The success and failure of a system predominantly lies in the commitment to drive out the flaws from it. An attempt was made by the legislature in 1996 when amendments were made to the Arbitration Act of 1940 and now another effort has been made to drive out the various shortcomings that have not only plagued the Arbitration process but has also made it inefficient, biased and expensive.
Some of the striking features of the Arbitration Amendment Act, 2015 along with areas where it misses out on are discussed below:
- Court Re-defined: The definition of “Court” for the purpose of international commercial arbitration has been defined to mean only the High Court while for the purpose of domestic arbitration it shall remain the same.
- Amendment of Section 2(2): A proviso to Section 2(2) has been added which envisages that subject to the agreement to the contrary, Section 9(interim measures), Section 27(taking of evidence) and Section 37(1)(a), 37(3)shall also apply to international commercial arbitration’s, even if the seat of arbitration is outside India. The amended Act has cleared the mis understanding created by the conflicting view taken by the Honorable Supreme Court in its respective decisions in Bhatia International, Ventura Global and Bharat Aluminium Co. v. Kaiser. The words “an arbitral award made or to be made insuch place (arbitration outside India)” signifies that the provision shall come into force retrospectively meaning thereby the decision of the Supreme Court in Bhatia International and Ventura Global case has been restored. The amendment has the effect of harmoniously reading Part I and Part II of the Arbitration Act.
- Amendment to Section 9 (Interim Measures): The amendment has the effect of minimising the intervention of the Courts and where intervention is sought,efforts have been made that such intervention does not stall the arbitration process The amended section envisages that if the Court passes an interim measure of protection under the section before commencement of arbitral proceedings, then the arbitral proceedings shall have to commence within a period of 90 days from the date of such order or within such time as the Court may determine. Also, that the Court shall not entertain any application under section 9 after the Arbitral Tribunal has been constituted unless the Court find that such circumstances exist which may not render the remedy under Section 17 efficacious.
- Amendment to Section 12: The new law ensures a neutral ground for appointment of arbitrators as disclosures in writing are to be made with respect to any relationships, direct or in direct, with the appointing parties.Two Schedules have been inserted (Fifth Schedule & Seventh Schedule) which lists the grounds that would give rise to justifiable doubt to independence and impartiality of arbitrator and the circumstances given in both the Schedulesare exhaustive. Any person not falling under any of the grounds mentioned in the Schedules is likely to be independent and impartial in all respects.Further, section 12(1)(b) also lays down that the arbitration should be concluded within a period of 12 months extendable by a maximum of 6 months.
- Amendment to Section 14: On termination of mandate of an arbitrator,the Court may substitute the arbitrator.
- Amendment to Section 17 (Interim Measures by Arbitral tribunal): The new law provides that an arbitral tribunal under Section 17 of the amended Acts hall have the same powers that are available to a court under Section
9 and that the interim order passed by an arbitral tribunal will be enforceable as if it is an order of a court.
- Amendment to Section 23: The new Act empowers the respondent to submit a counter claim or plead a set off which was missing in the Old Act.
- Amendment to section 24: It requires the arbitral tribunal to hold the hearing for presentation of evidence or oral arguments on day to day basis, and mandates the tribunal not to grant any adjournments unless sufficient cause is shown. It further empowers the tribunal to impose exemplary cost where adjournment is sought without any sufficient cause.
- Amendment to Section 25: The new Act empowers the tribunal to treat Respondent’s failure to communicate his statement of defence as forfeiture of his right to file such statement of defence. However, the tribunal will continue the proceedings without treating such failure as admission of the allegations made by the Claimant.
- Insertions of time limit for arbitral award and fast track procedure under section 29A and 29B: Under the amended Act,an award shall be made by the arbitral tribunal within 12 months from the date it enters upon reference. This period can be extended for a maximum period of 6 months with the consent of the parties. When the Court grants an extension of time as above, it may substitute some or all of the arbitrators. Section 29B provides that the parties to an arbitration agreement may mutually agree at any stage either before or at the time of appointment of the arbitral tribunal to use the fast-track arbitration procedure where under the arbitral tribunal shall consist of a sole arbitrator and shall be decided on the basis of written pleadings, documents and submissions without any oral hearing. Under this procedure, awards must be granted within 6 months.
- Amendment of Section 34: The major amendments in section 34 are that an arbitral award may be set aside if it is contrary to ‘public policy’,clarifying circumstances in which such an award can be perceived as being in conflict however limiting the scope as determination of such violation cannot go into the review of the merits of the ispute. Further the addition of subsection 2A which provides for an additional ground of “patently illegality” to challenge an award arising from domestic arbitrations only and such award shall not be set aside merely on the ground of an erroneous application of law or byre-appreciation of evidence. A time limit of one year from the date of service of the advance notice on the other parties, which has also been made amandatory requirement, has been fixed for disposal of the application under Section 34.
- Amendment to Section 36 (Stay on enforcement of award): The Act provides that an award would not be stayed automatically by merely filing an application for setting aside the award under Section 34. Based on a separate application filed for stay, there has to be a specific order from the Court staying the execution of the award.
What the amended act, 2015 misses out on?
- Making the arrangement less formal: The Courts time and again have observed that the arbitration process must be simple, less technical and more responsible to the actual reality of the situations.The proceedings of arbitration must adhere to the principles of natural justice and must be in consonance with such practice and procedure which will lead to aproper resolution of the dispute. An end eavour should be made that wherever possible strict adherence to various procedural laws should be relaxed. The motive is not to take away burden of cases from courts and put it on a different system but to create a system where people have an opportunity of resolving the dispute among themselves before approaching judiciary.
- Only retired judges not a very sound mechanism: The trend is when the court appoints an arbitrator, they are usually retired judges of High Courts and Supreme Court. With many arbitrations entailing technical aspects, it takes a long time for the arbitrator to understand and get acquainted with the various technical aspects of the dispute. The appointment of an expert arbitrator has not been contemplated. There is a need to create a pool of experienced professionals who can be formally trained and certified asarbitrators by a specialized body. The arbitration process must be administered by an organization that is efficient and has full time employees with the experience to expedite cases to prompt resolution.
- Concept of Emergency Relief missing: Under the Hong Kong International Arbitration Centre (HKIAC) Rules, 2013, a party may seek emergency relief prior to the constitution of the arbitral tribunal. Where a party believes it requires emergency relief, it may submit an application for the appointment of an emergency arbitrator concurrent with, or following the filing of, a notice of arbitration to HKIAC. If the application is accepted,HKIAC will seek to appoint an emergency arbitrator within two days after receipt of both the application and the application deposit and the decision will be made within 15 days of the receipt of the file by the emergency arbitrator. The Indian Arbitration Amended Act, 2015 has missed out on incorporating such relief.
- Use of technology: There are no provisions that encourage the use of technology during arbitration proceedings.Use of teleconferencing and video-conferencing to replace formal sittings of the arbitral proceedings could save time and aid in a smoother and more efficient conduct of arbitration proceedings.
- Connected Matters: There is no provision of connecting / consolidating two or more arbitration’s wherein a similar question of law or fact is being dealt with. A similar provision though is present in Indian Council of Arbitration (ICA) wherein if there are two or more applications made by ICA and the issue involved arises out of the same transaction, the Registrar may with the consent of the parties fix the hearing of the dispute to be
heard ointly or refer the application to the same tribunal.
- Joinder of Parties: While the basic principle behind Arbitration Clause is a matter of privity, a number of U.S.courts and recently Hong Kong International Arbitration Centre have recognised doctrines that either allow parties to an arbitration clause to join third parties or that allow third parties who are not parties to an arbitration to arbitrate against parties to an arbitration clause.
The amendment brought to the 1996 Act is certainly a positive step towards making arbitration expeditious, efficacious and a cost effective remedy. The new amendments seek to curb the practices leading to wastage of time and making the arbitration process prohibitively a costly affair. The new law also makes the declaration by the arbitrator about his independence and impartiality more realistic as compared to a bare formality under the previous regime. Making the arbitrator responsible for delay in the arbitration proceedings, for the reasons attributable to him, would ensure that the arbitrators do not take up arbitrations which are beyond their capacities. The scope of various unnecessary adjournments for continuous flow of fees has been eliminated. Such a deterrent would imbibe self-discipline and control amongst the arbitrators. It can finally be said that the present amendments certainly travel an extra mile towards achieving the objectives of the Act.