ADVANCEMENT AND ANALYSIS OF ARBITRATION IN COMMERCIAL DISPUTES

This article has been written by Parneet Kaur & Vishwas Chitwar, 4th year Students of Institute of Law Nirma University, Ahmedabad.


INTRODUCTION

The aim of alternative conflict settlement is to speed up and circumvent the legal system's slow pace and failure to provide justice in a timely manner. There is a barrier to doing business because of pending legal proceedings, and this barrier leads to a loss of income as well as the Indian economy in the long run. As a result, a number of corporations and large multinational corporations have decided to seek alternative conflict resolution strategies outside of the courtroom, in order to keep up with the rapid speed of globalisation and its changing developments.


This is one of the primary reasons for the renewed participation in and recourse of arbitration and conciliation as a result of the terms of the Arbitration and Conciliation Act of 1996 and subsequent amendments. The court's interference at some point of the arbitration proceeding as well as the parties' right to appeal the proceedings, including the fact that both parties had consented to the proceeding, were significant flaws. Finally, the award can be challenged on a variety of grounds. As a result, international parties became disinterested in the Indian arbitration process, preferring foreign awards from states that were signatories to the New York Convention on Foreign Awards.


As foreign awards are recognized in India under the Foreign Ward Act of 1961, this award will be implemented in India. However, as a result of liberalization, India's arbitration rules have been modernized, and conciliation has been recognized for the first time in the 1996 act. Due to the convenience and autonomy offered by the current process and rules of arbitration, this act's replacement has opened doors for international investors.


GROWTH OF ARBITRATION LAW IN INDIA

The Arbitration Protocol and Convention Act, 1937, the Indian Arbitration Act, 1940, and the Foreign Awards (Recognition and Enforcement) Act, 1961 regulated arbitration prior to the passage of the Arbitration and Conciliation Act, 1996. Prior to the adoption of the act of 1996, the act of 1940 was the main act that covered all arbitration proceedings involving national bodies as well as foreign parties. The Act of 1996 was passed in response to India's numerous liberalization programs and some of the Act of 1940's shortcomings.

The court's interference at some point of the arbitration proceeding, as well as the parties' right to appeal the proceedings including the fact that both parties had consented to the proceeding, were significant flaws.


Finally, the award can be challenged on a variety of grounds. As a result, international parties became disinterested in the Indian arbitration process, preferring foreign awards from states that were signatories to the New York Convention on Foreign Awards. As foreign awards are recognized in India under the Foreign Ward Act of 1961, this award will be implemented in India. However, as a result of liberalization, India's arbitration rules have been modernized, and conciliation has been recognized for the first time in the 1996 act. Due to the convenience and autonomy offered by the current process and rules of arbitration, this act's replacement has opened doors for international investors.


1. Arbitration and Conciliation Act,1996

The act of 1996, with some amendments, followed the UNCITRAL MODEL LAW OF ARBITRATION which had three parts: -

  • Part 1 deals with domestic arbitration and international commercial arbitration;

  • Part 2 deals with overseas judgments and their enforcement;

  • Part 3 deals with conciliation-related constitutional requirements.

The Act's aim was to make it easier to resolve disputes quickly. The issue that emerged as a result of this was the impediments posed by the Indian legal system in cross-border conflicts. Instead of India, the cross-border contracts were arbitrated in other countries such as Singapore, New York, or London. The first major reform was introduced in 2015 to resolve this issue and make international arbitration a feasible proceeding and solution in India.


2. Arbitration and Conciliation Amendment Act 2015

The 2015 amendment addressed a significant flaw created by the landmark BALCO decision, which prohibited India courts from providing temporary relief. As a result, the following major changes were made in 2015 to explain the act's objectives: -

  • A time limit for settling disagreements

  • Process for appointing an arbitrator Reasons for objecting to the nomination on the basis of impartiality and freedom

  • Before the start of the arbitration, provide temporary relief to international seated arbitrations by Indian courts.

  • The Act introduces the "Cost Follow Event" regime.

However, shortly after these changes were enacted, a third bill was enacted in the year 2018 to fix the act's remaining flaws.


3. Arbitration and Conciliation (Amendment) Bill 2018

On August 10th, 2018, the Arbitration and Conciliation (Amendment) Bill 2018 was passed. The creation of an autonomous body called the Arbitration Council of India, whose job it would be to accredit and rate arbitral institutions, was a key feature of this amendment. The bill also included provisions to increase the secrecy of arbitration hearings and include arbitration protection. It also recommended adding an eighth schedule to the 1996 Act, which would require arbitrators to meet some qualifications and have prior accreditation experience.


The bill further sought to exclude International Commercial Arbitration for a period of 12 months to allow for the conclusion of the whole trial and to extend the timeframe to the date of the proceedings' closure rather than the date of the tribunal's formation.


4. Arbitration and Conciliation (Amendment) Act, 2019

The courts continued to select arbitrators for arbitration hearings and adjudication of disputes between the parties prior to the passage of this provision. The 2019 amendment limited the judiciary's involvement in this process. The Supreme Court, in cases involving international arbitration, and the high Court, in cases involving other types of arbitration, will nominate the arbitral institutions that will select the arbitrators under this amendment. This is an effort to put India's arbitration law in line with foreign courts that have a similar tribunal process.


This amendment also establishes the Indian Arbitration Council, which will have the authority to rate arbitral agencies, create, review, and revise norms, and ensure a reasonable standard of arbitration proceedings. There was an overlap in the case of temporary interventions as a relief prior to this provision. The parties could go to the arbitral tribunal or the courts for temporary relief until the final award is made. The parties should only request redress from the courts after the pass award had been passed, according to this provision.


The parties were also required to complete their pleadings within a span of six months from the date of service of the written notice to the arbitrator under this amendment. This is mainly to ensure that no sides intentionally attempt to delay the arbitration process. It also clarifies that in appealing an arbitral award in an arbitration court, the challenging party must depend only on the arbitration tribunal's record and no other award or facts. As a result, the prize is scrutinized over a shorter period of time.


Section 87 of the 2019 amendment was added, stating that the amendment must take effect immediately. It only applies to arbitration hearings that began after the effective date of the act's extension, as well as court proceedings resulting from such arbitration proceedings. This effectively overturned the Supreme Court's decision in BCCI v. Kochi Cricket Private Limited (the "BCCI Judgment"). Along with this, other changes were implemented, such as the preservation of anonymity and the imposition of a time limit for passing the trophy.


CONCLUSION

From the 1940 passage of the first arbitration act until the 1996 enactment of the Arbitration and Conciliation Act. We've had a very static stage of arbitration where the judiciary has complete jurisdiction over the proceedings and could intervene at any point during the process. However, after the government's liberalization policies in response to evolving globalization patterns, we saw a pro-arbitration policy for the first time, in which the position of the judiciary and courts was minimized and international arbitration was promoted and accepted in India.


The arbitration process was polished and streamlined along the lines of a modern Model BIT legislation and international arbitral institutions with corresponding revisions in 2015 and 2019, as well as numerous landmark decisions. The Arbitration Council of India was established as a result of this power. This, I think, is critical because many companies choose a simpler path, and a country with more lenient provisions invites and promotes corporations to hold arbitration hearings in India rather than elsewhere.

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