Keeping up with the times: The Government of India proposes new arbitration law reforms

Over the last decade, India has taken significant steps to strengthen its arbitration law to help establish itself as a global hub for international arbitration and to provide greater certainty to investors regarding enforcement of contracts. The latest round of proposed amendments to India’s arbitration law aims to streamline the arbitration process, reduce avenues for court intervention, and increase the efficiency of arbitration.

Background

Building on the momentum from the amendments in 2015, 2019 and 2020-21 (discussed in our 'Investing in India' alert last year), the Indian Government has proposed a new round of changes to the Indian Arbitration and Conciliation Act 1996 ("Arbitration Act"). The draft Arbitration and Conciliation (Amendment) Bill, 2024 ("2024 Draft Bill") seeks to promote institutional arbitration, further reduce court intervention, and facilitate the timely conclusion of arbitration proceedings in India. The 2024 Draft Bill comes in the wake of recommendations in February 2024 issued by a 16-member expert committee led by Dr. T.K. Viswanathan, a Former Secretary, Ministry of Law and Justice, Government of India. A public consultation on the 2024 Draft Bill is underway.

Key amendments 

Promoting Institutional Arbitration in India

The 2019 amendments to the Arbitration Act envisioned the setting up of an autonomous body, known as the Arbitration Council of India ("ACI"), for the promotion of institutional arbitration in India. The 2024 Draft Bill aims to provide a new fillip to institutional arbitration with the following key changes:

• Definition of 'arbitral institution': The 2024 Draft Bill defines "arbitral institution" as "a body or organisation that provides for 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."
• Enhancement of powers of arbitral institutions: Arbitral institutions are proposed to have enhanced powers including the power to extend the time-limit to issue an award, to order a reduction of arbitrators' fees where delay stems from arbitral tribunal, and to substitute arbitrators (Section 29-A). These powers currently vest exclusively with the courts. This proposal would also ease some of the burden upon courts to address applications seeking extension of mandate for an arbitral tribunal.
• Elimination of 'grading' of arbitral institutions: Under the 2019 amendments, the ACI was envisaged to have the responsibility for grading arbitral institutions and framing policies in this regard. The 2024 Draft Bill (while retaining the ACI's duty to promote institutional arbitration and strengthen arbitral institutions in Section 43-D), proposes to replace the grading power of the ACI with functions such as recognition of arbitral institutions and providing model rules of procedures or guidelines, among others.

Promoting Efficiency – Introduction of Time Limits for Dealing with Certain Applications

The 2024 Draft Bill also introduces various time limits aimed at improving the efficiency of India-seated arbitration proceedings:

• 60-day time limit for disposing of applications under Section 8: The 2024 Draft Bill proposes a time limit of 60 days within which courts must dispose of a party's application for referral to arbitration where there is an arbitration agreement (Section 8 of the Arbitration Act). For this proposal to work in practice, it would have to be supplemented by other measures aimed at reducing the pendency of arbitral applications before Indian courts.
• 30-day limit for an arbitral tribunal to dispose of jurisdictional objections as preliminary issue: Section 16 of the Arbitration Act embodies the well-known principle that an arbitral tribunal is empowered to rule on its own jurisdiction. The 2024 Draft Bill proposes to streamline and increase the efficiency of arbitral proceedings by introducing a time limit of 30 days within which an arbitral tribunal must dispose of any jurisdictional objections as a preliminary issue. The proposal also requires the arbitral tribunal to record the reasons for deferring a ruling on the jurisdictional objections (should it not rule in the manner envisaged in this draft amendment) in writing.
• 60-day time limit for appeals under Section 37(1): Section 37(1) of the Arbitration Act lists the limited set of orders where a party is allowed an appeal against an order issued by a first instance court as part of its supervisory jurisdiction over an arbitration. These are, (i) an order refusing to refer the parties to arbitration where a valid arbitration agreement is alleged to exist (under Section 8 of the Arbitration Act); (ii) an order refusing to appoint an arbitrator where the parties have failed to make such appointment or the parties' agreed upon procedure has not led to such appointment (under Section 11 of the Arbitration Act); (iii) an order granting or refusing to grant an interim measure (under Section 9 of the Arbitration Act); or (iv) an order setting aside or refusing to set aside an arbitral award under Section 34 of the Arbitration Act. The 2024 Draft Bill proposes to introduce a strict time limit of 60 days for such an appeal, which will run from the date when an appealable order is received by the aggrieved party.

Reducing Court Intervention – Applications for Interim Measures

For all India-seated arbitrations and in certain foreign-seated arbitrations (where parties have not excluded the application of Section 9 of the Arbitration Act), Indian courts are empowered to grant interim measures in aid of arbitration proceedings. These interim measures can be granted at any time — before or during the arbitral proceedings and even after the award is issued (but before it is enforced in India). The 2015 amendments introduced limitations upon the court's power to grant interim relief once an arbitral tribunal had been constituted. The 2024 Draft Bill proposes to limit the Indian courts' power to grant interim measures to the period before the commencement of arbitration or after the rendering of an award.

To protect the parties' rights to seek interim measures during arbitral proceedings, the 2024 Draft Bill introduces two related changes:

• Speeding-up the process of commencing arbitration proceedings: Section 9(2) of the Arbitration Act provides a time limit of 90 days to commence arbitration proceedings, which starts running from the date when a pre-arbitral interim measure order is passed by a court. The 2024 Draft Bill proposes to amend this provision in a manner that the 90-day limitation would start running earlier, i.e., from the date of filing of an application for an interim measure. Through this proposal, the 2024 Draft Bill aims to reduce delays to the commencement of arbitration that can be caused by prolonged pre-arbitral court proceedings.
• Availability of interim relief through emergency arbitrators: The 2024 Draft Bill proposes the introduction of Section 9-A in the Arbitration Act that would allow parties to apply for interim measures from an emergency arbitrator once arbitral proceedings have begun but before an arbitral tribunal is constituted. Section 9-A is proposed to apply to all India-seated arbitrations and certain foreign-seated international commercial arbitrations (where parties have not excluded its application). This is a welcome step following the Supreme Court of India's decision in Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. & Ors.,¹ which, as we had previously reported, had paved the way for the enforcement of emergency arbitration awards in India-seated arbitrations. The proposed Section 9-A seeks to extend that benefit to foreign-seated arbitrations unless parties expressly agree to exclude it from their arbitration agreement. Any orders made by an emergency arbitrator are proposed to be enforceable just like interim measures orders made by an arbitral tribunal under Section 17(1) of the Arbitration Act. Since orders made by arbitral tribunals are treated on the same footing as orders made by civil courts in India (see Section 17(2) of the Arbitration Act), this means that any orders made by emergency arbitrators will also be enforceable as if they were civil court orders. That said, Section 17 of the Arbitration Act in its terms, does not apply to foreign-seated arbitrations. This position should be clarified to remove any ambiguity regarding the status of enforceability of orders rendered by foreign-seated emergency arbitrators.

Once the arbitral tribunal is constituted, Section 17 of the Arbitration Act already grants wide powers to an India-seated tribunal to grant interim measures during the arbitral proceedings. Under the 2024 Draft Bill, these powers are proposed to extend to powers to confirm, modify or vacate the orders made by emergency arbitrators.

Reducing Court Intervention – Applications to Set Aside India-Seated Arbitration Awards

With the proposed addition of Section 34-A to the Arbitration Act, the 2024 Draft Bill seeks to introduce the concept of an 'Appellate Arbitral Tribunal' for the first time. Under this new provision, arbitral institutions in India may provide in their rules for an appellate arbitral tribunal that can entertain applications for setting aside an award, which are decided exclusively by Indian courts under Section 34 of the Arbitration Act.

There are parallels to this mechanism under the rules of certain arbitral institutions, such as those of the International Arbitration Chamber of Paris ("CAIP"), European Court of Arbitration ("CEA"), Arbitrators' and Mediators' Institute of New Zealand Inc ("AMINZ"), American Arbitration Association ("AAA"), International Centre for Dispute Resolution ("ICDR"), International Institute for Conflict Prevention & Resolution ("CPR"), Judicial Arbitration and Mediation Services ("JAMS") and the Shenzhen Court of International Arbitration ("SCIA").

In recognition of the principle of party autonomy, several arbitration laws, such as those of Argentina, Belgium, Croatia, Netherlands, Nigeria, and Poland, expressly clarify that parties may agree to a second tier of arbitration within their arbitration agreement, but such arrangements are rare in practice. Even the Supreme Court of India has recognized the validity of appellate arbitration provisions involving another tier of arbitration. In Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd.,² the Supreme Court found that a two-tiered arbitration clause under the then applicable version of the Rules of Arbitration of the Indian Council of Arbitration ("ICA Rules") was valid and enforceable, and that the ICC tribunal could sit in appeal over the Indian award. The Supreme Court noted that the Arbitration Act did not prohibit such provisions, nor did it exclude the autonomy of parties to mutually agree to a procedure to reconsider an award in appeal.

If adopted, the version of Section 34 proposed by the 2024 Draft Bill would empower parties to choose an appellate arbitral tribunal as the forum for entertaining a challenge to their arbitral award – to the exclusion of courts' jurisdiction. This is much-more far reaching than the recognition of appellate arbitration mechanisms in arbitration laws of other countries discussed above.

The provision is, therefore, novel and untested in practice. Violation of public policy is a ground for challenging a domestic award in several jurisdictions (including India) and perhaps unsurprisingly, this provision does not appear to have any equivalent in arbitration laws of other countries – as both the courts and the legislature may consider that private arbitral tribunals are not best-placed to decide what constitutes a violation of public policy.

It would be interesting to see whether this proposal will make its way into the statute and how it will hold up to public comments and scrutiny at the stage of discussions before the Indian Parliament, considering the sensitivities and perceived risks around outsourcing the interpretation of public policy to private arbitral tribunals.

If adopted, it would also be interesting to see how popular this proposal ends up being in practice and how successful it is in achieving its intended goal of limiting court intervention under Section 34 of the Arbitration Act. Given that the disposal of petitions under Section 34 of the Arbitration Act by courts takes about three to four years on average,³ there is an obvious incentive for arbitration users to opt-in to a quicker appellate mechanism before an arbitral tribunal. Should it find many takers among arbitration users, it could also have the effect of reducing the backlog and pendency in Indian courts arising out of set-aside applications.

Other Proposals

Along with the changes summarised above, the 2024 Draft Bill also proposes to omit any references in the Arbitration Act to "conciliation" in light of the Mediation Act, 2023 coming into force. It also embraces online dispute resolution (a reality of the post-pandemic world) by proposing to include within the definition of arbitration a proceeding conducted wholly or partially by use of electronic means.

Conclusion

The 2024 Draft Bill continues to build on the strides made in recent years to transform the arbitration landscape of India. The 2024 Draft Bill can boost investor confidence by expediting arbitral processes and reducing court intervention.

Pushkar Keshavmurthy (Law Clerk, White & Case, Paris) contributed to the development of this publication.

_{1 (2022) 1 SCC 209.
2 (2006) 11 SCC 245; (2017) 2 SCC 228.
3 Amer Vaid, Section 34 of Arbitration Act and timely disposal: Two roads that never meet, Bar & Bench (“As on September 1, 2023, there are 2,106 petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 pending before the Delhi High Court. The disposal of Section 34 petitions is on average taking 1,327 days or roughly more than 3.5 years. The average number of hearings for final disposal of a Section 34 petition is 23.").}

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