Arbitration is a form of alternative dispute resolution (ADR) that allows parties to settle their disputes without going to court. Arbitration is governed by the Arbitration and Conciliation Act 1996 (the Act) in India, which is based on the UNCITRAL Model Law on International Commercial Arbitration 1985. The Act aims to provide a speedy, efficient, and cost-effective mechanism for resolving commercial disputes through arbitration.
The Act has been amended twice, in 2015 and 2019, to address some of the issues and challenges faced by the arbitration regime in India. Some of the key amendments include:
- The establishment of the Arbitration Council of India (ACI), a statutory body to grade arbitral institutions, accredit arbitrators and promote arbitration in India.
- The introduction of a time limit of 12 months for completing domestic arbitrations and 18 months for international arbitrations, extendable by mutual consent of the parties or by the court for sufficient cause.
- The clarification of the scope and applicability of interim measures and emergency arbitrations under the Act.
- The recognition of institutional arbitration and the empowerment of arbitral institutions to appoint arbitrators in case of default by the parties or their chosen mechanism.
- The enhancement of the autonomy and impartiality of arbitrators by prescribing qualifications, experience, and norms of ethics for them.
- The narrowing down of the grounds for setting aside arbitral awards and the exclusion of patent illegality as a ground for challenging international commercial arbitral awards.
The amendments have been widely welcomed by the arbitration community as they seek to align Indian arbitration law with international best practices and standards. However, some challenges and criticisms remain, such as:
- The lack of clarity and consistency in some of the provisions of the Act, such as the definition of "international commercial arbitration", the applicability of Part I (domestic arbitration) to foreign-seated arbitrations, and the scope of judicial intervention in arbitration matters.
- The delay and backlog in the enforcement of arbitral awards due to multiple levels of appeals and challenges before various courts.
- The high cost and complexity of arbitration proceedings due to factors such as multiple arbitrators, frequent adjournments, extensive document production, expert witnesses and legal fees.
- The low awareness and preference for arbitration among Indian businesses and consumers due to cultural factors, lack of trust in arbitrators and arbitral institutions, and preference for judicial remedies.
Therefore, while the Act has made significant strides in improving the arbitration landscape in India, there is still room for further improvement and reform. Some possible suggestions include:
- Simplifying and harmonizing the provisions of the Act with international standards and conventions, such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
- Streamlining and expediting the judicial process for enforcing arbitral awards by creating specialized arbitration benches or tribunals at various levels of courts.
- Reducing the cost and duration of arbitration proceedings by encouraging online or hybrid modes of arbitration, limiting document production and discovery, adopting fast-track procedures, and imposing cost sanctions for frivolous claims or challenges.
- Promoting arbitration awareness and education among various stakeholders, such as lawyers, judges, businesses, consumers, academicians, and students, through seminars, workshops, publications, and campaigns.
- Developing a robust arbitration culture and ecosystem in India by fostering cooperation and collaboration among various actors, such as arbitral institutions, arbitrators, lawyers, courts, government agencies, and civil society organizations.
Arbitration is a viable and valuable option for resolving commercial disputes in India. The Arbitration and Conciliation Act 1996 has laid down a solid foundation for developing a progressive and effective arbitration regime in India. However, it requires constant review and revision to keep pace with the changing needs and expectations of the parties. It also requires active participation and support from all stakeholders to ensure its success and sustainability.
