The New Delhi International Arbitration Centre (Amendment) Bill, 2022 (the “Bill”) was passed by the Lok Sabha (the lower house of the Indian parliament) on 8 August 2022. Arbitration is seen as a time-efficient alternative to the largely backlogged litigations before the national courts in India. Like other developing Asian nations, India is also ambitious in becoming a robust hub for international arbitrations and somewhat challenge Singapore’s dominance in this arena. The legislative changes in the Indian laws relating to arbitrations in the last decade signify India’s ambitiousness. The steps in this direction are also important as India wants to attract more foreign investments and a time-efficient resolution of the disputes is an important factor for foreign investors who don’t want to be stuck in litigations before the national courts for years and in some cases decades.
This article is divided into three parts. Part I briefly mentions the main and controversial provisions and objectives of The New Delhi International Arbitration Centre Act, 2019 (the “Act”). Part II deals with the legal battle to which some provisions of the Act were subjected. Part III analyses the proposed amendments and the objectives of the Act. The Conclusion provides the way forward.
I. The New Delhi International Arbitration Centre Act, 2019
India has thirty-six domestic and regional arbitration institutions, however, it lacked an arbitration institution with an international reputation backed by the government. One such attempt was made back in 1995 when the International Centre for Alternative Dispute Resolution (ICADR) was set up under the aegis of the government and registered under the Societies Registration Act, 1860. However, ICADR turned out to be a disaster. It was not “able to actively engage and embrace developments in the arbitration ecosystem and create a reputation par excellence keeping pace with the dynamic nature of arbitration over more than two decades”.
The High Level Committee appointed by the government indicated that the ICADR has “failed to address the growing needs of institutional arbitration and also to bear optimum caseload and to become a better choice to the parties for arbitration”. ICADR had received forty-nine arbitration cases (including four international arbitrations) out of which forty-two were disposed of and the remaining seven were in progress according to its latest publicly available annual report.
Therefore, The New Delhi International Arbitration Centre Act, 2019 was another attempt to bring India on the international arbitration map. As the name suggests, the objective of the Act was to provide for the establishment and incorporation of the New Delhi International Arbitration Centre (NDIAC) to create an independent and autonomous regime for institutional arbitrations and to declare NDIAC to be an institution of national importance. The Act has detailed provisions from the composition of the NDIAC to its finance, accounts and audit.
The Act also provided for some controversial provisions for acquisition, taking over and transfer of the undertakings of the ICADR and vesting them in NDIAC without interfering with its activities and without adversely affecting ICADR’s character as a Society.
II. The Legal Battle
The basis of the government for the acquisition, taking over and transfer of the undertakings of the ICADR was that the ICADR received land and substantial funding by way of grants and other benefits from the government for constructing infrastructure and making other facilities. While on the other hand, a provision was also made in the Act that all the liabilities in relation to any undertaking shall only be enforceable against the ICADR and not against the government.
Aggrieved by these measures, the ICADR moved the High Court of Delhi. The key stances of the ICADR before the High Court of Delhi were (i) it is an autonomous organisation; (ii) the government had decided to take over without paying any compensation; (iii) the government had not paid a “single penny” to the ICADR in the last five years; (iv) the government had not followed the due principle established by law before deciding to take the ICADR’s assets. On 21 July 2022, after more than three years since these matters were filed and listed twenty-five times for hearings, the petitioners sought to withdraw the petitions with liberty to file afresh after the respondents challenged the petitions for the lack of maintainability. The Court dismissed the petitions as withdrawn.
It is quite ironic to see how the establishment of an institution that is supposed to administer and facilitate arbitrations (a procedure that is perceived to be time efficient) and provide an alternative to litigations was itself stuck in litigations for years.
III. The Amendment Bill of 2022
Though not yet established but NDIAC is supposed to be an institution of national importance. However, it was felt that the name of the institution, New Delhi International Arbitration Centre, gave an impression of being city-centric whereas it should be reflective of the aspirations to promote India as a hub of institutional arbitration and establish itself as a centre of international commercial arbitration. Moreover, there is already an arbitration institution in Delhi namely, Delhi International Arbitration Centre. Therefore, it was considered imperative to change the name of the Centre from New Delhi International Arbitration Centre to India International Arbitration Centre (IIAC) so that a unique identity of the institute of national importance as conferred on it by law is evident and reflects its true objective.
Additionally, section 15(a) is proposed to be amended to include “other forms of alternative dispute resolution mechanism” such as mediation, conciliation etc. Thereby giving the IIAC a more comprehensive outlook and suggesting that apart from arbitrations, it would also be facilitating and administering other forms of alternative dispute resolution. The proposed amendment to section 15(a) read with Memorandum Regarding Delegated Legislation attached to the Bill also provides for the framing of regulations for the procedure and conduct of arbitrations and other forms of dispute resolution by the IIAC by way of delegated legislation. Usually, the regulations take the form of arbitration rules of the arbitration institution. Since the Bill also provides for other forms of alternate dispute resolution, it remains to be seen if one consolidated set of rules would be framed for arbitration as well as other forms of alternative dispute resolution like some other arbitration institutions have done or separate for each one of them.
An anomaly in the Act was that it provided for the utilisation of the fund of the NDIAC for the salaries and allowances of only the ‘members’. Therefore, it was unclear how would the other staff of the NDIAC would be paid. It is proposed in the amendment to include “Registrar, Counsel and other officers and employees of the Centre” in section 25(3) to resolve this issue.
Furthermore, the proviso to section 34(1) gave the power to the government to make orders to remove any difficulty that arises in giving effect to the provisions of the Act within two years from the date of its commencement. It is proposed in the amendment to increase this time limit from two years to five years likely due to the legal battle mentioned in the previous section. This proposed amendment would be retrospective in nature when it comes into force since the above-mentioned period of two years lapsed on 25 July 2021.
The next step for the Bill to take the shape of an Act is to get it passed in the Rajya Sabha (the upper house of the Indian parliament) which could not be done in the last session of the parliament as it was adjourned sine die on 8 August 2022. Thereafter, the Bill needs to get the assent of the President of India. It is also quite impressive to see the swiftness of the government to introduce the Bill in the Lok Sabha on 5 August 2022 after the pending litigations in the High Court of Delhi were dismissed on 21 July 2022.
Most of the international arbitrations where one of the parties is Indian take place in Singapore and are administered by the Singapore International Arbitration Centre. One of the main factors for this is that Singapore serves as a neutral seat of arbitration. For instance, if one party is Indian and the other one is Indonesian then is it unlikely that they would agree on India or Indonesia as the seat of the arbitration. They would prefer a neutral seat of arbitration like Singapore. Therefore, to make India a robust hub for international arbitrations, it is imperative to focus on the parties that are not Indian as the chances of them selecting India as a neutral seat are more.