The Arbitration Council of India: Breaking New Ground or Elephant in the Room?

-Gunjan Chhabra, Partner

The Arbitration and Conciliation (Amendment) Act, 2019 (2019 Act) recently received the assent of the President and has been published in the Official Gazette on 9^thof August, 2019. Although the act has still not been enforced because the Act provides for the official date of applicability to be notified by way of publication in the official gazette, yet it is only a matter of time now.

With the arrival of 2019 Act being imminent, there are a lot of apprehensions as it provides for massive changes in how things have been operating till date. One of the major changes being brought about by the 2019 Act is the introduction of the Arbitration Council of India by way of adding a new Part in the Arbitration and Conciliation Act, being Part IA. This is a ground-breaking introduction in the Arbitration scenario of India, as such an institution having such wide reaching powers has yet to be seen in action. 

However, we feel, that there is a lot to be discussed with this particular change which is being brought about, and it is indeed quite surprising why there isn’t more dialogue and discussion on this issue. Therefore its important to analyze the provisions relating to the Arbitration Council of India, and why we think so.

Establishment of the Arbitration Council of India

The 2019 Act provides under Section 43B for the Central Government to establish a Council for the purposes of this Act known as the Arbitration Council of India. The council is to be a body corporate with perpetual succession, with its head office at New Delhi, and may establish its offices at other places in India, with prior approval of the Central Government. 

Therefore both the setting up of the main Council as well as even offices of the Council has to be done only by the Central Government or with the approval of the Central Government. 

Membership of the Council

Section 43C of the 2019 Act provides for seven members in the Council. The important factor to consider is that all the members of the Council are to be appointed or nominated by the Central Government themselves, be it in consultation with some other entity or without consultation. The constitution of the membership is as follows:-

1. Chairperson – a person who has been a Judge of Supreme Court or High Court, or eminent person, having special knowledge and experience in conduct or administration of arbitration, to be appointed by Central Government in consultation with the Chief Justice of India.
2. Member- An eminent arbitration practitioner having substantial knowledge and experience in institutional arbitration, both domestic and international, to be nominated by the Central Government.
3. Member – An eminent academician having experience in research and teaching in the field of arbitration and alternative dispute resolution laws, to be appointed by the Central Government in consultation with the Chairperson.
4. Member, ex officio – Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice or his representative not below the rank of joint secretary.
5. Member, ex officio – Secretary to the Government of India in the Department of Expenditure, Ministry of Finance or his representative not below the rank of joint secretary.
6. Part Time Member – One representative of a recognized body of commerce and industry, chosen on rotational basis by the Central Government.
7. Chief Executive Office-Member-Secretary, ex officio. Section 43M provides that the Chief Executive Officer shall be responsible for the day to day administration of the Council. As such no qualifications are provided, but just that they may be as prescribed by the Central Government. 

The term of office is three years, with a retirement age of seventy years for a Chairperson and Sixty Seven years in the case of a Member.

Salaries and travel allowances

The 2019 Amendment Act provides that even the salaries, allowances, other terms and conditions of the Chairpersons and members shall be prescribed by the Central Government. The Part-Time Member shall be entitled to travel and other allowances also only according to the prescription of the Central Government.

Duties and Powers of the Council

Section 43D introduced in the 2019 Act provides for it to be the duty of the Council to take all measures to promote and encourage arbitration, mediation, conciliation or other ADR mechanisms and for that purpose to frame policies and guidelines for the establishment, operation and maintenance of uniform professional standards.

The Council is empowered with several powers for discharge of its duties which are as under:-

1. Under Section 43-I to grade arbitral institutions on the basis of criteria relating to infrastructure, quality and caliber of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations and for this purpose they are empowered even to make the regulations, and policies.
2. To grant recognition to professional institutes which provide the accreditation of arbitrators. The accreditation of arbitrators has to be according to the Eighth Schedule. The Central government once again is empowered to amend the criteria provided in the Eighth Schedule.
3. The Council is also empowered to review the grading of arbitral institutions and arbitrators.
4. To hold training, workshops and courses in the area of arbitration in collaboration of law firms, law universities and arbitral institutes.
5. Frame, review and update norms to ensure satisfactory levels of arbitration and conciliation.
6. Act as a forum for exchange of views and techniques to be adopted for creating a platform to make India a robust centre for domestic and international arbitration and conciliation.
7. Make recommendations to the Central Government on various measures to be adopted to make provisions for easy resolution of commercial disputes.
8. Promote Institutional arbitration by strengthening arbitral institutions.
9. Conduct examination and training on various subjects relating to arbitration and conciliation and award certificates thereof.
10. Establish and maintain depository of arbitral awards in India.
11. Make recommendations regarding personnel, training an infrastructure of arbitral institutions.

Member Resignations

The 2019 Act, under Section 43F provides that the Members, may by notice in writing addressed to the Central Government, resign from their office, provided that they continue to hold office till three months from the date of receipt of resignation or until his replacement enters upon office or until expiry of his term of office, whichever is earlier. The only exception to this rider, is if the Central Government permits an earlier relieving from office.

Secretariat

The 2019 Act also provides for a Secretariat to the Council consisting of such number of members and officers and employees as prescribed by the Central Government. 

Qualifications, appointment etc.

The qualifications, appointment and other terms and conditions of the service of the employees and all other officers of the Council shall also be such as prescribed by the Central Government.

Why the Arbitration Council of India is a highly debatable framework

1. Majorly every aspect of the Arbitration Council is controlled by the Central Government, ranging from the establishment of the Council, the offices of the Council, upto the appointment of each of members of the Council, having control over the salaries and allowances, full control over the resignation of all members, power of amending criteria of accreditation, control over the Secretariat, and also having complete control over the qualifications, appointment and any other terms and conditions of all employees/officers of the Council.

• Several categories of members, which the Central Government has discretion to appoint, mentions the term “Eminent Persons” as a qualification. But this term has not been defined anywhere and ends up granting an arbitrary power to the Central Government to place whoever it pleases in the Council. This can lead to a huge misuse of such a power without any accountability whatsoever.

• Secretary to the Government for two departments are part of the Council. This is another example of the deep and pervasive control the Central Government has proposed to exercise over the Council having two members who are already Government Secretaries.

• An Arbitration Council to be set up at a National Level and which is supposed to have full control over all aspects of arbitration in India right from the grass-root level of providing courses and training in arbitration, upto accrediting arbitrators and arbitral institutions, setting up any and all standards for ADR in India, should ideally have been an autonomous institution. Instead it has been made out to be nothing more than a pawn in the hands of the Central Government.

• Even otherwise, such a deep control over the ADR mechanism by the Central Government might end up introducing unnecessary technicalities in an otherwise preferred arbitration mechanism in India, not leaving much difference between a Court proceeding and an arbitration. This ends up giving a back-seat even to party autonomy, being such a highly regulated body.

• Such a set-up, which is not just regulated but in essence, entirely controlled by the Central Government, may also discourage foreign investors from choosing India as a preferred seat of arbitration. This is because no foreign investors may want to be shackled with the unnecessary hurdles being imposed by the government in a hugely private affair that is supposed to be arbitration.

Denouement

To conclude, it may be said that the present framework which the 2019 act has brought about with regard to the Arbitration Council is indeed an incredibly debatable topic for discussion. In a global environment where more and more importance is being given to party autonomy, India seems to be regressing in granting much more control to the government and legislature, even with regard to, what is supposed to be an out of Court mechanism. 

It is not clear as to why this issue is not being discussed more in the present time when usurping of power by the Central Government is an issue of central debate. It appears that the Arbitration Council of India, as on date, is indeed the elephant in the room.

A brief tabular comparison of the modifications which have been brought about by the 2019 Act, are available . 

To read specifically about the Accreditation of Arbitrators under the 2019 Act, read here.