India's lower house of Parliament approves further amendments to the Indian Arbitration Act

As previously reported here, a draft Bill to amend the Arbitration and Conciliation Act 1996 (the "Act") was approved by the Indian Cabinet on 7 March 2018 (the "Bill"). The Bill was listed as a part of the agenda for the monsoon session of the Indian Parliament and was passed by the Lower House on 10 August 2018, without any amendments. The text of the Bill can be found here.

The Law Minister has described the Bill as "a momentous and important legislation" aimed at making India "a hub of domestic and international arbitration". The key features of the Bill are:

• The Arbitration Council of India: The Bill aims to develop institutional arbitration in India by providing for the establishment of the Arbitration Council of India (the "Council") in Delhi, which will be an independent body that is meant to, among other things:
  • frame polices governing the grading of arbitral institutions;
  • develop guidelines for the accreditation of arbitrators;
  • promote the use of arbitration and ADR in India;
  • make recommendations on measures for resolution of disputes; and
  • establish and maintain a depository of arbitral awards made both in India and overseas.[1]
• Time limits for pleadings and awards: The Bill introduces a new requirement that the Statement of Claim and Defence are to be filed within six months of the arbitral tribunal's appointment. Section 29A of the Act, as it currently stands, requires the award to be made within 12 months of the arbitral tribunal being constituted (with a six month extension to be granted if parties agree). The Bill amends the rule in Section 29A and the award must now be made (i) within twelve months from the date of the completion of pleadings and (ii) it does not apply to international commercial arbitrations.[2]
• Qualifications of an arbitrator: The qualifications and experience for accreditation of arbitrators are specified in the new Eighth Schedule to the Act. The Eight Schedule also specifies general norms applicable to arbitrators including stressing impartiality, fairness and integrity.
• Appointment of arbitrators: Historically arbitrations in India have suffered from delays due to the time taken when approaching the courts for the appointment of arbitrators. The Bill recognises this and now permits the Supreme Court and the High Court to designate specific arbitral institutions which parties can approach for the appointment of arbitrators, with the aim to streamline the process.
• Protection for arbitrators: The new section 42B provides the arbitrator with the protection that no action will lie against them for acts done in good faith under the Act or the rules formulated pursuant to the Act.
• Duty of Confidentiality: A wide ranging duty of confidentiality is imposed under a new section 42A on the arbitrator, the arbitral institution and the parties to the arbitration agreement. Section 42A requires that the arbitrator, the institution and the parties "shall keep confidentiality of all arbitral proceedings" except where disclosure of the award is necessary for the purpose of implementation and enforcement of the award.
• Applicability of the Arbitration and Conciliation (Amendment) Act 2015 (the "Amendment Act"): There have been varying judgments by the courts in relation to the applicability of the Amendment Act and when it would apply (See here). As previously reported, the Bill clarifies the position by noting that the Amendment Act:
  • Applies to arbitral proceedings commenced on or after the commencement of the Amendment Act i.e. 23 October 2015; and
  • Applies to any court proceedings arising out of or in relation to such arbitral proceedings (and does not apply to court proceedings in relation to arbitrations commenced prior to the commencement of the Amendment Act even if the court proceedings are initiated post 23 October 2015).

The Bill will now need to be passed by the Upper House of Parliament (the Rajya Sabha) which is likely to take place during the Winter session of Parliament in November-December 2018.

For more information, please contact Nicholas Peacock, Partner, Donny Surtani, Partner, Kritika Venugopal, Senior Associate, Karan Talwar, Associate or your usual Herbert Smith Freehills contact.

[1] The terms on which such records may be kept are not prescribed in the Bill, which instead envisages separate regulations for this purpose.  The details of these regulations are likely to be of interest to parties wishing to keep some or all of their arbitral awards confidential.

[2] Defined in section 2 of the Act.