On 5 January 2018, the Central Government introduced New Delhi International Arbitration Centre Bill, 2018 (the “Bill”) in the lower house of Indian Parliament (Lok Sabha). This was with the objective of making India an investor-friendly nation. There are few arbitral institutions operating in India – Indian Council of Arbitration (“ICA”), International Centre for Alternative Dispute Resolution (the “ICADR”) and more recently Mumbai Centre for International Arbitration (“MCIA”). However, foreign investors have long preferred referring their disputes to arbitration centres located in Singapore, Hong Kong or London under the aegis of institutional rules of International Chamber of Commerce (“ICC”), Singapore International Arbitration Centre (“SIAC”) or London Court of International Arbitration (“LCIA”). Unwarranted judicial intervention and under-developed dispute resolution infrastructure and procedures have dented investors’ confidence, and discourages investors from adopting recourse to contract enforcement measures. The Bill proposes to establish the New Delhi International Arbitration Centre (the “NDIAC”) in order to acquire and revamp the procedural framework and governance structure that was previously in place under the ICADR. Further, the Bill seeks to develop and expedite the dispute resolution process. Undoubtedly, this is a welcome move to encourage foreign investment in the country and would auger well for India’s reputation globally.
The following features of the Bill seeks to do away with the procedural issues previously in place under the ICADR, making it distinct from other arbitral institutions in India.
Ambiguities in the Bill
Though the Bill is a crucial step to build India into a global arbitration hub, there are some inherent ambiguities in the Bill that will cause roadblocks in the development of an effective dispute resolution mechanism.
Illustratively, the Central Government is the appointing authority of the members of the NDIAC and a periodic contributor to its funds. Further, its accounts are proposed to be audited by the Comptroller and Auditor-General of India. The Central Government would also have the power to remove members from office. Investors adopting alternate modes of dispute resolution prefer a neutral decision making body. The proactive role played by the Central Government may discourage contracting parties from referring disputes to NDIAC for fear that the independence and credibility of the arbitral institution will be compromised, especially in cases where the opposite party is a public sector undertaking. Although SIAC was established with government aid and funding, it has now become a completely self-sufficient and independent arbitration institute.
Further, the Bill only addresses the administrative issues in relation to NDIAC. It remains to be seen how the procedural framework concerning the settlement of disputes is laid. The primary reason behind ICADR’s failure to become an institute of choice was its antiquated approach in resolving disputes. In order to present NDIAC as a preferred arbitration institute, it must be competitively priced, have state of the art facilities and must have precise timelines for the completion of arbitration proceedings. Separately, provisions such as consolidation of arbitrations, emergency arbitrators, immunity to arbitrators and confidentiality of information that were not envisaged under the ICADR Rules must be incorporated in the NDIAC procedural framework.
The Bill, establishing NDIAC with an organised governance structure, will replace the outdated ICADR and lay a strong foundation in the institutional arbitration setup of India. The High Level Committee headed by Justice B.N. Srikrishna (the “Committee”) suggested taking over of ICADR and overhauling its governance structure because of the procedural deficiencies in the functioning of the ICADR. Particularly, the large governing council and the archaic rules make the institute unattractive to the potential contracting parties. The Bill proposes to overcome these roadblocks by streamlining the organisational structure of the arbitration centre. Further, the Arbitration and Conciliation (Amendment) Bill, 2018 (the “Arbitration Amendment Bill”) proposes to establish the Arbitration Council of India (the “ACI”) which will periodically review and grade the arbitral institutions in India. The periodic review and grading will certainly help in promoting the credibility of NDIAC among the foreign investors. It is hoped that NDIAC will change the perception of doing business in our country and will expedite the dispute settlement mechanism. However, the Parliament must clear the ambiguities associated with the Bill. Particularly, an investor friendly procedural framework must be adopted. A transparent process for appointment and removal of the members must be incorporated. Separately, the Central Government involvement/ interference in the functioning and funding of NDIAC must be phased out to gain investors’ confidence.
This article was originally published in Wolters Kluwer on 4 May 2018 Co-written by: Binsy Susan, Partner; Neha Sharma, Associate. Click here for original article
Contributed by: Binsy Susan, Partner; Neha Sharma, Associate
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