Arbitration In India: Institutional Mechanism After 2024 Amendments

The arbitration landscape in India is set to change with the Arbitration and Conciliation (Amendment) Bill, 2024, (Draft Amendment), to modernise the dispute resolution mechanism while embedding the institutional arbitration mechanism into the Indian Legal Framework. This Amendment is a step towards making India an International Hub for Arbitration, aiming to promote ease of doing business by providing a boost to institutional arbitration without judicial intervention and the timely conclusion of arbitration proceedings. Though the arbitration regime has seen various significant changes in 2015, 2019, and 2021, the draft amendment will bring major changes to the arbitration law in India. The Draft amendment is a result of the recommendations issued by the Expert Committee led by Dr. T.K. Vishwanathan, and the Bill has not yet been passed, as the public consultation is underway.

Key Changes

• Promoting Institutional Arbitration
  The draft bill defines an “arbitral institution” as “a body or organisation that provides for the conduct of arbitration proceedings under its aegis, by an arbitral tribunal as per its own rules of procedure or as otherwise agreed by the parties.” This definition is preferable to the approach adopted in the 2019 amendments, which required an institution to be designated by the Supreme Court of India or a High Court for it to be considered an “arbitral institution.”
  
  The Bill also enhanced the powers of arbitral institutions. The arbitral institutions are proposed to have the power to extend the time limit to issue an award, to order a reduction of arbitrator’s fees where the delay is from the arbitral tribunal, and to substitute arbitrators. (Section 29-A)

• Introduction of Time Limits
  For promoting efficiency, the 2024 Bill introduced time limits for certain applications. For an application under Section 8, the Bill proposes a time limit of 60 days for disposing of the application. A 30-day limit has been proposed to the arbitral tribunal to dispose of the jurisdictional objections as preliminary issues. Further, it seeks the tribunal to record reasons in writing for deferring a ruling on the jurisdictional objections. Under section 37(1) of the Arbitration Act, a 60-day time limit for appeal is proposed by the Bill.

• Interim Measures
  The Indian Courts are empowered under the Arbitration Act to grant interim measures for all Indian-seated arbitrations and certain foreign-seated arbitrations. The 2015 amendment to the Act introduced certain limitations on the court’s power to grant interim relief once an arbitral tribunal has been constituted. The Bill proposes to restrict the parties’ rights to approach the court for interim relief once the arbitration proceedings have commenced, to encourage them to seek interim relief from the arbitral tribunal under section 17 of the Act. The 2024 Bill also proposes certain limits on the court’s power to grant interim relief before the commencement of arbitration or after the award is rendered.
  
  Under Section 9(2) of the Act, a time limit of 90 days is provided to commence arbitration proceedings from the date on which the pre-arbitral interim measure order is passed by the Court. The Bill proposes that the 90-day time limit would start from the date of filing of the application for an interim measure. The 2024 Bill also proposes to introduce section 9-A in the Arbitration Act, allowing parties to apply for interim measures from an emergency arbitrator after the arbitral proceedings commence but before the arbitral tribunal is constituted.

• Appellate tribunal
  The 2024 amendment aims to reduce court intervention in arbitration proceedings. The Bill proposes an appellate tribunal under Section 34-A of the Act, wherein the ‘Appellate Arbitral Tribunal’ can entertain applications for setting aside an arbitral award decided exclusively by an Indian Court under Section 34 of the Arbitration Act.

• Omission of ‘Conciliation’
  In 2023, the Mediation Act came into force in India, which also deals with Conciliation. The 2024 Bill proposes to omit any references to ‘conciliation’ in the Arbitration Act.

• Emergency Arbitrator
  The 2024 Bill aims to insert section 2(ea), defining ‘emergency arbitrator’ as an arbitrator appointed under section 9A. The Bill recognises the legal decision in the case of Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. & Ors., wherein the emergency arbitrator’s award was recognised and considered enforceable under section 17(1) of the Act. The Bill aims to align with international practices and includes provisions for the appointment of emergency arbitrators. Though detailed provisions are not provided in the Bill, the statutory recognition of the emergency arbitrators is a welcome change, where ad hoc arbitrations remain a common practice.

• Determination of arbitration fees
  The Draft amendment proposes to delete the model schedule of fees (Schedule IV) and the related provisions. It proposes to give the ad hoc arbitrators the power to determine the fees where the parties have not decided the fees, with the Arbitration Council of India. However, there is a lack of clarity on the fees as the Bill does not provide any criteria or factors to determine the arbitration fees.  

• Place of Arbitration
  The Bill seeks to address the ambiguous and litigated issue of the distinction between “seat” and “venue” of arbitration. The Supreme Court has addressed the same issues in various cases, including BALCO v. Kaiser Aluminium Technical Services Inc. and BGS SGS Soma JV v. NHPC Ltd. The 2024 amendment proposes to replace the term “place” with “seat” throughout the act and clarifies that the seat of arbitration is the legal jurisdiction where the arbitration proceedings are commenced.

The Bill under Section 2-A clarifies the definition of court and the seat of arbitration. Section 2-A(1) clarifies that in arbitration other than international commercial arbitration, the courts will have jurisdiction based on the seat of arbitration as agreed by the parties or determined by the tribunal. Under section 2-A(2), in international commercial arbitration, the high court having territorial and pecuniary jurisdiction over the seat of arbitration will have jurisdiction.

Further, under Section 20, two options are with the parties for the seat of arbitration:

“(a) Option 1 allows the parties to agree on a seat of arbitration, or for the Tribunal to determine the seat in case of no agreement between the parties.

(b) Option 2 provides that if no seat is agreed upon or determined, the seat will be the place where the contract was executed, or the cause of action arose.”

Challenges

Despite the promising reforms in the arbitration regime in India, challenges persist. The non-intervention of the judiciary with an increased role of arbitral institutions and tribunals might impact the cost of arbitration. The Arbitration Council of India is yet to be constituted, raising questions of operational readiness. Further, the Bill does not address the appeal process for ad hoc arbitration nor fee structures, highlighting risks of procedural gaps.

Conclusion

The 2024 amendment is a significant leap in the institutional arbitration mechanisms within the Indian dispute resolution mechanism. With expedited proceedings, limited court intervention, an emergency arbitrator, and embracing digital technology, India is aligning the arbitration framework with the international standard and is supporting its aim to be a global arbitration hub.