The Arbitration and Conciliation (Amendment) Ordinance, 2020

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The Arbitration and Conciliation (Amendment) Ordinance, 2020

Introduction

The Arbitration and Conciliation Act, 1996 (Act) provides for the framework of conducting international and domestic arbitration, as well as conciliation proceedings in India.

The President of India, Ram Nath Kovind, on 04 November 2020, promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2020, (Ordinance) thereby amending certain provisions of the Act.

Background

In terms of the ease of doing business ranking issued by the World Bank for the year 2020, India stands at an overall rank of 63 out of 190 countries. However, when it comes to enforcing contracts, India ranks at 163 out of 190 countries

Accordingly, there is a need for India to provide a competent, investor friendly and easy business setup and also to streamline the process of contract enforcement and dispute resolution.

In light of the efforts to improve the Indian business setup, to address the concerns raised by stakeholders and also to cater to situations where agreements or awards are induced by fraud or corruption, the Ordinance has been promulgated.

The Ordinance has amended provisions of section 36 and section 43J of the Act.

Amendment to section 36 of the Act

Section 36 of the Act deals with the enforcement of arbitral awards.

Position before the amendment

(i) According to section 36, an arbitral award can be enforced in cases where an application to set aside the award has not been made and the time for making the same has expired. Such award is enforced in accordance with the Code of Civil Procedure, 1908.

(ii) In cases where an application to set aside an award has been filed, courts may still enforce the award. On the other hand, they also have the power to grant an order of stay on the operation of the award until the application for setting aside the award is disposed.

Position after the amendment

The Ordinance has amended section 36 of the Act by conferring additional powers to courts to grant a stay on the operation of awards.

In terms of the Ordinance, the courts have been granted the power to stay the operation of an award unconditionally, until the application for setting aside the award is disposed. Such stay can be granted if the court is satisfied that a prima facie case is made out if the following were affected by fraud or corruption:

(i) the arbitration agreement which is the basis of the award; or

(ii) the making of the award itself.

This new provision applies to all court cases relating to arbitral proceedings, irrespective of whether such proceedings commenced prior to or after 23 October 2015.

Amendment to section 43J of the Act

Section 43J of the Act deals with norms for accreditation of arbitrators.

Position before the amendment

Section 43J was incorporated in the Act in 2019. In terms of the section, only the persons qualifying the criteria set out in the eighth schedule of the Act, such as advocates, chartered accountants, officers of the Indian Legal Service, etc. could be appointed as arbitrators.

Position after the amendment

The Ordinance has replaced the existing section 43J with a new provision. The new provision prescribes that qualifications, experience and norms for accreditation of arbitrators will be specified by regulations. However, the Ordinance is silent on details of such regulations

Additionally, the Ordinance has also omitted the eighth-schedule dealing with detailed qualification criteria of arbitrators.

Conclusion

The amendments made by the Ordinance have received mixed reactions from stakeholders. The introduction of new grounds of fraud/corruption for stay on arbitral awards is a welcome change. However, it is to be tested whether such provisions fall prey to abuse by stakeholders as a means of delaying enforcement of arbitral awards.

Further, the norms in respect of qualification of arbitrators are still unclear. The prescription of such qualifications may lead to significant changes in the process of selection of arbitrators.