Lawyers | ||||
|---|---|---|---|---|
|
International Commercial Arbitration in India
The complexities and inefficiencies of traditional litigation—especially the lack of legal certainty, high costs, and prolonged timelines—have led the global community to increasingly embrace alternative dispute resolution (ADR) mechanisms, particularly arbitration. Recognizing this trend, India has actively participated in shaping international arbitration standards and is a signatory to key international conventions that regulate arbitration proceedings and enforceability. This proactive approach aligns with the Indian government’s broader strategy to attract foreign investment and global business giants. Historically, the lack of a robust arbitration framework and judicial restraint in handling arbitration-related matters, especially those involving foreign entities, has deterred many investors. However, the government has made substantial strides to address these issues through reforms, particularly with the introduction of the Arbitration & Conciliation (Amendment) Act, 2015 (the “Amendment Act”) and the Arbitration & Conciliation (Amendment) Bill, 2018 (the “Amendment Bill”).
What is International Commercial Arbitration?
Before delving into the evolving landscape of International Commercial Arbitration in India, it’s important to first define what constitutes International Commercial Arbitration.
Arbitration arising from disputes related to a legal relationship—whether contractual or not—that is deemed “commercial” under Indian law, qualifies as International Commercial Arbitration. The defining feature of such arbitration is that at least one of the parties must fulfill one of the following criteria:
- An individual who is not an Indian national or habitually residing in India.
- A body corporate incorporated outside India.
- An association or body of individuals whose management or control is not exercised from India.
- The government of a foreign country.
Classification of International Commercial Arbitration
International Commercial Arbitration can be categorized into two distinct types for better clarity:
- International Commercial Arbitration with a seat in India.
- International Commercial Arbitration conducted outside India.
This distinction is crucial when determining the applicability of different sections of the Arbitration & Conciliation Act, 1996 (“the Act”), especially in relation to Part I (governing domestic arbitration) and Part II (dealing with the recognition and enforcement of foreign awards under the New York and Geneva Conventions).
In International Commercial Arbitration with a seat in India, the process is treated similarly to domestic arbitration and governed by Part I of the Act. A party seeking to resolve an international dispute in India must first notify the other party of its intent and then file an application under Section 8 of the Act before a competent court. Previously, the process was more cumbersome. However, the Amendment Act of 2015 has streamlined procedures by establishing specialized Commercial Courts, Commercial Divisions, and Commercial Appellate Divisions in High Courts. These courts are designed to expedite the resolution of international commercial disputes and to offer expertise in this specialized area.
The Commercial Courts Act, 2015 enumerates various disputes considered “commercial,” and Section 10 grants these courts exclusive jurisdiction over matters related to international commercial arbitration. This reform aims to increase efficiency, consistency, and expertise in adjudicating such disputes.
Changes Brought by the Amendment Act
One of the most significant reforms introduced by the Amendment Act, 2015 is the enhancement of the powers and status of Arbitral Tribunals. The amendment empowers tribunals to grant interim relief, and the status of arbitral awards is elevated to that of court orders. This change ensures that tribunals have more authority and their awards are enforceable like court judgments, with parties failing to comply being subject to contempt proceedings. This reform greatly strengthens the arbitration institution.
The Amendment Act also addresses several concerns that had previously plagued arbitration in India. For instance, the enforceability of interim relief and arbitral awards was clarified. The Act now extends the applicability of Part I to international commercial arbitrations conducted outside India, provided there is an express agreement between the parties. This means that if the parties agree to subject their arbitration to Indian laws, the provisions of Part I, including those on interim relief and appeal, would apply, even if the arbitration is conducted abroad.
Proposed Changes in the Amendment Bill
The Amendment Bill, 2018 introduces further reforms aimed at strengthening India’s position as a hub for international commercial arbitration. Key proposals include the establishment of the Arbitration Council of India, which will oversee arbitration proceedings, regulate standards, and improve the quality of arbitration professionals. Additionally, the Bill introduces provisions to ensure the confidentiality of arbitration proceedings, except for the arbitral award, and extends immunity to arbitrators for actions taken in good faith.
These changes reflect India’s commitment to fostering a robust and reliable arbitration environment that attracts both domestic and international parties.
As the volume of international commercial transactions between India and foreign entities continues to rise, India’s arbitration framework is gradually evolving to meet global standards. The Amendment Act of 2015 and the proposed changes in the Amendment Bill of 2018 reflect a significant shift in India’s approach to international commercial arbitration. These reforms aim to enhance the efficiency, reliability, and transparency of the arbitration process, thereby creating an environment conducive to economic growth and fostering investor confidence. By strengthening arbitration as a preferred mode of dispute resolution, India is well on its way to becoming a leading destination for international commercial arbitration.
