India’s Arbitration Law Is In A ‘Chronic State Of Animated Suspension’: Fali S Nariman

Speaking at the inaugural session of the United Nations Commission on International Trade Law (UNCITRAL) South Asia Conference, 2023 Senior Advocate, Fali S Nariman, said that India’s Arbitration law is in a ‘chronic state of animated suspension’.

In the event held on September 14, Nariman said that when the Arbitration and Conciliation Act, 1996 was enacted it largely conformed to the UNCITRAL model law adopted by the U.N General Assembly in 1985. However, since the subsequent amendments, the 1996 Act ‘went off the rails’, he remarked.

“I say this with some regret, with a series of subsequent amendments, made by the Amendment Act of 2016 and the amendment Act of 2019, as well as some court decisions, the 1996 Act went off the rails and there came into existence far too many conflicting judgments on different provisions of the act, all of which are yet to be reviewed by larger benches of India's Supreme Court.”

He pointed out that in June 2023, the Government of India constituted an expert committee to reconsider the provisions of the Arbitration and Conciliation Act 1996 and to advise whether there should be a modification of the existing law. Even though the committee has made its report, it is confidential at the moment because it is still under consideration by the Government of India. “Meanwhile I am sorry to tell you that arbitration law in India is in a somewhat chronic state of animated suspension, which is really a pity.” He said.

He explained that India's experience in International Commercial Arbitration started back in the 1920s, more than 100 years ago, but it was haphazard, since there was no enacted law on International Commercial Arbitration until the UNCITRAL Model Law helped remedy this. However he expressed regret, at the practice of countries, including India, enacting laws that deviate from the UNCITRAL model.

“The problem is that, when after years, not months, but years of confabulation and discussion, that had taken place in the formulation of the model law, the majority of nation-states around the world chose not to adopt it in its entirety, but enacted national laws with different variations and different alterations. Thus far, 87 nation states have fashioned their laws on the model law adapting, but not adopting the UNCITRAL model. The exceptions are only three states Canada, Australia and Hong Kong.” He said.

According to Nariman, one of the major problems faced in International Commercial Arbitration today, including under the 1996 Act, is the current system for challenging the independence and impartiality of the arbitrator or of the chairman of the Arbitral Tribunal. “Under the present dispensation there has to be disclosed some good reason not suspicion, that the person already appointed is not likely to be impartial, which is an uphill almost impossible task.” He said.

Another major challenge faced in International Commercial Arbitration today, according to Nariman, is that a quick, yet not so expensive, and expert resolution of the dispute is ‘difficult, almost impossible’ to achieve.

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