Context:
The Arbitration Council of India (ACI), envisaged under the Arbitration and Conciliation (Amendment) Act, 2019, remains unconstituted even after six years, raising concerns about India’s ambition to become a global arbitration hub.
Key Highlights:
- Legislative Background
- The 2019 Amendment to the Arbitration and Conciliation Act provided for the establishment of the Arbitration Council of India (ACI).
- Objective: Promote institutional arbitration and reduce dependence on ad-hoc arbitration.
- Delay in Implementation
- The ACI has not yet been formed despite statutory backing.
- The Union Law Ministry expects its formation within the year.
- Former Law Secretary P.K. Malhotra highlighted that the delay hampers India’s arbitration ecosystem.
- Shift Toward Institutional Arbitration
- Growing preference among corporates and PSUs for institutional arbitration.
- Institutional mechanisms enhance credibility, speed, and transparency.
- Stakeholders Involved
- Ministry of Law & Justice
- Corporate sector & PSUs
- International investors
- Arbitration institutions
- Significance & Concerns
- Weakens India’s ambition to emerge as an International Commercial Arbitration (ICA) hub.
- Affects investor confidence and Ease of Doing Business rankings.
- Contradicts India’s broader judicial reform and dispute resolution goals.
Relevant Prelims Points:
- Arbitration: A dispute resolution mechanism outside courts, where a neutral third party (arbitrator) gives a binding decision.
- Institutional Arbitration: Conducted under established arbitral institutions with predefined rules (e.g., SIAC, LCIA).
- Ad-hoc Arbitration: Parties independently decide procedures and arbitrators without institutional oversight.
- Arbitration and Conciliation Act, 1996: Based on the UNCITRAL Model Law.
- 2019 Amendment: Introduced ACI to grade arbitral institutions and accredit arbitrators.
- India is a signatory to the New York Convention, 1958 (recognition and enforcement of foreign arbitral awards).
Relevant Mains Points:
- Judicial Reforms & Governance:
- Reducing pendency of cases through alternative dispute resolution (ADR).
- Strengthening institutional arbitration improves contract enforcement.
- Economic Implications:
- Enhances investor confidence and supports FDI inflows.
- Positions India competitively against hubs like Singapore and London.
- Challenges:
- Executive control concerns over ACI composition (debate on independence).
- Need for professional arbitrator accreditation and quality assurance.
- Coordination between judiciary and arbitration institutions.
- Way Forward:
- Expedite constitution of ACI with functional autonomy.
- Ensure transparent grading of institutions and arbitrators.
- Promote specialized arbitration benches in High Courts.
- Capacity building and awareness among MSMEs and startups.
UPSC Relevance:
GS Paper 2 – Polity & Governance (Judicial reforms, ADR mechanisms)
GS Paper 3 – Economy (Ease of Doing Business, Investment Climate)
Prelims – Arbitration Act amendments, ADR mechanisms