Nascent Arbitration Ecosystem in India

Context: The government has proposed an amendment to the Commercial Courts Act 2015 aiming to expedite commercial dispute resolution.

Major Highlights:

• The government is working to establish dedicated Commercial Courts with jurisdiction and power conferred under Commercial Court Act 2015. 
• The goal is to:
  • Institutionalise, license and regulate Arbitration in India. 
  • Prompt institutionalisation of the Arbitration Council of India (established under 2019 amendment) to standardise arbitration across the country.  

What is Arbitration? 

• Arbitration is a method of resolving disputes outside the traditional Court System. It involves neutral third parties, known as arbitrators, agreed upon by the disputing parties. 
• Key Characteristics of Arbitration:
  • Voluntary in nature involving mutual consent of the parties prior to the contract. 
  • Flexibility as compared to formal court procedures. 
  • Binding and non-binding depending upon the nature of agreement. 

About the Arbitration and Conciliation (Amendment) Bill 2024

• The bill is drafted to amend the Arbitration Act 1996, as per the recommendations of Justice Srikrishna Committee. 
• Earlier Amendments in Act of 1996:
  • The 2015 Amendment was aimed to reduce court intervention and make the act more user-friendly. 
  • The 2019 Amendment to create an independent body to grade arbitral institutions named Arbitration Council of India. 
  • The 2021 Amendment to reduce frauds, specify the arbitrators qualifications and promote global competitiveness. 
• Key Features of the Proposed Bill of 2024:
  • Define Arbitration Institutions as a body that conducts arbitration proceedings under its own rules or as agreed by parties, streamlining the arbitration process. 
  • Recognising Institutions: The bill shifts from grading to recognising the arbitration institutions, focusing on their accreditation and the provision of model procedural rules. 
  • Introduction of Appellate Tribunal: Arbitration Appellate Tribunal to further reduce court interventions in the awards. 
  • Emergency Arbitration provisions for interim relief before the constitution of the arbitral tribunal. 
  • Time limit: The court must decide on arbitration referral within 60 days.

Benefits of the Proposed Amendments

• Promoting institutionalisation of arbitration procedure in India by addressing loopholes. 
• Reduce court interventions by proposing appellate tribunal. 
• Timely conclusion of disputes by proposing time limits for courts to referral for arbitration. 
• Providing interim relief by providing provision for emergency relief. 

Challenges Associated with Arbitration Ecosystem in India

• Nascent Institutionalisation: The Arbitration Council of India (ACI), established under the 2019 amendment, became operational only in 2023.  
• Delay in Awards: Arbitration awards are often delayed due to delay in court referral and appeal in courts. 
• Lack of Awareness: The arbitration is predominantly utilised by large businesses. Small and medium businesses are still unaware about the process.  
• Competition: Indian Arbitration faces stiff competition from Singapore's arbitration due to its effectiveness and user-friendly practices. 

Conclusion: Arbitration is the key to address commercial disputes to enhance ease of doing business and reduce judicial pendency. Institutionalisation, hassle free process and quality arbitrators need to be provided to make arbitration effective in India.