Understanding Arbitration Amendment Bill 2015

Introduction

Arbitration is the most preferred dispute resolution mechanism in today’s commercial world, however, India is fast to catch with it but is loosing its role in emerging as the seat of arbitration. The International investor is keen on choosing destinations like Singapore, London for the adjudication of disputes. Time has come for India to send a strong message to international community about the viability of India to emerge as the seat of arbitration and the recent amendment does help in sending the message. The amendment seeks to replace the ordinance and intends to make India more investor friendly with sound legal framework. The Parliament has passed the Arbitration and Conciliation (Amendment) Bill, 2015. The date of amendment coming into force is from October 23, 2015. The important changes introduced are discussed below.

A. Discussion on Amendment

SECTION HEADING AMENDMENT
2 Court

Domestic Arbitration: The Bill modifies by adding clarification that in case of a domestic arbitration the meaning of court would be principal civil court or High Court exercising original jurisdiction.

International Commercial Arbitration: In the case of international arbitration, the relevant court would only be the relevant high court.

7 Arbitration Agreement

Communication by Electronic Means: Arbitration Agreement has to be in writing which if contained by means of telecommunication including communication by electronic means.

8

Power to refer parties to arbitration where there is an arbitration agreement  Referral for Arbitration even if Contrary Judgment exist if Arbitration Agreement is Valid: Under the Act, if any matter that is brought before a court is the subject of an arbitration agreement, parties will be referred to arbitration.  The Bill states that this power of referral is to be exercised by a court even if there is a previous court judgment to the contrary.  The Court must refer the parties to arbitration unless it thinks that a valid arbitration agreement does not exist.
9 Interim measures, etc. by Court

Grounds for Maintainability of Application under the Section: The Bill amends this provision to specify that if the Court passes such an interim order before the commencement of arbitral proceedings, the proceedings must commence within 90 days from the making of the order, or within a time specified by the Court.  Further, the Court must not accept such an application, unless it thinks that the arbitral tribunal will not be able to provide a similar remedy.

11 Appointment of Arbitrators

Substitution of the Word: The word ‘Chief Justice and the person or institution designated by him’ is substituted by the Supreme Court as the case may be, High Court or an institution designated by it in Section 11 (4) (5) and (6).

Confine the Argument to Valid Arbitration Agreement: The Bill states that, at this stage, the Court must confine itself to the examination of the existence of a valid arbitration agreement. An application for an appointment of arbitrator has to be disposed within period of sixty days of service of notice to the opposite party.

11A Power of Central Government to amend IV Schedule Amendment to IV Schedule of fees: vested with the Central Government.
12 Grounds for Challenge

The person who is appointed as an arbitrator has to make certain disclosures in writing about his impartiality and neutrality with special mention about his ability to complete the arbitration within a period of 12 months.

The Fifth Schedule would act as a guide to judge the impartiality or neutrality of the arbitrator.

The Sixth schedule provides the form for disclosure.

The arbitrator who is connected to the parties or counsel or subject matter of dispute or any of the categories in VII Schedule would be ineligible to be an arbitrator.

The parties can waive of the application of this section by express agreement after dispute.

This will not apply to proceeding before the commencement of the amendment.

14 Failure or impossibility to act

The mandate of the arbitrator would terminate and be substituted by another arbitrator if the grounds mentioned therein are satisfied.

17 Interim Measures Similar to grounds of section 9
23 Statement of Claim and Defense

Set-off and Counter claim can be submitted if the same is within the scope of arbitration agreement.

24 Hearing and written proceedings

Oral hearing and Oral argument to be presented on day-to-day basis and no adjournments without sufficient cause.

25 Default of a Party

Including the sentence ‘Shall have discretion of right of respondent to file the reply/statement of defence as forfeited’.

28 Rules applicable to Substance of Dispute

While writing the award the terms of the contract and trade usage related to transactions to be taken into account.

29A Time Limit for Arbitral Award

Period of Making Award: Within twelve months within date on which tribunal enters into reference. The date of reference would be the date on which all the members of tribunal receive the notice.

The extension of Period of Making Award: By six months only by the parties.

Additional Fees: If the tribunal passes the award within six months from terms of reference. The additional fees as would be agreed between the parties.

Failure to Pass an Award under Extended Period: The mandate of the arbitrator would terminate and further extension would be granted only with the permission of the Court before or after the expiry of the tribunal only on grounds of sufficient cause and on terms and conditions prescribed by the court. Further, if the delay is attributable to the tribunal then the same involve reduction of fees to the extent of 5% cap per month for each month delay. The court would have power to substitute all or one of the arbitrator but the proceedings would continue from the point left with evidence or material already on record. The second tribunal if newly constituted, it would be deemed in continuation of the existing one.

Period of Disposal of Application under the Section: Sixty days from the service of notice to the Opposite Party.

29B Fast Track Procedure

Resolution of Dispute by Fast Track: Parties to an arbitration agreement agree for the same at any stage, which involves hearing without oral argument on the basis of submissions, documents and pleadings. The fast track procedure can be concluded within a period of six months from term of reference. The period for extension would be as provided in Section 29A of the amended Act.

31 Form and Content of the arbitral award The rate of interest would be higher by 2% than the current prevalent rate of interest at the time of award.
31A Cost of an Arbitration The tribunal would determine cost payable. Cost means:(i)    Fees and expenses of the arbitrator(ii)   Fees and expenses of court and witnesses(iii)   Legal Fees and Expenses

(iv) Administration Fees of Institution doing arbitration

(v)   Miscellaneous

The following factors would be taken into account for fixing any fees under the Act: Order as to payment of Cost with general rule that unsuccessful party pays to the successful party in case of any reverse order the same would come with reasons.

34 Application for setting aside arbitral award Clarification as to what amounts to conflict with public policy of India.Insertion of Subsection 2 (A) for patent illegality at the face of the award.
36 Enforcement

 Substitution by new Section: The enforcement of the award would be as per the provision of Code of Civil Procedure, 1908. An application under section 34 would not render the award unenforceable unless the court grants a stay to the award.

37 Appealable Order For section 8, 9 and 34
47 Evidence

In this section and all the following sections of this Chapter, “Court” means the High Court of original jurisdiction having jurisdiction over the subject matter of the award if the same had been the subject matter of a suit.

48 Condition for Enforcement of Foreign Award

Explanation has been added for award in conflict with public policy

57 Conditions for enforcement of foreign awards

The award would be considered against the public policy if the award was made by fraud or corruption (which shall not entail review of dispute) or was in violation of section 75 or section 81 or in contravention with fundamental policy of India or is in conflict with most basic notion of the morality and justice.

 B. Schedules Introduced

SCHEDULE PARTICULARS 
Schedule IV Model Fees
Schedule V Arbitrator’s relationship with the parties and counsel, dispute etc. as per section 12 (1) (b)
Schedule VI Format for Section 12 (1) (b)
Schedule VII Arbitrator’s relationship with the parties and counsel, dispute etc. as per section 12(5) of the amending act

Conclusions

  • Time has been biggest factor to enable India emerge as the seat of arbitration and the amendment at least is a step in the directions.
  • The idea is to make the amendment user friendly
  • Neutrality of arbitrators is another important focus of the amendment
  • Interim measure often also adds to period of adjudication now comes with a caveat that the application would not be maintainable, if the same relief can be obtained from tribunal.
  • Rewarding the arbitrator who does his job before time.
  • Extensions to tribunal only with consent of party for six months and beyond only with permission of court and only if sufficient cause exists.
  • Important clarifications have been added
  • The amendment Act come into force on 23.10.2015 which would have impact on amendment proceedings on or after the aforesaid date.
  • Model Fees has been added which would help reduce the cost of conducting the proceedings
Published :
January 8, 2016
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