International Arbitration Centre Bill passed in LS

Context

The Lok Sabha has passed the New Delhi International Arbitration Centre Bill, aimed at establishing an independent and autonomous body for institutionalized domestic and international arbitration

Background

• The Government in view of the urgency to make India a hub of institutionalized arbitration and promote 'Ease of Doing Business’ promulgated The New Delhi International Arbitration Centre Ordinance, 2019 on March 2, 2019, to establish an autonomous and independent institution for better management of arbitration in India.
• Previously, a similar Bill was passed by Lok Sabha on January 4, 2019. However, the Bill lapsed with the dissolution of the 16th Lok Sabha.
• As per the provisions of Article 107(5) of the Constitution of India, a Bill, which has been passed by the Lok Sabha but is still pending in the Rajya Sabha, shall lapse on dissolution of the Lok Sabha.

What are the Key features of the Bill?

• New Delhi International Arbitration Centre (NDIAC): The Bill seeks to provide for the establishment of the NDIAC to conduct arbitration, mediation, and conciliation proceedings. It declares the NDIAC as an institution of national importance.
• International Centre for Alternative Dispute Resolution (ICADR): The ICADR is a registered society to promote the resolution of disputes through alternative dispute resolution methods (such as arbitration and mediation). The Bill seeks to transfer the existing ICADR to the central government. Upon notification by the central government, all the rights, title, and interest in the ICADR will be transferred to the NDIAC. 
• Composition: The NDIAC will consist of seven members including:
• Chairperson who has been a Judge of the Supreme Court or a High Court, or an eminent person with special knowledge and experience in the conduct or administration of arbitration.
• Two eminent persons having substantial knowledge and experience in institutional arbitration.
• Three ex-officio members, including a nominee from the Ministry of Finance and a Chief Executive Officer (responsible for the day-to-day administration of the NDIAC).
• Arepresentative from a recognised body of commerce and industry, appointed as a part-time member, on a rotational basis.
• Term and superannuation: The members of NDIAC will hold office for three years and will be eligible for re-appointment. The retirement age for the Chairperson is 70 years and other members are 67 years.
• Finance and audit: The NDIAC will be required to maintain a fund which will be credited with grants received from the central government, fees collected for its activities, and other sources. The accounts of the NDIAC will be audited and certified by the Comptroller and Auditor-General of India.
• Institutional support: The Bill specifies that the NDIAC will establish a Chamber of Arbitration which will maintain a permanent panel of arbitrators. Further, the NDIAC may also establish an Arbitration Academy for training arbitrators and conducting research in the area of alternative dispute resolution. 

Aim and Objectives of NDAIC

• To bring   targeted   reforms   to   develop   itself   as   a   flagship institution for conducting international and domestic arbitration
• Provide facilities and administrative assistance for conciliation mediation and arbitral proceedings;
• Maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators;
• Facilitate conducting of international and domestic arbitrations and conciliation in the most professional manner.
• Provide cost effective and timely services for the conduct of arbitrations and conciliations at Domestic and International level.
• Promote studies in the field of alternative dispute resolution and related matters, and to promote reforms in the system of settlement of disputes.
• Co-operate with other societies, institutions and organizations, national or international for promoting alternative dispute resolution.

Significance

• According to the World Bank’s latest annual Ease of Doing Business report, 2018, India ranks 100th among 190 countries. In 2017, it was placed at 130th spot.
• The dispute resolution process has a huge impact on the economy and doing business in a country. The rapidly changing economic activity demands expeditious settlement of disputes, creation and establishment of mechanism such as institutional arbitration. This is necessary to inspire confidence and credibility among the litigants of commercial disputes.
• Also, The indicator of ‘enforcing contracts’ measures the time and cost for resolving a commercial dispute through a local court of the first instance and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system.
• The huge pendency of cases in courts further underlines the need for strengthening the Alternative Dispute Resolution mechanism.
• The committee headed by former Supreme Court judge B N Srikrishna had lamented that the International Centre for Alternative Dispute Resolution (ICDAR) in Delhi had only conducted 22 arbitrations in 23 years .
• The Committee, inter alia, recommended that the International Centre for Alternative Dispute Resolution, which was set up in the year, 1995, with the Government funds to promote alternative dispute resolution mechanism has however not been able to achieve the objectives for which it had been set up.
• Establishment of New Delhi International Arbitration Centre also aims to turn India into an alternative destination to Singapore for international arbitration.

What is Arbitration?

• Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

Principal characteristics of Arbitration:

• Arbitration can only take place if both parties have agreed to it. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.
• Under the World Intellectual Property Organization (WIPO) Arbitration Rules, the parties can select a sole arbitrator together. If they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator.
• In addition to their selection of neutrals of appropriate nationality, parties are able to choose such important elements as the applicable law, language and venue of the arbitration. This allows them to ensure that no party enjoys a home court advantage.
• The WIPO Rules specifically protect the confidentiality of the existence of the arbitration, any disclosures made during that procedure, and the award. In certain circumstances, the WIPO Rules allow a party to restrict access to trade secrets or other confidential information that is submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal.
• The decision of the arbitral tribunal is final and easy to enforce. Under the WIPO Rules, the parties agree to carry out the decision of the arbitral tribunal without delay. International awards are enforced by national courts under the New York Convention, which permits them to be set aside only in very limited circumstances.

Disadvantages of Arbitration

• Inability to Appeal: As a general and practical rule, the arbitrator’s decision cannot be appealed. Only in certain limited situations, such as when the arbitrator exceeded his or her authority or upon proof of corruption, fraud or undue influence, will an arbitrator’s decision be reviewed by a district court. This can be especially troubling given that an arbitrator generally has more discretionary and decision-making power than a judge or jury. Therefore, the binding nature of the decision and the general lack of ability to seek recourse from an incorrect decision make the consequences of the arbitration more profound.
• Lack of Formal Discovery: Although the lack of a full fledge formal discovery process in arbitration proceedings may result in decreased costs, it can also mean that the parties (or one party in particular) may not have all of the information necessary to fully evaluate the case. Therefore, a party may present its case to an arbitrator without being privy to all of the pertinent facts that could have been revealed had more formal discovery, such as interrogatories, requests for production and depositions, been conducted.
• Discretion of the Arbitrator: An arbitrator may make his or her decision without issuing any written opinion or explanatory statement. Furthermore, since arbitrations are private and so infrequently reviewed by courts, the lack of transparency in the decision-making process may leave room for bias in arbitration proceedings.
• Rising Costs: Although arbitrations are typically going to be less expensive than litigation, the cost of arbitration is on the rise, making arbitration often more expensive than other ADR proceedings.

Conclusion

The benefits of institutional arbitration will be manifold for the Government and its agency and to the parties to a dispute and will result in quality experts being available in India and also an advantage in terms of cost incurred.

It will facilitate India becoming a hub for institutional arbitration as well as positively impact the Indian economy and doing business in India.