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IMPACT OF THE ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2021 ON INDIA’S PRO ARBITRATION OUTLOOK

Author: Sameer Afzal Ansari, III year of B.A.,LL.B. from Guru Gobind Singh Indraprastha University


The tfirst tArbitration tAct tin tIndia twas tenforced tin t1899. tIt thas tbeen more tthan t120 tyears, tand tIndia tis tstill tviewed tas tan tarchaic tsystem tof arbitration trules. tHowever, tthe tjudgements tand tamendment tin thetPrincipal tAct tof t1996 thave tclearly texpressed tthe tlawmaker's tintention to tprogress tIndia tas tan tarbitration-friendly tregime. The trecent taddition tto the tpro-arbitration toutlook tis tthe tArbitration t& tConciliation (Amendment) Act t2021. tThis tis tthe tthird tamendment tto tthe tAct tof t1996 tin tthe tpast six tyears, tand tshows tthe tlegislative tintent tto treform tthe tArbitration tAct of t1996, tmaking tIndia tan tarbitration-friendly tregime.


The tamendment thas ttwo tprimary tchanges tin tthe tAct. tThe tfirst tis tto enable tautomatic tstay ton tawards tin tcertain tcases twhere tthe tcourt thas prima tfacie tevidence tthat tthe tcontract ton twhich taward tis tbased twas affected tby t'fraud' tand t'corruption'. tThe tsecond tchange tis tthe tEighth Schedule's tomission tfrom tthe tprincipal tAct, twhich tspecifies tthe regulations, tqualifications, texperience, tand tnorms tfor taccreditation tof arbitrators. tThis tarticle twill tanalyse tthe timpact tof tthese tamendments ton India's tpro-arbitration toutlook.


AUTOMATIC STAY ON AWARDS

The amendment in Section 34 on automatic stay of the Principal Act's awards is the most significant change in the Amendment Act of 2021. tIn the tpresent system, ta tparty tcan tfile tan tapplication tbefore tthe tCourt under tSection t34 of tthe t1996 tAct tfor tsetting taside tan tarbitral taward. However, tafter tthe 2015 tamendment tto tthe tAct, tan tautomatic tstay twould not tbe tgranted ton the taward's toperation tby tmerely tfiling tan tapplication for tsetting tit taside.


The t2021 tAmendment thas tintroduced ta tmaterial tchange tby tadding ta proviso tunder tsection t36(3) tto tensure tthat tif tcourts tare tprima tfacie satisfied tby tthe tcase tmade tout tof teither t(i) tthe tarbitration tagreement tor contract, twhich tis tthe tbasis tof tthe taward; tor t(ii) tthe tmaking tof tthe award, twas tinduced tor taffected tby tfraud tor tcorruption. tIt tshalltstay tthe award tunconditionally tpending tdisposal tof tthe tchallenge. tThis thas ta retrospective teffect, tdeemed tto tbe teffective tfrom tOctober t23, t2015. Many parliamentarians tcriticised tthe tunconditional tstay tduring tintroduction tof the tBill tIn tLok tSabha. tExperts talso tpoint tout tthat tan tunconditional tstay amounts tto ta tblanket tstay, twhich twill thurdle tIndia's tefforts ttowards ta pro-arbitration tregime. tThis tis tprimarily tbecause tit tbecomes teasy tfor losing tparty tto tallege tcorruption tand tautomatic tstay ton tthe tarbitral award's tenforcement.


This tmay tdefeat tthe tvery tpurpose tof talternate tdispute tmechanism tby drawing tparties tto tcourts tand tmaking tit tprone tto tlitigation. tAnother primary tconcern twith tthis tamendment tis tthat tthe tlegislation tdoes tnot describe teither tfraud tor tcorruption, tcreating tan tambiguous tsituation where tdefendant tparties tmay tsuffer tthe tlitigation theat teven tif tthey tare correct. tThis tamendment's tretrospective teffect tmight talso topen tup ta floodgate tof tlitigation tcases tand toverburden tthe tcourts. In tcases twhere tan application tunder tSection t36(2) tof tthe tAct tis tpending tadjudication tbefore a tcourt, tthe tapplicants twill tnow thave tto tmake trenewed tapplications based on tthe tgrounds tlisted tin tthe tnew tamendment. tThis tis tlikely tto tinvolve delays tand tincreased tcosts tunless tthe tcourts tcan tsua tsponte ttake tnotice tof this tnew tamendment tand tdispose tof tit twith tthe tfiling tof tnew submissions.


Therefore, tthis tamendment twill taffect tenforcement tof tawards, tand tIndia might tfurther tslip tin tease tof tdoing tbusiness treports. tThis tamendment takes ta tregressive tstep tand tdoes tnot thelp tIndia's taim tof ta tpro-arbitration tregime. In tresponse tto tthe tamendment's tbacklash, tThe tLaw Minister tstated tthat tdespite tthe tuse tof twords, tfraud tand tcorruption tin Section t34 twere tnecessary tas tlatter tdoes tnot tprovide tan t"automatic tstay" of tthe taward. tHe tfurther tadded tthat tthe tGovernment twanted tto promptly prevent tparties tcollusive tattempts tto tseek tthe tbenefit tof tan taward ttainted with tcorruption.


These targuments tare tunconvincing tas the tdoes tnot tprovides tthe reasoning behind this tclaim. tFurthermore, tpro-amendment tscholars thave targued tthat enabling tthis tchangetrelieves tpersons taffected tdue tto tfraudulent telements in tthe tarbitration taward. tThey tcite texamples tlike tVenture tGlobal Engineering, twhere tthere twas talleged tfraud tby tthe trespondent's tTech Mahindra tand tSatyam tComputers. This tfraud twas tdiscovered tonly tafter three tyears tafter tthe tenforcement tof tthe taward, tas ta tresult, tthe taward had tto tbe trevisited tand taccordingly tset taside. tHowever, tit tis tstill tunclear how twidening tthe tAct's tscope twould tprotect tseveral tinnocent tparties where tthe tchallenge tis tonly tmade tto tdelay tthe tenforcement tof tawards.


WIDENING THE SCOPE OF QUALIFICATION OF ARBITRATORS

There twere ttwo tamendments tin tthis tarea; thowever, tboth tare tinterlinked, so tdiscussed ttogether. tThe t2019 tAmendment tof tthe tPrincipal tAct tadded section t43J twhich tstated tqualifications, teligibility tand tnorms tfor accreditation tof tarbitrators. tThis tsection tfurther tdirected tthe tEighth Schedule tof tthe tAct, twhich tprovided tan texhaustive tlist tof tqualifications that tan tarbitrator tneeded tto tpossess.


The tschedule talso thad ta tminimum trequirement tof tpersons twith tan educational tqualification tat tdegree tlevel twith tten tyears tof texperience tin scientific tor ttechnical tstreams. tOther tthan tthe tprofessional tqualifications, the tEighth tSchedule talso tprovided tgeneral tnorms tthat twould tapply tto an arbitrator tfor taccreditation tlike tfairness, tintegrity, tbeing timpartial tand neutral tand tso ton.


These tqualification tand tthe tgeneral tnorms twere tvery tbroad. tThis tsection, among tother tthings, tlimited tthe tability tof tqualified tforeign tlawyers tfrom acting tas tarbitrators tin tIndia. tThis twas tseen tas ta tsignificant thurdle twhen compared tto tarbitration-friendly tstates tlike tFrance.


The t2021 tAmendment tact thas tsubstituted tSection t43J tof tthe tAct tand deleted tthe tSchedule tEighth tof tthe tprimary tAct. tThis teffectively tmeans that tparties tare tfree tto tappoint tarbitrators tregardless tof ttheir qualifications. tIn tthe tLok tSabha, tmost tmembers tappreciated tthe Government tfor tproposing tto tomit tthe tEighth tSchedule tas tit twill tattract eminent tinternational tarbitrators tto tthe tcountry tand tfurther tthe tgoal tof making tIndia ta thub tof tinternational tarbitration.


The tLaw tMinister tadded tthat tthis tamendment twould tgive tgreater flexibility tto tthe tArbitration tCouncil tof tIndia tand tpromote tinstitutional arbitration. tThe tamendment tto tSection t43J tstates tthat tqualifications tof arbitrators twill tbe tbased ton tthe t“regulations”, twhich tas tdefined tunder Section t2(1)(j) tto tinclude tregulations tmade tby tthe tArbitration tCouncil tof India. tHowever, twhat tthese t“regulations” tmight tbe, twho twould tmake them, tby twhen tthey twould tbe treleased, tare tsome tof tthe tquestions thatthave tbeen tleft tunanswered.


By tamending tSection t43J, tthe tAmendment tAct talso tprovides tthe Commission, tfreedom tto ttake tinto tconsideration tthe tappointment tof foreign tarbitrators, tbacked tby tthe tUNCITRAL tModel tLaw tprovisions. tThis change talso treinstates tthe tparty tautonomy tprinciple, twhich tenables tto choose tarbitrators tregardless tof ttheir tqualifications.


ANALYSIS AND CONCLUSION

As tstated tat tthe tbeginning, tthe tlegislators' tintent tin tthe t21st tcentury tto make tIndia tan tArbitration tfriendly tregime tis treflected tby tthe tflurry tof amendments tand tpromulgation tof tordinances tin tthe tpast tfew tyears. These trapid tamendments tare tsigns tof tpositive tintent tand treflect thow tthe legislators thave tbeen thearing tto tthe tfield tscholars twith topen-mindedness.


However, tthese tContinuous tpiecemeal tamendments tto tthe tArbitration tAct in trecent tyears tindicates tthat tthe tGovernment tlacks tlegislative twisdom tto stand tits town tlaws. tAn texample twould tbe tinclusion tof tsection t43J tin tthe 2019 tAmendment tAct tand tmaterially tchanging tit tjust ttwo tyears tlater through tthe t2021 tAmendment tAct. tSimilarly, tthe tAmendment tto tsection 36 tconcerning tautomatic tstay tand tchanging tit tmaterially tin tthe tcurrent 2021 tAmendment tAct.


The t2021 tAmendment tAct tuses tbroad tand tambiguous tterms tin tboth amendments. tThe tAmendment tof tsection t36 tuses tterms tlike tfraud tand corruption twithout tan texhaustive tlist tor tclarification tof twhat twould constitute tfraud tand tcorrupt tpractises. tTherefore, tparties twho twant tto delay tthe taward tenforcement tcan texploit tthis tsection, tpushing tcases tback to tan torthodox tlitigation tsystem.