Introduction to Arbitration

arbitration

Arbitration is an easier and simple platform to solve the dispute. Solving disputes through arbitrator is an ancient custom. In the past when any dispute arose in villages, it was solved by the help of ‘Panch’. Such ‘Panchs’ was the reputed people of the village and there were faith and confidence over them. Their decision was binding overall. With the passage of time, it adopted the nature of law and was being called ‘Arbitration’. Not only this it was provided international nature by Geneva Conventions, 1972 and New York Convention, 1958.

What is Arbitration?

It means two or more than two parties submit or refer their dispute to a third person named Arbitrator for the decision who decided the dispute judicially.

In other words, it could be said that when two parties agree to have any intention of solving their dispute by the negotiations of other person and which requires to follow all the formalities of judicial adjudication is called Arbitration.

Illustration

A, B, C and D constitute a partnership firm and keeps a clause in the partnership documents that their dispute shall be solved by the Arbitrator. This is an Arbitration Agreement

According to John B.Saunders – “Arbitration is the reference of a dispute or conflict between two or more parties for the decision after hearing both the parties judicially to such person or persons which is not a court of competent jurisdiction”.

In this case of Collins Versus Collins (28 L.J.CH. 196), Romil H.R. has stated while defining the it that it is the reference of a dispute or conflict on a subject matter between the parties for the decision to one or more person with or without the umpire”.

According to section 2 (1) (a) of the Arbitration and Conciliation Act, 1996 Arbitration means arbitration whether or not administered by permanent arbitral institutions.

But this definition is incomplete, brief and unclear. Actually, it does not define it. The above definition of Arbitration is appropriate and according to these definitions:

  • It is followed for reference to the dispute between one or more person for the purpose of disposition.
  • Stitch person is called the arbitration to whom the dispute is referred for disposition.
  • It is not a court of competent jurisdiction.
  • It is also not a suit instituted in a court.
  • This solves the dispute after hearing both the parties judicially.

Types:

It is of three types:

  1. Personal or Domestic Arbitration
  2. Statutory Arbitration, and
  3. International Arbitration.
  1. Personal or Domestic Arbitration

    It is the most followed type of Arbitration. In this, two or more parties refer their dispute or conflict to Arbitral Tribunal for the decision.

    Arbitration and conciliation Act, 1996 does not define personal or Domestic Arbitration. The Act defines international commercial arbitration. On the basis of this definition, personal or Domestic Arbitration could be defined. According to it – such Arbitration which is not international Arbitration is domestic Arbitration.

    Under Domestic Arbitration both the parties are Indians. Such a person could also be a legal person like a company, corporation, etc.

  1. Statutory Arbitration

    Generally, the procedure of Arbitration is determined by the mutual consent of the parties. Where such procedure is determined, the Arbitration proceedings shall be conducted in accordance with it.

    But sometimes the dispute coming within the limits of an Act are to be solved by Arbitration through the procedure mentioned in the Act and the proceedings are to be conducted in accordance to that procedure, like- appointment of arbitration, place of Arbitration, the period for giving award enforcement of Award, the procedure to be followed for Arbitral proceedings, fees for Arbitration, etc such Arbitration is called statutory Arbitration.

    There is no consideration of the contents of parties in the statutory Arbitration. Parties are bound to follow the provisions of statutory Arbitration. Generally, Co-operation Societies Act, Company Act Electricity Supply Act, etc. Consist provision of statutory Arbitration.

  1. International Arbitration

    Creation of international Arbitration is the result of growing international trade. Increase in communication methods and liberalisation of national trade policy has lead to a tremendous increase in international trade and commerce. In such situations, it is natural to accrue dispute and conflict during international trade & commerce.

    It is the reason that Arbitration & Conciliation Act, 1996 has laid down provision for resolving such dispute and enforcement of the foreign award. Under the Act, such Arbitration has been denoted as International Commercial Arbitration.

    Section 2(1)(f) of the Act defines international commercial arbitration as – International Commercial Arbitration means an Arbitration relating to a dispute arising out of the legal relationship, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is-

    • An individual who is a national of, or habitually residents in, any country other than India;
    • A body corporate which is incorporated in any country other than India;
    • A company or an association or a body of individuals whose central management and control is exercised in any country other than India;
    • The government of a foreign country: It is to mention here that no difference has been made between the Arbitration and International Commercial Arbitration under the Act. ( Progressive Construction Limited Versus Louis Burger Group A.I.R. 2012 Andhra Pradesh 38)

Benefits

It has several benefits out of which followings are the main:

  • Simple and express procedure: The procedure of this is very simple and expressive. It does not contain the complex procedure of courts. The provisions of the code of civil procedure and evidence Act does not apply to Arbitral proceedings. There is also no requirement of appointment of an advocate or legal experts. In all, it follows the principle of natural justice.
  • Not being Expensive and Delaying: Its proceedings are neither expensive nor delaying. The disposal of the suit by court takes a lot of time owing to the overload of work and it also expensive. Whereas there is only one dispute before an Arbitrator, he solves it earlier and with fewer expenses. Generally, it has to give an award within four months and the umpire has to within two months in an Arbitration.
  • Appointment of Arbitration by Parties: In this, parties appoint the Arbitrator. The arbitrator is the faithful person of the parties. Hence whatever they decided, it is easily acceptable to both the parties, and there is also no apprehension of partiality. Whereas judges in court are government servant appointed by the Government, whose decision could be against the will of the parties.
  • Services of Experts: Since it are appointed by the parties, so they may appoint the expert of the subject matter to dispute as an Arbitrator. This increase the possibilities of a better justice. Whereas, it is not necessary that a judge in Court be an expert of a subject matter. An expert can only present in court as a witness which is not sufficient.
  • Individual Examination: One benefit of this is also that the Arbitrate can itself examine a disputed place or subject matter which helps in arriving out a correct conclusion. Whereas this work is not being done by the judge itself but being done by the commissioner this does not prove to be so useful.
  • Revocation of Authority: During Arbitral proceedings, if it appears that an Arbitrator is guilty of corrupt behaviour or misconduct, the parties can revoke its authority. Whereas the authority of a judge cannot be revoked in this manner.
  • Confidentiality: Arbitral proceedings are always confidential. The arbitrator also can not publish such proceedings whereas the proceedings of the court are held in open court which makes them no more confidential.

Likewise, it also has several other benefits which are causing an increase in its following day by day.

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