In October 2015 India’s arbitration law underwent major changes with the enactment of the Arbitration and Conciliation (Amendment) Act 2015 (“Amendment Act“). One of the most controversial provisions in the Amendment Act was the introduction of a 12 month time limit within which an arbitral award must be rendered (section 29A).
The Amendment Act
According to section 29A all arbitrations seated in India commenced after 23 October 2015 are required to have a final award issued within 12 months of the appointment of the tribunal. For parties who have commenced an Indian seated arbitration since the Amendment Act was passed, it may therefore become necessary to consider applying for an extension if it looks likely that a final award will not be issued within the 12 month time limit.
While parties may agree to extend this period by up to six months, there is no guidance in the Amendment Act as to when or how the parties may make such application. Furthermore, if a final award is not rendered within the 12 month period (or within a 12 month + six month extension period) the arbitration will be terminated unless the period is extended by the Indian courts. The Amendment Act states that for the court to extend the time period there must be “sufficient cause” and the extension will be on “such terms and conditions” as the court deems appropriate. Again there is little guidance in the Amendment Act as to what may constitute sufficient cause or the possible terms and conditions.
In granting an extension, and if the court finds that the delay is attributable to the arbitral tribunal, the court may also:
- Order a reduction of the fees of the arbitrator(s) by up to 5% for each month of the delay (section 29A(4)); and
- Substitute any arbitrator the court considers responsible for the delay with a replacement arbitrator, and have the proceedings continue from the stage already reached in the arbitration and on the basis of the evidence and material already on record (section 29A(6)).
Furthermore, if the court finds that one or more of the parties is responsible for the delay, the court may also impose cost penalties on the dilatory party (section 29A(8)).
For parties who have commenced an India seated arbitration since 23 October 2015, they should consider whether they will need to apply for a six month extension or run the risk of having the proceedings terminated. How freely the Indian courts will allow extensions to the Amendment Act’s 12 month time limit remains to be seen, however parties may wish to err on the side of caution and seek to agree to an extension before the expiry of the initial 12 month time limit, or run the risk of an award being set aside by the Indian courts or refused enforcement by an enforcement court.
Delay is a common complaint about arbitration, particularly in India, and this measure is intended to address it. To this extent section 29A is welcome. However it may open the door to questions about the status of awards issued out of time, both in India and in the New York Convention countries where enforcement is sought. It may also prove difficult in practice to achieve the deadline in complex cases, or where one party is engaged in delaying tactics. This may make extensions of time the norm rather than the exception.