REUTERS | Gilles Adt

New developments in Indian arbitration including extension of limitation periods due to COVID-19

On 23 March 2020, the Supreme Court of India issued, by way of a suo motu writ petition, an order extending limitation periods by a period of 15 days or until further orders were made. The order was issued pursuant to article 142, read with article 141, of the Constitution of India. Article 142 of the constitution confers upon the Supreme Court the power to make such orders as is necessary to do complete justice in a matter before it. Further, article 141 provides that such orders shall be binding on all courts within India.

The extension of time was ordered to apply to all proceedings, before any court, tribunal or forum in India, in respect of all proceedings. These include the filing of petitions, applications, and appeals, regardless of the limitations prescribed under general or special laws (applicable to both central government and state legislation).

The order was made prior to India’s nationwide 21 day lockdown measures commencing on 25 March 2020 as a result of COVID-19. The purpose was to provide reprieve to parties scheduled to submit filings before courts or tribunals but who would have been unable to do so due to restrictions on movement.

In light of the extended lockdown measures which were in place until 17 May 2020, the orders made on 23 March 2020 were modified, on 6 May 2020, to extend limitation periods under the Arbitration and Conciliation Act 1996 with effect from 15 March 2020 until further orders were made. The court clarified that where the limitation expired after 15 March 2020, then the period would be extended by a further 15 days after the date on which the lockdown was lifted in a territory (for example, where time for issuing an award expired after 15 March 2020, a further 15 day extension beyond lockdown was permitted).

Draft NDIAC Rules released for public comment

In 2016, the government of India appointed a high level committee to review and propose developments/improvements to institutional arbitration in India. The committee was chaired by Justice B.N. Srikrishna, one of the most prominent former judges of the Supreme Court of India.

A committee report recommended that the effectiveness of the International Centre for Alternative Dispute Resolution (ICADR) should be reviewed. As a result, in March 2019, the New Delhi International Arbitration Centre Ordinance 2019 was announced to replace the ICADR and establish a new arbitration centre in New Delhi (NDIAC). The NDIAC ordinance was approved by cabinet, passed by the lower and upper houses of Parliament and, finally, the President of India gave his assent, on 26 July 2019, to enact the NDIAC Act 2019. The aim is for NDIAC to conduct domestic and international arbitration and provide the necessary administrative support and facilities for the purposes of mediation and arbitration proceedings.

Earlier this year, a draft version of the NDIAC Rules were issued for public comment. The draft rules have manifested as follows:

  • The New Delhi International Arbitration Centre (the terms and conditions and the salary and allowances payable to the Chairperson and Full-time Members) Rules 2020.
  • The New Delhi International Arbitration Centre (the travelling and other allowances payable to Part-time Members) Rules 2020.
  • The New Delhi International Arbitration Centre (the number of officers and employees of the Secretariat of the Centre) Rules 2020.
  • The New Delhi International Arbitration Centre (the qualifications, experience, method of selection and the functions of the Registrar, Counsel and other officers and employees of the Centre) Rules 2020.

New foreign investment law being considered by India

India is planning new legislation to safeguard and improve foreign investment. Reports have suggested that officials recognise that a major issue for investors has been the enforcement of contracts and fast dispute resolution. The purpose of the new law is to offer:

  • Protection to foreign investors against policy changes by central and state governments.
  • A fast-track dispute resolution mechanism.

Foreign investors have been long affected by policy changes exposing them to high regulatory risks. Indeed, in recent years, India has faced a number of claims from investors under its bilateral investment treaties (BITs). At the start of this decade, India lost a claim by White Industries and, ever since, several claims have been brought by more foreign investors challenging retrospective tax collection, withdrawal of tax concessions and cancellation of spectrum licences. India’s experiences, as a frequent respondent in investor state dispute settlement (ISDS) claims, prompted the government to adopt a new model BIT in 2015 and, subsequently to terminate its existing BITs with more than 50 countries in 2017.

It is in this context that the new proposed legislation is intended to provide a domestic avenue for speedy dispute resolution to foreign investors. However, it is unclear whether the proposed law intends to replace ISDS protections for foreign investors completely. Even if it does, one might question whether a domestic reform without consideration to international law obligations will provide the comfort to foreign investors that it purports to do.

In any event, for any proposed reform to be successful, it will require the following concerns to be addressed early:

  • The scope of such laws should be clearly defined, including the rights of foreign investors and any restrictions. This will ensure predictability and promote stability if foreign investors clearly understand the extent of their rights.
  • There must be systematic and proper implementation of the dispute resolution mechanism under the legislative amendments. Investors must be provided with a forum which can provide efficient dispute resolution services to resolve disputes and grievances in a predictable and fair manner.
  • Further, the importance of judicial support can never be overstated. Foreign investors will naturally be wary of bringing disputes before the domestic courts, and may therefore choose arbitration. However, robust judicial support and consistency in the decision making process may ameliorate such concerns.

Leave a Reply

Your email address will not be published. Required fields are marked *

Share this post on: