Calls for reduced court intervention in amending the Arbitration Act now that the consultation period is closing

While the government’s proposed reforms seek to promote institutional arbitration, they still include provisions that would delay dispute resolution by allowing courts to intervene, experts said.

When the Arbitration Act was amended for the second time in 2019, it was strengthened to give the powers of reviewing arbitration institutions to the Arbitration Council of India (ACI), a body of experts and policy makers that would frame procedural rules for arbitration.

Now, under the new proposed changes, the Arbitration Board of India would only have the power to ‘recognise’ arbitration institutions. Furthermore, the amended law aims to give courts the power to appoint arbitration institutions in cases pending before them.

“It’s good that the gradation has been removed. However, designation by courts after ACI recognition dilutes the authority of ACI, causes duplication of efforts and invites unnecessary judicial intervention, all of which are against the principles of ADR (alternative dispute resolution),” said P. Madhava Rao, Registrar of the Hyderabad-based Amika Arbitration and Conciliation Board, in the institution’s recommendations to the government.

“As a result, this clause should be removed from the amendments, and the designation section from the original law should be completely removed,” he added.

It is fair to say that although the ACI was established by the amendment of the Arbitration Act of 2019, it has not yet been established.

The Amika Arbitration and Mediation Council also proposed that the government give arbitrators powers to gather evidence.

Under existing law, arbitrators can only use evidence collected by courts to resolve the dispute.

“This is yet another major threat to the speed at which justice is delivered. If the Arbitration Tribunal is dependent on courts to obtain evidence, this will undoubtedly be delayed and the purpose of ADR will be defeated. Therefore, arbitral tribunals should be given the power to decide evidence instead of writing to the courts, which would increase the burden on the courts,” the set of recommendations said.

Previous amendments

However, this is not the first time that stakeholders have fought to reduce court intervention. There have been calls over the years to reduce the involvement of courts each time the Arbitration Act, passed in 1996, was amended – in 2015, 2019 and 2021.

This was intended to reduce the burden on the courts, which are clogged with cases, and to make the arbitration method fully independent as a dispute resolution mechanism.

Experts have also asked the government to give arbitration tribunals the power to enforce awards. Currently, disputants must turn to civil courts to enforce such judgments.

When arbitral awards are as binding as the judgment of a court, there is no problem in allowing arbitrators to enforce their awards themselves, Rao said.

Rao emphasized that arbitration is a mechanism where parties mutually decide to resolve an issue, while one party takes the other to court without its consent. Therefore, Rao concluded, appeals against the enforcement of awards are less likely in arbitrations, because parties would willingly resolve the dispute, and enforcement through courts would only lead to further delays.

Mint earlier reported on August 15 that the Union Ministry of Law and Justice was exploring the possible implementation of global best practices for the enforcement of arbitral awards.

Although practitioners have called for judicial cuts, the current amendments, which were open for consultation until November 3, contain some provisions that pursue the same goal.

The draft amendment proposes an appellate arbitration tribunal for disputes settled by arbitration institutions. This means that if disputants have chosen to resolve disputes through arbitration by engaging the services of a specialized institution, and they wish to appeal the arbitrator’s decision, they can appeal to another arbitration tribunal instead of at a court.

But this amendment could also prove to be more expensive for the disputants.

“The option for parties to agree to appeal to arbitral tribunals to decide an initial challenge to an award in the Bill aims to reduce one level of judicial intervention in the arbitration process,” said Shaneen Parikh, Partner ( head – international arbitration), Cyril Amarchand Mangaldas.

“While it will relieve the courts of some pressure from the challenges under section 34, further appeals under section 37 of the Act and up to the Supreme Court will still be available. With the possibility of increased scrutiny by the court of a tribunal decision, this will ultimately not be the case. have the desired effect of genuinely reducing court intervention, and in any case will likely be more expensive for parties. Parikh added.

Shiv Sapra, partner at Kochhar & Co., opined that the new appellate court would be similar to the high courts, which currently hear arbitration cases.

“It will be interesting to observe the criterion that would be set for appointment of members of such tribunals as the appeal is currently before the Hon’ble Courts under Article 34 and 37. It is expected that the appoint members The fact that parties still have the option to approach the court as before is an additional advantage because it gives a party the freedom to choose between the two,” said Sapra.

Pursuant to Articles 34 and 37 of the Arbitration Act, parties can appeal against arbitral awards to the court.

Some experts also pointed to online and digital ways to resolve disputes.

Alay Razvi, Managing Partner of Accord Juris, said digital dispute resolution is a crucial area that needs policy development. “The other crucial area that needs to be looked at is having a better framework that would support the digital dispute resolution process. Further amendments would be required from time to time depending on the emerging challenges to make the provisions airtight and process-friendly.” he said.