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Arbitration and Conciliation (Amendment) Bill, 2021

Posted on March 12, 2021 by admin1  1085

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Recently, the Parliament has given its nod to the Arbitration and Conciliation (Amendment) Bill, 2021.

  • The Lok Sabha already passed the bill in February 2021.

Rationale behind the Step

  • India wants to be an excellent hub for arbitration and this can make India a big hub for domestic and international arbitration.
  • Freedom must be given to the domestic and international arbitrators to make the process easier so that the country can move towards the path of economic development.
  • The legislation seeks to ensure that all stakeholders get an opportunity to seek an unconditional stay on enforcement of arbitral awards where the arbitration agreement or contract is induced by fraud or corruption.

Key Highlights

  • It seeks to amend the Arbitration and Conciliation Act, 1996 so as to
    • enable automatic stay on awards in certain cases and 
    • specify by regulations the qualifications, experience and norms for accreditation of arbitrators.
    • Seeks to ensure that stakeholder parties can seek an unconditional stay on enforcement of arbitral awards in cases where the “arbitration agreement or contract is induced by fraud or corruption.”
  • Also it does away with the 8th Schedule of the Act that contained the necessary qualifications for accreditation of arbitrators.
  • Added a proviso in Section 36 of the Arbitration Act and will come into effect retrospectively from October 23, 2015. As per this amendment, if the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award was induced or effected by fraud or corruption, it will stay the award unconditionally pending disposal of the challenge made to the award under Section 34.
  • Until recently, an arbitration award was enforceable even if an appeal was filed against it in the court under Section 36 of the law. The court, however, could grant a stay on the award on conditions as it deemed fit.

Issues raised with respect to proposed amendment to Section 36 of the Act:

  • It is very easy for the losing party to allege corruption and obtain an automatic stay on enforcement of the arbitral award. Thereafter, the parties will have to wait for enforcement till final disposal by the Court. This defeats the very objective of alternate dispute mechanisms by drawing parties to Courts and making them prone to prolonged litigation.
  • Legislation does not define Fraud/ Corruption.
  • Retrospective application of Amendment Act (from 2015) with respect to automatic stay may open floodgates of litigation.
  • Amendment will affect enforcement of contracts and ultimately affect ease of doing business in India.

Arbitration

  • It is a mechanism for resolving disputes between investors and brokers, or between brokers.
  • Arbitration is distinct from mediation, in which parties negotiate to reach a voluntary settlement, and decisions are not binding unless all parties agree to them.

Need for Arbitration

  • Indian judiciary currently has approximately 3 crore pending cases, with many more
  • increasing with every passing day. Due to this overburden on the judiciary, there was an urgent need felt for the establishment of a system to address the disputes outside the judiciary.
  • The right to timely justice is an implicit part of the fundamental Right to Life and liberty. The clogged judicial system results in delayed justice which infringes the fundamental right of citizens.
  • It plays a crucial role in internalising the culture of conciliation and mediation among the people.
  • It is not as technical as our normal judicial system therefore it suits common people’s needs for simplicity of laws. The parties can freely discuss their cases.

Challenges

  • India already lags behind when it comes to the enforcement of international contracts and agreements. The Bill can further hamper the spirit of Make in India campaign and deteriorate rankings in Ease of Doing Business Index.
  • India aims to become a hub of domestic and international arbitration. Through the implementation of these legislative changes, resolution of commercial disputes could take longer duration now onwards.

Arbitration Council of India (ACI)

  • The Amendment Act  2019 seeks to insert a new Part 1A to the Act of 1996 for the establishment and incorporation of an independent body namely, the Arbitration Council of India (ACI) for the purpose of grading of arbitral institutions and accreditation of arbitrators, etc
  • Composition
    • The ACI will consist of a Chairperson who is either: (i) a Judge of the Supreme Court; or (ii) a Judge of a High Court; or (iii) Chief Justice of a High Court; or (iv) 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.
  •  Functions
    • Framing policies for grading arbitral institutions and accrediting arbitrators
    • Making policies for the establishment, operation and maintenance of uniform professional standards for all alternate dispute redressal matters
    • Maintaining a depository of arbitral awards (judgments) made in India and abroad.

Source :AIR

 
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