On March 2, 2019, the President of India promulgated the New Delhi International Arbitration Centre Ordinance, 2019 (“Ordinance”). The Ordinance aims to create an independent and autonomous regime for institutionalised arbitration and to transfer the undertakings of the previously existing International Centre for Alternative Dispute Resolution (“ICADR”) to the newly formed New Delhi International Arbitration Centre (“NDIAC”).
Over time, it has been observed that despite the existence of several arbitral institutions in India, parties have preferred ad hoc arbitration or referred their disputes to arbitral institutions in foreign countries. The economy of the country was affected adversely since foreign investors saw the Indian arbitral institutions as under-developed and infected with unnecessary judicial intervention. In this backdrop, a ten member High-Level Committee (“Committee”) was constituted by the Central Government with Justice B.N. Srikrishna at its helm. The purpose of the Committee was to study the arbitral landscape in India, analyse its shortcomings and prepare a roadmap for making India a robust centre for international and domestic arbitration. The key recommendations of the Committee included formation of a separate body corporate for taking over the undertakings of the ICADR, establishment of a council for grading arbitral institutions in India, accreditation of arbitrators by professional institutes recognised by the council, amendments to the Arbitration and Conciliation Act, 1996 etc. These recommendations formed the basis of the Ordinance.
CHAMBER OF ARBITRATION AND ARBITRATION ACADEMY
The Ordinance envisages creation of a Chamber of Arbitration (“Chamber”) that will empanel arbitrators of repute and scrutinize applications of arbitrators for empanelment. The Chamber will consist of experienced professionals in the field of arbitration, conciliation and alternative dispute resolution and the NDIAC is empowered to formulate regulations to lay down the criteria for admission to the panel of people experienced in international commercial arbitration as well as other types of arbitration. The Ordinance further empowers the NDIAC to establish an Arbitration Academy for the purpose of training individuals particularly in the area of international commercial arbitration to compete on par with international arbitral institutions and to conduct research on alternative dispute resolution and allied areas and give suggestions for obtaining the purposes of the Ordinance.
RULES AND REGULATIONS
The Ordinance empowers the Central Government to make rules to carry out the provisions of the Ordinance. The NDIAC is also empowered to make regulations, with the previous approval of the Central Government, for giving effect to the provisions of the Ordinance. However, no rules or regulations have been notified so far.
CONCLUSION
The Committee had circulated a questionnaire seeking to understand the functioning of arbitral institutions and challenges faced by them, if any. From a review of the answers received by the Committee, it was revealed that majority of the arbitral institutions are incorporated as Section 25 companies that operate independently. Several arbitral institutions, though they were initially established with some help from the government, eventually operated independently. This means that these institutions rely on the fees charged to the parties and other income to sustain themselves. Thus, these institutions being independent entities, it becomes easier for parties to a dispute to trust the institution to act in a neutral capacity. However, the NDIAC appears to have come with strings. It is largely funded by the Central Government and the Central Government also has powers to appoint as well as remove its members.
Further, the ICADR has challenged the validity of the Ordinance before the Delhi High Court contending that no urgency as required under Article 123 of the Constitution for the promulgation of an ordinance is made out and the Central Government has used the power under the Constitution as a “parallel source of legislative power”. It is also contended that the Ordinance violates Articles 14, 19(1)(g) and 300A of the Constitution of India and that the immediate takeover of ICADR will leave its employees and officers in the lurch. The Delhi High Court has directed the Central Government to file its affidavit in reply and thereafter a detailed order will be passed by the court. While no interim relief is granted, reports say that the bench orally expressed doubts about the urgency to take over the undertakings of the ICADR.
The NDIAC has been formed to establish a flagship arbitral institute capable of competing at par with other arbitral institutions around the world. As per the Committee report, while the ICADR was only able to deal with 49 cases of arbitration and 4 cases of conciliation over two decades, its contemporaries were far ahead with 343 new cases handled by the Singapore International Arbitration Centre, 303 new cases handled by the London Court of International Arbitration and 966 cases handled by the International Chamber of Commerce Court in 2016 alone. To catch up with its rivals, the NDIAC would have to create an investor friendly atmosphere and put in place procedures to expedite the dispute resolution process. While the Ordinance addresses administrative issues encountered by the ICADR, the rules and regulations made in consonance with the Ordinance will have to cover a wide gap to spruce up the NDIAC’s performance so that it has a fair chance against other arbitral giants.
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