Arbitration 2015-Weapon Reloaded

“When will mankind be convinced and agree to settle their difficulties by arbitration?” Benjamin Franklin.

Historically, arbitration was successfully used by the ancient Greeks and the Vikings to solve interstate and intrastate conflicts. In more recent history, arbitration played an important role in solving international border disputes. Currently, negotiation and mediation are the widespread

mechanisms for resolving international conflicts and arbitration continues to be an efficient tool for conflict resolution, particularly for international and national commercial disputes.

Though historically significant for the resolution of disputes, in India, arbitration is not often used correctly in that way. The sluggish judicial system,  led to delays rendering arbitrations inept and unappealing. With an eye to make India an Arbitration hub, the Government of India has now approved number of amendments for making Arbitration a preferred mode for settlement of commercial disputes. This will not only lead to expeditious disposal of cases but also be more user-friendly, cost effective  and enhance the efficiency of arbitration.

To start off on the right foot, an application for appointment of an Arbitrator shall now be disposed of by the High Court or Supreme Court as expeditiously as possible and an endeavor to dispose of the matter within 60 days. Further, Arbitral tribunal will now make its award within a period of 12 months where parties may extend such period up to 6 months and shall be extended by the court only on sufficient grounds. The court while extending the period might also order reduction of fees of arbitrator(s) not exceeding five per cent for each month of delay, if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal. As an incentive, additional fee shall be paid to the arbitrator, if the award is made within six months.  Also, disputes be resolved through fast track procedure and award in such cases shall be given in six months period.[1]

The Arbitral tribunal shall now grant all kinds of interim measures which the Court is empowered to grant, and such order shall be enforceable in the same manner as if it is an order of Court. Further, an application to challenge the award is to be disposed of by the Court within one year and mere filing of an application for challenging the award would not automatically stay execution of the award. Award can only be stayed where the Court passed any specific order on an application filed by the party. [2]

One of the most significant amendment is of Section 34 relating to the grounds for challenge of an arbitral award, to restrict the term 'Public Policy of India" (as a ground for challenging the award) by explaining that only where making of award was induced or affected by fraud or corruption, or it is in contravention with the fundamental policy of Indian Law or is in conflict with the most basic notions of morality or justice, the award shall be treated as against the Public Policy of India. [3]

In order to avoid frivolous and meritless litigation/arbitration, a new Section 31A is to be added for providing comprehensive provisions for costs regime which will be applicable both to arbitrators as well as related litigation in Court. Further, in order to ensure neutrality, the amendment mandates the arbitrator to “disclose in writing about existence of any relationship or interest which may give rise to justifiable doubts about his neutrality”. Any person in the position of conflict of interest would be ineligible to be appointed as an arbitrator. Lastly, amendments in Sections 2(1)(e) , 2(1)(f)(iii), 7(4)(b), 8(1) and (2), 9, 11, 14(1), 23, 24, 25, 28(3), 31(7)(b), 34 (2A) 37, 48, 56 and in Section 57 are also proposed for making the arbitration process more effective.[4]

Thus, India did put in place a progressive piece of legislation which is essentially based on the Model Law and the United Nations Commission on International Trade Law (UNCITRAL ) Arbitration Rules which had an effective law in place and the Government of India is certainly committed to improve its legal framework relating to Arbitration. All it needs now is inculcation of the culture of arbitration within the bar, the bench and the arbitral community. The gear of the past needs to be dropped so that India, undeniably, not only will have an attractive arbitration mechanism on offer which could fairly be proclaimed that Arbitration is fair, effective, expedite and legally binding but also could be recognized as an favorable international venue for arbitration proceedings.