Delay in Constituting Arbitration Council of India

Syllabus: GS2/ Governance

Context

• The Union Government has not yet constituted the Arbitration Council of India (ACI) despite amendments to the Arbitration and Conciliation Act in 2019.

What is the Arbitration Council of India (ACI)?

• The ACI was proposed under the Arbitration and Conciliation (Amendment) Act, 2019. It is mandated to regulate and promote institutional arbitration in India.
• Its key functions include:
  • Grading arbitration institutions.
  • Framing norms for arbitral institutions and arbitrators.
  • Promoting professionalism, transparency, and efficiency in arbitration.

Arbitration Mechanism in India

• Arbitration is a quasi-judicial process of settlement of disputes between Trading Member, Investor, Clearing Member, Authorised Person, Listed Company etc. 
• Arbitration aims at quicker legal resolution for the disputes. 
• The Arbitration and Conciliation Act 1996 has been modelled on lines of the UNCITRAL (United Nations Commission on International Trade Law) framework of laws.
• Arbitration Agreement: Parties can agree to resolve their disputes through arbitration either before or after a dispute arises.
• Arbitral Tribunal: The arbitral tribunal, comprised of one or more arbitrators, is appointed by the parties or as per the procedure agreed upon by them.
  • The decision on the dispute is mostly binding on the parties.
  • Generally, there is no right to appeal an arbitrator’s decision.
• Arbitration Proceedings: The Arbitration Act provides a framework for conducting arbitration proceedings, including the appointment of arbitrators, the conduct of hearings, submission of evidence, and issuance of the final arbitral award.
• Enforcement: The Act empowers arbitral tribunals to grant interim measures to preserve the rights of parties, pending the final resolution of the dispute.
  • Arbitral awards, once granted, are enforceable in the same manner as court judgments.
• Institutional and Ad Hoc Arbitration: Arbitration in India can be conducted through institutional arbitration bodies like the Indian Council of Arbitration (ICA), International Chamber of Commerce (ICC), or through ad hoc arbitration where parties directly appoint arbitrators.

Implications of the Delay

• It weakens investor confidence in India’s dispute resolution framework.
• It hampers ease of doing business and contract enforcement.
• The delay reduces India’s competitiveness vis-à-vis established arbitration hubs.
• It encourages forum shopping and preference for foreign arbitration centres.
• Problems with Ad-hoc Arbitration: 
  • The dominance of ad-hoc arbitration has led to procedural delays and rising costs.
  • Ad-hoc arbitration has increasingly mirrored court litigation rather than offering speedy resolution.

Source: TH