Arbitration and Conciliation (Amendment) Bill, 2018

March 8, 2018

 

The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved the Arbitration and Conciliation (Amendment) Bill, 2018 for introduction in the Parliament. It is a part of the efforts of the Government to encourage institutional arbitration for settlement of disputes and make India a centre of robust Alternative Dispute Resolution (ADR) mechanism.

 Basics of Arbitration and Conciliation:

  1. Arbitration: Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

  2. Characteristics of Arbitration:

    1. It is consensual i.e. it can only happen when both the affected parties agree for arbitration.

    2. Parties choose the arbitrator.

    3. Arbitrator is neutral.

    4. Arbitration is a confidential procedure.

    5. The decision of the arbitral tribunal is final and easy to enforce.

  3. ConciliationFor conciliation, a third party shall play the role of a conciliator helping the parties to resolve dispute through negotiation.

  4. Difference between Arbitration and Conciliation:

    1. The conciliator is not allowed to directly resolve the dispute and render a decision, but the parties of the dispute themselves shall achieve an agreement with the help of the conciliator.

While an arbitration award is final, the agreement achieved through conciliation is not binding on the parties. Therefore, if one party do not voluntarily implement the agreement, the other can institute court or arbitration proceedings.

 Background:

  1. The Arbitration and Conciliation Act, 1996, was amended by the Arbitration and Conciliation (Amendment) Act, 2015 in order to make arbitration process user friendly, cost effective and ensure speedy disposal and neutrality of arbitrators. 

  2. To give a boost to institutional, arbitration vis-a-vis ad hoc arbitration and to remove some practical difficulties in applicability of the Arbitration and Conciliation (Amendment) Act, 2015, a High Level Committee (HLC) under the Chairmanship of Justice B. H. Srikrishna, was constituted by the Central Government,

  3. The HLC was given the mandate

    1. to examine the effectiveness of existing arbitration mechanism by studying the functioning and performance of Arbitral Institutions in India; 

    2. to devise a road map to promote institutionalized arbitration mechanisms in India; 

    3. to evolve an effective and efficient arbitration eco-system for commercial dispute resolution and submit a Report on suggested reforms in the statute.

 

Salient Features:

  1. Appointment of Arbitrators: To facilitate speedy appointment of arbitrators through designated arbitral institutions by the Supreme Court or the High Court, without having any requirement to approach the court in this regard. It is envisaged that parties may directly approach arbitral institutions designated by the Supreme Court for International Commercial arbitration and in other cases the concerned High Courts.

  2. Grading of Arbitral Institution: The amendment provides for creation of an independent body namely the Arbitration Council of India (ACI) which will grade arbitral institution and accredit arbitrators by laying down norms and take all such steps as may be necessary to promote and encourage arbitration, conciliation, mediation and other ADR Mechanism and for that purpose evolve policy and guidelines for the establishment., operation and maintenance of uniform professional standards in respect of all matters relating to arbitration and ADR mechanism. The Council shall also maintain an electronic depository of all arbitral awards, 

  3. Organisation: The ACI shall be a body corporate. The Chairperson of ACI shall be a person who has been a Judge of the Supreme Court or Chief Justice or Judge of any High Court or any eminent person. Further, the other Members would include an eminent academician etc. besides other Government nominees, 

  4. Jurisdiction and Timelines as per the Act: It is  proposed to amend  sub section (1) of section  29A by excluding International Arbitration from the bounds of timeline and further to provide that the time limit for arbitral award in other arbitrations shall be within 12 months from the completion of the pleadings of the parties. 

  5. Safeguard for Arbitrator: A new section 42A is proposed to be inserted to provide that the arbitrator and the arbitral institutions shall keep confidentiality of all arbitral proceedings except award. Further, a new section 42B protects an Arbitrator from suit or other legal proceedings for any action or omission done in good faith in the course of arbitration proceedings.

  6. Implementation of the Act: A new section 87 is proposed to be inserted to clarify that unless parties agree otherwise the Amendment Act 2015 shall not apply to

    1. Arbitral proceedings .which have commenced before the commencement of the Amendment Act of 2015

    2. Court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Amendment Act of 2015 and

    3. Shall apply only to Arbitral proceedings commenced on or after the commencement of the Amendment Act of 2015 and to court proceedings arising out of or in relation to such Arbitral proceedings.

 Benefits of Arbitration and Conciliation Act for India:

 

 

  1. Quick decision i.e. faster resolution of disputes.

  2. Minimum legal technicalities and formalities. Hence, decisions are fast and costs are lower.

  3. Flexibility regarding procedures, venue, language etc.

  4. Arbitrator is usually expert in the subject matter and hence, can understand the dispute quickly and thoroughly. A judge in the court may not be able to fully appreciate the problem, if it is of intricate technical nature.

  5. Cost of court fees and other expenses can be quite high, also, Once the matter goes to court, adverse publicity in press cannot be avoided.

  6. Arbitration provides confidentiality as the hearing doesn't take place in open courts and transcripts are not available for public record.

 

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