go into ironing out a number of these creases and fine tuning the legislation..(Promod Nair (promod.nair@aristachambers.com) is an advocate and the founder of Arista Chambers, a specialist dispute resolution practice.)
.JPG?w=480&auto=format%2Ccompress&fit=max)