Role of The Arbitration and Conciliation Act, 1996 in development of ADR in India
Rohan Sthanu
Amity University Mumbai
This blog is written by Rohan Sthanu, a Fourth-year law student of Amity University Mumbai
Abstract
The Arbitration and Conciliation Act, 1996, is a landmark legislation in India which changed the legal regime relating to disputes resolution. Arising from prehistoric conflict resolution techniques but fully developed with the British in mind by the Arbitration Act of 1940, the current structure was initiated due to the inefficiencies of the prior laws. The 1996 Act brings Indian arbitration law provisions into conformity with international standards to encourage arbitration and conciliation. Through providing support to enforce the arbitral awards, and encouraging the forms of amicable settlements, the Act increases the effectiveness of the conflict solution and decongestions the courts. This article aims to understanding the historical background, major characteristics as well as the purpose of the 1996 Act and its relevance in the development of a conducive legal framework for arbitration in India.
Arbitration Laws in India
Arbitration has been a critical component of the society for the resolution of disputes throughout history. Indian conventional ways of dealing with conflict of interest are relatively replaced with more structured mechanisms and systems measured in present day legal procedures., especially concerning arbitration. Arbitration in India may be traced back to a time when legal precedents can from texts which suggested that elders in the communities or other leaders of the society acted as arbitrators. However, with the coming of the British colonialism, there began to emerge structured legal system which harbored in the Arbitration Act of 1940. This earlier legislation although it gave a measure of foundation to arbitration systems was seen to be suffering largely from a rigid approach and unrealistic procedures.
Arbitration Act 1940
The Arbitration act of 1940 of India was the primary legal instruments that set the tone of arbitration in India. The bill was to establish legal frameworks for setting up arbitration that would help resolve disputes out of court
Features of Arbitration Act, 1940
· Scope and Applicability: It was mainly domestic arbitration which was governed by the Act. Its main objective was to provide procedural frameworks governing all aspects of arbitration of different kinds of civil contentions, including business.
· Arbitration Agreement: The Act sought to define arbitration agreements – these had to be in writing. This provision laid the foundation for the realization of the enforceability of such agreements.
· Appointment of Arbitrators: The Act was also on matters concerning the appointment of arbitrators, and on issues of controversy over the appointment of the said arbitrators.
· Powers of Arbitrators: It spelt out the functions of arbitrations, to enable them to hold proceedings equitably and objectively.
· Conduct of Proceedings: The Act provided provisions regarding the conduct of arbitral proceedings even though it was often (predicted to be) too formal and mechanical in process.
Limitations of Arbitration Act 1940
The Arbitration was one of the best arbitration acts of the time but it still had a limited scope, it lacked certain efficiency. The limitations of the act are as follows –
· Rigidity in Procedure: The act was rigid and was not flexible with time. This rigidity may culminate into slow and unworthy approaches towards the settlement of disputes.
· Limited Scope: Despite this, the Act only provided for reasonable provisions on domestic arbitration without considering international arbitration. This gap became a cause for concern especially with the rising global trade and international transactions taking place now than ever before.
· Judicial Interference: The Act permitted appreciable degree of intervention from the Courts in arbitral processes. Courts could review the awards or interfere with the appointment of arbitrators and such actions therefore led to a degradation of the primary purpose of arbitration to facilitate fast resolutions of disputes.
· Lack of Clarity: Some of the terms and process under the Act were ambiguous that court interpreted them in different ways hence variation in arbitration practices.
· Inadequate Support for Institutional Arbitration: Disappointingly, the Act failed both to actively market and offer the requisite structure for institutional arbitration which have recognized more structured procedures.
Need for a new act
The weaknesses in the Arbitration Act, 1940 had once more established that the country needed a new and a more effective legislation of arbitration in India. The globalization of trade had also put pressure on the country to develop a new law for cross border issues and to par with international laws. This shift was to make arbitration more effective and faster by reducing the interference of the courts in the arbitration procedures so that the parties could reclaim their disputes in the desired timely manner through arbitration hence making it even more appealing to the disputing parties. Further, modern framework was needed to cater institutional arbitration based on the structured and more preferable processes becoming the parts of growing international environment.
The Arbitration and Conciliation Act, 1996
This act came into force on the 22nd day of August, 1996.It extends to the whole of India. This act provides for domestic arbitration, international commercial arbitration and also enforcement of foreign arbitral awards. Dispute resolution through arbitration is provided in the structure by the Act and is applicable for both domestic and international cases. They include provisions on the appointment of arbitrators, the arbitration procedure, and recognition, and enforcement of awards with provisions laid down by law that make the process efficient and promptly delivers justice. Moreover, it provides a platform for an effective use of conciliation an ADR mechanism that enable parties to come to a compromise. There have been certain practical issues in implementation of the Act, improvements in the efficacy of arbitration and minimization of judicial interference has been attempted by amending the Act from time to time to make the environment more arbitration – friendly in India. It also provides for conciliation It proceeds on the basis of the UN Model Law so as to make our law accord with the law adopted by the United Nations Commission on International Trade Law (UNCITRAL). The General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice.
Objectives of the act –
It was widely felt that the 1940 Act, which contained the general law of arbitration, had become outdated.
Several representative bodies of trade and industry and experts in the field of arbitration had proposed amendments to this Act to make it more responsive to contemporary requirements.
To comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation.
to make provisions for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration.
Features of the act -
1. Parties' Autonomy: Particularly, it is interested in party autonomy since both parties control the procedure, the choice of arbitrators and even the rules of arbitration.
2. Arbitration Agreement: The Act also outlines the arbitration agreement and indicated that it has to be in writing, this may take the form of a document, an email or even electronic transmission.
3. Arbitration Tribunal: It prescribes the appointment of the arbitral tribunal, its powers and tasks which is among them the jurisdiction of the arbitral tribunal.
4. Conciliation: The Act also focuses on conciliation, since the name is suggestive of this the process is one whereby the parties that have a disagreement can sort out their difference without having to go to the court and the purpose here is to ensure that the parties to the dispute are enabled to go on carrying on their business relationships.
5. Amendments – The act has gone through certain modifications especially in the year 2015 and 2019 respectively.
Conclusion
The Arbitration and Conciliation Act, 1996 marked a significant departure from the previous arbitration law in India, which was governed by three statutes: which include the Arbitration Act of 1940 and the Arbitration (Protocol and Convention) Act of 1937 and the Foreign Awards (Recognition and Enforcement) Act of 1961. The previous legislation was criticised for being – antiquated, bureaucratic and leading to too much judicial activism which slows down the proceedings of an arbitration process. The 1940 Act opened the flood gates for courts to interfere frequently and made the process of arbitration costly and time-consuming which, of course, was against the very idea of having an effective substitute for litigation.
While the 1996 Act sought to update the arbitration laws by adopting fragments of the UNCITRAL Model Law based on limited court interference, party autonomy, and a broad structure for arbitration whether domestic or international. It incorporated new procedures which include; the parties were allowed to make their own regulations on the conduct of the arbitration; there was limited supervisory jurisdiction afforded to the courts to inter airport in arbitral processes as well as the selection of the arbitrators. The other important change was the finality of the awards given by the arbitrators that only in certain cases can be contested or nullified which did enhance efficiency in the dispute resolving mechanism.
Furthermore the 1996 Act brought another procedure of ADR in the form of conciliation which was not available under the earlier law. The new Act also dealt with the issue of recognition and enforcement of foreign arbitral award which placed India on par with international standards and improved its standing as an international arbitration destination. Altogether it was seen that 1996 Act was a more liberal, flexible and efficient mechanism towards arbitration in comparison to the previous law, which has solved many of the problems associated with the arbitration at one hand which affected the arbitration processes in India at the other hand.
References
· https://blog.ipleaders.in/arbitration-and-conciliation-act-1996/