The laws that govern the resolution of disputes arising from economic activity are being continuously reviewed and revised by the Government of India in order to make it easier for businesses to operate. The Arbitration and Conciliation Act of 1996, as revised in 2016 and 2019, introduced arbitration into the legal system by reducing the amount of involvement of courts in the arbitration process. In the case of business disputes, pre-insti-tutional mediation is mandated by the Business Courts Act 2015, which was established in 2015 and revised in 2018. On the other hand, the Mediation Act, 2023, which was passed in 2023, institutionalised mediation procedures in India.
As a result of these amendments, as well as proposed amendments to the Arbitration and Conciliation Act of 1996 and new enactments, the Government recently proposed amending the Commercial Courts Act of 2015 – on 8 November 2024. The purpose of this amendment is to simplify the process of approaching, initiating, and resolving commercial disputes through alternative dispute resolution mechanisms and mainstream dispute resolution systems through commercial courts.
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Thus, through the Commercial Courts amendment bill, 2024, the Government seeks to “provide for the constitution of dedicated Commercial Courts exclusively for the purpose of exercising the jurisdiction and powers conferred under the Commercial Court Act, 2015 and Commercial Courts (Arbitration) and Commercial Divisions (Arbitration) exclusively for the purpose of exercising the jurisdiction and powers granted to the courts under the Arbitration and Conciliation Act, 2015 and to amend them. The proposed revisions aim to offer further impetus for faster and more specialised adjudication of commercial issues, as well as to simplify the appropriate procedure for commercial dispute resolution in courts.”
After a plain reading of the proposed alterations, the statement of objectives not only looks appealing, but it also offers a rosy picture of the conflict settlement mechanisms that will be utilised by Commercial Courts once they have been revised and authorised. In addition, the administration solicited comments and recommendations from the public regarding the suggested course correc-tions. Nevertheless, a more in-depth examination of the amendments that have been suggested indicates that they are neither as agreeable as they appear to be, nor do they support the efforts that the government has made up to this point to institutionalise arbitration and entice business parties into the arena of arbitration.
Regarding the eagerness of the government to institutionalise, license, and control arbitration in India, there are two difficulties that need to be addressed. It was for this same reason that the Arbitration Council of India was to be established, which was made possible by an amendment to the Arbi-tration and Conciliation Act of 1996. Amendments to the Arbitration and Conciliation Act, 1996 have been suggested by a number of high-level committees, including the Justice Sri Krishna Committee and by Dr. T.K. Viswanathan.
An additional change that has been recommended was to be presented during the winter session of Parliament, which was just recently adjourned. Neither the establishment nor the operationalisation of the Arbitration Council of India (ASI) has yet taken place. Also included in this category is the Mediation Council of India (MCI), which was suggested by the Mediation Act of 2023 with the intention of institutionalising, licensing, and regulating mediation institutions in India. It is not known where the MCI was initially established and where it began to function.
The proposed revisions to the Commercial Court Act, 2015 include Online Dispute Resolution (ODR) in commercial courts. Referring matters for mediation even in cases where urgent interim relief is sought, the provision made in the amendment to section 12 A of the Commercial Courts Act, 2015 is “provided that in case where an urgent interim relief was sought and granted or denied by the court, it shall thereafter, refer the parties to mediation and the procedure for pre-institution mediation shall apply mutatis mutandis.” This provision clearly promotes mediation for resolving com-mercial issues. However, the foundation of MCI will encourage, advocate for, license, and regulate mediation organisations. There are no answers available from the government.
The amendments also suggest increasing arbitration processes for resolving commercial issues. The reforms aim to promote arbitration for the quick res-olution of commercial disputes. In addition to recommending commercial cases for resolution in regular commercial courts, the amendments seek to establish designated arbitration courts within the commercial courts system while also empowering state governments to establish commercial courts at the district level with the permission of the high courts.
Looking at these, as well as a number of recent decisions taken by the government in bureaucratic circles, we wonder if the government is serious about fostering institutional arbitration by establishing arbitration institutions in the private sector. On 3 June 2024, the department of expenditure informed all government departments that “Arbitration as a method of dispute resolution should not be routinely or automatically included in procurement contracts/tenders, especially in large contracts.”
On 2 December 2024, the Department of Legal Affairs, Ministry of Law, Government of India issued a public notice stating unequivocally that there is currently no procedure in place in the Department of Legal Affairs for recognising or grading institutions providing ODR services. It is further clarified that the list of institutions included in the letter dated 18.09.2020 is not recognised by the Department of Legal Affairs, and no institution has the authority to make any such statement of recognition.’
While repeatedly stating that judicial intervention in arbitration is discouraged, the proposed amendments to the Commercial Courts Act, 2015 require High Court approval for at least eight actions taken under the act, such as the declaration of dedicated arbitration commercial courts, the establishment of new commercial courts at the district level, and so on. The question is will the revisions truly promote ease of doing business? (The writer is formeInternational Senior Advisor to UNDP.)
