"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Thursday, August 7, 2014

Comments on the Law Commission's 246th Report: "Amendment to Arbitration and Conciliation Act, 1996": Part I

The Law Commission's 246th Report titled "Amendment to Arbitration and Conciliation Act, 1996" was submitted to the Law Minister on 05.08.2014 proposing several changes to the Arbitration and Conciliation Act 1996 ("1996 Act" or "Act"). The Report was made available to public on 07.08.2014. The road to reforms on the 1996 Act is at least a decade old. In 2001, the Law Commission published the 176th Report proposing several amendments to the 1996 Act. But the Act remained, and remains, unamended. Subsequently, after reports by several bodies (including the BP Saraf Committee and the Departmental Related Standing Committee on Personnel, Public Grievances, Law and Justice). In 2010, the Ministry of Law and Justice came up with a Consultation Paper. Based on the same, conferences/ consultations were held. From the inputs derived from these, the Ministry prepared a Draft Note for the Cabinet. Subsequently, the Ministry requested the Law Commission to study the amendments proposed in the Draft Note for the Cabinet . The Law Commission has now come up with the 246th Report. In this post, we comment on the changes made by the Commisssion. 

Amendments to the Preamble:
The Commission has noted that the para should be added in the Preamble to reiterate the Act's commitment to fairness, speed and economy in dispute resolution:

"And WHEREAS it is further required to improve the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation, in order to provide a fair, expeditious and cost-effective means of dispute resolution;

The Commission was of the view that such an amendment may not "directly affect the substantive rights and liabilities of the parties", the amendment would form "basis for  Arbitral Tribunals and Courts to interpret" the Act in consonance with the aforesaid objectives.   

Comments: Why should domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards be specified separately? Wouldn't it have sufficed to simply state "...to improve the law relating to arbitration as also to define..."? 

We are slightly sceptic of this amendent as there were enough such signals in the Act which were wholly ignored by the judiicary and the Act was construed at their whim and fancy. Nevertheless, the Commission probably felt that since BALCO (2012) and the subsequent changes to the judiciary's approach to arbitration, it is important to provide such signals to ensure that courts consider these objectives while dealing with the Act. It is important to clearly state what the Legislature wants out of arbitration in India. Considering this, the amendment's unambiguous statement of the object of the enactment is in the right direction. 

Amendments to Section 2:
Arbitral Tribunal Includes Emergency Arbitrator:
The Commission seeks to include "emergency arbitrator" to the the definition of arbitral tribunal in S. 2(1)(d). 

Comment: Several institutions such as the International Chamber of Commerce, Singapore International Arbitration Centre, Stockholm Chamber of Commerce provide for an arbitrator appointed prior to the constitution of the arbitral tribunal for the sake of emergency interim relief. The amendment seeks to recognise  emergency arbitrator under the Rules. 

Apart from the above-said amendment, there is nothing else in the amendment on the Emergency arbitrator. Two aspects are worth noting here: 

1) In a jurisdiction which consists predominantly of ad hoc arbitration, shouldn't the Commission have thought of a court appointed emergency arbitrator parallel to court based interim measures? Such an appointment should be based merely on an application by a party and the standards of entering into jurisdiction by such emergency arbitrator should be the same as that of an emergency arbitrator under the institutional Rules. An aspect probably worth examining by the Law Commission.

2) Legal recognition to such measures ordered by the emergency arbitrator should be made express. Further, institutional Rules, such as the ICC Rules, may not be clear on whether such orders by the emergency arbitrator are enforceable and the means of enforcing them. The Commission could have perhaps clarified where and how the emergency arbitrator's order would fit in in the scheme of interim measures ordered by the tribunal, its appealability and enforcement. 

Court for the Purposes of International Commercial Arbitration:
"Court" for the purposes of International Commercial Arbitration would mean the High Court. Thus, the District Court is being divested of the power to deal with International Commercial Arbitrations. 

Comments: The Commercial Division Bill proposed to constitute a Bench of the High Court to deal with all matters pertaining to challenge and execution of arbitral awards. This amendment departs from the previous stand by letting the District Court deal with all matters pertaining to domestic arbitration while emasculating the jurisdiction to deal with International Commercial Arbitration. An appropriate move as past records show that even the Supreme Court has struggled to deal with choice of law doctrine clearly. Hence, this amendment is a good move. In restrospect, the Commercial Division Bill perhaps went far too ahead in further burdening the already burdened High Court in dealing with domestic arbitrations as well. 

In the next few days, we will be commenting on all the amendments proposed by the Law Commission. For now, we leave the readers to ponder over the amendments and the comments provided above. 

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