By: Shreya Choudhary
ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2018
The Arbitration and Conciliation (Amendment) Bill, 2018 (hereinafter ‘Bill’) seeks to establish Institutional Arbitration in India primarily by introducing Part IA along with other minor changes to the Arbitration and Conciliation Act, 1996. The need for Institutional Arbitration in India was recommended in a High-Level Committee Report (hereinafter ‘Report’) prepared under the chairmanship of former Supreme Court judge Justice B.N. Srikrishna. The objectives behind this move were to strengthen the trust of domestic and foreign business/commercial ventures in India, make the country a preferred seat of arbitration and promote resolution of disputes through institutions in an increasingly institutional-arbitration era.
ARBITRATION COUNCIL OF INDIA: A BRIEF OVERVIEW
The Bill emphasises on establishing the Arbitration Council of India (hereinafter ‘Council’) for its multifarious pros. The Council will encourage arbitration and other alternative dispute resolution mechanisms, grade and accredit Arbitral Institutions (hereinafter ‘Institutions’), keep an electronic depository of arbitral awards, formulate policies/guidelines for maintenance of uniform professional standards in arbitration matters and will also appoint arbitrators through designated Institutions by Supreme Court/ High Court. As proposed by the Bill, the Council would consist of a retired judge of Supreme Court/High Court, an eminent academician and other government nominees.
CHALLENGES POSED BY THE ESTABLISHMENT OF THE COUNCIL
As can be seen in the Report, successful Institutions that exist in the international scenario have balanced institutionalization with party autonomy. However, the Bill fails to strike a balance between the two chords, exposing arbitration in India to the following flaws-
Functions of the Council Giving Birth to a New Regulator?
As proposed by Section 43D(2) of the Bill, the Council will frame policies, set up, review and update norms and standards, and make recommendations regarding personnel, training and infrastructure of Institutions. The ambit of the powers and functions provided in the Bill seems to be regulatory, ambiguous and not very specific about the particulars. The ill-defined nature of powers conferred upon the Council brings forth the following issues-
- Defying the basis of Arbitration
While realizing the short-term goal of strengthening Institutional Arbitration set up, the drafters of the Bill have failed to consider the out-of-court settlement as one of the long-term goals that arbitration, being an alternative dispute resolution mechanism, seeks to achieve. The Council is foreseen to act as another Court (of arbitration processes) making regulations for the Institutions which would be backed by law. Further, this regulatory nature of the Council is not in consonance with the recommendation of the Report which sought the establishment of the Arbitration Promotion Council of India as only a promoter of Institutional Arbitration, highlighting the fact that statutory regulation of Institutional Arbitration and/or Institutions is antithetical to the foundation of party autonomy on which it is based.
- Compromising Choice and Party Autonomy
We can infer that the legislative intent behind conferring the power to the Council to evolve policies for the Arbitral Institutions is to maintain a uniform standard. This standardization with regards to practice, norms, personnel, training and infrastructure among all the Arbitral Institutions that would be submitting to the grading of the Council will result in limited diversity among Institutions, as a consequence of which the parties will have to compromise on their need-based specific preferences, thus restricting their autonomy.
3. Uncertainty with Regards to the Scope of the Power
While Part IA has been added to explain in length the establishment, constitution and functions of the Council, the detailed provisions contained within the Part IA from Section 43A to Section 43J fail to encompass the scope of the powers exercised by it. This will give the Council unquestionable dominance as a regulator, consequently belittling the autonomy of the parties.
Mandatory Submission to the Accreditation of the Council
The Council prima facie makes it voluntary for the Institutions to submit to its accreditation. However, the proposed insertion of Section 11(3A) makes it mandatory. By virtue of this Section, for appointment purposes, the Supreme Court or the High Court will have the power to designate only that Institution which is graded by the Council. Thus, in a case where parties require assistance in appointing an arbitrator, the High Courts and Supreme Court would designate Institutions as appointing authorities for arbitrators on the basis of grading given by the Council. For the purposes of Section 11, this in a way restricts eligibility to be an appointing authority to only those institutions that meet the above precondition, consequently creating a situation where institutions in an increasingly competitive environment end up submitting to the Council and those refusing the standardization getting affected.
Questioning the Existence of Section 11
Section 11 of the Arbitration and Conciliation Act, 1996 provides the parties, the Courts and the institutions designated by such Courts the power to appoint arbitrators. First, the parties are given the freedom to agree upon the arbitrator and his appointment. On failure of the parties to come to such an agreement, or on failure to follow the agreed appointment procedure, under the Section, the Courts are given the power to appoint the arbitrator. Now, from a cumulative reading of Section 11 with the proposed insertions and omissions of the Bill, we find that the legislators seek to leave the Courts with no role in the appointment of arbitrators whatsoever. The role of the Courts has been restricted merely to designate Institutions to appoint arbitrators. This makes us question the validity of Section 11 itself which previously provided the Courts with the power to appoint arbitrators upon failure of the parties in doing so.
Probable Conflict of Interests: Government Involvement
The Council will be composed of government nominees as its members who will perform regulatory functions, appoint arbitrators and accredit the Institutions. Further, the Council will also be guided by the Central Government to exercise other functions as it may deem fit. As the institutions perform crucial functions, it is expected of them to be independent and impartial. Such involvement of the government within the composition and functions of the Council creates doubts and possibilities of bias and partial treatment. This provision is opposed to the idea highlighted in the Report which recommended that the Council should be autonomous of government involvement.
A critical analysis of the Amendment in light of the proposed establishment of Council poses few questions before us. Will the Institutional Arbitration set-up in India compromise on the basis of arbitration considering the interventionist attitude of the government, judiciary and a new regulator? Will the Council serve as a regulator, being a deterrent to arbitration or as a promoter, being a driving force for Institutional Arbitration in India? Will India see a paradigm shift of choice from ad-hoc to Institutional Arbitration with the passing of the Bill? Will the implementation of the changes proposed by the Bill include and redress the aforementioned lacunae in law?
In my opinion, repercussions of the foreseeable lacunae in the proposed amendments and the negative questions can be fixed and answered if the following things are kept in mind:
- first, more autonomy/flexibility to the institutions to make decisions regarding the norms, personnel, infrastructure, and submission to accreditation of the Council while retaining the standardisation necessary to observe a basic quality of Institutional Arbitration set-up in India.
- second, more clarity in terms of drafting the provisions regarding the scope of the functions to be exercised by the Council.
- third, less interventionist approach of the Government within the Council to ensure its independence, and avoid bias and partiality.
Considering that now the Bill is passed by the Lok Sabha, it’s time for us to critically ponder over the challenges to the institutional set-up in India and ensure that the provisions if implemented, take into account the aforementioned solutions to these.
(Shreya is currently a student at ILS Law College, Pune.)