Indian law provides provision for dispute resolution by way of International Commercial Arbitration. This mechanism is aimed at resolving commercial disputes between an Indian entity and a foreign entity within the framework of Indian Arbitration Laws. The arbitration proceedings can be governed by the rules of arbitration institutions or the courts have the power to appoint arbitrators under the provisions of section 11 of the Arbitration and Conciliation Act 1996. By way of arbitration, business disputes between parties are settled through mutually agreed-upon terms. The parties submit the dispute to one or more arbitrators who settle the dispute by making a binding decision on the dispute. Thus, arbitration is a way of settling the dispute outside the courts in an efficient and timely manner.
As per Indian laws, section 2(1)(f) of the Arbitration Act defines ICA (International Commercial Arbitration) as a legal and commercial relationship and either of the parties is a foreign national/resident or a foreign body corporate, company, association or body of individuals whose central management is in foreign hands. Thus, as per Indian laws, arbitration with a seat in India involving a foreign party is regarded as ICA, subject to Part I of the Act.
Arbitration is a progressing alternative to the legal system and aims to fill up gaps that persist in the conventional court proceedings. Various legal aspects of commercial arbitration in India include, provision of a Neutral Dispute Resolution Forum against the local courts, providing parties with commercial expertise to adjudicate the tribunal, unlike courts that merely exercise general jurisdiction. The law in India provides parties with an enforceable award as opposed to jurisdictional uncertainties in litigation and the arbitration procedure is speedy avoiding the delays and appeals that always persist in the court system. In addition, the parties are not subject to public trials, thereby upholding the confidentiality of the parties.
Arbitration resolves the dispute following adjudicatory procedures affording the parties an opportunity to be heard. Thus, arbitration agreements usually take the form of clauses in commercial contracts providing for arbitration of future disputes and include submission agreements covering arbitration of existing disputes.
The UNICITRAL Model Law was adopted in 1985 and was subsequently revised in 2006. There are more than 60 countries that have adopted this model law that allows comprehensive legislative treatment of the international arbitral process. The Model upholds the validity and enforceability of arbitration agreements (Arts. 7-9) by providing a guideline for competent arbitrators (Art 16) and the absolute judicial non-interference (Art 5). The parties have the choice of arbitral seat (Art 1(2), 20), appointing of the arbitrators (Art 10-15) and the provisional measures (Art 17) to be taken. The Model only lays down an objective procedure for arbitration (Art 18-26), and evidence taking (art 27) as per the applicable substantive law (Art 28) to come to a concluding arbitral award (Art 29-33). Most importantly, the model enforces the recognition and enforcement of foreign arbitral awards including bases of non-recognition (Art 35-36).
Business lawyers and law firms work closely with clients for drafting and review of international arbitration agreements. During such drafting, important considerations include provisions such as, but not limited to, definition of arbitration clause, scope of the disputes submitted to arbitration, stating an arbitral institution and its rules, the seat of the arbitration, venue of the arbitration, method of appointment of the arbitrator, number and qualifications of the arbitrators, language of the arbitration, applicable law and jurisdiction.
International Commercial Arbitration with Seat outside India
There is no generally applicable procedural code that applies to ICA worldwide. Each procedure is tailored to specific cases that are distinct from litigation. Thus, specific country based institutional rules apply. This can be seen in the judgment of Bhatia International v/s. Bulk Trading in which it was held that Indian courts have the right to use their jurisdiction to test the significance of an arbitral award made in India, even if the actual law of the contract is foreign. The court recognized that Part 1 of the Arbitration and Conciliation Act, 1996 gives effect to UNCITRAL Model Law allowing courts to grant interim relief even when the seat of international commercial arbitration is outside India.
International Commercial Arbitration with Seat in India
The international commercial arbitration process in India begins with a notice of arbitration, which is sent from one party to another to represent the intention of the party to settle the dispute through arbitration. Under section 8 of the Arbitration and Conciliation Act, 1996 (the Act), if the party before a judicial authority, applies along with the original copy of the arbitration agreement, on the date of submitting its first statement itself, then the judicial authority must accept such application. As per the Act, section 9 allows interim relief to be granted to the parties by the court. In addition, section 17 allows the same for the arbitral tribunal. These provisions provide security to the party seeking relief until the final decision is given.
Section 11 of the Act allows appointment of arbitrators where within 30 days, each party nominates one arbitrator and subsequently the two appoint the third one. Their nationality is decided by the parties. An arbitrator must act independent and impartial manner. Where he is found to be partial and dependent, then his appointment can be challenged. Moreover, he must possess the qualifications agreed to by the parties and solve the dispute in a time-bound period.
The parties must be flexible in terms of the procedure, place, and language of the arbitration as the arbitral tribunal decides the sequence the evidence is to be examined. The parties can also settle the dispute through mutual consent or the arbitral tribunal. In case a party is not satisfied with the decision of the tribunal it can make an application to the court under section 34 to set aside the arbitral award. Or, an appeal can be filed for refusal to provide interim relief under section 9 and section 17 and to set aside the arbitral award under section 34.
With changing time, there is an increase in international dealings and contracts that increased the need for international arbitrations to resolve disputes at an international level. It also provides security to the parties where they can easily enter into agreements at an international level. The BALCO case judgment is a very good precedent in this matter. According to it parties while entering into arbitration do not face any inconvenient procedures. Thus, parties not only adhere to the domestic judicial system but also engage in international commercial arbitration for absolute redressal.
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