Updates

On October 23, 2015, the Indian President signed into law an amendment to India’s arbitration law intended to build the confidence of foreign investors in India. The Arbitration and Conciliation (Amendment) Ordinance, 2015 (“Amendment”) expedites the arbitration process and limits the power of Indian courts to intervene in domestic and international commercial arbitrations.

For example, under the Amendment:

  1. Arbitration awards must be made within 12 months from the date on which all the arbitrators have received written notice of their appointment; the parties can mutually agree to extend the time period to 18 months but any further delay will result in termination of tribunal’s mandate unless a court extends the time period for “sufficient cause and on such terms and conditions as may be imposed by the Court.” A court is required to decide such requests for extension within 60 days from the date of service of notice on the opposite party
  2.  Parties may agree, before or at the time of appointment of the arbitral tribunal, to resolve their dispute through a fast track procedure based on written submissions without an oral hearing
  3.  Parties may seek interim relief from a court prior to the commencement of international commercial arbitration, but must commence arbitration within 90 days of obtaining such interim measures; once the arbitral tribunal is constituted, a court may not grant any relief unless the court finds that circumstances exist which may render interim relief ordered by the arbitration tribunal ineffective
  4.  “Patent illegality” — which had frequently been used as a way to re-litigate the merits of arbitrations — is no longer a ground to challenge an international commercial arbitration award and, in any event, arbitration awards can no longer be reviewed on merits when challenged for violating the fundamental policy of Indian law
  5.  Arbitrators may be challenged for lack of independence and impartiality if they have a relationship listed on a schedule of relationships that would disqualify a person’s appointment as an arbitrator; for example, unless the parties waive a ground for disqualification by a written agreement, an employee is now disqualified from acting as an arbitrator even if that employee was not involved in the contract at issue
  6. Unless otherwise agreed by the parties, the loser-pays principle will apply not only to the costs of arbitration, but also to the costs of litigation related to arbitration
  7. The lower courts no longer have jurisdiction to review applications arising out of an arbitration seated in India. Now, the Indian High Courts will be the exclusive court of first instance for matters arising out of arbitration, such as applications for interim measures
  8.  For purposes of determining whether an arbitration is a domestic or international commercial arbitration, the nationality of a corporation will be determined by its place of incorporation, and the location of corporation’s central management and control is now irrelevant

The Indian government will have six weeks from the commencement of Indian Parliament’s winter session in November 2015 to get approval for the Amendment. If the government fails to get the approval in six weeks, the Amendment will cease to operate.

Overall, the Amendment is a necessary and positive step toward more speedy and fair resolutions of disputes through international commercial arbitration in India.