The Arbitration and Conciliation (Amendment) Act, 2021 amends the Arbitration and Conciliation Act, 1996. It changes the rules for arbitration and conciliation in India. Arbitration is a way to settle disputes outside courts. The Arbitration and Conciliation Act 2021 came into force on March 10, 2021 by replacing a temporary rule from November 2020. It focuses on how courts enforce arbitration decisions and who can be an arbitrator. Before this amendment, the law had one set of rules. Now, it has new ones. The goal is to make arbitration in India better by improving how decisions are enforced and how arbitrators are chosen.
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Evolution of Arbitration Law in India
Arbitration law in India has grown over time and before this law, the disputes were handled by different laws. The modern system started with the Arbitration Act of 1940. Later, the Arbitration and Conciliation Act 1996 replaced it. The 1996 Act used the UNCITRAL Model Law to make arbitration clear and less controlled by courts.
Still, after 1996, courts slowed down arbitration by delaying decisions and getting involved too much. People said arbitration was too slow and court-focused. To fix this, India made big changes:
2015 Amendment (effective October 23, 2015): This was a big step since it stopped courts from automatically pausing arbitration decisions when challenged. Courts got more freedom to decide. Arbitration tribunals gained powers like courts for temporary orders. Some rules also applied to arbitrations held outside India. These changes aimed to make arbitration faster and freer from courts.
2019 Amendment (assented August 9, 2019): This added new rules. It planned an Arbitration Council of India, which isn’t active yet. It also listed arbitrator qualifications, like legal training, in an “Eighth Schedule.” It added Section 87 to clarify rules for older cases, but the Supreme Court later removed this section.
2020 Ordinance and 2021 Amendment: In 2020, a temporary rule changed enforcement and arbitrator qualifications. The 2021 Act made these changes permanent.
Read about the role of UNCITRAL in ADR.
Objectives of the Arbitration and Conciliation (Amendment) Act, 2021
The Arbitration and Conciliation Act 2021 aims to make arbitration in India more trustworthy and flexible. It wants to reduce problems in the system while protecting against unfair arbitration decisions. Here are its main goals:
Prevent Fraud and Corruption: The law stops courts from enforcing arbitration decisions that seem based on fraud or corruption. Courts can pause these decisions for review.
Protect Fair Decisions: The law supports arbitration by setting clear rules to avoid delays in enforcing valid decisions.
Attract Global Arbitrators: By removing strict rules on who can be an arbitrator, the law allows foreign or specialized experts. This builds trust in India’s arbitration system worldwide.
Promote Efficiency and Fairness: The law balances quick dispute resolution with fairness. It lets courts pause decisions in fraud cases to protect parties. It also gives freedom to choose skilled arbitrators for complex disputes.
Align with Global Standards: The changes make India’s arbitration rules closer to international practices, following advice from law commissions and global groups.
Key Provisions of The Arbitration and Conciliation Act 2021
The Arbitration and Conciliation Act 2021 brings important changes. It strengthens the stay on arbitration decisions in fraud cases and removes strict rules for choosing arbitrators. These changes affect how decisions are enforced and who can serve as an arbitrator. Given below are the main provisions:
Pause on Enforcement for Fraud or Corruption: A new rule in Section 36(3) of the 1996 Act says courts must pause enforcement if they see early evidence of fraud or corruption in an arbitration agreement or decision. Once the court finds fraud, the pause is automatic until the challenge is decided. This stops enforcement during fraud claims.
Effective Date (Backdated Effect): The fraud and corruption pause rule applies from October 23, 2015, the date of the 2015 amendment. This covers arbitrations and court cases started on or after that date.
Arbitrator Qualifications and Accreditation: The Arbitration and Conciliation Act 2021 removes fixed rules for arbitrator qualifications. The 2019 Act had an Eighth Schedule listing requirements, like legal experience. The Arbitration and Conciliation Act 2021 deletes this schedule. Now, Section 43J says the government will set qualifications and standards through regulations later.
Deletion of Eighth Schedule: The Eighth Schedule, added in 2019, is gone. It had rules like requiring legal qualifications and limiting foreign arbitrators. Removing it lifts those restrictions.
Court’s Discretion and Civil Procedure: The 2015 amendment let courts use the Civil Procedure Code to pause decisions or set conditions. The 2021 Act changes this for fraud cases, making pauses automatic when fraud is shown, overriding general court powers.
Replacing the Ordinance: The 2020 temporary rule introduced these changes. The 2021 Act makes them permanent law.
Learn about Indian Council of Arbitration
Significance and Impact of the Amendment
The Arbitration and Conciliation Act 2021 is important because it affects how fast arbitration works and how much people trust the results.
The changes have good effects. Allowing any qualified person, including foreign experts, to be an arbitrator makes India’s arbitration system more appealing globally. Parties can pick arbitrators with the right skills, improving the quality and trust in arbitration decisions. Removing strict rules supports party freedom, aligning India with global arbitration standards.
However, the new pause rule might slow enforcement. If someone claims fraud, courts must pause the decision, delaying the winner’s ability to enforce it. This could lead to more court battles. The impact depends on how courts use the rule. If courts pause decisions often, it might encourage people to claim fraud to delay things. If courts demand strong proof of fraud, fewer cases will be paused. Future court rulings will show the real effect.
The amendment shows India’s effort to support arbitration while addressing misuse. It may attract more international disputes to India because of flexible arbitrator rules. However, lawyers must be ready to argue about fraud early to protect enforcement.
For ease of doing business, opinions differ. Some see the clear rules as helpful. Others think the pause rule could slow dispute resolution, hurting India’s business ranking. The amendment tries to balance quick arbitration with fair outcomes. It will shape how businesses and courts handle disputes for years.
Summary
The Arbitration and Conciliation Act 2021 made some big changes where courts must put a stay on arbitration decisions if there is early evidence of fraud or corruption. The law also removes strict rules for choosing arbitrators, letting parties pick anyone qualified, including foreign experts. These changes started in 2015 and became permanent in March 2021. The goals are to ensure fair arbitration decisions by stopping corrupt ones and to make India’s arbitration system more attractive worldwide by giving more choice in arbitrators. The impact is mixed. Parties have more freedom to choose arbitrators, and courts can tackle fraud clearly. But enforcing decisions might take longer, and it’s unclear how courts will apply these rules.
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Arbitration and Conciliation Act, 2021: FAQs
Q1. What is The Arbitration and Conciliation Act 2021?
It’s an update to the 1996 law that improves how arbitration decisions are enforced and who can be an arbitrator in India.
Q2. What does the 2021 amendment change?
It lets courts pause arbitration decisions if fraud is suspected and removes strict rules for picking arbitrators, making the process more flexible.
Q3. What is Section 21 of the Arbitration and Conciliation Act?
Section 21 says arbitration starts when a party sends a notice asking for it, unless the parties agree otherwise.
Q4. What is Section 44 of the Arbitration Act?
Section 44 explains foreign awards under the New York Convention, allowing them to be enforced in India if they meet certain rules.
Q5. What is the new arbitration policy in 2021?
The 2021 amendment promotes fair arbitration by pausing decisions for fraud and giving more freedom to choose arbitrators, matching global standards.
