India next global hub for commercial arbitration?

Cabinet recently passed amendments to Arbitration and Conciliation Act, 1996; Aims to make India a hub for international commercial arbitration

The Cabinet has cleared the amendments to the Arbitration and Conciliation Act, 1996, specifying deadlines for awards by tribunals and incentivising expeditious disposal of cases. However, these alone will not make India an international hub for commercial arbitration. According to experts, India should have more capacity such as having regular legal experts and not just retired judges in the arbitral panel. The amendments, approved by the Cabinet, seek to provide for arbitral tribunal making its award within 12 months. Parties might extend such periods up to six months. Thereafter, it can only be extended by the court.

While extending the period, the court might also order reduction of arbitrators' fees not exceeding five per cent for each month of delay, if the court finds the proceedings have been delayed for reasons attributable to the arbitral tribunal. If the award is made within six months, the arbitrator might get additional fees if the parties agree. Besides, a new provision would be inserted for a fast-track procedure for conducting arbitration. Parties to the dispute might agree their dispute be resolved through the fast-track procedure. Award in such cases shall be given in six months.

A new sub-section in Section 11 would be added to ensure an application for appointment of an arbitrator shall be disposed of by the high court or Supreme Court expeditiously, and the matter should be disposed of within 60 days. The amendments are based on the Law Commission's 246th report. An official statement had said these recommendations would ensure that India become a hub of International commercial arbitration.

Ganesh Chandru, executive partner at Lakshmikumaran & Sridharan, a law firm, says more institutional arbitration should take place in India, for which existing arbitral institutions should be modernised. Right now, most of the arbitrations in India are ad-hoc, says Chandru, who is in the arbitral panel of Singapore and Kuala Lumpur. He advises arbitration hearings should be conducted continuously during the week days and not just during weekends so that there is continuity of proceedings.

Amit Bansal, senior partner at Deloitte Haskins & Sells, says these amendments are a step toward achieving this objective, but a strong institutional framework is also needed. Bansal says arbitral panel is full of retired judges of high courts and the Supreme Court. Besides, it does not have many non-legal experts. This is contrary to international arbitration centres such as the ones in Singapore, London and Paris. Chandru, too, says increasing the pool of arbitrators is an important step for which there needs to be nation-wide training of arbitrators and more people should be accredited as full-time arbitrators.

Naresh Thacker, partner, Economic Laws Practice, says a quick and efficient mechanism of redressal of business disputes is always welcome and the government has shown urgency in setting right all areas which businesses - both domestic and international - see as a hurdle to doing business in India. "The move to amend the Arbitration and Conciliation Act, 1996 is the first step in providing a platform to the alternate dispute resolution mechanism to achieve its true goal, that of providing expeditious and effective settlement of commercial disputes," he points out.However, he cautions it is naïve to believe the morning after the Bill becomes an Act, India will suddenly be recognised as an International arbitration hub.

"It is not merely a change in law that will be enough. The conduct and attitude of all stakeholders, including litigants, lawyers, arbitrators and courts will ultimately determine whether the amendments will achieve what is intended," he says. Chandru suggests arbitration should be made a compulsory module in all law colleges as this is likely to become the preferred way of resolving commercial disputes in the years to come.

Arbitration is preferred by many companies in a dispute than normal legal process because it is more expeditious, though a costlier affair, and its award is enforceable in foreign jurisdictions as well. All major disputes of companies, including Vodafone, NTT DoCoMo versus Tata Teleservices, moved to international arbitration centres due to cumbersome processes in India.

Recently, former revenue secretary Shaktikanta Das said arbitration is not the best route to solve disputes related to taxes. He found mutual agreement procedure and advance pricing agreements as much better ways to settle tax disputes.
'DISINCENTIVISE ARBITRAL PANEL'

• Cabinet recently passed amendments to the Arbitration and Conciliation Act, 1996
• Aim is to make India a hub for international commercial arbitration
• Amendments specify dvarying deadlines for award and challenging that award
• Disincentivise arbitral panel for delay in awards
• Experts say institutional framework needs to be strengthened to make India a preferred centre of commercial arbitration
• Panel should have active experts in the field as well as non-legal experts