In a significant development for Indian arbitration law, the President of India has formally adopted the Arbitration and Conciliation (Amendment) Ordinance 2015 (the "Ordinance"), which will bring about major and long-awaited reforms to arbitration in India. The Ordinance amends Arbitration and Conciliation Act 1996 and seeks in particular to eliminate the procedural delays that have previously frustrated arbitration proceedings and shaken investor confidence in selecting India as a seat of arbitration. The reforms do not reflect the UNCITRAL Model Law and are innovative in many respects, so whilst they are a positive development for Indian arbitration law, they also carry certain risks and uncertainties.
IntroductionFrom the Law Commission's 246th Report, many of the reforms of the Law Commission of India have been incorporated while many have not been retained in the Ordinance, of those not included important ones have been discussed at below
In the similar way the Law Commission has submitted its Report No 260 setting out its keenly awaited analysis of India's 2015 Draft Model Bilateral Investment Treaty. This development is a step closer to the Government of India finalising its model Bilateral Investment Treaty (BIT) and reinvigorating its BIT programme, which has been under review since 2003.
BITs are effective international law instruments that protect the rights of investors making investments abroad, particularly in emerging markets. They are often used in conjunction with sound contract drafting as part of long-term investment planning.
Once the Draft Model is finalised it will form the basis for future investment treaties to be concluded by India, including in replacement of its existing BITs. As such, the wording of the Draft Model is an important part of India's foreign investment policy and affects foreign investors seeking to invest in India.
White Industries' successful arbitration against India (2011) is the first known BIT ruling against India. This case, combined with the uncertainty that was created as a result of events such as the retrospective application of tax laws, has put India's BITs in sharp focus.
Boosting and keeping foreign investment in India continues to be on the Government's declared policy agenda. However, the increasing trend of investors threatening BIT claims against India, together with India's experience in the White Industries case, appears to have made the Government apprehensive about BITs.
The Law Commission of India (LCI) has made various suggestions for amendments to the Draft Model that seeks to balance the interests of investors and the state alike.