Arbitration law in India: Everything you want to know
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 (ADR) mechanism that benefits parties who want to avoid the normal lengthy recourse to the local courts for settlement of disputes. It is 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.
Advancement, liberalization, and globalization of international business relations necessitated the invention of a flexible, reasonable, favorable and time-saving method of resolution of disputes without making the parties go through the rigorous, time consuming and resource exhausting procedure of the traditional justice delivery system
The Indian law with respect to the arbitration is largely based on the English Common Law. The Indian arbitration is governed and regulated by the Arbitration and Conciliation Act 1996, which derives its basis from the 1985 UNCITRAL Model on International Commercial Arbitration and the UNCITRAL Arbitration Rules of 1976.
Ad hoc Arbitration: Conduct of arbitration by the tribunal following the rules already agreed between the parties or following the rules laid down by tribunal in case of the nonexistence of agreement between parties. Ad hoc arbitration helps in greater control over the arbitration process, flexibility to decide the procedure, and also ensures cost-effectiveness. However, the success of the ad hoc arbitration is ensured only in case of mutual agreement of parties.
Institutional Arbitration: Administration of arbitration in accordance with the rules of the procedure of an institution. The same provides for important aspects of arbitration such as the appointment of arbitrators, managing the arbitration process, identifying venues for holding arbitration hearings. Many such Indian arbitrations are administered by international arbitral institutions such as the Court of Arbitration of the International Chamber of Commerce, the Singapore International Arbitration Centre, and the London Court of International Arbitration.
There are at the moment 35 Arbitral Institutions in India for a) Domestic; b) International; c) PSUs; d) Trade and merchant associations; and e) City-specific chambers of commerce and industry Such institutions either have their own rules or are governed by the rules of UNCITRAL. This form of arbitration helps in getting a clear set of arbitration rules, a clear timeline to conduct arbitration, a panel of arbitrators to choose from, assistance from highly trained staff helps when parties lack proper knowledge regarding arbitral proceedings.
The success of this mode of arbitration is thwarted by lack of creditworthy institutions, lack of governmental support, lack of legislative support, no autonomy of parties over the arbitration process, delays in Indian courts, excessive interference and involvement in proceedings thereby discouraging foreign parties.
The Indian judiciary is thus now leaving no stones unturned to simplify the procedures in the cases of International Commercial Arbitration. Moreover, the amendment in Section 36 has given more teeth to the Act as now to challenge an award under Section 34 of the Act the stay is not automatic as was the scenario in pre amended Arbitration and Conciliation Act 1996 before its amendment in 2015 and conditions akin to Order 41 Rule 5 of Code of Civil Procedure are to be imposed by the Court adjudicating the correctness of the Award. This factor would also cut out unnecessary challenges to an Arbitration Award in line with the purpose of the Act and the authoritative judicial dicta in this regard.