Answer:

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators (third party) who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. Arbitration process is aimed at reducing the burden on courts, expeditious disposal, improving ease of doing business etc.

In India, Arbitration mechanism is regulated by the Arbitration and Conciliation Act, 1996. However, multiple issues remained in arbitration as an effective mechanism for alternative dispute resolution:

♤ Ambiguities in the legislation: Losing parties have exploited the ambiguities in the Arbitration and Conciliation Act, 1996 to challenge the awards, which has led to a lack of finality of awards.

♤ Duplicative Litigation: The parties almost invariably appeal against arbitration awards, resulting in long drawn-out disputes that can last up to 10 years.

♤ Lack of Institutional mechanism: There is no tribunal or other dedicated institution to enforce the awards in time-bound manner.

♤ Lack of arbitration infrastructure: There are very few qualified arbitrators in the country. Also the rules and practices followed are often outdated and inadequate.

♤ Delays in Indian courts and excessive judicial involvement in arbitral proceedings contributed to discouraging foreign parties to arbitrate in India.

The recent amendments to the Arbitration and Conciliation Act in 2019 aims to overcome the existing challenges in the arbitration mechanism in India:

♤ Arbitration Council of India: A permanent body is established to promote and encourage arbitration, mediation, conciliation or other ADR mechanism. It will also form policy and guidelines for the establishment, operation and mainstream of uniform professional standards.

♤ Appointment of Arbitrators: Earlier, parties were free to choose arbitrators. Now, the Supreme Court and High Courts may designate arbitral institutions, which parties can approach for the appointment of arbitrators.

♤ An application for appointment of an arbitrator is required to be disposed of within 30 days.

♤ It prescribes minimum qualifications for a person to be accredited as an arbitrator.

♤ Time limit: The Act seeks to remove time restrictions of 12 months for international commercial arbitrations.

♤ Confidentiality of proceedings: The Act provides that all details of arbitration proceedings will be kept confidential except for the details of the arbitral award in certain circumstances.

However, since the Supreme Court has struck down Section 87 inserted by the new amendment, further clarity needs to be brought in to ensure smooth process of arbitration. The act aims to make India as a global arbitration hub. It will not only help the government and businesses in cutting down lengthy legal proceedings but also boost India's ranking in the 'Ease-of-doing-Business Index’.