India: The New Delhi International Arbitration Centre Ordinance 2019 – An Overview

Last Updated: 11 March 2019
Article by Madhav Misra and Arjun Masters

The Ordinance

The New Delhi International Arbitration Centre Ordinance 2019 ("Ordinance") was recently promulgated by the President of India, Shri Ram Nath Kovind, on 2 March 2019 to set up the New Delhi International Arbitration Centre ("NDIAC"). The Ordinance is based on the report dated 30 July 2017 of a ten-member committee chaired by Justice B.N. Srikrishna ("Srikrishna Report") to review the institutionalization of arbitration in India. The main objective of the Ordinance is to create an autonomous body for institutionalized arbitration in India and make this a hub for both domestic as well as international institutional arbitrations. The Ordinance directs the transfer of all undertakings of the International Centre of Alternate Dispute Resolution ("ICADR"), established in 1995, to the NDIAC.

The Bill

Pursuant to the findings of the Srikrishna Report, the Central Government prepared a Bill which was introduced in the Lok Sabha on 5 January 2018 as The New Delhi International Arbitration Centre Bill 2018. The Bill was passed by the Lok Sabha on 4 January 2019 but it could not be cleared by the Rajya Sabha prior to the expiry of this year's budget session of Parliament.

Genesis – the findings of the Srikrishna Report

The Ordinance is primarily based upon the Bill which was drafted after the Srikrishna Report's suggestion that necessary reforms were required for the institutionalization of arbitration in India. The Srikrishna Report analyzed the performance of the established arbitration centers in India such as the ICADR, the Indian Council of Arbitration ("ICA"), the Delhi International Arbitration Centre ("DAC") and Mumbai Centre for International Arbitration ("MCIA"). It was observed that the case load of these centres was low. It was surprising that parties preferred to arbitrate in well-established international centres for Arbitration such as ICC, LCIA, SIAC rather than conducting the arbitration at one of the centres in India.

The Srikrishna Report concluded that parties generally preferred ad-hoc arbitration instead of institutional arbitration due to various issues, the most important being the credibility of arbitral institutions as well as the lack of statutory backing for institutional arbitration. Further, the lack of sector specific arbitrators in the panels of these centres was also identified as a pressing concern.

The Srikrishna Report cited the example of the ICADR, which despite being one of India's premier institutional arbitration centres, has not been able to keep up with the changes in arbitration. Its criticism was that the ICADR's governing council is so large (47 Members) that effective decision-making becomes difficult. The Srikrishna Report suggested creating a flagship institution for arbitration in India, to rival international contemporaries. A reflection of this mandate can also be seen in the NDIAC being designated in the Ordinance as an institute of "national importance".

The NDIAC's Structure

Structurally, the Ordinance has simplified the organizational composition of the NDIAC, restricting it only to seven members including the Chairperson. The Chairperson may be a retired judge of the Supreme Court or High Court or an eminent person, having special knowledge and experience in arbitration law. The Chairperson shall be appointed by the Central Government in consultation with Chief Justice of India. The other members include: (a) two eminent person having knowledge and experience in international as well as domestic institutional arbitration; (b) one representative of a recognized body commerce and industry, chosen on a rotational basis; (c) the secretary of the Department of Legal Affairs, Ministry of Law and Justice or his representative not below the rank of joint secretary; and (d) a financial adviser to be nominated by the Department of Expenditure, Ministry of Finance and the Chief Executive Officer. The term of office for the Chairperson and the other members cannot exceed more than three years. Further, the Ordinance prescribes an age limit of seventy years and sixty-seven years for the office of the Chairperson and other members respectively.

The Ordinance also mandates the establishment of the Chamber of Arbitration and an Arbitration Academy. The Chamber of Arbitration shall empanel reputed arbitrators and filter the applications for admission in the panel. The Arbitration Academy will train arbitrators and conduct research in the field of alternative dispute resolution.

The Timing of the Ordinance

The Ordinance was promulgated by the President while exercising his powers under Article 123 of the Constitution which prescribes that once an ordinance is promulgated, it has to be subsequently passed by both houses of Parliament or it shall cease to exist at the expiration of six weeks from the reassembly of Parliament. Hence, the Ordinance is required to be passed by both the houses of Parliament by this year's monsoon session. Since the Ordinance was promulgated along with seven other ordinances, media reports have questioned the timing of the Ordinance given the upcoming Lok Sabha elections.

The Ordinance has also been recently challenged by the ICADR before the Delhi High Court in a writ petition, primarily on the ground that the requirement under Article 123 of the Constitution for "immediate action" has not been met. The Court has directed the Central Government to file its counter affidavit within two weeks.

Issues Ahead

In any case, it would be interesting to see how the NDIAC takes on its international contemporaries. One major issue faced by the ICADR was insufficient case load. For instance, and as per the Srikrishna Report, the total number of cases taken up by the ICADR since its inception in 1995 till 2016 has been only 49. Comparatively, the SIAC handled 343 new cases alone in 2016 while the number of new cases handled by the ICC in 2016 was 966. These figures give a small glimpse of what the NDIAC is up against. Interestingly, the LCIA had set up its India branch in 2010 but had to shut shop in 2016 due to lack of uptake. It would indeed be intriguing to see how the NDIAC addresses these issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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