History of Arbitration in India
This was the first formal statute relating to the subject of arbitration in India, but was applicable only to Presidency towns of Madras, Bombay and Calcutta. It was based on the English Arbitration Act, 1889. The Act permitted a sitting judge to hold the position of an arbitrator as well.
The Second Schedule of the Code provided for the extension of the arbitration regime to other parts of India, giving it a pan-India status.
This Act dealt with the recognition and enforcement of foreign awards, specifically those under the Geneva Protocol on Arbitration Clauses, 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927. The Act hence promoted cross-border arbitration.
This Act replaced the Indian Arbitration Act, 1899 and the Second Schedule of the Code of Civil Procedure, 1908. It was based on the English Arbitration Act, 1934, and was the first comprehensive arbitration law in independent India. It solely and extensively dealt with domestic arbitrations in India, and remained in force for over half a century. However, it was often criticized for being overly court-driven, procedural, and time-consuming.
This Act dealt with the recognition and enforcement of foreign awards under the New York Convention, 1958.
On the international front, the said model law was adopted with an aim to create uniformity for arbitration-related statutes worldwide. All nations were encouraged to adopt clauses similar to the model law while legislating statues related to their domestic arbitration.
This Act consolidated all relating to arbitration, including for the recognition and enforcement of both domestic and international awards. The need for such a statute was specifically felt because of the liberalization and globalization that the Indian economy had witnessed after 1991. Although the economic reforms attracted foreign investors, the Arbitration Act 1940 was not adequate to deal with the requirements and expectations of such investors. Thus to make the arbitration law in India contemporaneous with worldwide position, the 1996 Act was enacted, with its provisions being largely inspired by the UNCITRAL Model Law. This Act replaced the Arbitration Act, 1940; the Arbitration (Protocol and Convention) Act, 1937; and the Foreign Awards (Recognition and Enforcement) Act, 1961.
This Report was published in 2003, and highlighted various flaws in the 1996 Act such as difficulties in obtaining interim relief, lack of immediate appeal rights, violation of equal treatment of parties during appointment of arbitrators, etc. It consequently suggested relevant amendments to the 1996 Act.
Accepting almost all recommendations made in the 176th Law Commission Report, the Government introduced this Amendment Bill. This Report was first submitted to a committee headed by J. Saraf for its recommendations in 2004. Thereafter in 2005, it was referred to the Department Related Standing Committee on Personnel, Public Grievances, Law and Justice for a further analysis. This Committee identified multiple issues with the Bill, such as excessive interference by the Courts, contradictions between multiple sections, etc. The Bill as a whole was found to be inadequate and was hence withdrawn.
In light of the multiple setbacks that the 1996 Act posed, such as excessive intervention by the courts, delays in enforcement of awards, etc. the 246th Law Commission Report was released. The Report provided multiple recommendations to improve the arbitral process, such as a greater emphasis on institutionalizing arbitration, decreasing judicial intervention, clarifying provisions on setting aside of the arbitral award, providing power to the tribunal to grant interim relief, etc.
This Act adopted a lot of the recommendations made in the 264th Law Commission Report such as favouring institutional arbitration, setting strict time limits for completion of the arbitration, substantial restrictions in judicial interventions, etc.
The Report recommended further changes to the 1996 Act, specifically providing an impetus to institutional arbitration. It also recommended the development of the International Centre for Alternative Dispute Resolution as a flagship arbitral institution. The Committee also examined the issues of management and resolution of bilateral investment treaty (“BIT”) arbitrations.
This Amendment aimed at making India an arbitration-friendly jurisdiction by further aligning its laws with international practices. Key features of this Amendment include reducing judicial intervention, streamlining the process of appointment of arbitrators, making international arbitration provisions more party friendly, expediting the process of appointment of arbitrators, etc.
This Amendment was introduced to address the issue of corrupt practices in securing contracts or arbitral awards and to promote India as a hub of international commercial arbitration by attracting eminent arbitrators to the country.
This Act contained all the relevant provisions for mediation, thereby repealing the provisions related to Conciliation from the 1996 Act.
The Draft Arbitration and Conciliation (Amendment) Bill, 2024, has been introduced with an aim to modernize and revamp arbitration in India. Few key recommendations include the establishment of Appellate Arbitral Tribunals (AATs), extending the ‘patent illegality’ ground to international commercial arbitrations, prohibiting interim relief under Section 9 after Tribunal constitution, recognition of emergency arbitration and introduction of stricter timelines.
This Report has suggested multiple changes to various provisions of the 1996 Act, such as replacement of the word ‘seat’ with either ‘place’ or ‘venue’, amendment to the definition of ‘court’, validation of insufficiently stamped arbitration agreements, changes in provisions on interim measures, revamping the procedure for appointment of arbitrators, etc.
