Arbitration Council of India Still Awaited Years After Amendment

Despite 2019 amendment, Arbitration Council of India remains unconstituted, hindering arbitration efforts.

Photo by Onkarphoto

Six years after the law was amended, the Union government is yet to constitute the Arbitration Council of India to regulate and promote institutional arbitration in the country. Senior officials in the Union Law Ministry said it took years for corporates and public sector undertakings to shun ad-hoc arbitration and go for institutional arbitration to settle commercial disputes. The proposed council is mandated to regulate institutional arbitration. Former Union Law Secretary P.K. Malhotra disagreed, stating that the provision for an institutional mechanism by the Arbitration Council of India was made by amending the Arbitration Act in 2019 and the proposed council has not yet been constituted, adversely affecting efforts for making India a hub of international arbitration.

Key Facts

Arbitration Council of India: Yet to be constituted

Arbitration Act amended: 2019

Purpose: Regulate institutional arbitration

Impact: Hinders India's arbitration hub efforts

UPSC Exam Angles

GS Paper II: Polity and Governance - Statutory, regulatory and various quasi-judicial bodies

GS Paper II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Potential question types: Statement-based, analytical questions on the role and importance of arbitration

Visual Insights

Evolution of Arbitration Law and the ACI

Timeline showing key amendments to the Arbitration and Conciliation Act and the ongoing delay in establishing the Arbitration Council of India (ACI).

The Arbitration and Conciliation Act, 1996, was a landmark legislation. Amendments in 2015 and 2019 aimed to improve efficiency and promote institutional arbitration. However, the delay in establishing the ACI undermines these efforts.

1996Arbitration and Conciliation Act enacted, based on UNCITRAL Model Law.
2015Arbitration and Conciliation (Amendment) Act, 2015: Aimed at streamlining the arbitration process and reducing court intervention.
2019Arbitration and Conciliation (Amendment) Act, 2019: Introduced provisions for the establishment of the Arbitration Council of India (ACI) to promote institutional arbitration.
2020-2025Repeated delays in the constitution of the ACI. Various committees and consultations held, but no concrete action.
2026ACI still not constituted. Concerns raised by legal experts and industry stakeholders about the impact on India's arbitration ecosystem.

More Information

Background

The history of arbitration in India dates back to ancient times, with references found in the Dharmashastras and other ancient texts. However, the formal legal framework began to take shape during the British colonial era. The first significant legislation was the Indian Arbitration Act of 1899, which was largely based on the English Arbitration Act of 1889.

This Act primarily dealt with arbitration in the Presidency towns. Subsequently, the Arbitration Act of 1940 was enacted, which was a more comprehensive legislation applicable to the entire country. Post-independence, the need for a modern and effective arbitration law was felt, especially in the context of increasing international trade and investment.

This led to the enactment of the Arbitration and Conciliation Act of 1996, which was based on the UNCITRAL Model Law on International Commercial Arbitration. The 1996 Act aimed to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards. Amendments have been made since then to further streamline the process and promote India as an arbitration hub.

Latest Developments

In recent years, there has been a renewed focus on strengthening the arbitration ecosystem in India. The 2015 and 2019 amendments to the Arbitration and Conciliation Act, 1996, were aimed at addressing some of the shortcomings and making the arbitration process more efficient and user-friendly. The establishment of the New Delhi International Arbitration Centre (NDIAC) as an autonomous institution is another significant step in this direction.

NDIAC aims to promote institutional arbitration and provide state-of-the-art facilities for conducting arbitration proceedings. The government has also been actively promoting India as a preferred destination for international commercial arbitration through various initiatives and policy reforms. However, challenges remain in terms of enforcement of arbitral awards, reducing court intervention, and building capacity among arbitrators and legal professionals.

The delay in the constitution of the Arbitration Council of India, as highlighted in the news, is a setback to these efforts.

Practice Questions (MCQs)

1. Consider the following statements regarding the Arbitration Council of India (ACI): 1. It is a statutory body mandated to regulate institutional arbitration in India. 2. The Chairperson of the ACI is appointed by the President of India. 3. The ACI aims to promote India as a hub for international commercial arbitration. Which of the statements given above is/are correct?

A.1 and 2 only
B.2 and 3 only
C.1 and 3 only
D.1, 2 and 3

Show Answer

Answer: C

Statement 2 is incorrect. The method of appointment of the Chairperson is specified in the Arbitration and Conciliation Act, and it does not involve the President directly. Statements 1 and 3 are correct as per the mandate and objectives of the ACI.

2. Which of the following statements accurately reflects the impact of the Arbitration and Conciliation Act, 1996 on India's legal framework?

A.It completely replaced all previous arbitration laws in India, leaving no room for customary arbitration practices.
B.It consolidated and amended the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards, based on the UNCITRAL Model Law.
C.It primarily focused on criminal arbitration, introducing new methods for resolving criminal disputes outside of traditional courts.
D.It had minimal impact on the existing legal framework, as it was largely advisory and non-binding.

Show Answer

Answer: B

The Arbitration and Conciliation Act, 1996, was a significant step in modernizing India's arbitration law, based on the UNCITRAL Model Law. It consolidated and amended the laws relating to both domestic and international arbitration.

3. Assertion (A): The establishment of the Arbitration Council of India (ACI) is crucial for promoting institutional arbitration in India. Reason (R): Ad-hoc arbitration often lacks the structure and expertise provided by established arbitral institutions. In the context of the above statements, which of the following is correct?

A.Both A and R are true, and R is the correct explanation of A.
B.Both A and R are true, but R is NOT the correct explanation of A.
C.A is true, but R is false.
D.A is false, but R is true.

Show Answer

Answer: A

Both the assertion and the reason are correct. The ACI is intended to promote institutional arbitration, and ad-hoc arbitration often lacks the structure and expertise that institutions provide, making R the correct explanation for A.