Repeal law dealing with arbitration, enact new one: AG

Repeal law dealing with arbitration, enact new one: AG

Repeal law dealing with arbitration, enact new one: AG

Amid the government's keenness to attract more foreign investments, the country's top law officer has suggested scrapping of an act which deals with business disputes and replacing it with one that is in tune with the current global practices.

Attorney General Mukul Rohatgi has suggested that the existing Arbitration Act could be hampering investments as it is not seen positively by the business community, particularly the foreign ones.

Long delays in the arbitration proceedings and high costs are some of the aspects which have been highlighted as impediments by Rohatgi, sources said.

While suggesting repeal of the 1996 Act, he has said the new law should ensure timely settlement of business disputes and penalty for unnecessary delays by arbitrators.
The AG had been approached for suggestions by the Law Ministry which wanted to amend the Arbitration and Conciliation Act, 1996.

Rohatgi has said that instead of amendments, the law should be scrapped altogether and replaced with a new one that is in tune with the global practices.

This assumes significance since the Narendra Modi government is keen on attracting foreign investments and is opening various sectors to FDI.

The government seeks to remove burden from courts on issues relating to commercial or business disputes by strengthening the arbitration mechanism in the country.
He suggested that a "strict" time limit should be fixed for giving arbitration award (order), say six months.

The AG has also suggested penalty for arbitrators who delay matters either because of personal benefit or otherwise. He said they should be debarred from taking up fresh arbitrations, say for a period of three years, from the time of the default.

The new law, the AG said, must provide for a ceiling of fees and expenses of arbitrators and arbitration itself. The fees can be graded into two or three levels depending on the type of dispute settlement they are presiding.

Rohatgi has also suggested that if a court entertains objections against an award, a stay should be granted after hearing both the parties involved.

In August, the Law Commission had also come out with its recommendations to amend the Arbitration Act by proposing minimal interference by courts, time limit to complete proceedings and recommending a structural fee schedule for arbitrators.

The Commission said the Act has been in force for almost two decades in the country. But "in this period of time, although arbitration has fast emerged as a frequently chosen alternative to litigation, it has come to be afflicted with various problems including those of high costs and delays, making it no better than either the earlier regime which it was intended to replace or to litigation to which it intends to provide an alternative".

The Commission has encouraged the culture of institutional arbitration in India which it said will go a long way to redress the institutional and systemic malaise that has seriously affected the growth of arbitration.

It hoped high courts and the Supreme Court, while acting in the exercise of their jurisdiction of the Act, will take steps to encourage the parties to refer their disputes to institutionalised arbitration.