A View on Arbitration and Conciliation (Amendment) Bill, 2021

  A View on Arbitration and Conciliation (Amendment) Bill, 2021

INTRODUCTION 

The Lok Sabha has passed the Arbitration and Conciliation (Amendment) Bill, 2021 to check misuse by “fly-by-night operators” who take advantage of the law to get favourable awards by fraud.The Bill intended to replace the Arbitration and Conciliation (Amendment) ordinance issued in November, 2020.

Article 51 of the Indian Constitution states that India must make every effort to:

In the relations of organised peoples with one country, promote respect for international law and treaty responsibilities.

Encourage the use of arbitration to resolve international issues. ACI is a step in fulfilling this constitutional need.

Arbitration is a method of resolving conflicts between parties by appointing an arbitrator, who is an independent third party who is impartial and neutral. Arbitrators listen to both sides of a dispute before reaching a decision.

Conciliation is a method of resolving conflicts between parties by choosing a conciliator who assists (amicably) the disputants in reaching a negotiated settlement. It is an informal technique for resolving a problem without resorting to litigation.

Highlights of the Bill:

1. It seeks to amend the Arbitration and Conciliation Act, 1996 so as to (i) enable automatic stay on awards in certain cases and (ii) specify by regulations the qualifications, experience and norms for accreditation of arbitrators.

2. Seeks to ensure that stakeholder parties can seek an unconditional stay on enforcement of arbitral awards in cases where the “arbitration agreement or contract is induced by fraud or corruption.”Also does away with the 8th Schedule of the Act that contained the necessary qualifications for accreditation of arbitrators.

3. Added a provision in Section 36 of the Arbitration Act and will come into effect retrospectively from October 23, 2015. As per this amendment, if the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award was induced or effected by fraud or corruption, it will stay the award unconditionally pending disposal of the challenge made to the award under Section 34.

Issues raised with respect to proposed amendment to Section 36 of the Act:

1. It is very easy for the losing party to allege corruption and obtain an automatic stay on enforcement of the arbitral award. Thereafter, the parties will have to wait for enforcement till final disposal by the Court. This defeats the very objective of alternate dispute mechanism by drawing parties to Courts and making them prone to prolonged litigation.

2. Legislation does not define Fraud/ Corruption.

3. Retrospective application of Amendment Act (from 2015) with respect to automatic stay may open floodgates of litigation.

4. Amendment will affect enforcement of contracts and ultimately affect ease of doing business in India.

• BENEFITS OF THE BILL
  
  

1. Would bring about parity among all the stakeholders in the arbitration process.

2. All the stakeholders get an opportunity to seek unconditional stay on enforcement of arbitral awards where the agreement or contract is “induced by fraud or corruption”.

3. Checking misuse of the provisions under Arbitration and Conciliation Act, 1996 would save the taxpayers money by holding those accountable who siphoned off of them unlawfully.

• DRAWBACKS OF THE BILL
  
  

1. India already lags behind when it comes to the enforcement of international contracts and agreements. The Bill can further hamper the spirit of Make in India campaign and deteriorate rankings in Ease of Doing Business Index.

2. India aims to become a hub of domestic and international arbitration. Through the implementation of these legislative changes, resolution of commercial disputes could take longer duration now onwards.