The Law Commission of India has proposed radical overhaul of the Arbitration & Conciliation Act, 1996, in an effort to make India a hub for institutional arbitration. In a report submitted to the government earlier this month, an expert committee headed by Law Commission chairman Justice A P Shah, suggested that the government should set up a specialised body with representation from all stakeholders of arbitration to encourage the spread of institutional arbitration in the country. It sought to accord legal recognition to an 'emergency arbitrator', the new norm in most institutional rules.
To avoid delays, the report proposes to make appointment of an arbitrator an administrative decision to be carried out by the High Court or the Supreme Court, as the case may be, helping bring Indian arbitration in line with global best practices.
The report recommended that all applications should be disposed-off within a period of 60 days, and any challenge to arbitral award within one year, from service of notice.
To avoid unnecessary litigation, the report recommends a general rule requiring a losing party to pay actual costs of the successful party. Currently, there is no enforcement mechanism provided for orders passed by an arbitral tribunal.
The report proposes to amend Section 17 of the Act expanding the scope of the provisions and ensure that an interim order passed by an arbitral tribunal is treated as an order of the court.
The report proposes a specific provision to deal with setting aside of a domestic award on the ground of patent illegality. In cases of foreign award and awards passed in international commercial arbitration in India, it has recommended that a narrower construct be given to 'public policy', so as to include only fundamental policy of Indian law, and most basic notions of justice or morality.
Rationalising the provision permitting grant of interest, the report proposes a move to a market-based determination of interest in line with commercial realities.
In order to bring Indian law in conformity with UNCITRAL Model law, the report proposes that an arbitration agreement can additionally be concluded by electronic communication. On the issue of arbitrator's fees, the report recommends for domestic ad hoc arbitrations, a model schedule of fees, to be updated regularly to ensure that they remain realistic.
ANALYSIS: With a government that is eyeing judicial reform, clear and precise amendments are bound to find favour and impart confidence to foreign investors. It will be interesting to see how soon, if at all, these amendments are implemented. The consequent acceptance and manner in which the proposed amendments will actually be interpreted by the judiciary is also something that only time will tell.
(Source: Edited excerpts from an analysis by Nishith Desai Associates)
