While reforms pitched by the government seek to promote institutional arbitration, they still have provisions which would delay dispute resolution by allowing courts to intervene, said experts.
When the Arbitration Act was amended for the second time in 2019, it was strengthened to give powers of grading arbitration institutions to the Arbitration Council of India (ACI), a body of experts and policymakers which would make rules of procedure for arbitration.
Now, under the new proposed amendments, the Arbitration Council of India would only have the powers to “recognise” arbitration institutions. Additionally, the amended law seeks to empower courts to designate arbitral institutions in matters before them.
“It is good that the gradation has been removed. However, designation by courts following ACI recognition dilutes ACI’s authority, causes duplication of work, and invites unnecessary judicial intervention, all of which violate ADR (alternative dispute resolution) principles,” said P. Madhava Rao, registrar of Hyderabad-based Amika Arbitration and Mediation Council, in the institution’s recommendations to the government.
“As a result, this clause should be removed from the amendments, and the designation section from the original act should be removed entirely,” he added.
To be sure, although the ACI was created in the 2019 amendment to the Arbitration Act, it has not been constituted yet.
Amika Arbitration and Mediation Council also suggested the government provide powers to arbitrators to gather evidence.
Under existing law, arbitrators can only use evidence gathered by courts to resolve the dispute.
“This is yet another major threat to the speed with which justice is administered. When the Arbitration Tribunal relies on courts to take evidence, it will undoubtedly be delayed, and the purpose of ADR is defeated. Therefore, arbitration tribunals should be empowered to take evidence rather than writing to the courts, which would increase the burden on the courts,” the set of recommendations said.
Earlier amendments
This is not, however, the first time stakeholders have batted for reducing court intervention. Calls to cut down the involvement of courts have been made over the years whenever the Arbitration Act, passed in 1996, was amended—in 2015, 2019, and 2021.
This was to reduce the burden on courts, which are clogged with cases, and to empower the method of arbitration as a dispute resolution mechanism to be completely independent.
Experts have also asked the government to empower arbitral tribunals with powers to enforce awards. Currently, disputants have to approach civil courts to get such awards enforced.
When arbitral awards are just as binding as a court’s decree, there is no problem in allowing arbitrators to enforce their awards themselves, said Rao.
Rao stressed that arbitration is a mechanism where parties mutually decide to resolve an issue, whereas one party drags another to court, without its consent. Therefore, appeals against enforcement of awards, Rao concluded, are less likely in arbitrations as parties would willingly want to resolve the dispute, and enforcement through courts would only lead to further delays.
Mint previously reported on 15 August that the Union law and justice ministry was conducting research into potentially implementing global best practices for enforcement of arbitral awards.
While practitioners have called for cutting court intervention, the current amendments which were open for consultation till 3 November, do have some provisions towards the same goal.
The draft amendment proposes an appellate arbitration tribunal for disputes being resolved by arbitration institutions. That means if disputants have chosen to resolve disputes via arbitration by engaging the services of a specialized institution, and they wish to appeal the decision of the arbitrator, they can appeal to another appellate arbitration tribunal, rather than a court of law.
But this amendment may also prove to be more expensive for disputants.
“The option to parties to agree to appellate arbitral tribunals to decide a first challenge to an award in the draft bill aims to reduce one level of court intervention in the arbitral process,” said Shaneen Parikh, partner (head – international arbitration), Cyril Amarchand Mangaldas.
“While it will relieve courts of some pressure from challenges under section 34, further appeals under Section 37 of the Act and up to the Supreme Court will still be available. With the possibility of heightened court scrutiny over a tribunal decision, this may not ultimately have the desired effect of truly reducing court intervention, and will in any event likely be more expensive for parties.” Parikh added.
Shiv Sapra, partner at Kochhar & Co., was of the opinion that the new appellate tribunal would be akin to high courts, which hear arbitration appeals currently.
“It will be interesting to observe the criteron which would be set for the appointment of members of such tribunals, since presently the recourse lies before the Hon’ble Courts under Section 34 and 37. It is expected that the members to be appointed would be similarly positioned. That parties still have the option of approaching the courts as before is an added advantage as it gives a party the freedom to choose between the two,” Sapra said.
Section 34 and 37 of the Arbitration Act allow parties to appeal arbitral awards in courts.
Some experts also pointed to online and digital means of resolving disputes.
Alay Razvi, Managing Partner, Accord Juris said digital dispute resolution is a critical area which needs policy development. “The other critical area to be looked at would be having better framework which would support digital dispute resolution process. It would require further more amendments from time to time, subject to the new upcoming challenges, to make the provisions airtight and litigation friendly,” he said.