The impact of Arbitration and Conciliation Amendment Act ,2015 by Zainub@LEXCLIQ

The Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”), which obtained the President’s assent on December 31, 2015 and was declared to enter into effect on October 23, 2015, introduced significant amendments to the Arbitration Act. The road to the Amendment Act has been long and winding.

 

A. INTERIM RELIEF

1. FROM COURT

Following the Supreme Court’s decision in Bharat Aluminium and Co. v. Kaiser Aluminium and Co.2 (“BALCO”), Indian courts had no authority to participate in international arbitrations. Following BALCO, if a party’s assets were located in India and there was a risk that the assets would be dissipated, the other party could not seek provisional orders from Indian courts.This inconsistency was resolved in the Amendment Act by the addition of Section 2(2), which makes the provision for interim relief(s) valid even if the arbitration takes place outside of India, subject to an agreement to the contrary. Only parties to a “international commercial arbitration” with a seat outside of India are eligible for this option. This means that the protection will not be available to two Indian parties who choose to arbitrate outside India.

 

2. ARBITRAL TRIBUNAL

Section 17 has been revised to grant the arbitral tribunal the same powers as a court under Section 9. The Amendment Act provides that once the arbitral tribunal has been established, the parties can approach the arbitral tribunal without the intervention of the courts.If there are conditions that make the solution of obtaining interim orders from an arbitral tribunal ineffective, courts cannot consider applications for interim measures.Also clarifies that the arbitral tribunal’s interim steps will have the same impact as a civil court order under the Civil Procedure Code of 1908. (“CPC”). This is a major advancement since, under the previous arbitration system, the arbitral tribunal’s provisional decisions could not be legally implemented, effectively making them meaningless.

 

B. LIMITED SCOPE TO REFUSE ARBITRATION REQUEST

When there is an arbitration agreement, the judicial authority may refer the parties to arbitration until it determines prima facie that there is no legitimate arbitration agreement. While Section 8(1) refers to “judicial authority,” the term “court” is used instead of “judicial authority” in Section 8(2), which appears to be an error.While the scope of amended Section 11 tends to be limited to determining if an arbitration arrangement exists, the scope of amended Section 8 appears to be wider in that the judicial authority may also determine if the arbitration provision is legitimate.

 

C. AMENDMENTS TO GROUNDS FOR CHALLENGING ARBITRAL AWARD

The concept of “public policy” in Section 34 has been restricted, and an arbitral award can now be reversed only if it I was motivated or influenced by fraud or corruption; (ii) is contrary to India’s fundamental policy; or (iii) clashes with the most fundamental notions of morality or justice.

In February 2015, the Law Commission submitted its Supplementary Report in response to the Supreme Court’s decision in ONGC Limited v. Western Geco International Limited5 (which extended the definition of “public policy” to include the Wednesbury principle of reasonableness, requiring a check on the validity of the arbitral award), which recommendations were adopted and enforced.

 

D. NO AUTOMATIC STAY OF ARBITRAL AWARD UPON FILING OF A CHALLENGE TO THE ARBITRAL AWARD

The Amendment Act stipulates that the arbitral award will not be automatically stayed, and that a separate application will be required to request a stay of the arbitral award. The court must now document reasons for granting a stay, and the rules of the CPC for granting a stay of a money decree have been made applicable, indicating that the losing party must now eit.

 

E. TIME BOUND PROCEEDINGS

The Amended Act sets shorter deadlines in order to boost the quality of the arbitration process. Section 24 has been modified to provide a proviso requiring the arbitral tribunal to conduct oral hearings for testimony and oral argument on a regular basis and not to grant any adjournments unless there is reasonable cause.The arbitral tribunal has been given the authority to impose heavy costs for adjournments that are not justified. The arbitrator(s) must make an award within 12 (twelve) months of receiving a written notice of appointment. The parties can agree to extend the time limit for a maximum of 6 (six) months.

 

F. FAST TRACK PROCEDURE

Section 29B has been added, which gives the parties the option of deciding on a fast track process in which the award must be made within 6 (six) months of the arbitrator(s) obtaining written notice of appointment. Without an oral hearing, the dispute will be resolved based on the parties’ written pleadings, papers, and submissions.

 

G. A NEW EXPANSIVE COST REGIME INTRODUCED

Section 31A has been added, giving the arbitral tribunal wide cost-awarding authority. The Law Commission Report’s recommendation for an expansive regime to award costs based on fair and reasonable criterion rules has been adopted. The arbitral tribunal has the authority to determine if costs must be charged, how much they must be paid, and when they must be paid.The clause also states that in most cases, the unsuccessful party would be ordered to pay the successful party’s expenses. The costs which include arbitrator, case, and witness fees and expenses, legal fees and expenses, organisation administrative costs, and any other costs incurred in connection with the arbitral or court proceedings.

 

H. DISCLOSURE REQUIREMENTS OF ARBITRATOR

The disclosure provisions in the Amendment Act are based on the IBA Guidelines on Conflict of Interest in International Arbitration. The Fifth and Seventh Schedules have been introduced as a guide to deciding conditions that would make an arbitrator disqualified.

 

I. CAP ON FEES TO ARBITRATOR

The Fourth Schedule was implemented to include model payments in cases other than international commercial arbitrations and in cases where parties have agreed to the rules of an arbitral institution, in order to prevent the arbitration process from being too costly.Section 11A (2) has been introduced which details the procedure for Central Government to amend the Fourth Schedule.

 

 

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