India is fast developing as a favorite
destination for foreign investors to invest and conduct business in India. In
the World Bank’s latest annual Ease of Doing Business report, India ranked
100th compared to previous year’s 130th, which is a significant improvement in
the rankings.

However, the image and perception of
India being a difficult country in terms of enforcement of contracts still
needs to go long.  

To improve the Ease of Doing Business
sentiment further, the Indian Government is mulling radical reforms in certain
rigid and outdated laws. The objective is to make the existing laws more
compatible, adoptable and accessible to the foreign investors for doing
business in India.

Such reforms are also likely to
include amending the prevailing laws to effectively handle the existing
challenges and meet the expectations placed on these laws.

In this context, Indian Government is
planning to amend the Indian Arbitration and Conciliation Act, 1996 to ensure
the speedy disposal of disputes through arbitration. The rationale behind this
decision is to make the existing laws flexible enough to encourage more
contractual parties to take up the arbitration as the medium for resolution of
domestic and international disputes.

In this regard, poor track record of
International Centre for Alternative Dispute Resolution (ICDAR) in New Delhi in
resolving disputes through arbitration as it conducted 22 arbitrations in 23
years is also contributed to the decision to amend the arbitration law. ICDAR
is provided with all required amenities such as money and land, but miserably
failed to create awareness among the contractual parties highlighting the
significance of arbitration as a dispute resolution mechanism.

The following are the most important
proposed amendments to arbitration laws:

·    Formation of
a promotion council and a dedicated band of lawyers to contest arbitration
cases.

·    Resolution of
dispute through arbitration initiated by any accepted third party, decision
evolved in such arbitration will be final and binding on the parties.

It is a welcome measure to amend the
existing arbitration laws with the objective of strengthening arbitration
mechanism in the country and transform the nation into arbitration hub at
international level.

It is hoped that the proposed
amendments to the arbitration law will encourage contractual parties to take up
arbitration as medium for dispute resolution and accommodate speedy resolution
of disputes arose under various domestic and international contracts through
arbitration process.

Research and inputs by Paruchuri
Baswanth Mohan

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 Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in “The A-List – India’s Top 100 Lawyers” by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at [email protected].