Attorney General suggests new Arbitration and Conciliation Act with timely and cost effective settlements

Attorney General Mukul Rohatgi has advocated the repeal of Arbitration and Conciliation Act 1996, advising a new law with emphasis on timely settlement of business disputes and fixing greater onus on arbitrators against delay. The move is being seen as facilitating the Government’s plan to provide a business-friendly environment for foreign investors. Rohatgi had been approached by the Law Ministry for suggestions.

The Government is in favor of reducing the burden over the Courts on issues concerning commercial or business disputes by reinforcing the arbitration mechanism in the country.

Rohatgi suggested strict penalties such as debarment for a period of three years in case of unnecessary delay. He also recommends a ceiling of fees and expenses of arbitrators and arbitration itself. The fees can be graded into two or three levels depending on the type of dispute settlement they are presiding.

He also recommended that if an objection is entertained against an award, the Court should grant a stay after hearing both the parties involved.

Union Law Minister, D.V. Sadananda Gowda had also hinted on repeal of the law being on top of Government’s priority list, in order to attract foreign investments.

He had recently informed the Lok Sabha that the Government was making an effort to move away from entering into adversarial litigation in inter-ministerial and departmental matters. In fact, in August, the Law Secretary had written to all ministry Secretaries to “desist” from going to courts, and instead determine discords through alternative dispute resolution mechanism like arbitration.

The 246^th Law Commission of India Report titled, ‘Amendment to the Arbitration and Conciliation Act, 1996’, had earlier in August, suggested some major changes to the Arbitration and Conciliation Act.

The report had sought to find an appropriate path and balance between judicial intervention and judicial restraint.

It had also recommended a model schedule of fees and has empowered the High Court to frame appropriate rules for fixation of fees for arbitrators and for which purpose it may take the said model schedule of fees into account. Read the report and a list of all major suggestions here.

The Arbitration and Conciliation Act, 1996 is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980. The working of the 1940 Act was also the subject of the 210th Report of the Public Accounts Committee of the Fifth Lok Sabha. The Law Commission of India also examined the working of the 1940 Act in its 76th Report.

The Commission had earlier recommended various amendments to the Act in its 176^th Report on the ‘Arbitration and Conciliation (Amendment) Bill, 2001’, after which the Government decided to accept almost all such recommendations and accordingly, introduced the ‘Arbitration and Conciliation (Amendment) Bill, 2003’ in the Rajya Sabha on 22nd December, 2003.

In order to re-look into the provisions of the Act, the Ministry of Law and Justice issued a consultation paper on 08th April, 2010 inviting suggestions from eminent lawyers, judges, industry members, institutions and various other stakeholders.