Tipping point

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Lord Peter Goldsmith QC, PC recently gave an inaugural address to the 11th Annual International Arbitration Conclave in New Delhi, where he put a spirited case against changes to the law proposed in the 2018 Arbitration Bill. Here he condenses his arguments for India Business Law Journal

Last year, my learned colleague and friend, the Honourable Chief Justice of Singapore, Sundaresh Menon, spoke at the 10th Annual International Arbitration Conclave in New Delhi on “The role of national courts of the seat in international arbitration”. In his address, he outlined five key attributes underlying a successful arbitral seat and noted the significant progress made by India on all fronts.

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Lord Peter Goldsmith QC PC

I have had the privilege to be associated with arbitration in India over a number of years, both as counsel and as arbitrator. I have watched the progress made by practitioners, the courts and even government to advance the prospects of arbitration in India. This progress has been considerable, not only in the Arbitration Ordinance, but also in the discussions and reports that preceded it, the deliberations and ultimate pro-arbitration decisions of the Supreme Court in a number of cases which proceeded on the premise that — for good reason — India had a serious ambition to establish itself as a leading hub for international arbitration, and therefore to reverse elements of the law which impeded that ambition. I have attended numerous conferences in which that ambition has been spoken of in loud and authoritative terms.

And there was a considerable burden to carry to achieve that aim, because India had developed a reputation internationally as a jurisdiction to shun; the courts were too ready to intervene in cases, or to refuse enforcement on dubious grounds, even in cases not seated in India.

Progress has been considerable and I was looking forward therefore to commending that progress and expressly sharing Chief Justice Menon’s optimism that India can establish itself as a leading international arbitration hub, and commending the government that explicitly gave it that aim.

But that was before I studied the changes to the law proposed in the 2018 Arbitration Bill. This bill has passed the lower house but has yet to be considered by the Rajya Sabha, the upper house. Some of the changes proposed are welcome, although some are undoubtedly controversial, such as the proposal to count the time for completion of the arbitration from the close of pleadings, which will make a major change to the flagship provision in the ordinance to make arbitration swifter, or the provision for blanket confidentiality.

But my concern, and I believe the concern of the international community, centres on two other changes. First, the proposed provisions for the new body, the Arbitration Council of India, not merely to promote arbitration as was recommended, but apparently also to regulate it. The idea that a government appointed body should regulate arbitration and arbitrators is anathema to the idea of free and autonomous arbitration.

Second, the proposals for the required qualifications of arbitrators. These are to be found in proposed new section 43G, which provides mandatory requirements for the qualifications, experience and norms for accreditation of arbitrators as specified in the Eighth Schedule:

The first requirement is that:

“A person shall not be qualified to be an arbitrator unless he/she…”

(i) is an advocate within the meaning of the Advocates Act, 1961, having 10 years of practice experience as an advocate; or …”

These would appear at a stroke to prohibit the appointment of foreign lawyers as arbitrators in Indian-seated arbitrations, because you would have to be an Indian advocate to qualify.

And although there are some exceptions for other qualifications (e.g., Indian chartered accountants), it will also prohibit the appointment of many experienced and able arbitrators such as the experienced ships masters I used to appear in front of in London shipping cases, and apparently a wide swathe of other experts, such as architects and doctors.

It is no answer, as I understand is proposed by some, that it is open to the government to relax these rules in consultation with the new council. Why should anyone believe that will happen? The conservatism of the Indian legal regulatory bodies in not allowing foreign legal professionals in is notorious.

I first came to India nearly 25 years ago as chairman of the English Bar to argue for a relaxation of the rules on foreign lawyers practising in India. Due to the opposition of some Indian professional legal bodies we are still waiting. So, I do not hold my breath for the monopoly of arbitration appointments to Indian lawyers once given by statute to be easily given up.

What will these changes do if they become law? Foreign businesses will not be prepared to sign up to agreements providing for Indian arbitration if they will not have the chance to appoint arbitrators from jurisdictions with which they are more familiar.

They will, I predict, set back the cause of Indian arbitration by many years, perhaps a generation. Not a case of one step forward and two steps back but one step forward and 10 steps back. Having pushed the Sisyphean rock of Indian arbitration painfully, step by step, up the steep slope of international acceptability, it will release that boulder to plummet in free-fall back down again.

Some may question my motives for taking this stance to the bill, given my involvement and associations with other international arbitration centres. But I say this not as a competitor, not as someone who wants to seen Indian arbitration fail, or who is worried about any effects on me personally. I say this as a friend of India, and of Indian arbitration.

It is not too late. There is a good chance that this bill will not pass before the election. It should be delayed so better advice can prevail and these pernicious elements are removed.

These developments also validate the importance of arbitration as a form of dispute resolution. Arbitration has been lauded for its confidentiality, its finality of process, its flexibility, and the ease of enforcement under the New York Convention. In India, it also offers the promise of resolution of commercial and civil disputes far faster than India’s overcrowded court system can offer.

So, we face a critical moment for the development of international arbitration in India. The market has never before been so crowded, with traditional arbitration centres jostling for position with emerging contenders. India can still play a major role in that mix. Its potential as a seat of arbitration is impressive, and the wisdom and hard work of the arbitration community in the country give it justified cause for optimism. But if these proposals are left to proceed without further discussion or compromise, they could deal a significant blow to India’s prospects as a home to arbitration.

Lord Goldsmith QC, PC is a British barrister and former Attorney General for England, Wales and Northern Ireland. He is currently head of European litigation practice at US law firm Debevoise & Plimpton and vice chairperson of the Hong Kong International Arbitration Centre.