What is Arbitration
Alternative Dispute Resolution which is also referred to as appropriate or amicable dispute resolution is another way of resolving disputes between parties without taking them to the courts. While courts decide the outcome in a case, ADR resolves the dispute effectively, efficiently, and amicably. Arbitration is one of the prominent forms of ADR.
It is commonly used in disputes that are commercial in nature. Parties who have inserted an arbitration clause in the contract can refer the dispute to arbitration. A significant difference of arbitration as compared to mediation is that one of the parties cannot withdraw from arbitration one-sidedly. The parties can select the venue, the language in which the proceedings take place as well as the applicable law so as to make certain that no party gets an undue advantage.
Kinds of Arbitration
Unlike civil or criminal cases, a dispute is sent to the arbitration tribunal. The tribunal resolves the dispute and the final decision cannot be appealed, making it binding on both parties. No judicial proceedings are involved to ensure the swift resolution of the disputes. The following are the different types of arbitration as per the jurisdiction of the case:
Domestic Arbitration
In domestic arbitration, both the parties must be Indians and the proceedings take place in India itself. In the Arbitration and Conciliation Act, 1996 there is no specific definition given to domestic arbitration. A mere reading of Section 2(2) can lead us to infer that domestic arbitration is when the parties had agreed to resolve any disputes that arise in India. The proceedings must be held in the domestic territory and must be in lieu of the procedural and substantive law in India.
International Arbitration
As the name suggests, international arbitration occurs outside the domestic territory because of either a clause inserted in the agreement between the parties or the cause of action that arises from a foreign element relating to the dispute or to the parties. According to the circumstances that led to a case being filed foreign or Indian law would be applicable.
International commercial Arbitration
According to Section 2(1)(f), international commercial arbitration can be understood as arbitration that takes place because of a dispute arising from a commercial contract where either one of the parties resides in a foreign country or is a foreign national; or the core management committee of an association, company or a body of individuals is controlled by foreign individuals. On the basis of the established procedure and rules, there are further three types of arbitration that have been recognized in India.
Ad-hoc Arbitration
Ad-hoc arbitration refers to when parties with mutual consent opt for arbitration to resolve the dispute. It is the most common form of arbitration used in India owing to reasonable costs and adequate infrastructure. Arbitration is conducted without having any institutional proceedings, that is, it does not comply with the rules of an arbitral institution. The parties have the option to choose the rules and the procedure to be followed.
Fast track Arbitration
Fast track arbitration can be seen as an effective solution to solving the problems faced because of delays and time-consuming proceedings in other forms of arbitration.
Institutional Arbitration
In Institutional Arbitration, the parties are free to choose a particular arbitral institution in the arbitration agreement itself. The institution’s governing body or the parties can appoint one or more arbitrators from a panel of arbitrators that had been previously agreed upon. Part I of the Act gives parties the freedom to appoint an arbitrator to deal with a specific issue.
Advantages of arbitration in India
- Mutual consent of both parties – Arbitration can only take place when both the parties have given their consent and the contract includes an arbitration clause.
- Unbiased procedure – No party enjoys an undue advantage because of the fact that the parties are free to decide the relevant venue, language, and the applicable law.
- Confidential procedure – Any disclosure made by the parties in the proceedings and when the arbitration award is given is to be kept confidential.
- Cost-effective procedure – No exorbitant cost is charged from the parties making it common for parties to prefer arbitration over the traditional form of litigation.
- Simple and informal procedure – The parties do not have to separately hire an attorney to represent them and the outcome of the case can be adapted in compliance with the needs of both parties. The environment is comfortable and no formal mannerisms are used, making it easier for the parties to reach a suitable outcome.
- Freedom to choose arbitrator – The parties can select an arbitrator or agree to get an arbitrator with relevant exercise in the particular domain by the institution.
- Stipulated time period for giving an award – The tribunal will give the award within a short tenure of twelve months from the last day of the pleadings in case of domestic arbitration. On the other hand, in internal commercial disputes, the time period is rather relaxed and no stipulated time period is allotted. Hence, there are no unnecessary delays in giving the award.
- Binding decision – The arbitration awards given are enforceable making the decision binding on the parties.
- Position of control – The parties have a position to control the outcome as they can directly participate in the decision-making procedure. In this way, the dispute is amicably resolved.
- Conclusion - Arbitration has emerged as an appropriate forum for effectively resolving misunderstandings between the parties and amicably giving an outcome in a way that benefits both parties. The Act has been subject to a number of reforms and amendments. It has developed multifold and is still continuing to adapt to the changing needs of the public at large. There is a serious need for citizens to be aware of alternate ways of resolving disputes and their benefits. Many people are financially exploited and do not receive adequate relief via litigation. It can be seen as a respite from the pendency of cases and is free from any sort of bias or advantage given to one party.
