More clarity needed, says Freshfields

International investors have been encouraged by the amendments of India’s Arbitration and Conciliation Act but there are still many questions and few answers as they have been wary of the country’s court system.

If considering Indian-seated arbitration as a potential option, international investors will need to be mindful of these changes made in August 2019, said the UK-based Freshfields Bruckhaus Deringer LLP, a global consultant group.

Until there is more clarity on these changes and their effects, cautious investors may continue to choose a seat outside India, such as Singapore or London.

Over recent years, India has become more arbitration-friendly, with the Indian courts stressing the importance of a ‘hands-off’ approach to international arbitration, said Freshfields in October 2019 report on “India in the spotlight”.

In August 2019, significant amendments were made to India’s Arbitration and Conciliation Act that affect both domestic and international arbitration proceedings.

The three biggest changes are:
establishing an Arbitration Council of India (ACI), which has the aim of developing institutional arbitration in India and the power to grade arbitral institutions on certain criteria;

restricting who can serve as an arbitrator in India-seated arbitrations, potentially excluding non-Indians; and

conferring powers of appointment on an arbitral institution in an attempt to prevent delays in arbitrator appointments.

There are also provisions relating to confidentiality and arbitrator immunity.

The government has brought into force the provisions relating to confidentiality and arbitrator immunity, while the other changes listed above will come into force when formally notified y the government. That date remains unclear at this stage, according to Freshfields.

The consultancy sees challenges ahead. Will the government appoint or nominate the ACI’s chairperson and members. It remains to be seen whether in practice this will be problematic.

It is also unclear to what extent the ACI will seek to regulate international arbitral institutions. For instance, does an arbitral institution have to be registered in India to be considered for grading?

Will institutions that operate offices in India such as SIAC and the ICC, for example, also be subject to grading?

A number of the changes, particularly the restriction on who can serve as an arbitrator, are cause for concern as they could make truly international arbitration seated in India an impossibility, limit the pool of available arbitrators and curtail party autonomy, according to Freshfields.


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