Jahanvi Agarwal
An expert committee, led by former law secretary T K Vishwanathan, has submitted its report on arbitration sector reforms to the law ministry. The panel, which included representatives from the law ministry and domain experts, suggested amending the arbitration law to grant courts the authority to set aside or modify arbitration awards, sources mentioned.
Industry representatives criticized the proposed law changes, labeling them as detrimental to arbitration reforms in India. They highlighted issues such as high arbitrator fees, proposing the removal of the Fourth Schedule dealing with fee schedules. The panel also suggested no limits on the number of arbitrations an Arbitrator can handle, potentially causing delays in award settlements. Additionally, they observed the absence of an upper age limit for arbitrator appointments.
The committee’s mandate was to assess the current arbitration ecosystem, evaluate the Arbitration Act’s functioning, and compare it with foreign jurisdictions. They were tasked with proposing a model arbitration system that is efficient, cost-effective, and meets user requirements.
Arbitration is a private dispute resolution method where parties opt for arbitrators instead of courts, with their decisions being binding. The Supreme Court, in a recent civil appeal hearing, noted the receipt of a draft committee report by the government. The court ordered the submission of the finalized report, including soft copies to the Bench and counsels representing diverse parties, by February 15, 2024.
The committee’s recommendations encompass several key areas such as:
- They propose reforms regarding Section 34, which deals with challenges to arbitration awards. The suggested amendment grants the court the authority to set aside or modify the award.
- They aim to address the burden of interest incurred during challenges to arbitral awards, proposing post-award interest.
- They propose a simple interest rate of 3% higher than the RBI repo rate, viewed as a safeguard against unfair market practices, despite concerns that it may prolong award execution without penalties for delay.
- They suggest removing the Fourth Schedule, which outlines fee schedules for arbitrators, addressing the issue of high arbitrator fees in India.
- They propose no limits on the number of arbitrations an arbitrator can handle, potentially leading to delays in award issuance.
- They note the absence of an upper age limit for arbitrator appointments, highlighting the flexibility of arbitration with no time, cost, or age restrictions.