India briefing

January 2016

The Indian Arbitration and Conciliation

(Amendment) Act
The changes to the arbitration law in India, first
issued in an ordinance in October 2015, have now
become permanent. Ben Giaretta and Akshay
Kishore explain what this means for foreign
investors.

1. Interim relief is available

The Act reforms the powers of the Indian courts to grant
interim measures, such as injunctions, so that:

From ordinance to Act

The arbitration law in India was changed by an
ordinance that was issued in October 2015. This was the
culmination of a number of years of discussion about
appropriate changes, and followed a report by the Law
Commission of India in 2014. We reported on the
ordinance in an earlier briefing.
The ordinance was only temporary: it had effect only
until the next session of the Indian Parliament. At the
end of 2015, therefore, Parliament approved a Bill which
made the changes permanent, and on 31 December
2015 the Arbitration and Conciliation (Amendment) Act,
2015 (the Act) became law. The Act replaces the
ordinance entirely and is deemed to have come into
force on the date of the ordinance (23 October 2015).

What has changed between ordinance

and Act?
Virtually nothing. The Act is word-for-word identical
with the ordinance, with two exceptions:

a provision has been added to clarify that the Act

only applies to Indian arbitrations commenced on or
after 23 October 2015 (unless specifically agreed by
parties); and
a typographical error in one of the Schedules has
been corrected.

What does the Act mean for foreign

investors?
The Act makes arbitration a more effective option for
India-related dispute resolution. In our previous
briefing, we highlighted the following key changes:

the Indian courts may now grant interim measures

in support of arbitrations outside India;
if an Indian court grants interim measures before an
arbitration has commenced, the arbitration must
start within 90 days (or such further time as the
court orders);
the jurisdiction of the courts to grant interim
measures after the tribunal has been appointed is
limited to circumstances where tribunal-ordered
interim measures would not be "efficacious"; and
an interim measure issued by an arbitral tribunal
seated in India is enforceable in the same manner as
a court order.

2. "Public policy" has been restricted

"Public policy" is no longer a broad ground to resist
enforcement in India of an international commercial
arbitration award or a foreign award. It is limited to
circumstances where there has been fraud or
corruption, or contravention of "the fundamental policy
of Indian law" or "the most basic notions of morality or
justice". The Indian courts will not review the merits of
the dispute when considering a public policy argument.
3. The High Courts have jurisdiction
Applications arising out of international commercial
arbitration and applications to enforce foreign awards
must now be made to a High Court, and not to a lower
court, where the judges may not be familiar with
arbitration. The High Courts also have the power to:

set aside awards made in India where arbitrators

have failed to comply with new requirements for
disclosure of interests;
delegate the appointment of arbitrators in ad hoc
arbitration to an arbitration institution;
limit the fees charged by arbitrators in ad hoc
domestic arbitration in India;
award costs in any court application arising out of an
arbitration; and
allow enforcement of an award made in India to
proceed, even if there is a challenge to that award

AUSTRALIA BELGIUM CHINA FRANCE GERMANY HONG KONG SAR INDONESIA (ASSOCIATED OFFICE) ITALY JAPAN PAPUA NEW GUINEA
SAUDI ARABIA (ASSOCIATED OFFICE) SINGAPORE SPAIN SWEDEN UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES OF AMERICA

(and the courts must deal with such a challenge

within one year).
4. There are time limits for arbitrations
Arbitrators sitting in India must now issue an award
within 12 months of their appointment. The parties may
agree to extend this period by six months and a court
may extend the period (either before or after it has
expired) by such time as it considers appropriate.
When dealing with an application to extend time, the
Indian courts have the power to:

The Act answers two significant questions that had been

raised about the ordinance, namely whether or not the
changes would apply to arbitrations started before 23
October 2015 and whether the changes would become
permanent. But other questions remain unanswered. In
particular, a number of questions arise from the
12-month time limit on arbitrations, such as:

reduce the fees of the arbitrators if they are

responsible for the delay, by up to five per cent for
each month of delay;
replace one or all of the arbitrators, without
requiring repetition of the proceedings; and
impose cost penalties on any of the parties.

Parties to an Indian arbitration may also agree, either

before or at the time of appointing arbitrators, to follow
a fast-track procedure which must be completed within
six months.

What happens next?

The ordinance had attracted a great deal of comment
and, while in general there was a favourable reaction, a
number of issues were identified with it.

In what circumstances might the Indian courts

refuse to extend the time limit for an arbitration?
Will arbitrators sacrifice quality for expedition in
order to meet the time limit?
How long will the Indian courts take to deal with an
application to extend time?
Will such applications descend into arguments
between parties and arbitrators as to whom should
be penalised for the delay?

These will only be answered over time, as new

arbitrations are started and as applications are made to
the courts in relation to those arbitrations.
Such uncertainties mainly concern Indian-seated
arbitration. Foreign investors may therefore prefer in
the short term to specify an offshore seat in their
arbitration clauses rather than agreeing to arbitration in
India. While the Act overall must be welcomed, some
caution is needed until there is experience of how it
operates in practice.

Further information
Please contact us if you would like any further information about any of the issues raised in this briefing.
Ben Giaretta
Partner, Singapore
Asia Head of International
Arbitration

Richard Gubbins
Partner, London
Head of India Practice

+65 6416 3353

ben.giaretta@ashurst.com

+44 20 7859 1252

richard.gubbins@ashurst.com

Akshay Kishore
Senior Associate, Singapore
+65 6416 3343
akshay.kishore@ashurst.com

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Ashurst LLP 2016 Ref: 3230234 11 January 2016