Cabinet defers decision on Arbitration Act amendment

The Union Cabinet today deferred a decision on the amendment of the Arbitration and Conciliation Act, which seeks to fix a timeline for settling commercial disputes and a cap on arbitration fee, amid opposition from a section of arbitrators.
Without giving reasons, official sources said a decision to amend the Arbitration and Conciliation Act, 1996 was deferred today.
A senior minister said the language of the bill would be changed and it could be taken up in the Cabinet meeting next week. "We will bring it in the Monsoon Session of Parliament itself," the minister said.
Amid its keenness to attract the maximum foreign investment, the government has decided to amend the Arbitration Act to make it mandatory for a judge presiding over commercial disputes to settle cases within nine months.

According to the amendments, the arbitrator deciding on a commercial dispute will have to clear the case within a nine month time-frame. The arbitrator will be free to seek an extension from the high court. But in case of further delays, the high court will be free to debar the arbitrator from taking up fresh cases for a certain period.
This is a crucial amendment to the arbitration law as many foreign companies are said to be hesitant to do business in India because of long-drawn litigations.

Another amendment puts a cap on fee of arbitrator. The arbitrator will also have to spell out if there is a conflict of interest in the case he or she is taking up.

Sources in the government said some former judges, who are into arbitration, were opposed to the strict timeline and the clause putting a cap on fee.
The government wanted to promulgate an ordinance on the arbitration law. It was cleared by the Cabinet on December 29, 2014 but it was never sent to the President for his approval.
The move to amend the law comes amidst the government's keenness to attract maximum foreign investment by projecting the 'ease of doing business' in India, which is being highlighted by Prime Minister Narendra Modi.
In its report submitted last year, the Law Commission had also supported amending the arbitration law to help India become a favoured destination, after Singapore and London, for international arbitration.