• The Department of Legal Affairs in the law ministry has invited comments on the draft Arbitration and Conciliation (Amendment) Bill, 2024. 

• It aims to provide further boost to institutional arbitration, reduce court intervention in arbitrations and ensure timely conclusion of arbitration proceedings.

• The draft Bill comes months after an expert committee headed by former law secretary and former Lok Sabha secretary general T.K. Vishwanathan submitted its report on proposed reforms in the arbitration sector to the law ministry.

• It proposes the concept of ‘emergency arbitration’. The proposed amendment says arbitral institutions may, for the purpose of grant of interim measures, provide for appointment of ‘emergency arbitrator’ prior to the constitution of an arbitral tribunal. The emergency arbitrator appointed will conduct proceedings in the manner as may be specified by the (arbitration) council.

What is arbitration?

• Arbitration, a form of alternative dispute resolution, is a technique for the resolution of disputes outside the court system. In arbitration, the parties agree to have their dispute heard by one or more arbitrators and agree to be bound by their decision.

• Arbitration, like a lawsuit in court (litigation), offers a final means of resolving a dispute. Arbitration may be cheaper and quicker than litigating a dispute in court. 

• In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

• Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.

• The parties select a neutral arbitrator or panel of arbitrators to decide if wrongdoing occurred and, if so, how to compensate the wronged party for it. 

Significance of arbitration mechanism

• Desire for quick and affordable justice dispensation is universal. In present times, early resolution of a dispute not only saves valuable time and money of the parties to the dispute but also promotes the environment for enforcement of contract. 

• Commercial and financial markets have a big role to promote a country’s economic standing in the comity of nations. For such economic activities to prosper, a simple framework of rules that encourage investors and promote business activities is a prerequisite. 

• Therefore, the government and associated institutions are giving high priority to frame business facilitating laws and regulations with a view to make India one of the preferred destinations for investment and business.

Arbitration and Conciliation Act, 1996

• The Arbitration and Conciliation Act, 1996 governs the arbitral proceedings in India. 

• To keep pace with current developments in the arbitration landscape and to enable arbitration as a viable dispute resolution mechanism, the arbitration law has undergone significant changes in the years 2015, 2019 and 2021. 

• The changes are enabled to signal a paradigm shift for ensuring timely conclusion of arbitration proceedings, minimising judicial intervention in the arbitral process and enforcement of arbitral awards.

• The Arbitration and Conciliation (Amendment) Act, 2015 provided for expeditious, fast-track and time bound arbitral proceedings, neutrality of arbitrators and cost effective delivery mechanism. 

• This was followed by the Arbitration and Conciliation (Amendment) Act, 2019 with the main objective of giving boost to institutional arbitration and to reduce the share of ad-hoc arbitration in the country. 

• Further, Section 34 of the Act was amended vide the Arbitration and Conciliation (Amendment) Act, 2021, which provides for unconditional stay of enforcement of arbitral awards where the underlying arbitration agreement, contracts or making of the arbitral award are induced by fraud or corruption.

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