ARBITRATION COUNCIL OF INDIA(ACI)
1. Context
Nearly six years after the 2019 amendments to the Arbitration and Conciliation Act, 1996 (1996 Act), the Union government is yet to constitute the Arbitration Council of India (ACI), envisaged as the central regulatory and promotional body for institutional arbitration.
2. What is the Arbitration Council of India (ACI)?
- The Arbitration Council of India (ACI) is a statutory body created to strengthen and professionalize the system of arbitration in India, making the country a more reliable and attractive destination for resolving commercial and legal disputes outside traditional courts.
- It was established under the Arbitration and Conciliation (Amendment) Act, 2019, which amended the original Arbitration and Conciliation Act, 1996.
- In simple terms, the main purpose of the ACI is to improve the quality, credibility, and efficiency of arbitration in India.
- Arbitration is a method where disputes—especially in business and contractual matters—are settled by neutral experts called arbitrators instead of through lengthy court trials.
- By creating a national-level authority, the government aimed to bring uniform standards and oversight to how arbitration is practiced across the country.
- One of the key roles of the ACI is to grade and accredit arbitration institutions. This means it evaluates arbitral institutions based on criteria such as infrastructure, quality of arbitrators, case management practices, and transparency.
- Institutions that meet the required standards are officially recognized, which helps parties choose reliable forums for resolving their disputes. Over time, this process is meant to raise overall confidence in India’s arbitration ecosystem.
- The ACI also plays a role in maintaining a database of qualified arbitrators. This helps ensure that parties have access to trained and experienced professionals, reducing concerns about bias, lack of expertise, or procedural irregularities.
- By promoting training and setting professional benchmarks, the Council contributes to building a pool of high-quality arbitration practitioners in the country
3. Proposed Mandate
- The 2019 legislative changes put forward the creation of the Arbitration Council of India as a central regulatory authority responsible for encouraging, modernising, and strengthening arbitration practices across the country.
- This framework was shaped by the suggestions of the High-Level Committee on Arbitration, led by Justice B.N. Srikrishna, which presented its findings in July 2017.
- Under these amendments, the Council was given broad responsibilities, such as evaluating and ranking arbitral institutions, recognising professional organisations that certify arbitrators, and maintaining a national record of arbitration awards issued in India.
- The proposal also stated that the ACI would be led by a Chairperson appointed by the Central Government in consultation with the Chief Justice of India.
- This position could be held by a former Supreme Court judge, a former Chief Justice or judge of a High Court, or a distinguished expert in arbitration, along with ex officio members from the executive branch forming part of the Council
4. Institutional Independence
- One of the principal criticisms directed at the Council is its perceived lack of institutional independence.
- A majority of its members are either selected or appointed by the Union government, which has led to worries about the autonomy of the arbitration system in India—especially since the government itself is the largest party to legal disputes.
- Legal experts have pointed out that placing regulatory authority in a body dominated by government nominees, with powers to rate arbitration centres, certify arbitrators, and shape policy, raises serious concerns about neutrality and has little parallel in countries known for arbitration-friendly frameworks.
- Additional issues have been raised regarding the ACI’s responsibility for approving and assessing arbitral institutions.
- Although this approach is said to be influenced by models in Singapore and Hong Kong, there is an important difference. In those jurisdictions, arbitration is largely managed by a single, central institution rather than a regulator supervising numerous bodies.
- The 2019 amendments allow the ACI to recognise an unlimited number of arbitration institutions, which could weaken quality control, create heavy administrative burdens for the Council, and increase costs for public resources
5. Judicial Intervention restriction
- Under the Arbitration and Conciliation Act, 1996, Indian courts have the authority to issue interim protections to safeguard the interests of parties involved in arbitration.
- Currently, such relief can be sought before the arbitration begins, while proceedings are ongoing, or even after an arbitral award is issued but prior to its enforcement in India.
- The draft Bill aims to redefine this role by restricting the courts’ power to grant interim measures only to two stages: before the start of arbitration or after the award has been delivered.
- It proposes a change to Section 9(2), which at present mandates that arbitration must be initiated within 90 days from the date a court grants pre-arbitration interim relief.
- Under the new proposal, this 90-day countdown would instead start from the date the application for interim relief is submitted, rather than when the court passes the order. The purpose behind this shift is to reduce delays caused by extended court involvement before arbitration formally begins.
- Another key recommendation is the addition of a new Section 9-A, which would permit parties to approach an emergency arbitrator for interim protection after arbitration has started but before the arbitral tribunal is formally constituted
6. 2024 draft bill mandate
- On October 18, 2024, the Union government issued the draft Arbitration and Conciliation (Amendment) Bill, 2024 and opened it up for public feedback. The proposed legislation aims to revitalise institutional arbitration by introducing a range of structural changes.
- It offers a new definition of an “arbitral institution,” describing it as any body or organisation that administers arbitration proceedings under its own procedural framework or as agreed upon by the parties.
- This represents a shift away from the 2019 framework, which required such institutions to be formally notified or designated by the Supreme Court or a High Court.
- The draft also seeks to broaden the responsibilities of arbitral institutions by granting them certain powers that are currently exercised solely by the courts.
- These include the ability to extend the deadline for issuing arbitral awards, lower arbitrators’ fees in cases where delays are caused by the tribunal, and replace arbitrators when necessary.
- If implemented, these steps are expected to limit the extent of judicial involvement in arbitration proceedings.
- However, in March 2025, while responding to a query in Parliament, Union Law Minister Arjun Ram Meghwal stated that the Bill was still being examined
7. Way Forward
The report led by Justice B.N. Srikrishna observed that the ongoing prevalence of ad hoc arbitration in India largely stems from parties’ strong inclination toward controlling their own procedures. This tendency is further strengthened by long-standing doubts about the neutrality and administrative capacity of domestic arbitration institutions. The report emphasised that closing this gap in confidence is essential if Indian arbitral bodies are to compete effectively with well-established international institutions
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For Prelims: Arbitration, Alternate Dispute Resolution, International Arbitration Centre, Foreign Direct Investment, Startup India For Mains: Alternate Dispute Resolution, Impact of Arbitration on Efficiency of Function of Judiciary, Promoting Dispute Resolution in India. |
Source: The Hindu
