New ADR Bill Passed By Lok Sabha
Written by: K. RAJEEV REDDY
Introduction
The Lok Sabha on Friday passed a bill to amend the arbitration law, with Law Minister Ravi Shankar Prasad saying foreign arbitrators are welcome in India. The bill seeks to ensure that all stakeholders get an opportunity to seek an unconditional stay on enforcement of arbitral awards where the agreement or contract is “induced by fraud or corruption”. Responding to a debate on the bill, the minister said he would like to make it clear foreign arbitrators are welcome in India.
The bill was passed by a voice vote and statutory resolution opposing the ordinance was rejected by the House. Among other things, the bill, which amends the Arbitration and Conciliation Act, 1996, seeks to do away with the 8th Schedule of the Act which contained the necessary qualifications for accreditation of arbitrators.
The qualifications for accreditation of arbitrators are proposed to be prescribed by regulations to be framed by an arbitration council to be set up. Till recently, an arbitration award was enforceable even if an appeal was filed against it in the court under Section 36 of the law. But the court could grant a stay on the award on conditions as it deemed fit.
As per the proposed amendment, if the award is being given on the basis of an agreement based on fraud or corruption, then the court will not impose a condition to stay the award and grant an unconditional stay during the pendency of the appeal if it has been challenged under Section 34 of the arbitration law. The bill, according to the statement of objects and reasons, provides for “unconditional stay of enforcement of arbitral awards, where the underlying arbitration agreement, contracts or arbitral award is induced by fraud or corruption”.
The Lok Sabha has passed the Arbitration and Conciliation (Amendment) Bill, 2021 to check misuse by “fly-by-night operators” who take advantage of the law to get favourable awards by fraud. The Bill intends to replace the Arbitration and Conciliation (Amendment) ordinance issued in November 2020.
Arbitration Council of India
Constitutional Background: The Constitution of India, Article 51, India is obliged to endeavour to:
Foster respect for international law and treaty obligations in the dealings of organized peoples with one country.
Encourage settlement of international disputes by arbitration. ACI is a step-in realization of this constitutional obligation.
Objective: The Arbitration and Conciliation (Amendment) Act, 2019 seeks to establish an independent body called the Arbitration Council of India (ACI) for the promotion of arbitration, mediation, conciliation, and other alternative disputes redressal mechanisms.
Arbitration: It is a process in which disputes resolve between the parties by appointing an independent third party who is an impartial and neutral person called an arbitrator. Arbitrators hear both the parties before arriving at a solution to their dispute.
Conciliation: It is a process in which disputes resolve between the parties by appointing a conciliator who helps (amicable) the disputed parties to arrive at a negotiated settlement. Settling the dispute without litigation is an informal process. He does so by lowering tensions, improving communication, interpreting issues, providing technical help.
Composition of the ACI:
The ACI will consist of a Chairperson who is either:
A Judge of the Supreme Court; or
A Judge of a High Court; or
Chief Justice of a High Court; or
An eminent person with expert knowledge in the conduct of the arbitration.
Other members will include an eminent arbitration practitioner, an academician with experience in arbitration, and government appointees.
Appointment of Arbitrators:
Under the Act, the Supreme Court and High Courts may designate arbitral institutions, which parties can approach for the appointment of arbitrators.
For international commercial arbitration, appointments will be made by the institution designated by the Supreme Court.
For domestic arbitration, appointments will be made by the institution designated by the concerned High Court.
In case there are no arbitral institutions available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators to perform the functions of the arbitral institutions.
An application for the appointment of an arbitrator is required to be disposed of within 30 days.
Provisions of the Amendment Bill
This Bill deal with domestic and international arbitration.
The Bill also defines the law to conduct the conciliation proceedings.
The Bill replaces the ordinance containing the same provisions that were promulgated on 4th November 2020.
It will amend the Arbitration and Conciliation Act of 1996.
With the amendment, the bill will enable automatic stay on awards in some cases.
Under this amendment, omit the eighth schedule of the act that specifies through the regulations of qualifications, experience, and norms of the accreditation of arbitrators.
It will stay on the arbitral award that may be provided by the Court. It can be provided even during the pendency of the setting aside application.
It also amends section 36 of the Arbitration and Conciliation Act of 1996.
Key Points:
Features of the Bill
Qualifications of Arbitrators:
It does away with the qualifications of the arbitrators under the 8th Schedule of the Arbitration and Conciliation Act, 1996 which specified that the arbitrator must be:
An advocate under the Advocates Act, 1961 with 10 years of experience, or
An officer of the Indian Legal Service.
The qualifications for accreditation of arbitrators is proposed to be prescribed by regulations to be framed by an arbitration council to be set up.
Unconditional Stay on Awards:
If the Award is being given on the basis of a fraudulent agreement or corruption, then the court can grant an unconditional stay as long as an appeal under Section 34 of the arbitration law is pending. The Ordinance also omits the Eighth Schedule of the Arbitration Act, which deals with the qualifications and experience of arbitrators. This provision had faced criticism from some quarters that the conditions prescribed in the law came in way of India getting the benefit of having foreign arbitrators.
Benefits:
Would bring about parity among all the stakeholders in the arbitration process.
All the stakeholders get an opportunity to seek an unconditional stay on enforcement of arbitral awards where the agreement or contract is “induced by fraud or corruption”.
Checking misuse of the provisions under the Arbitration and Conciliation Act, 1996 would save the taxpayers money by holding those accountable who siphoned off of them unlawfully.
Drawbacks:
India already lags behind when it comes to the enforcement of international contracts and agreements. The Bill can further hamper the spirit of the Make in India campaign and deteriorate rankings in the Ease of Doing Business Index. India aims to become a hub of domestic and international arbitration. Through the implementation of these legislative changes, the resolution of commercial disputes could take a longer duration from now onwards.
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