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India is a sovereign and a democratic republic and in India every law or every legislation is passed on due to some requirement or a thought, which is a good thing in the actual sense, but there is also a need for establishing a better pool of arbitrators as a thought or as a basic requirement.But the problem with the Indian laws and the amendments is that the way in which they are written it can be referred as that the scepticism comes on the mischief that it can play in terms of its implementation or in terms of affecting rights and interest of the parties in general. For example: The recent B.N. Shrikrishna committee report talked about the establishment of the “Arbitration Promotion Council of India”but the main change they did was they removed the word “promotion” and established the “Arbitration Council of India (ACI)”, so the main problem which arises here is that, it is not clear that what work this particular body will do. The further analysis of this is explained by me in this article
There are some of the minor changes which have been brought this year in the Indian Arbitration Regime. These amendments were based on the report of the high level committee headed by Justice (retired) B.N Shrikrishna which had proposed the introduction of such a schedule. Similarly the 8th Schedule which has been inserted through the 2019 Amendment Act to the Arbitration and Conciliation Act, 1996 and also the insertion of Section 43J talks about the ‘qualification, experience and accreditation of the arbitrators’. Schedule 8 should be read in consonance with Section 43J. It reads as:
“A person shall not be qualified to be an arbitrator unless he is:
“an advocate, chartered accountant, cost accountant, company secretary, an officer of the Indian legal service, or an officer with a law degree having experience in the legal matters in the Government, Autonomous Body, Public Sector Undertaking or at a senior level managerial position in private sector;has been an officer with engineering degree; has been an officer having senior level experience of administration in the Central Government or State Government or having experience of senior level management of a Public Sector Undertaking or a Government company or a private company of repute; and all of these must be having 10 years of experience in their particular field; a person, in any other case, having educational qualification at degree level with ten years of experience in scientific or technical stream in the fields of telecom, information technology, Intellectual Property Rights or other specialised areas in the Government, Autonomous Body, Public Sector Undertaking or a senior level managerial position in a private sector, as the case may be.”
So, the mischief here is that at the one end Section 43I talks prescribes the grading of arbitral institutions and at the other end Section 43J prescribes for the grading of arbitrators and then the Disqualification of Arbitrator and laying down the principles on which the disqualification can take place. There are general conditions prescribed for the Arbitrators and one of the conditions prescribes that:
“the arbitrator shall be conversant with the Constitution of India, principles of natural justice, equity, common and customary laws, commercial laws, labour laws, law of torts, making and enforcing the arbitral awards”
Is the Party Autonomy in Domestic or International Arbitration being affected?
So the basic and the main question which arises here is that when we talk about Arbitration in India or Internationally the only underlying principle which flows across is the “party autonomy” and the rights of the parties to choose their own Arbitrator, these are the paramount items in so far as the Arbitration goes, that is the basic construct as to why the parties move out of litigation because the parties get much more autonomy and the right to choose their own Arbitrator who would adjudicate their disputes, but if it can be looked through the International perspective the question which arises is that “Will this raise doubt in the mind of the foreign parties?” i.e. Can the parties appoint an Arbitrator who is of a Foreign jurisdiction in the India seated Arbitration? with keeping in mind these general conditions prescribed in the 8th schedule. This can be interpreted in many different ways but any perception to even suggest would lead to a very negative impact on the Arbitration in India rather than the positive one.
So there are 2 major points which can be taken from the International perspective that:
These conditions are so unclear that the way they are framed it seems like it’s intention is to exclude the people who are not qualifying in India as an Arbitrator or the people who don’t know the Indian Constitution well. It can be inferred as that if this is being implemented in the country then it is a serious blow to the International Arbitration in India and there can be seen no justification for that.
The thing is that what’s being motivating the Indian Government to incorporate such amendments is in the terms is of quality control. The Government did such amendments as to improve the quality of Arbitration in India and to make India a hub of International Arbitration, but there are various instances around the world in which it can be seen that many countries decided not to include such provisions in their Arbitration Law.
For example: In England when there was a recommendation regarding putting some general and prescribed conditions for the qualification of the Arbitrators, the stern decision was taken by the majority that there is no need to do it.
One of the key reasons for that was not only “party autonomy” but also about the problem of generating “satellite litigation”. The minute when there was a stipulation of the qualifications as the matter of law similarly to stipulating qualifications as a matter of contract, it seems like inviting the people to challenge on the basis of a particular qualification that has not been satisfied. In India now-a-days many parties are choosing arbitrators of a foreign jurisdiction due to a lot of International Commercial disputes between the domestic corporations and the foreign corporations. The reason they are choosing the arbitrators of foreign jurisdiction is due to a lot of specialisation in different fields of arbitrations, so as to solve the disputes of the parties with efficiently and quickly. It has not been prescribed that what level of knowledge is required or what concepts of constitution is required , because the arbitrator who is of a foreign jurisdiction would not know the basic concepts of the Constitution of India.
The another example which can be taken into consideration is of the contractual qualifications. In this there are many arbitration clauses in the Industrial sectors that includes the specific criteria for the Arbitrators. One of them which has been around many years which was before the age of equality and political correctness prescribed that the Arbitrator must be a courts commercial man.
The basis on which the challenges was that the people used to say that the Arbitrators are not properly characterized as a Commercial man and that is something which does not just crop out at the seat of Arbitration. It is not just a challenge that will be in India in fact this is a challenge that would be hanging over the Arbitration process anywhere around the world where the recognition is given to such type of laws. The process of Arbitration will slow down where the recognition or the qualification of any particular Arbitrator is sought because it seems from the recently incorporated laws in the Indian Arbitration and Conciliation Act, 1996. Whenever an award is brought before the court and around the world it is recognized it is clear in the 8th schedule but it will be taken in the sense that “the Arbitrators are not qualified properly as a matter of Indian law, so this thing will slow down the process as a result”.
ABOUT THE AUTHOR
Ved Thakur is a II year law student at Gujarat National Law University, Gandhinagar. He has a keen interest in Domestic and International Commercial Arbitration.
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