Arbitration and Conciliation Act, 1996
The Arbitration Council of India: Part IA
Part IA, comprising Sections 43A to 43M, was inserted by the Amendment Act of 2019 on the recommendation of the High Level Committee chaired by Justice B.N. Srikrishna. Its purpose is institutional: to grade arbitral institutions, to set norms for the accreditation of arbitrators, to maintain a depository of awards and generally to move Indian arbitration from the ad hoc model to the institutional one. The Part was brought into force on 12 October 2023. The Council itself has still not been constituted, which is the single most important fact to state in any answer on this subject.
The Council, its four principal functions, its composition and the position on the ground
1. Background
The Srikrishna Committee, which reported in 2017, identified the predominance of ad hoc arbitration as the central weakness of the Indian system and attributed to it the cost, delay and unpredictability that had driven parties to foreign seats. It recommended an autonomous body to promote institutional arbitration, to grade institutions and to accredit arbitrators. The Amendment Act of 2019 gave effect to the recommendation by creating the Arbitration Council of India and by linking the appointment machinery in Section 11 to institutions graded by it.
2. Establishment and Composition
Sections 43B and 43C, Arbitration and Conciliation Act, 1996 43B(1). The Central Government shall, by notification in the Official Gazette, establish, for the purposes of this Act, a Council to be known as the Arbitration Council of India to perform the duties and discharge the functions under this Act. 43B(2) and (3). The Council shall be a body corporate, having perpetual succession and a common seal, with power to acquire, hold and dispose of property and to contract and to sue and be sued; its head office shall be at Delhi, and it may establish offices at other places in India with the prior approval of the Central Government. 43C(1). The Council shall consist of a Chairperson, being a Judge of the Supreme Court or a Chief Justice or a Judge of a High Court or an eminent person having special knowledge and experience in the conduct or administration of arbitration; an eminent arbitration practitioner and an eminent academician as Members; the Secretary to the Government of India in the Department of Legal Affairs and the Secretary in the Department of Expenditure, ex officio; one representative of a recognised body of commerce and industry as a part-time Member; and the Chief Executive Officer as Member-Secretary, ex officio. |
The Chairperson and the two eminent Members are appointed by the Central Government in consultation with the Chief Justice of India. Sections 43D to 43H deal with the duties of the Council, the terms and conditions of office, resignation and removal, and the vacancies and procedure of meetings.
⚠ The criticism of the composition Two ex officio Secretaries to the Government, and a Chairperson and Members appointed by the Central Government, give the executive a substantial presence in a body meant to regulate a private dispute resolution system in which the Government is itself the largest litigant. The objection is one of independence rather than of competence, and it has been made repeatedly in commentary and in the litigation seeking the Council's constitution. Any answer on this topic should state the point, since it is the standard criticism of Part IA. |
3. Duties and Functions: Section 43D
Section 43D(1) makes it the duty of the Council to take all such measures as may be necessary to promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanisms, and for that purpose to frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. Section 43D(2) sets out the particular functions.
- Framing policies governing the grading of arbitral institutions, and recognising professional institutes providing accreditation of arbitrators.
- Reviewing the grading of arbitral institutions and of arbitrators, and holding training, workshops and courses in the area of arbitration in collaboration with law firms, law universities and arbitral institutes.
- Framing, reviewing and updating norms to ensure satisfactory level of arbitration and conciliation, and acting in a manner conducive to their speedy and appropriate conduct.
- Maintaining an electronic depository of arbitral awards made in India and such other records as may be specified.
- Making recommendations to the Central Government on matters relating to the manner of constitution of arbitral institutions and on personnel, training and infrastructure.
4. Grading, Accreditation and the Depository
4.1 Grading of arbitral institutions: Section 43-I
The Council is to grade arbitral institutions on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations, in such manner as may be specified by regulations. Grading matters beyond reputation, because the appointment machinery in Section 11 as amended in 2019 contemplates appointment by arbitral institutions designated by the Supreme Court and the High Courts, and the designation is to be made from among graded institutions. Where no graded institution is available, the High Court is to maintain a panel of arbitrators.
4.2 Accreditation of arbitrators: Section 43J
As enacted in 2019, Section 43J provided that the qualifications, experience and norms for accreditation of arbitrators shall be such as specified in the Eighth Schedule. The Amendment Act of 2021 substituted the section so that these matters are now to be such as may be specified by the regulations, and omitted the Eighth Schedule altogether.
⚠ The Eighth Schedule: what it contained and why it went The Eighth Schedule listed the persons qualified to act as arbitrators: an advocate under the Advocates Act, 1961 with ten years of practice; a chartered accountant, cost accountant or company secretary with ten years of practice; an officer of the Indian Legal Service; an officer with a law degree and ten years of experience in the legal matters of a government department or a public sector undertaking; an engineer with ten years of experience; and certain senior officers and persons with technical qualifications, together with general norms on impartiality, conduct and integrity. The criticism was immediate and twofold. The qualifications were drawn by reference to Indian professional statutes, so a foreign lawyer or a retired foreign judge appeared to be excluded, which sat badly with the ambition of making India a seat for international arbitration. And prescribing qualifications by statute cut across party autonomy, since the parties are ordinarily free to appoint whom they choose. The Schedule was omitted by the Amendment Act of 2021, and the subject moved to regulations. |
4.3 Depository of awards: Section 43K
The Council is to maintain an electronic depository of arbitral awards made in India and such other records related thereto in such manner as may be specified by the regulations. The provision has to be read with the confidentiality obligation in Section 42A, which protects all arbitral proceedings except the award where disclosure is necessary for implementation and enforcement. How a depository of awards is to be reconciled with the privacy that commercial parties expect from arbitration is an unresolved question, and it is one of the reasons the provision has attracted comment.
5. Regulations and Administration: Sections 43L and 43M
Section 43L empowers the Council, with the previous approval of the Central Government, to make regulations consistent with the Act and the rules made under it, to carry out the purposes of Part IA. Section 43M provides for a Chief Executive Officer, appointed in the prescribed manner, who is responsible for the day to day administration of the Council, and for a Secretariat consisting of such number of officers and employees as may be prescribed. The Council is to be assisted in the discharge of its functions by the Chief Executive Officer and may delegate powers to him.
6. The Position on the Ground
Part IA was inserted by the Amendment Act of 2019 and brought into force on 12 October 2023. The Council has nevertheless not been constituted, and the Union Government has been called upon to respond to a petition before the Supreme Court seeking its establishment along with uniform guidelines for the regulation, conduct and accreditation of arbitral institutions and arbitrators. The practical consequences are these.
Provision | Intended position | Position in practice |
|---|---|---|
Section 11 appointment | Appointment by arbitral institutions designated by the Supreme Court and the High Courts from among graded institutions | Appointments continue to be made by the courts, since there is no grading authority |
Section 43-I grading | A national grading of arbitral institutions | No grading exists; institutions are chosen on reputation |
Section 43J accreditation | Norms for accreditation specified by regulations | No regulations; the Eighth Schedule that once applied was omitted in 2021 |
Section 43K depository | An electronic depository of awards | Not established |
The draft Arbitration and Conciliation (Amendment) Bill, 2024, circulated for public consultation in October 2024, proposes further changes to the institutional framework. It remains a consultation draft: it has not been introduced in either House and no provision of it is in force. The law as it stands is the Act of 1996 as amended in 2015, 2019 and 2021.
7. Assessment
The case for the Council is that institutional arbitration cannot develop without a body to set standards, and that grading and accreditation are the mechanisms by which a market chooses between institutions on something better than reputation. The case against the scheme as enacted rests on three points: the composition gives the executive a large role in regulating a field in which the Government is the principal litigant; a depository of awards is difficult to reconcile with the confidentiality that parties choose arbitration to obtain; and statutory prescription of who may act as an arbitrator, which the Eighth Schedule attempted, cuts against party autonomy. The omission of the Eighth Schedule in 2021 answered the third objection. The first two remain, and the delay in constituting the Council means that none of the machinery has yet been tested.
8. Related Topics and Provisions
Topic or provision | Connection |
|---|---|
Institutional ADR vs Ad Hoc ADR | The model Part IA was enacted to promote |
Composition of the Arbitral Tribunal: Sections 10 to 15 | Appointment under Section 11 and the qualifications of arbitrators |
Historical Development of Arbitration Law in India | The Srikrishna Committee and the amendments of 2019 and 2021 |
Sections 42A and 42B, A&C Act, 1996 | Confidentiality, and the depository question it raises |
New Delhi International Arbitration Centre Act, 2019 | The India International Arbitration Centre, established alongside Part IA |