ARBITRATION

 

The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996 (Act). 

The dictionary meaning of ‘arbitration’ is the process of solving an argument between people by helping them to agree to an acceptable solution

Arbitration is a part of the Alternative Dispute Resolution mechanism that benefits parties who want to avoid the normal lengthy recourse to the local courts for settlement of disputes. It is in fact a legal technique for the resolution of dispute outside the courts, wherein the parties to a dispute refer it to one or more persons namely arbitrator(s) by whose decision (the “award”) they agree to be bound.

The Act is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976. The Statement of Objects and Reasons of the Act recognises that India’s economic reforms will become effective only if the nation’s dispute resolution provisions are in tune with international regime.

The more significant provisions of the Act are to be found in Part I and Part II thereof. Part I contains the provisions for domestic and international commercial arbitration in India. All arbitration conducted in India would be governed by Part I, irrespective of the nationalities of the parties. Part II provides for enforcement of foreign awards.

What is Arbitration law?

Arbitration is the dispute settlement process between two agreeable parties to appoint an arbitrator to give a binding solution on the dispute. It is a way to settle disputes outside the courts thereby saving time and resources at the same time.

Arbitration is a legal mechanism encouraging settlement of disputes between two or more parties mutually by the appointment of a third party whose decision is binding on the parties referring the said dispute.

Arbitration is an effective way of expediting resolution of disputes in these modern times when there is scarcity of time.

Can all disputes be arbitrated?

All disputes are not arbitrable and there are certain disputes which fall outside categories of arbitrable disputes as held by the Hon’ble Apex Court in the matter of Booz Allen and Hamilton Inc V. SBI Home Finance Ltd. These are:

a) criminal offences

b) guardianship matters

c) insolvency and winding up proceedings

d) matters of probate, letters of administration, succession certificate etc

e) eviction proceedings

f) patents, trademarks, copyright

g) Anti Trust/ competition laws

h) Bribery/Corruption Laws

i) Fraud

Need for Arbitration

Advancement, liberalisation and globalisation of international business relations necessitated the invention of a flexible, reasonable, favourable and time saving method of resolution of disputes without making the parties to go through the rigorous, time consuming and resource exhausting procedure of the traditional justice delivery system.

Advantages of Arbitration

a) Minimalization of court intervention

b) Reduction in costs of dispute redressal and resolution

c) Expeditious and timely disposal

d) Enforcement of awards through neutrality of arbitrator

e) Encouragement of foreign investment by recognising the country as that having a sound legal framework

f) Effective conduct of and maintaining sound foreign relations

Objects and Reasons set forth the main objectives of the Act as follows:

 

What powers and obligations do arbitrators have?

The Arbitration and Conciliation Act gives the arbitrators broad powers to conduct the proceedings. These include the power to:

• rule on the existence and validity of the arbitration agreement or on its own jurisdiction;
• order interim measures;
• determine the admissibility and weight of the evidence adduced before it;
• decide the dispute on the merits according to the governing law and terms of the contract;
• appoint experts;
• encourage settlement through other mechanisms, including conciliation;
• determine the costs of the arbitration and their apportionment between the parties; and
• deliver a reasoned award.

Conduct of arbitration proceedings: 

The arbitrators are masters of their own procedure and subject to parties agreement, may conduct the proceedings “in the manner they consider appropriate.” 

This power includes- 

• “the power to determine the admissibility, relevance, materiality and weight of any evidence”.
• The only restrain on them is that they shall treat the parties with equality and each party shall be given a full opportunity to present his case,
• sufficient advance notice of any hearing or meeting
• Neither the Code of Civil Procedure nor the Indian Evidence Act applies to arbitrations.
• Unless the parties agree otherwise, the tribunal shall decide whether to hold oral hearings for the presentation of evidence or for arguments or whether the proceedings shall be conducted on the basis of documents or other material alone. However the arbitral tribunal shall hold oral hearings if a party so requests (unless the parties have agreed that no oral hearing shall be held).

This essay will throw light only on few main aspects of the Act to understand what is arbitration and its benefits.

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