On Arbitration-3

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INSTITUTE- UILS

DEPARTMENT OF LAWS
BBA LLB AND B.COM LLB
SUBJECT- Clinical - I- Alternative Dispute
Resolution
Arbitration
CODE- LLT-414
Name of the Faculty : PUNEETISH KAUR
DISCOVER . LEARN . EMPOWER
Clinical – I -
Alternative • Space for visual (size 24)
Dispute
Resolution
Course Outcome
CO Title Level
Number Will be covered in
this lecture
CO 1 The student will understand the meaning Rememb
of arbitration er

CO2 The students will understand the Understa


approaches ofarbitration nd

2
Arbitration
• Arbitration, a form of alternative dispute resolution
(ADR), is a technique for the resolution of disputes
outside the courts, where the parties to a dispute refer
it to one or more persons – arbitrators, by whose
decision they agree to be bound.
• Not defined in Arbitration and conciliation Act, 1996.
• The entire law of Arbitration is based on UNICITRAL
model Law.
• Arbitration is the means by which the parties to a
dispute get the matter settled through the intervention
of an agreed third party.
• he United Nations have given due recognition to
Model Law of International Commercial Arbitration
and Conciliation rules given by the United Nations
Commission on trade and law ( UNCITRAL).
• The model law and rules have played a significant role
in the settlement of commercial disputes and provided
rules to various other countries.
• These can be adapted and made according to their
municipal laws as earlier there was no unified law
related to trade and its need was felt with globalization
which further gave rise to disputes related to it.
• In spite of the need for arbitration, there are some disadvantages
where arbitration cannot be used as an effective mode of
settlement, as:
• Arbitration lacks in granting authoritative remedies such as
permanent injunction and specific performance order.
• In certain cases, the arbitrators do not have jurisdiction and are
excluded to try the case.
• The cost can be a major factor as, if the arbitration proceeding is
delayed, the cost keeps on increasing and especially, in the cases
where three arbitrators are appointed by the parties.
• No appeal can be made for an arbitration order granted by the
arbitrator.
• Lack of cross-examination as the process relies on evidence and
not on witnesses.
• Conditions:-
a. There should be an arbitration clause in the
agreement to resolve disputes.
b. There is a arbitral disputes between 2 or more parties
c. Dispute is referred to 3rd person other than a court of
competent jurisdiction.
d. Persons or persons constituting arbitration are under
obligation to resolve the dispute/difference in a
judicial manner- that is by hearing both the parties.
• Arbitration can be either voluntary or mandatory.
• Of course, mandatory Arbitration can only come
from s statute or from a contract that is voluntarily
entered into, where the parties agree to hold all
existing or future disputes to arbitration, without
necessarily knowing, specifically, what disputes will
ever occur.
• Arbitrator: The Arbitrator always acts like a Judge.
He discharges quasi-judicial functions. He must act
honestly and impartially.
Scope of Arbitration:
• “Arbitrability” – It is one of the matters which
involve the simple question . What type of issues
cannot be submitted to Arbitration.
• In Booz Allen and Hamilaton v. SBI Home Finance
Limited and others, the courts and laid down the
“Test of arbitrability” and held disputes concerning
only rights in personam to be amenable to
arbitration and not rights in Rem.
• Though Supreme Court did not enunciate any exhaustive list for the subject matters outside the
ambit of arbitrability, some of the well recognized examples of non-arbitrable disputes in India
are:

• § Disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
• § Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights.
• § Guardianship matters
• § Insolvency and winding up matters
• § Testamentary matters (grant of probate, letters of administration and succession certificate)
• § Eviction or tenancy matters governed by special statutes
• § Matters related to mortgage
• § Industrial Disputes
• § consumer disputes
• Actionable torts
• In any arbitral dispute ensuring the objective
arbitrability becomes pivotal since courts in India
and all major countries are empowered to even set
aside an arbitral award on the ground that the
subject matter of the dispute was not capable of
resolution by arbitration.
SC taking Pro Arbitration
approach
• Frauds
• Delivering a pro-arbitration judgment, the Hon’ble
Supreme Court of India recently in A Ayyasamy v. A
Paramasivam & Ors. The Supreme Court had held
that where there are simple allegations of fraud,
touching upon the internal affairs of the
parties inter se without any implication in the
public domain, the arbitration clause need not be
avoided and the parties can be relegated to
arbitration.
• Intellectual Property Disputes
• While dealing with arbitrability of intellectual property disputes (“IP
Disputes”), recent cases discuss IPR disputes to be traditionally “non-
arbitrable disputes”.
• In the case of Indian Performing Right Society Limited
(IPRS) v. Entertainment Network 2016 SCC OnLine Bom 5893, a
coordinate bench of Hon’ble High Court held that in cases of copyright
infringement, the remedies of injunctions, damages, etc., may only be
conferred by a Court, and are hence not arbitrable.
• Ayyasamy case created further confusion when the Supreme Court in its
obiter declared patents, trademarks, and copyright disputes to be non-
arbitrable.
• he Madras High Court through its decision in Lifestyle Equities CV v. QD
Seatoman Designs Pvt. Ltd (2017) 8 MLJ 385. The Court applied
the Booz Allen caveat and held that disputes relating to patent use and
infringement concern ‘rights in personam’, and therefore, are arbitrable.
Types of Arbitration
The following are the different kinds of Arbitrations found in India:
1. Institutional Arbitration – It means that the parties conduct their arbitration procedure in
accordance with rules and with the assistance of arbitral institution.
• Usually administered by an arbitral institution.
• THEY Expect from the institution certain services in connection with organization and
supervision of the proceedings.
• They charge a price to render these services.
• Services rendered by these tribunals:-
1. Setting the Arbitration in motion.
2. Fixing and supervising time limits
3. Deciding on challenges and replacement of arbitrators
4. Supervising the process in absence of party
5. Premises
6. Support staff
7. Notifying the Award etc.
• In order to obtain the assistance of the arbitral institution, the parties will have to agree to it
explicitly, usually in the wording of arbitration clause in their contract. Otherwise an unclear
arbitral institution can lead to conflict between the parties.
• 2. Ad-hoc Arbitration –
• Arbitration which is not conducted under the auspices of
any arbitral institution is termed as ad-hoc arbitration.
• The present arbitration law has laid greater emphasis on
institutional arbitration set up under the well defined rules
of procedure rather than the use of ad hoc arbitration
especially in the Arbitration Amendment Act, 2019.
• Parties do not have an obligation to submit their arbitration
to the rules of an arbitral institution; they are free to state
their own rules of procedure.
• Do it yourself Arbitration.
• c. Statutory Arbitration – It is an Arbitration
imposed on the parties by operation of law.
• Obligatory, binding on parties
• Examples:
• Section 43 {c } of Indian Trusts Act, 1882
• Section 24, 31 and 32 of Defense of India Act, 1971
• Section 5 of Delhi Transport Laws (Amendment
Act), 1971
4. International Arbitration –
• When arbitration happens within India or outside
India containing elements which are foreign in
origin in relation to the parties or the subject of the
dispute, it is called as International Arbitration.
The law applicable can be Indian or foreign
depending upon the facts and circumstances of the
case and the contract in this regard between the
respective parties.
• Defined in 2 (1) (f) of the Arbitration and
Conciliation Act , 1996
5. Domestic Arbitration :
• Domestic arbitration is that type of arbitration, which
happens in India, wherein both parties must be Indians
and the conflict has to be decided in accordance with
the substantive law of India.
• Section 2 (2) (7) of the Act 1996 together, it is implied
that - domestic arbitration means an arbitration in
which the arbitral proceedings must necessarily be held
in India, and according to Indian substantive and
procedural law, and the cause of action for the dispute
has completely arisen in India, or in the event that the
parties are subject to Indian jurisdiction.
6. Foreign Arbitration :
A foreign Arbitration is an arbitration which is
conducted in a place outside India, and the
resulting award is sought to be enforced as a
foreign award.
Arbitration and Conciliation Act,
1996
• The Arbitration and Conciliation Act, 1996 (Act) provides the
framework for arbitration and conciliation in India.
• Drafted on the basis of the UNCITRAL Model Law, it is
divided into four parts. Each part governs a different aspect
of the arbitration and conciliation process:
• Part 1 governs commercial arbitration;
• Part 2 governs the enforcement of certain foreign awards;
• Part 3 governs conciliation; and
• Part 4 contains supplementary provisions (regarding the
power of the court to make rulings, etc.).
• The Act was amended in 2016 and recently in 2019 with an
aim to make it more robust by plugging the lacunae that
existed in the original legislation.
Arbitration agreement

• Defined under Section 2(b) read with Section 7 of the Act.


• It can be defined as a written statement or exchange of
communication between the parties or any statement made
through means of telecommunication.
• It is not compulsory for the parties to sign or unsign it.
• Even if an arbitration clause is present in the agreement it
would be considered as an arbitration agreement.
• Rickners Verwaltung Gmbh vs. Indian Oil Corporation,
1998 stated that the intention of the party in arbitration
gathers information in the form of expression and the
meaning it conveys. An arbitration agreement would be a
statement made by one party regarding the claim in dispute
and not denied by the other party.
Arbitrators

• Appointment of the Arbitrator


• The appointment of arbitrator is given under Section 11 of the Act.
• The Act provides full freedom to the parties to appoint an arbitrator as
of any nationality unless agreed by the parties. However, in the case of
failure to appoint an arbitrator the parties can approach the court to
make such an appointment.
• In case of domestic arbitration, the Chief Justice of the High Court has
the authority to appoint an arbitrator to the parties and in case of
International Commercial Arbitration, the Chief Justice of India has the
authority to make such appointment as in India, the foreign disputes
must be dealt by the highest judicial officers.
• In the case of Konkan Railway Corporation v. Rani Construction Pvt Ltd,
2002 the Supreme Court held that the function of Chief Justice of India
and his designates is to ensure the nomination of an arbitrator who is
independent, competent and impartial and settles the dispute between
the parties to the best of his knowledge.
Powers and Duties of Arbitrator
Power Duties
Pass Interim Order Order of Appointment
Decide the Process of Arbitration
Timely adjudicate the matter
Proceedings
He has the power to Terminate the
Act Judicially and Impartial
procedure
Appointing an Expert person Encourage settlement of the matter
Seeks Court permission in taking
Misconduct is not allowed
evidence
Correct the error in interpretation of
Pass the final award
the award
• Challenging an Arbitrator
• An arbitrator can be challenged under Section 12 of the Act
in the following two circumstances as
• Grounds related to his independence or impartiality.
• If he does not possess sufficient qualifications as to agreed
by the parties.
• Section 13 talks about the challenge procedure and specifies
the time limit under Section 13(2) as within 15 days after
becoming aware of the constitution of the Arbitral Tribunal
and any other circumstance, the party can make a written
statement specifying the reasons to the Arbitral Tribunal
and it is the Arbitral Tribunal and not the court who will
decide on the matter of challenge.
• Termination of an Arbitrator
• The Act provides for the termination of an
arbitrator under Section 14 of the Act and it can be
made in two circumstances which are:
• If he fails to act without undue delay, &
• If he is unable to perform his function due to De
jure or De facto.
• In case of any controversy in regard to the situation,
the parties can approach the court.
International Commercial Arbitration

• Section 2(1)(f) of The Arbitration and Conciliation Act, 1996,


defines an International Commercial Arbitration which
means: an arbitration relating to disputes arising out of legal
relationships, whether contractual or not, considered as
commercial under the law in force in India and where at
least one of the parties is—
• (i) An individual who is a national of, or habitually resident
in, any country other than India; or
• (ii) A body corporate which is incorporated in any country
other than India;
• (iii) A company or an association or a body of individuals
whose central management and control is exercised in any
country other than India;
• (iv) The Government of a foreign country
• When Arbitration is Deemed to be International In the United Nation
Commission on International Trade Law (UNCITRAL) Model Law, arbitration is
deemed to be international if any one of four different situations is present:
• Article 1 (3)
• (a) The parties to the arbitration agreement have, at the time of the conclusion
of the agreement, their places of business in different States.
• (b) One of the following places is situated outside the State in which the parties
have their places of business:
• (i) The place of arbitration, if determined in or pursuant to, the arbitration
agreement, is situated outside the State in which the parties have their places of
business
• (ii) Any place where a substantial part of the obligations of the commercial
relationship is to be performed or the place with which the subject-matter of
the dispute is most closely connected
• (iii)The parties have expressly agreed that the subject-matter of the arbitration
agreement relates to more than one country
• In 2012, the face of International Commercial
Arbitration changed when the Supreme Court of India
made a judgement in the case of Bharat Aluminium Co.
V. Kaiser Aluminium technical services Ltd, (2012) 9
SCC 552. Mostly commonly known as BALCO case and
gave the following guidelines as:
• In the case of International Commercial Arbitration
where the seat is outside India, no application can be
made in Indian courts for interim relief and they don’t
have any authority in this regard.
• The award granted in International Commercial
Arbitration will be subject to Indian jurisdiction only
when they are to be enforceable in India.
Main differences between arbitration
and conciliation
• The main differences between arbitration and conciliation are:
• Arbitration is primarily a method used to resolve disputes where both parties
present their case to a neutral third party who reaches a decision and then
enforces that decision. Conciliation, on the other hand, involves an independent
third party assisting the parties involved in the dispute to arrive at a mutually
agreeable outcome.
• The decision made by an arbitrator is enforceable similar to a judgement of a
court. A conciliator, however, does not have the right to enforce its decisions.
• Arbitration is a formal process and can follow similar procedures to court
proceedings where witnesses can be called and evidence can be presented to
argue the parties’ respective cases. Conciliation is an informal process and
normally involves a ‘round table’ discussion.
• An arbitral award is final and binding and has the effect of terminating the
arbitral proceedings whereas conciliation does not always ensure a mutually
agreeable outcome will arise between the parties.

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