Arbitration is one of the leading method for resolving disputes arising from commercial agreements or other domestic and international relationship. Due to huge pendency of cases in courts in India, there is a dire necessity for an effective and operative means of alternate dispute resolution.

India’s first arbitration enactment was the Arbitration Act, 1940. Other complementary legislations were formed in the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards Act, 1961. Arbitration under these laws was never effective and led to further litigation as a result of rampant challenge of awards. The legislature enacted the Arbitration & Conciliation Act, 1996 (“Principal Act”) to make arbitration, domestic and international, more effective in India. But the increasingly pro-arbitration approach adopted by the Courts in the recent past years, coupled with India’s desire to become an international arbitration hub eventually led to the enactment of the Arbitration Amendment Act. The Arbitration Amendment Act was enacted with the objective of taking drastic and reform-oriented steps to bring Indian arbitration law at par with global standards and provide an effective mechanism for resolving disputes with minimum court interference and make India a preferred destination for arbitration.

The Arbitration and Conciliation (Amendment) Act, 2015 (“The Amendment Act”) brought a much needed transformation and was aimed at revolutionizing the arbitration regime in India. Some of the important amended provisions have had significantly impact on the way arbitrations are conducted in India and have brought positive change to India ‘s reputation as a seat for international commercial arbitration. The Amendment Act brings about much needed changes to the Act by offering clarity with respect to interim relief for foreign seated arbitrations i.e. flexibility for the parties to approach courts, premised on speedy resolution of disputes, transparent and conflict-free appointment of arbitrator, judicial intervention and independence of the arbitral tribunal and introduction of measures to make arbitration in India time and cost efficient. This amendment seems to be an optimistic leap towards getting India at par with the other arbitration jurisdictions as preferred arbitration destination.

There has always been a concern in India with respect to the time taken for appointment of arbi- trators due to the existing jurisprudence and procedure. The time-frame for such appointment was usually twelve (12) to eighteen (18) months. Thus, this amendment seeks to address this delay by introducing a timeline and clarifying the procedure of appointment to be an exercise of administrative power by the courts.

One of the main issues plaguing the principal Act was the time taken from the commencement of arbitral proceedings till the date of passing of the award. In order to enhance the speed of arbitrations, the Arbitration Amendment Act has inserted a new provision, now known as Section 29A, which provides a time limit for completion of arbitral proceedings. As per the Arbitration Amendment Act, an award shall now have to be made within a period of twelve (12) months from the date the arbitral tribunal enters upon the reference and such period may be extended by a maximum period of six (6) months by the parties.

The Amendment Act has empowered the Hon’ble High Court to frame rules for determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal. A ‘model’ fees structure for arbitrators has been included in the Fourth Schedule to the Act for the consideration of the Hon’ble High Court. The Amendment Act links the arbitrator’s fee to the time taken to pass the final award and entitles the arbitrators to additional fees, if the award is made within a period of six (6) months, thereby incentivizing arbitrators to make the process speedier. Further, the courts have also been empowered to order a reduction of fees if there is a delay beyond eighteen (18) months in passing the final award, for reasons attributable to the arbitrators.

The internationally well-known cost regime ‘where costs follow the event’ has been bought into the enactment as Section 31A. Costs are not limited to legal fees, but also include travel expenses, witness expenses and so on. The imposition of costs also extends to every litigation arising out of an arbitration which has been addressed by virtue of the amendment. Further, it provides that an amount awarded by the arbitral tribunal will, unless otherwise specified by the arbitral tribunal, carry interest, which shall be 2% more than the current rate of interest per annum (the “current rate of interest” as per the Section 2(b) of the Interest Act, 1978), from the date of the award to the date of payment.

The new law also makes the declaration by the arbitrator about his independence and impartiality more realistic as compared to a bare formality under the previous regime. Making the arbitrator responsible for delay in the arbitration proceedings, for the reasons attributable to him, would ensure that the arbitrators do not take up arbitrations, which are beyond their capacities. The Amendment Act has amended particular sections within the principal Act that relates to the independence, impartiality, fees, and ineligibility of arbitrators when appointed. The Amendment Act has made the appointment of an arbitrator an administrative decision to be carried out by the Supreme Court or the High Court, as the case may be, under Section 11. It has also further imposed an obligation under this section to dispose of the case as expeditiously as possible and even gone a step further to provide a timeline of sixty (60) days.

Neutrality of the arbitrator was one of the major drawbacks of Indian arbitration. By the present amendment, the neutrality of Indian arbitrators has been made at par with international arbitrations. Amendment to Section 12, as per the new law made the declaration on the part of the arbitration about his independence and impartiality more onerous.

A major change that has been introduced in the section 34 regarding challenge of awards is that a prior notice to the other party that the award is going to be challenged has been made mandatory and the party challenging the award has to file an affidavit endorsing compliance of the above requirement. Striking change that has been brought out by this amendment in Section 36 regarding execution of awards is that the automatic stay of execution during the pendency of Section 34 is taken away and after the period of time for challenging the award has expired, the award becomes immediately executable, unless the court grants an order of stay of the operation of the arbitral award. This will promote the use of arbitration in commercial disputes, as the parties will be able to enjoy the fruits of the award without the delays of pendency in courts.

The law of Arbitration, as a species of dispute resolution and contract enforcement law, continues to be linked to the evolution of International business, with arbitration clauses continuing to be heavily negotiated in cross-border transactions. Recognizing this, both the Government and the Judiciary, demonstrated an inclination to make India arbitration friendly, going so far as to dream of India becoming an Arbitration hub. The Amendment Act is the first step taken towards this end by the Government, to fix a law that inadvertently warranted, validated and made blameless; delays, heavy costs, partisan decision-making and enforcement loop-holes, without recourse to adequate remedial measures. Steps taken are favorable and much required move leaving an impact on our minds whether India will become a preferred destination for Arbitration. Time will tell and a long way to go.