Effect of Arbitral and Court Related Proceedings commenced prior to 23rd October, 2015

The Arbitration and Conciliation Act, 1996, as amended in 2015 and subsequent years, brought significant changes to India’s arbitration landscape. Section 87, introduced by the Arbitration and Conciliation (Amendment) Act, 2019, addresses the applicability of amendments made to the Act concerning arbitral and court proceedings initiated before October 23, 2015. This provision seeks to provide clarity on the retrospective or prospective application of the amended provisions, mitigating confusion and ensuring procedural consistency.

 

Key Provisions of Section 87

1. Applicability to Pre-2015 Proceedings

Section 87 explicitly states that the amendments introduced by the Arbitration and Conciliation (Amendment) Act, 2015, will not apply to arbitral or court proceedings that were initiated before October 23, 2015. This provision ensures that such proceedings remain governed by the unamended Act of 1996.

2. Clarification for Pending Proceedings

For arbitration or related judicial proceedings that were pending as of October 23, 2015, Section 87 freezes the procedural framework applicable at the time of initiation, providing clarity and preventing retroactive application of amended provisions.

3. Preservation of Legal Certainty

By clearly demarcating the scope of applicability of amendments, Section 87 preserves legal certainty and minimizes the risk of disputes over procedural issues in arbitration.

4. Scope Includes Judicial Proceedings

The provision is not limited to arbitral proceedings but extends to judicial proceedings related to arbitration. For instance, any applications for setting aside arbitral awards or enforcement proceedings are governed by the rules that existed before October 23, 2015.

5. Exceptions for Party Agreement

While the default position under Section 87 is the non-applicability of the 2015 amendments to pre-2015 proceedings, the provision allows for an exception where parties mutually agree to adopt the amended provisions for their arbitration or related judicial proceedings. This respects the principle of party autonomy.

6. Legislative Intent and Objective

The primary intent of Section 87 is to eliminate confusion and potential litigation arising from questions about the applicability of amendments to ongoing cases. It aims to balance the interests of parties involved in proceedings initiated under the old framework while ensuring a clear transition to the amended law for new cases.

7. Prospective Application of 2015 Amendments

For proceedings initiated after October 23, 2015, the amendments brought by the 2015 Act automatically apply, ensuring that newer cases benefit from the pro-reform provisions aimed at expediting arbitration and reducing court intervention.

 

Significance of Section 87

1. Clarification on Transitional Application
   Section 87 resolves ambiguity regarding the applicability of amendments to ongoing arbitral and court-related proceedings.
2. Legal Certainty for Parties
   By freezing the procedural framework as per the initiation date, the provision ensures predictability for stakeholders in arbitration.
3. Preservation of Judicial Resources
   This provision avoids unnecessary litigation on the applicability of the amended law, reducing the burden on courts.
4. Respect for Party Autonomy
   Section 87 allows parties the flexibility to opt for the amended provisions, balancing clarity with the principle of freedom of contract.
5. Global Arbitration Compatibility
   The section aligns India’s arbitration framework with global standards by addressing transitional provisions comprehensively.

 

Challenges and Criticism of Section 87

1. Potential Delay in Justice
   Restricting the applicability of amendments to pre-2015 proceedings could delay the implementation of pro-arbitration reforms.
2. Complexity in Transitional Cases
   The provision does not address all nuances of transitional cases, leading to potential procedural complications.
3. Inconsistent Stakeholder Impact
   Parties with proceedings initiated before 2015 may perceive the benefits of the amendments as inaccessible, creating an uneven playing field.
4. Criticism from Arbitration Advocates
   The provision has been criticized for potentially undermining India’s pro-reform stance in arbitration by delaying the adoption of modern procedural rules.

 

International Perspective on Transitional Provisions

In comparison to Section 87, other jurisdictions adopt varied approaches to transitional provisions in arbitration laws:

1. United Kingdom: The UK Arbitration Act, 1996, provides a clear distinction between substantive and procedural rules, ensuring that amendments do not retroactively alter substantive rights while applying procedural reforms to pending cases where feasible.
2. Singapore: Singapore’s arbitration laws ensure a smooth transition by applying amendments prospectively while offering parties the option to opt into the new framework for ongoing cases.
3. Hong Kong: Hong Kong adopts a flexible approach by allowing parties to choose whether to apply amendments retroactively, ensuring party autonomy and minimal disruption.

India’s approach under Section 87 is more restrictive, limiting the application of reforms to post-2015 cases, which some argue is a missed opportunity to align with international best practices.

 

Significance of Section 87 in Arbitration Reforms

Adding to its legislative intent, Section 87 holds the following significance:

1. Certainty in Legal Framework: By freezing procedural rules for pre-2015 cases, it reduces ambiguity for parties and practitioners.
2. Protection of Party Expectations: It ensures that parties relying on the old framework are not adversely affected by sudden procedural changes.
3. Clarity for Courts: Courts are provided with a clear guideline to resolve disputes related to the applicability of amendments.

 

Comparative Perspective

Globally, arbitration laws in jurisdictions like Singapore and the United Kingdom provide transitional provisions to ensure clarity on the application of amendments. Unlike Section 87, these jurisdictions typically emphasize the early adoption of pro-arbitration reforms to streamline proceedings. The legislative choice in India reflects a balancing act between respecting procedural consistency and advancing reform objectives.

1. United Kingdom

The UK Arbitration Act, 1996, offers clarity regarding the application of amendments. The Act distinguishes between substantive and procedural aspects, ensuring that substantive rights are not retroactively altered. Procedural reforms, on the other hand, are often applied to pending cases unless expressly excluded. This approach allows for a smoother transition and reduces the chances of strategic delays or confusion regarding the applicable framework.

• Key Advantage: The flexibility to apply procedural reforms ensures uniformity in ongoing cases, while protecting substantive rights.
• Comparison with India: Unlike Section 87, which excludes all pre-2015 cases from the reforms, the UK model allows limited retrospective application to procedural aspects, ensuring a balanced approach.

2. Singapore

Singapore is renowned for its arbitration-friendly regime. The International Arbitration Act (IAA) provides parties with the autonomy to decide whether amendments apply to their ongoing cases. This party-centric approach enhances flexibility and ensures minimal disruption to ongoing proceedings.

• Key Advantage: Parties have the choice to opt into the amended framework, ensuring that reforms can benefit ongoing cases while respecting party autonomy.
• Comparison with India: Section 87 lacks this flexibility, mandating a blanket exclusion of pre-2015 cases from the amended provisions, which some critics see as rigid.

3. Hong Kong

The Hong Kong Arbitration Ordinance adopts a pragmatic approach, applying procedural reforms to both pending and future cases unless such application undermines the parties’ legitimate expectations. Hong Kong also allows parties to agree on the applicability of amendments, emphasizing party autonomy and predictability.

• Key Advantage: The system balances procedural efficiency with respect for party expectations, ensuring harmony in transitional cases.
• Comparison with India: Unlike Hong Kong, India’s Section 87 does not provide room for party choice, limiting the reform’s reach to post-2015 cases and potentially delaying the benefits of reforms for older cases.

4. United States

The Federal Arbitration Act (FAA) in the United States does not have explicit provisions for transitional cases, leaving such matters to judicial interpretation. Courts often apply amendments prospectively, while occasionally allowing procedural reforms to affect ongoing cases if they enhance efficiency without impairing substantive rights.

• Key Advantage: Judicial discretion allows for case-specific adaptations, ensuring fairness and efficiency.
• Comparison with India: Section 87’s legislative mandate overrides judicial discretion, potentially creating rigidity in cases where retrospective application could be advantageous.

5. European Union

In the European Union, arbitration is governed by national laws aligned with the UNCITRAL Model Law on International Commercial Arbitration. Many EU countries apply a prospective approach to amendments but allow for transitional provisions that facilitate a smoother application of procedural reforms to ongoing cases.

• Key Advantage: Transitional mechanisms ensure minimal disruption to arbitration proceedings and allow reforms to enhance procedural fairness.
• Comparison with India: Section 87 deviates from the EU approach by completely excluding pre-2015 cases, which may slow the modernization of India’s arbitration landscape.

6. UNCITRAL Model Law

The UNCITRAL Model Law, widely adopted globally, does not explicitly address transitional provisions. However, jurisdictions following this model often interpret amendments to apply prospectively, balancing reform implementation with party expectations.

• Key Advantage: Uniformity and adaptability are ensured while minimizing procedural disruptions.
• Comparison with India: India’s strict demarcation under Section 87 contrasts with the flexibility generally observed under the Model Law framework.

 

Analysis of India’s Approach under Section 87

The comparative analysis reveals that India’s approach under Section 87 is relatively rigid compared to other arbitration hubs. By excluding pre-2015 cases from the scope of the 2015 amendments, the provision prioritizes procedural certainty over the advantages of reform implementation.

1. Lack of Flexibility: Unlike Singapore or Hong Kong, Section 87 does not provide parties with the choice to opt into the new framework, limiting the scope of arbitration reforms.
2. Legislative Mandate: While countries like the US rely on judicial discretion, Section 87 enforces a legislative override, which some critics argue undermines judicial innovation.
3. Impact on India’s Arbitration Competitiveness: The rigidity of Section 87 may deter international parties from choosing India as a preferred arbitration venue due to concerns about procedural delays and limited reform applicability.

 

Section 87 plays a pivotal role in balancing the continuity of existing arbitration cases with the introduction of progressive reforms. However, the criticisms and challenges highlighted underscore the need for greater flexibility and alignment with international standards. Future amendments to the Arbitration and Conciliation Act, 1996 could focus on offering parties the choice to adopt new procedural frameworks while preserving the sanctity of their substantive rights.

 

Frequently Asked Questions (FAQs)

1. What is the purpose of Section 87 of the Arbitration Act?
   Section 87 clarifies that the amendments introduced by the Arbitration and Conciliation (Amendment) Act, 2015, do not apply to proceedings initiated before October 23, 2015, unless agreed by the parties.
2. Does Section 87 apply to judicial proceedings related to arbitration?
   Yes, Section 87 explicitly includes judicial proceedings related to arbitration, ensuring they follow the pre-amendment framework.
3. Why was Section 87 introduced in 2019?
   It was introduced to address ambiguity and override judicial interpretations regarding the retrospective application of the 2015 amendments.
4. Can parties choose to apply the 2015 amendments under Section 87?
   Yes, Section 87 allows parties to mutually agree to apply the 2015 amendments to their arbitral or court-related proceedings.
5. What criticism has Section 87 faced?
   Critics argue that it delays the implementation of pro-arbitration reforms, overrides judicial decisions, and adds complexity to transitional cases.
6. How does Section 87 affect arbitral proceedings initiated after October 23, 2015?
   Proceedings initiated after this date automatically fall under the amended provisions of the Arbitration and Conciliation Act, 1996.
7. Does Section 87 promote legal certainty?
   Yes, it preserves procedural consistency for pre-2015 cases, but some argue it also delays the benefits of arbitration reforms.
8. How does Section 87 align with global arbitration practices?
   While it provides clarity on transitional provisions, its approach contrasts with global standards that emphasize early adoption of reforms to enhance arbitration efficiency.