Back
Latest News
Types of Arbitration in India
TYPES OF ARBITRATION
There are 2 types of Arbitration followed in India Ad-Hoc Arbitration & Institutional Arbitration. Ad-Hoc Arbitration is subject to a lot of vagaries, such as disagreement amongst parties at different stages of the dispute and uncertainty in the process. Institutional Arbitration is superior on all those fronts. However, a key disadvantage of institutional Arbitration is its cost. A cheap and yet reliable institutional Arbitration framework is likely to trump all the forms of Ad-Hoc Arbitration. Some of the famous International Arbitration Institution such as London Court of International Arbitration closed down their India office.
AD-HOC ARBITRATION
PROS
- Suitable for various claims: if properly structured, Ad-Hoc Arbitration is cost effective as compared to institutional Arbitration. The parties can formulate appropriate and impartial proceedings by incorporating suitable Arbitration rules.
- Control of the process: Parties can present their own rules and set convenient timelines for the Arbitral process. The tribunal, and to a diminished degree, the parties can arrange and conduct the proceedings.
- Cost effective: In comparison to Institutional Arbitration, Ad-Hoc Arbitration is cost effective. The parties will save the administrative fee paid to any institution (generally on the expensive side).
- Tribunal remuneration: Unlike in Institutional Arbitration where the institution prefixes the Arbitrator/s fee, in Ad-Hoc Arbitration the parties have the opportunity to negotiate the Arbitrator/s remuneration directly with the Arbitrator/s, who mostly treat the process in a detached manner.
CONS
- Disagreement between parties: The contrasting views of parties may at times be a barrier due to varying degrees of expectations and misinterpretations.
- Selection of the Arbitral Panel: Parties have to rely on their judgement while choosing an Arbitrator. Prejudices due to national bias or insufficient expertise and knowledge of well renowned foreign Arbitrators may affect the Arbitration.
- Lack of expertise: It is well known that an Arbitration clause is given little attention in a contract. In the lack of such diligent review, Arbitration may be governed by national laws which may provide default provisions due to an omission in the agreement between the parties.
- Failure to co-operate: Ad-Hoc Arbitration requires both parties to come together in a spirit of cooperation, backed by their lawyers, with an able procedural timetable and legal system in place to avoid a stalemate. Non-cooperation will more often than not result in a deadlock. Such roadblocks may be required to be resolved by the parties, which will involve a further expenditure of time and costs. The parties may approach courts to resolve such issues to make headway in the Arbitration leading to further expenses and defeating the purpose of an Ad-Hoc Arbitration, namely, resolving the dispute as soon as possible.
- Default: Processing with an Ex-Parte Ad-Hoc Arbitration is risky. The party placed exparte can challenge the award on the basis that the party was not provided an impartial opportunity to present its case. Also, stating the obvious, the party present will have to bear the costs of the Arbitration, including the remuneration of the tribunal until the costs are recovered from the party placed exparte.
INSTITUTIONAL ARBITRATION
PROS
- Reputation: The enforcement of an Award from a well-known Arbitration institution is perceived to be beneficial, the executing court may naturally be more accommodative to an institution considering its reputation, e.g. the ICC, given that such institutions have Arbitrations continuously and are relied on for well-supervised Arbitrations. Further, the parties have the advantage of clarifying or seeking assistance from the institution regarding the Arbitration.
- Supervision: Certain Institutions (like the ICC) review an award by a tribunal before it is published to the parties. This provides for an extra layer of protection which ensures that the content and reasoning are in the lines with the claims / counterclaims. The review is limited to the procedural grounds and does not interfere with the decision on merits, which analyses the compliance with the due process during the Arbitration.
- Quality of the Arbitral panel: Every international arbitral institution maintains a database of Arbitrators to help the parties appoint the Arbitrator/s in the relevant specialized field of dispute. Some institutions also ensure that there is no conflict to complete the mandate i.e. independence, impartiality, etc.
CONS
- Administration fees: Apart from the costs of the Arbitrators and their respective counsels, the parties have to bear additional fees payable to the institution. In addition to this coordinating with the institution is time-consuming, further increasing expenses.
- Bureaucratic rules: The informal means of dispute resolution at times may become unnecessarily bureaucratic with the procedural requirements of some arbitration institutions. However, such red-tapism allows for a smooth and organised arbitration, and diminishes procedural conflicts and uncertainty during the arbitration.
- Sovereignty issues: If a state is involved in arbitration, more often than not, the state may be reluctant to submit to the authority of an institution. This may be purely for political reasons, notwithstanding the stature of the institution.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
- Ad-hoc Arbitration
- Institutional Arbitration
- Pros and Cons of different types of Arbitration
