– Amrutha Santhosh Kumar
With the advent of globalization, liberalization regimes and the rapid advancement in international business relationships, it has become imperative to have a quick amicable method of resolving disputes at the international frontier. Arbitration is one of the most sought out methods of dispute resolution wherein an amicable settlement is reached by virtue of negotiations with a neutral third party acting as a mediator. Commercial activities involving parties of different nationalities often lead to disputes due to differences pertaining to legal and cultural background. As a preventive measure, the ideals of every commercial activity undertaken by the parties together is preceded by contracted undersigned, which stipulates the conditions and obligations of the contract beforehand. Arbitration agreements are also inserted as specific clauses within these commercial contracts. (Kenton, 2015)
International Commercial Arbitration system primarily relies on upon, national arbitration laws along with norms of arbitral institutions, multilateral conventions and bilateral treaties. It is defined as per Section 2(1)(f) of The Arbitration and Conciliation Act, 1996
There are many reasons as to why Arbitration is preferred over litigation. They are listed as follows.
- It is comparatively a speedy dispute resolving mechanism. Court Procedures involves compliance to procedures and rules, which is time-consuming. The process of Arbitration does not rely on strict procedures which helps to save time and prevent further delay.
- The Arbitrator is chosen amicably by both the parties and effectively plays the role of a neutral/impartial third party in carrying out negotiations so as to reach a settlement. It is also to be noted that arbitrators are generally chosen based on experience and expertise in the area of dispute in question.
- The Arbitration awards are generally enforced without further delay, unlike judicial decrees.
- The Arbitration procedure is cost-effective compared to the process of formal litigation.
Generally, a country which has nothing to do with the commercial transactions of both the parties involved is chosen as the seat of Arbitration by the entities involved in the dispute. However, it is significant to note that it can vary depending on the nature of the agreements, facts and circumstances of the dispute etc. Initially, before the enactment of the Arbitration and Conciliation Act 1996, the process of Arbitration was governed in India by the following three Acts listed as follows-
- The Arbitration (Protocol and Convention) Act, 1937
- The Indian Arbitration Act, 1940
- The Foreign Awards (Recognition and Enforcement) Act, 1961
The Arbitration (Protocol and Convention) Act of 1937 and the Foreign Awards (Recognition and Enforcement) Act of 1961 gave effect to the Geneva Convention and the New York Convention of 1958, respectively. Until the 1996 Act, the Indian Arbitration Act of 1940 was responsible for governing Arbitration matters in India. Initially, foreign parties were not keen on Arbitration in India due to a number of shortcomings of the 1940 Act. Earlier by virtue of the provisions of the Act, the Court could interfere at any stage during the process of Arbitration. Similarly, the Act did not prevent both the parties from raising further disputes during the proceeding even though they might have amicably agreed to resort to Arbitration initially. There were also a number of provisions by which the final award could be challenged, and all of these factors ultimately failed the institution of Arbitration as an effective and speedy method of alternate dispute resolution. Due to the above-listed reasons, foreign companies obtained awards in other countries who were members of the New York Convention Enforcement of Foreign Awards, since India was also a member nation of the New York Convention. It was by virtue of the Foreign Award (Recognition and Enforcement) Act of 1961 that such foreign awards were recognized in India. (Bharucha, 2020)
The Arbitration and Conciliation Act 1996 Adopted in India is an adaptation of the UNCITRAL Modal Law of Arbitration. However few changes were incorporated. The Act is divided into three parts for better understanding. Part 1 deals with International Commercial Arbitration and Domestic Arbitration. Part 2 deals with foreign awards in general as good provisions for its enforcement, whereas Part 3 deals with conciliation related statutory provisions. This Act has been amended to incorporate new ideas so as to remove backlogs and rectify the shortcomings of the Act. The primary goal is to encourage a time-efficient and cost-effective process of Arbitration for International Commercial disputes in India. (Pareek, 2013)
As per the ideals of Section 7 of the Act, the agreement of Arbitration has to be in writing. However, considering the fact that most of the agreements are now recorded electronically, the 2015 amendment of the Act provides that arbitration agreements can also be formed by communication through electronic means. There is no specific form required for the arbitration agreement, i.e. as mentioned earlier, it could either be in the form of an arbitration clause present as part of the initial contract or it could be a separate arbitration agreement. Sections 9 and 17 of the Act provide for interim relief to the parties by courts and arbitral tribunals. The interim relief sought can vary according to the facts and circumstances of the dispute.
According to Section 11 of the Act, the Arbitrator is appointed within a time span of 30 days. Generally, apart from a common arbitrator appointed by both the parties, each party appoints another one arbitrator individually. The Nationality of the Arbitrators is also decided by the parties. Appointment of the Arbitrator can be challenged on the grounds of bias/partiality. At times, even the appointment of Arbitrators leads to a tug- of -war between the parties involved, thereby hindering the process of Arbitration. The Arbitrator is expected to resolve the dispute within a certain time frame, and hence the process of Arbitration is time-bound. However, at times, due to certain unfortunate circumstances, the process can be prolonged. The Arbitrator must also meet the pre-requisite qualification criteria of both the parties. It makes no sense whatsoever to appoint a party who is completely alien to the subject- matter of the dispute. The arbitral tribunal is responsible for deciding the schedule or sequence for submission of the evidence by parties of the dispute. Apart from that factors like language adopted for Arbitration, mode of the procedure followed, the seat of Arbitration has to be duly agreed upon by the parties involved. (Gogisetti, 2019)
If the party is not satisfied with the award of Arbitral, an application for setting aside the award can be filed by virtue of Section 34 of the Act. Similarly, an appeal can also be filed on the grounds of refusal to provide interim relief and to set aside the award,
To make the provisions of the Act more effective and to iron out the flaws within the Act, amendments are imperative. However, the fact that these amendments have to withstand the scrutiny of the Courts makes it a tough challenge for bringing forth new ideals regularly. Changes like reducing the scope of interference by the courts, institution of Arbitration Council has definitely helped in making the process of Arbitration efficient and easier. The scope of International Commercial Arbitration has hence been evolving overtime ever since its inception and still has a long way to go.
Modo Resolutio 