That is…

The Arbitration Award!!

After considering all the written and oral submission of both the parties, the tribunal gives the much-awaited decision which is also known as Arbitral Award. This decision of the arbitral tribunal must be by a majority and in writing and signed by all the members of the tribunal. It must state the reasons for the award unless the parties have agreed that no reason for the award is to be given. The arbitral award should be dated and the place where it is made should be mentioned (i.e., the seat of arbitration) and a copy of the award should be given to each party. It is to be noted that Arbitral tribunals can also make interim awards.

The award should be stamped under the Indian Stamps Act and if it is not stamped or is insufficiently stamped is inadmissible for any purpose, which may be validated on payment of the deficiency and penalty (provided it was original). However, a foreign award is not liable to be stamped.

Now, coming to the interest and cost of arbitration to be paid by the parties. Cost of arbitration means reasonable cost relating to fees and expenses of arbitrators and witnesses, legal fees and expenses, administration fees of the institution supervising the arbitration and other expenses in connection with arbitral proceedings. The tribunal can decide the cost and share of each party. If the parties refuse to pay the costs, the arbitral tribunal may refuse to deliver its award. In such a case, any party can approach the court. The court will ask for a deposit from the parties and on such deposit, the award will be delivered by the tribunal.

Then the court will decide the cost of arbitration and shall pay the same to arbitrators. Balance, if any, will be refunded to the party. The regime for costs has been established which has applicability to both arbitration proceedings as well as the litigations arising out of arbitration.

As of now, the interest rate payable on damages and costs awarded shall be 18 per cent per annum, calculated from the date of the award to the date of payment unless the arbitration award mentions any other specific rate.

So, now what happened if one of the parties does not find the award to be fair or invalid due to any procedural or substantive reasons. In this case, Section 34 provides for the manner and grounds for challenge of the arbitral award. Before the expiry of 3 months from the date of receipt of the award, the party can challenge the award on the grounds provided under Section 34. However, if that period expires, the award holder can apply for execution of the arbitral award as a decree of the court.

Under Section 34, a party can challenge the arbitral award on the following grounds-

• the parties to the agreement are under some incapacity;
• the agreement is void;
• the award contains decisions on matters beyond the scope of the arbitration agreement;
• the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement;
• the award has been set aside or suspended by a competent authority of the country in which it was made;
• the subject matter of dispute cannot be settled by arbitration under Indian law; or
• the enforcement of the award would be contrary to Indian public policy.

This section provide two more grounds which are left with the Court itself to decide whether to set aside the arbitral award:

• Dispute is not capable of settlement by arbitral Process
• The award is in conflict with the public policy of India

Also, Previously, there was an automatic stay on the enforcement of the award once an application to set aside the award under Section 34 of the Act had been filed before the Indian courts. However, the 2015 Amendment Act required parties to file an additional application, and specifically seek a stay by demonstrating the need for such stay, to an Indian court, and the court can impose certain conditions on granting such stay, in the exercise of its discretion.

Coming to enforcement and execution of the award, which is governed by the Act read with the CPC. While the former lays down the substantive law governing enforceability and execution of an award, the latter deals with the procedures required to be followed when seeking execution of an award. According to Section 35 of the Act, an arbitral award shall be final and binding on the parties and persons claiming under them. Thus, an arbitral award becomes immediately enforceable unless challenged under Section 34 of the Act.

When the period for filing objections has expired or objections have been rejected, the award can be enforced under the CPC in the same manner as if it were a decree passed by a court of law. For the execution of an arbitral award the procedure as laid down in Order XXI of the CPC has to be followed. Order XXI of the CPC lays down the detailed procedure for enforcement of decrees. Where execution of an arbitral award is sought under Order XXI CPC by a decree-holder, the legal position as to objections to it is clear. At the stage of execution of the arbitral award, there can be no challenge as to its validity.

Also, the mere fact that an application for setting aside an arbitral award has been filed in the court does not itself render the award unenforceable unless the court grants a stay in accordance with the provisions of Arbitration and Conciliation Act in a separate application. It is the discretion of the court to impose such conditions as it deems fit while deciding the stay application.

Question of Week:

Can the award be enforceable before the expiry of 3 months provided to the parties to challenge the award?

No, if the application for the challenging the award has been made, as long as this period of 3 months has not elapsed, enforcement of the award is not possible.

So, with this we have come to an end of this season of Voila! Let’s Arbitrate.

That’s right. We are coming up with another season very very soon to discuss some of the major and recent developments in the world of International Arbitration.

Thank you so much reading these Blog posts till now and we hope to meet you again on another beautiful Saturday to update you with fresh and interesting content on Arbitration.

Spotify:

The post VOILA! LET’S ARBITRATE! BLOG POST-9:Award them with the Award! appeared first on LexForti .

Since we have come this far, I think it is safe to say that Arbitration proceedings are very flexible in respect to the place, time and procedure decided.

The arbitral tribunal should treat the parties equally and each party should be given full opportunity to present its case. The parties to the arbitration are free to agree on the procedure to be followed by the arbitral tribunal. If the parties do not agree to the procedure, the procedure will be as determined by the arbitral tribunal. The tribunal also has powers to determine the admissibility, relevance, materiality and weight of any evidence.

The Place of arbitration can be decided by mutual agreement. However, if the parties do not agree to the place, the same will be decided by the tribunal. Similarly, the language to be used in arbitral proceedings can be mutually agreed upon. Otherwise, the arbitral tribunal can decide on the same.

Now, we will discuss about another important part of the arbitration proceedings which is the submission of Statement of Claim and Defense. The Claimant should submit the statement of claims, points of issue and the relief or remedy sought. The Respondent should state his defence in respect of these particulars and all the relevant documents must also be submitted. Such claim or defence can be amended or supplemented at any time.

An application for counterclaim/set-off has to be adjudicated upon in the same arbitration proceeding without requiring a fresh one. The arbitral tribunal, under the amended Section 25 of the Act, can also exercise its discretion in treating the right of the defendant to file the statement of defence as forfeited under specified circumstances.

The 2019 Amendment Act has now introduced a six-month time frame for completion of a statement of claim and defence. However, this point was criticized as Mandating a fixed timeline for filing the statement of claim and defence would deprive parties of such flexibility and would effectively require them to file their complete pleadings at the very outset of the arbitration proceedings.

So, after submission of pleadings, unless the parties agree otherwise, the arbitral tribunal can decide whether there will be an oral hearing or whether proceedings can be conducted on the basis of documents and other materials. But, if one of the parties requests the arbitral tribunal for a hearing, sufficient advance notice of hearing should be given to both parties.

The 2019 Amendment Act has also provided that pleadings must be completed within 6 months from the appointment of arbitrator(s). However, this amendment exempted ICA from these time-limits. It introduced a non-binding proviso to this exemption stating that the award in an ICA may be made as expeditiously as possible and an endeavour may be made to dispose of the matter within 12 months from the date of completion of pleadings.

This now led us to another important part of arbitration proceedings i.e., the fast-track procedure to conduct these proceedings. The 2015 Amendment Act inserted new provisions to facilitate an expedited settlement of disputes based solely on documents subject to the agreement of the parties. The tribunal, for this purpose, consists only of a sole arbitrator, who shall be chosen by the parties. For the stated purpose the time limit for making an award under this section has been capped at 6 months from the date the arbitral tribunal enters upon the reference.

Parties can agree in writing to conduct arbitration under a fast-track procedure before the constitution of the arbitral tribunal. Under the fast-track procedure, unless the parties otherwise make a request for oral hearing, or the arbitral tribunal considers it necessary to have oral hearing, the arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing.

Since, we have understood about the line of arbitration proceedings, we should also consider a fact that there are good number of chances that parties may settle during the Arbitration Proceedings. It is permissible for parties to arrive at a mutual settlement even when the arbitration proceedings are going on. In fact, even the tribunal can make efforts to encourage mutual settlement. If parties settle the dispute by mutual agreement, the arbitration shall be terminated. However, if both parties and the arbitral tribunal agree, the settlement can be recorded in the form of an arbitral award on agreed terms, which is called a consent award and it shall have the same force as any other arbitral award.

Question of the Week:

Will the Limitation Act be applicable on the ICA with its seat in India?

Yes, the Limitation Act, 1963 is applicable to arbitrations under Part I and for this, the date on which the aggrieved party requests the other party to refer the matter to arbitration shall be considered.

Spotify:

The post VOILA! LET’S ARBITRATE! BLOG POST-8: ARBITRATION PROCEEDINGS ABOUT TO HAPPEN! appeared first on LexForti .

If one of the parties do not appoint an arbitrator within 30 days or if 2 appointed arbitrators fail to appoint third arbitrator in 30 days then the party can request the supreme court in case of the international commercial arbitration or relevant High Court in case of a domestic arbitration to appoint an arbitrator.

It is to be noted that in case an application for appointment of an arbitrator has been filed in the court, the court can enquire only about the existence of an arbitration agreement. The question of arbitrability of the dispute would be decided by the Tribunal and not the courts. The Court should dispose of the application for appointment of the arbitrator within 60 days and this will be treated as an administrative decision.

Another important thing which has to be noted here is that unless the agreement is sufficiently stamped, the court cannot appoint an arbitrator.

The limitation period for filing an application under Section 11 for the appointment would be 3 years from the failure to appoint the arbitrator and the court have the power to refuse to make the reference to arbitration where claims are ex-facie time barred as provided in Section 8 of the Act.

Challenging the appointment of Arbitrator:

We all know and understand that independence and impartiality of an arbitrator are indispensable for any arbitration proceeding. So, if there are such circumstances present which might lead the parties to challenge the independence and impartiality of the Appointed arbitrator, those circumstances need to be disclosed beforehand to the parties.

So, what these circumstances can be?

One, where the circumstances give rise to justifiable doubts as to arbitrator’s impartiality and independence and,

Two, where they do not posses the qualifications agreed upon by the parties.

The Non-disclosure of these circumstances can lead to serious consequences for the arbitrator, including termination of his/her mandate and even if he or she has not been assigned work or given remuneration by the concerned party.

The challenge to the appointment on the basis of grounds mentioned in the fifth schedule has to be decided by the arbitrator themselves. So, if he does not accept the challenge then the proceedings can continue and the arbitrator can make the arbitral award.

So, what should parties do in such circumstance?

In this situation, the party challenging the arbitrator can make an application for setting aside the resultant arbitral award in accordance to Section 34 of the Act. If the court agrees to the challenge the arbitral award can be set aside. Therefore, even if the arbitrator does not accept the challenge to his appointment, the other party cannot stall further arbitration proceedings by rushing to the court.

Now, we have to keep few things in mind like:

If the arbitrator has passed an award in an earlier arbitration between the same parties about the same dispute, this does not mean that there are justifiable grounds for challenging his impartiality under Clause 16, 5^th Schedule.

The appointment of a former employees of parties are not precluded from being appointed as arbitrators. Also, proposed arbitrators being government employees/ex-government employees was not sufficient in itself to make them ineligible to act as arbitrators, especially since they were ex-employees of public bodies not related to the party.

Since we talked about challenging the appointment of the arbitrator, we should also talk about Challenging the jurisdiction of the tribunal. Under Section 16 of the Act, an arbitral tribunal has the competence to rule on its own jurisdiction, which includes ruling on any objections with respect to the existence or validity of the arbitration agreement. The doctrine of ‘competence-competence’ confers jurisdiction on the Arbitrators to decide challenges to the arbitration clause itself. Therefore, where the arbitral tribunal was constituted by the parties without judicial intervention, the arbitral tribunal could determine all jurisdictional issues by exercising its powers of competence-competence under this Section.

Question of the Week:

When does the mandate of an arbitrator expires?

As held by various Supreme Court Judgements, the mandate of the arbitrator expires in case an award is not delivered within the time limit stipulated by the parties in the arbitration agreement. This will help a party to ensure a time-bound arbitration process while entering into a contract and in compelling the arbitrator to deliver his award within stipulated timelines.

Spotify:

The post VOILA! LET’S ARBITRATE! BLOG POST-7: ARBITRATORS AND THEIR APPOINTMENT appeared first on LexForti .

Such measures are particularly varied and innovative as international trade practices continue to generate new kinds of remedies according to the needs of the parties to the dispute and to the increasing complexity of cases. In the cases of ICA with seat in India, parties can take interim relief from Courts or Arbitral Tribunals under Section 9 and Section 17 of Arbitration and Conciliation act, 1996.

According to Section 9 of the Act, any party to an arbitration agreement can seek relief by the way of an interim application from the court. This Section permits granting of interim measures by the court before the commencement of the arbitral proceedings or after the pronouncement of award but before its enforcement. After the interim protection has been granted under Section 9, the arbitral proceedings must commence within 90 days from the date of the interim protection order or within such time as determined by the Court.

However, if the Arbitral Tribunal has already been set up, the application for interim relief under Section 9 will not be entertained unless Court finds the circumstances which may render interim relief provided under Section 17 inefficacious. Apart from this, it has to be noted that Section 9 interim measures can also be granted against third parties too in certain cases.

Now coming to Section 17 of the Arbitration and Conciliation act, 1996. It provides the Arbitral Tribunal with same powers as a Civil Court in relation to the grant of interim measures. Later, it had been amended by 2015 Amendment Act wherein the Arbitral Tribunal can give interim measures post award but before its execution. It has to be noted that the order passed by the Tribunal for the interim measures would be equivalent to the order passed by the court and will be enforceable under the Code of Civil Procedure 1908. This power was given with the intention to give significant power to Tribunal and reduce the burden and backlog before the courts.

However, there are various cases and situations where the party is still required to obtain order of interim relief from the Court only. For example, interim relief against encashment of a bank guarantee. So according to 2015 Amendment Act, the Tribunal has power to grant interim relief during arbitral proceedings or at any time after making of the arbitral award. However there was a huge confusion lying in these words. An arbitral Tribunal becomes functus officio once the final award has been rendered that is it loses its official authority and its legal effect. Therefore the words “at any time after making of arbitral award” creates ambiguity on the status of the arbitral Tribunal. Therefore, the 2019 amendment Act omitted this statement to extinguish that ambiguity.

What are the qualifications to provide an interim relief?

So if a party can show that it has a good case on merits, it would likely succeed in obtaining interim relief. There are no specific standards prescribed under the act for grant of interim relief. However, arbitral tribunals have normally required reasons like Irreparable form, urgency and no free judgement of the merits of the case to give the interim relief.

Other than this various courts or tribunals usually apply the standard given in CPC.

In the recent case of Avantha holdings Limited v. Vistra ITCL India Limited, there were some extra pre-requisites given by the court for providing interim relief under Section 9. These were, existence of prima facie case, balance of convenience, possibility of irreparable loss or prejudice if interim relief not granted, consideration of public interest, emergent necessity of ordering interim measures, and lastly when the applicant manifestly intense to initiate arbitral proceedings.

Question of the Week:

Can an Arbitral Tribunal review its award?

It is a very clever question since we have read that the Tribunal becomes functus officio once it gives its award i.e. it loses its authority. So, the answer to this question is that an arbitral tribunal cannot review an award on merits. The tribunal, thus cannot reopen the case even if fresh and extremely important evidence comes to light after pronouncement of award since their authority to re-examine the case ceases to exist.

Spotify Link:

The post Voila! Let’s Arbitration! Blog Post-6: How to get interim relief in International Commercial Arbitration? appeared first on LexForti .

To start an arbitration process, or we can say, to invoke the arbitration clause of the commercial contract, a request for arbitration or notice of arbitration must be filed. The name of this initial document depends on the rules of the institution administering the arbitration. This initial document is named as request for arbitration by the arbitral institutions like ICC, LCIA, ICSID, DIAC whereas it is named as notice of arbitration under SIAC, HKIAC and the UNCITRAL rules. The main difference between these two is the name since the required content for both the request and notice for arbitration is similar.

So in both the request for arbitration and notice for arbitration, there are various information which have to be mentioned in the document which depend on the rules of the institution administering the dispute. Generally, it must contain names of each of the parties, names of the representatives of the parties, a description of the dispute giving rise to claims, a statement of the relief sought, a description of the agreement containing the arbitration clause, the choice of one or more arbitrators, a description of the place of arbitration and lastly there should be an indication of the applicable rule of law governing the arbitration and an indicator of the language of the arbitration.

Now parties generally submit the supporting documents with their request for arbitration or notice fof arbitration. However, the supporting documents are not required under all the rules of arbitration and generally a very limited evidence has to be produced during the course of arbitration.

If any International Commercial Arbitration is being conducted in India, that is, the seat of arbitration is in India, generally the parties opt for the rules of International Commercial Arbitration, 2016 which are adopted by the Indian Council of arbitration. These rules provide for the information which has to be mentioned in the request for arbitration and the notice of arbitration to the respondent.

Apart from this, if the the dispute is not referred to arbitration by the parties themselves, then the court can do so if the subject matter of the dispute is governed by arbitration clause. This has been mentioned in the Section 8 of Arbitration and Conciliation Act. However, there is one exception here. In the conditions where the dispute settlement clause in the contract grants an option of getting the dispute adjudicated by arbitration or by Court, the party has to make a formal application to the Court for referring the dispute to arbitration which would be accompanied by a duly certified or original copy of the arbitration agreement. However, the agreement need not be signed to be considered as a valid agreement.

Also, there is no requirement for filing a formal application seeking a specific prayer for reference as long as the party raised an objection on the maintainability of suit in the light of the arbitration clause.

Validity of arbitration agreement:

Now you must be curious about who exactly would check the validity of any arbitration agreement? So, the 2015 Amendment Act narrowed the scope of the power of the judicial authority to examine or check the validity of any arbitration agreement between parties to agreement. It was decided that a mere incorporation of a document or clause relating to arbitration will be considered as a valid arbitration agreement. However, intention of the parties as well as consensus-ad-idem of the parties will be very important even if the same is implied from their conduct.

Non-signatories as a party to arbitration:

Since International Commercial Arbitration and its rules are developing day by day with every award, now the process has become very flexible. In one of the very important case of Supreme Court namely Chloro Controls Private Limited v. Severn Trent Water purification Inc & Ors, it was held that in any foreign seated arbitration the definition of the word ‘party’ to an arbitration agreement will also include persons claiming through or under such party, specially when there is a clear intention of the parties to bind both the signatory as well as the non-signatory parties. Therefore, even non-signatories to the arbitration agreement, whether in a domestic arbitration or India-seated International Commercial Arbitration, are concerned may also participate in arbitration proceedings as long as there are proper and necessary parties to the agreement. However this will depend on the nature of relief claimed by or against a party.

So this was all about notice of arbitration or request for arbitration and reference of the dispute to arbitration.

Question of the Week:

In what cases the court denies to refer a dispute for arbitration despite the presence of arbitration clause in the agreement?

As we discussed in the previous blog post, if the subject matter of the dispute is not arbitrable, the court can deny to refer the dispute to arbitration.

Spotify Link:

The post VOILA! LET’S ARBITRATE! BLOG POST-5: Send ‘EM THE NOTICE OF ARBITRATION. appeared first on LexForti .

The very important case in which the arbitrability of disputes was specifically discussed in India was the Booze Allen and Hamilton Inc. v. SBI Home Finance Ltd. In this case, the Supreme Court opined that the meaning of Arbitrability of any dispute changes in different contexts. It stated that the disputes which are capable of being adjudicated through arbitration; disputes which are covered by the arbitration agreement and the disputes that the parties have referred to arbitration will be arbitrable.

It was also stated by the court that any dispute which can be decided by a civil court can also be resolved through Arbitration.

However, there were few disputes which were excluded from the resolution by a private forum. These consisted of the disputes which are related to rights and liabilities arising out of any criminal offence, matrimony, guardianship matters, insolvency and winding up matters, testimony matters, trust deeds & Indian Trust Act, 1882 and evictions & tenancy related matters.

Now apart from this, there has always been a huge confusion that whether the disputes of fraud and Malpractices were considered to arbitrable or not. There are various judgements which provided different opinion in this context. In the case of N. Radhakrishnan v. M/s Maestro Engineers, it was alleged by one of the parties that the matters related to the serious malpractices and fraud are to be settled by court and not by the Arbitral Tribunal which was completely supported by the Court.

However, in Swiss Timing Limited v. Organizing Committee Commonwealth Games, 2010 as well as World Sport Group (Mauritius) Limited v. MSM Satellite (Singapore) Pvt. Ltd., the court held that Allegations to fraud are not a bar to refer the parties to a foreign seated arbitration. The only exception to refer parties to foreign seated arbitration are those which are specified in Section 45 of the Arbitration and Conciliation Act i.e., in cases where the arbitration agreement is either null or void, inoperative or incapable of being performed.

So, it can be concluded here that though the allegations of fraud are not arbitrable in ICA’s with a seat in India, the same bar would not be applied to ICA’s with a foreign seat.

Another important judgement which gave a very important opinion for the disputes related to fraud is the A Ayyasamy v. A Paramasivam & Ors., wherein the Supreme Court held that the allegations of fraud are arbitrable unless they are serious and complex in nature. It is important to note here that this opinion does not the overrule the case of N. Radhakrishnan discussed above but in fact is supplementary to that case. This judgment just differentiated between a “Fraud simpliciter” and “Serious Fraud” and insists that the serious fraud is best left to be determined by the court but the simple fraud can be determined by the Tribunal.

To simplify this opinion, the Supreme Court in Rashid Raga v. Sadaf Akhtar provide two prog tests to identify whether a particular dispute related to fraud is arbitrable or not. These two tests are:

1. Whether the plea permeates the arbitration agreement and render it void?
2. Whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain?

So, this was about arbitrability of disputes pertaining through fraud.

There are various other subject matters for which the Courts had various discussions and came on to a conclusion in regards to their arbitrability.

In 2019, a very important judgement came which simplified the meaning of arbitrability of any dispute and gave a four-fold test. In the case of Vidhya Drolia & Ors v. Durga Trading Corporation, it was held that a dispute would be non-arbitrable when:

1. It relates to action in rem or actions arising from right in rem.
2. It affects the third-party rights.
3. It relates to the inalienable sovereign and public interest.
4. It is specifically implied as non-arbitrable by a mandatory statute.

Later in various judgements it was also decided that the disputes related to oppression and management and Consumer Issues cannot be referred to arbitration as per tests given in the Vidhya Drolia case.

Question of the Week:

Whether the disputes pertaining to IPR are arbitrable?

Well, since there are not sufficient judgements as well legislations in this subject, the arbitrability of IPR disputes remain unsettled. However, through the various discussions of the Judges in Supreme Court and High Court on this matter, it can be understood that there cannot be bar on the arbitrability of the disputes relating to IPR arising out of the agreement entered by the parties and it will depend on the facts of each case.

Spotify Link:

The post VOILA! LET’S ARBITRATE! BLOG POST-4: ARBITRABILITY BEFORE ARBITRATION. appeared first on LexForti .

Keep reading for the answer to this question!!

Ever thought since when the concept of arbitration started happening? According to the biblical theory, King Solomon was considered to be the first arbitrator when he settled the issue between two women who were claiming to be the mother of a baby boy.

Wow!

Well, the same process which was used by the King Solomon has now evolved into a bigger platform of dispute resolution.

In India, the course of arbitration flourished since the end of nineteenth century and then it was recognized as form of dispute resolution for the very first time when Indian Arbitration Act, 1899 was enacted.

But since this enactment was restricted within the three presidency towns i.e., Madras, Bombay and Calcutta, Arbitration Act, 1940 was brought to fill the loopholes of the previous acts. However, this act was also criticized due to lack of provisions to deal with the enforcement of foreign awards.

After the economic liberalization in 1991, various steps were taken to attract foreign investment which required a comfortable business environment and ease of doing business. For this, the Arbitration and Conciliation Act of 1996 came into force which repealed the act of 1940.

This Act is based on the UNCITRAL Model law on International Commercial Arbitration, 1985. It covers both International and Domestic arbitration. Part-I of the Act deals with Domestic Arbitration and International Commercial Arbitration (with its seat in India) while the Part-II of the Act deals with Foreign Awards and their enforcement of foreign Arbitral Awards, 1958 (New York Convention) and Convention on the execution of foreign Arbitral Awards, 1927(Geneva Convention).

But still, this Act was lacking a lot of provisions to govern both International and Domestic Arbitration with time. Therefore, to overcome these problems, the Arbitration and Conciliation (Amendment) Act, 2015 and 2019 were enacted. These amendments granted flexibility to the parties with the foreign seated arbitrations to approach Indian Courts for aid in foreign seated arbitration. They also brought in the changes to expediate both domestic and international arbitrations.

Since we now know how the legislation for Arbitrations have evolved in India, aren’t you curious of how exactly the process of arbitration goes about in any international commercial dispute?

Well…Well…Well…

We are getting on that. Remember, the example we discussed in the beginning of this article. If you forgot, you can scroll way to the beginning of this blog and read it again. We will be using this example in the following explanation, so keep Reading!!

So, since the non-delivery of the goods has created a dispute between Mr O and Mr X, Arbitration is the best option to resolve this.

So, how should Mr O initiate the process of arbitration.

Step No.1: Since arbitration is a contract-based form of binding dispute resolution, the parties to a commercial dispute can initiate the process of arbitration, if there is an agreement between the parties which states that the parties can refer their disputes to arbitration.

Therefore, Mr O has to check first whether he and Mr X had any arbitration agreement or not. if they had, then he has to follow the next step. The steps of the arbitration would be set out in the contract which have to be followed before the parties can start the arbitration.

Step No.2: So, the next step for Mr O would be to send a “Request of arbitration” or a “Notice of Arbitration” to its opposite party, which in the present case is Mr X. Also, if the Arbitration agreement stated that the disputing party should nominate the Arbitrator, the notice should include the identity of the individual whom the claimant wishes to select.

Mr. X will have the opportunity to respond briefly within a set period of time and where appropriate, can also select the arbitrator.

Step No.3: Next, the tribunal is formally constituted with the number of arbitrators decided by both the parties to the dispute. And once the tribunal is constituted, the issues for determination would be identified which can be issues of fact, law or quantum. The process and the time table will also be decided which would be worked between the parties and the tribunal.

Step No.4: After taking care of all the above requirements, the arbitration will then proceed in accordance with the procedure adopted by the parties and the tribunal. This includes each party producing the written submission supported by the written witness statements and reports of technical experts wherever appropriate.

Step No.5: The court will then hear the partied wherein the lawyers of the Mr X and Mr O put forward the arguments and question the other party’s witnesses and experts. These hearings can last from half a day to many weeks and even months depending on the issue at stake.

Step No.6: After the hearing, the tribunal will produce its award which will be binding on both the parties.

Now if Mr X and Mr O are not satisfied with the award of the tribunal, they can challenge the award on the ground of the terms of the arbitration agreement, arbitral seat or the institutional rules for the arbitration.

If both the parties are satisfied with the awards, then,

Step No.7: The parties can enforce the award which can be enforced in the jurisdiction in which the enforcement is likely to be sought.

So, here was the history of the evolution of the Indian Arbitration legislation and a brief step-by-step explanation as to how the process of Arbitration works when an International Commercial Dispute has to be resolved through Arbitration.

Question of the Week: What are the qualifications which has to be kept in mind while choosing arbitrators?

Indian Law does not lay down any specific qualifications for arbitrators. Every person who is of age and of sound mind which are the basic qualifications. The Arbitrators are also chosen foe their knowledge, expertise, impartiality and integrity. Also, various arbitral institutions conducting international commercial arbitration in India have included foreigners in their panel of arbitrators in order to enable foreign parties to choose arbitrators of other nationalities whom they consider more suitable.

Spotify Link:

The post Evolution and Process of International Commercial Arbitration in India appeared first on LexForti .

In general words, resolution of the disputes arising under the international commercial contract through the process of arbitration is known as International Commercial Arbitration. Apart from this, the Arbitration and Conciliation Act, 1996 specifically defines ICA (short for ‘International Commercial Arbitration’) under Section 2(1)(f) as an arbitration relating to disputes arising out of a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident, or is in foreign hands. 

As we discussed in the last blog, it is used as a better alternative to litigation and the complete process is controlled primarily by the parties themselves instead of following the national legislation or established procedural rules. Most of the International Commercial Contracts contain a dispute resolution clause which specifies that if any dispute arises under the contract, it would be resolved through arbitration rather than litigation. 

Going ahead, Indian Laws provide for dispute resolution of any International Commercial Dispute through Arbitration and Conciliation Act, 1996. Arbitration involving a foriegn party and with its seat in India will be considered as an ICA. In such a situation, the Part-I of the Arbitration and Conciliation Act, 1996 will be applicable. However, if the seat is outside India, Part-II of the Act would be applicable instead of Part-I. The aim of this mechanism is to resolve the commercial disputes between the foreign and Indian entities within the framework of the Indian Arbitration Laws.

Now, be it an International or a domestic arbitration, the arbitration is of two types:

Number 1: Institutional Arbitration

Number 2: Ad Hoc Arbitration

In case of Institutional Arbitration, the parties agree to have an arbitral institution administer the dispute. These institutions make their own rules of arbitration which would be applicable to the arbitration proceedings conducted by them. These rules supplement the existing provision of the Arbitration Act in matters of procedure and other details as the legislation permits. The disputes dealt by them may also be general and specific in nature. The Arbitration institutes have fixed the arbitrator’s fees. Administrative expenses, qualified arbitration panels, rules governing the arbitration proceedings etc which help in the smooth and orderly conduct of arbitration.

In India, the Indian Council of Arbitration is the apex body in the arbitration matters and therefore handles the largest number of international cases in India.  Some of the other prominent institutions which conduct International Commercial Arbitration in India are: 

• Delhi International Arbitration Centre
• Indian Council of Arbitration
• ICDAR -New Delhi
• LCIA India and many more. 

Now, In case of ad hoc arbitration, the parties set up their own rules and conduct the complete arbitration independently. They are responsible for deciding the forum, the number of arbitrators, the procedure that will be followed and every other aspect of administering the arbitration. 

So, this is the introduction of International Commercial Arbitration and of the institutions which deal with the disputes related to it.

Question of the Week:

What if a party decided not to participate in the Arbitration Proceedings when the arbitration clause is invoked by the opposite party?

So, Ideally, when the parties agree to arbitrate, they shall be bound by the arbitration agreement. Therefore, when a party initiates arbitration proceedings, the other party will avail itself of the opportunity to present its case and participate in the proceedings. However, if the other party is unwilling to participate in the arbitration proceedings due any reason and therefore, do not participate in the proceedings, the arbitral tribunal proceeds in default of the participation of that party, Also, it should be noted that while taking this step, it has to be made sure that the unwilling party  is aware of the existence of the arbitration proceedings filed against it and is given full opportunity to present its case by filing a defense. Otherwise, later when it is proven that the party is not properly notified, the party may not be able to enforce the award given by the tribunal in those proceedings.

Spotify Link:

The post Voila! Let’s Arbitrate! Blog Post-2: What is International Commercial Arbitration? appeared first on LexForti .

X delivered the ordered good within the decided time and Y accepted the delivery and even signed on the delivery receipt. However, when Y inspected the delivered goods after two days, they found out that 50 of the wooden plies delivered are broken. To point out the same, Y wrote a complaint letter to X stating the same and asked them to replace the damaged goods with the good ones. With this, they also asked X to compensate Y by giving them the discount of 10 Lakhs on the principal which has to be paid by Y as Y suffered a huge loss due to the delivery of the damaged goods.  

When X received the complaint letter, they accepted their mistake and sent a reply stating that they will send the re-made wooden plies to Y as soon as possible and replace them with the damaged ones. However, X denied to compensate Y stating that X had already accepted the delivery and did not inspect them on the same day. For the same reason the damaged wooden plies could not be replaced on time and therefore Y has suffered from the loss.

Now there is a dispute between X and Y wherein it has to be decided whether X is liable to compensate Y or not? and Before this, the most important question is,

What is the best way to resolve this dispute? Y should file a Civil Suit against X in the Court?

No! Nah! Not at all!

This is the point where our best bet should be on an Alternative Dispute Resolution. So, when X and Y included the “Arbitration Clause” in their agreement, there is never a best time than this to use that clause.

Now your question must be, why do we choose Arbitration over a Civil Suit? Keep reading guys!!!

WHAT IS ARBITRATION?

Arbitration is a private dispute resolution process. That means, instead of filing a civil suit in a court for a commercial dispute, the parties submit their dispute to an Arbitrator or any number of Arbitrators. After considering the statement of claim and respondent’s statement, and other documents and hearing the parties fairly, the Arbitrator or Arbitrators come to a conclusion and give an award which will be binding on the parties. Simple?

But the civil suit also sounds like this. Is Arbitration any different?

Yes! Definitely! Totally!

AND, HOW IS IT BETTER?

Reason Number 1: Arbitration is consensual

This means that Arbitration happens only when both the parties agree to such dispute resolution process. Unlike this, civil suit can be started by any one of the parties and the other party, then, has no other option than to be a part of the court proceedings whether they like it or not.

Reason Number 2: Parties chose their own arbitrator or arbitrators.

Ever heard that the parties chose their own judges in the court? But this happens in the process of Arbitration. In fact, the parties can decide the number of Arbitrators with whatsoever required qualifications to resolve their dispute. No Questions Asked!

Now, the most important benefit of getting your own arbitrators is – that the qualifications of the Arbitrators can be according to the subject matter of dispute. That means, the complete dispute resolution would be much smoother and reasonable than normal court proceeding.

Reason Number 3: Arbitration is a neutral process.

Its an International Commercial Dispute, that means two different countries are involved in the transaction. Can the parties go for a civil suit? Wouldn’t it become complicated and unfair?

Of course!

Because, then in a normal court proceeding, one of the parties can be said to be in an advantageous position because any one of the Country’s laws and process would be followed.

But, in Arbitration, both the parties get to decide the applicable legislation, venue of the arbitration, seat of the arbitration and even the language used in the complete process. Isn’t it great?

Reason Number 4: Arbitration is a confidential process. (Sshh)

For example, the subject matter of the dispute is related to the ownership of any IP right or any trade secret.

Then, Arbitration gives complete right to the parties to keep the process completely confidential.

Reason Number 5: Decision is final and easy to enforce.

Since the complete process is agreed upon by the parties themselves according to their comfortability and chosen options, the decision is much more acceptable by the parties than the judgement given by the Civil Court. Therefore, the execution of the award also goes very smoothly.

And the most important aspect of all is: THE RELATIONSHIP BETWEEN BOTH THE PARTIES REMAINS MUCH STRONGER AFTER THE ARBITRATION THAN AFTER THE COURT PROCEEDINGS.

 This is what we call Arbitration and This is why we choose Arbitration.

Spotify Link:

The post Voila! Let’s Arbitrate! Blog Post-1: What Arbitration? Why Arbitration? How Arbitration? appeared first on LexForti .

Welcome to the Voila! Let’s Arbitrate Blog Post!!

I hope you are safe and healthy.

With the increasing cross-border transactions and business, the parties prefer arbitration as their dispute resolution mechanism. The growing popularity of arbitration to resolve the disputes of subject matters belonging to various areas of business and law demands lawyers and experts in this field to make the complete process smooth and effortless. Therefore, LexForti has come up with a Blog and Podcast series wherein from the very small rule to the international legislations related to International Commercial Arbitration would be discussed.

The Blogs and podcasts will be posted every Saturday bringing a detailed explanation of what is International commercial arbitration and how the parties approach the international forums to resolve their disputes.

We hope that you enjoy this series and learn a lot from this.

Spotify Link:

*This is not a course but an informative blog and podcast series based on verified sources.

The post Voila! Let’s Arbitrate!: Weekly Blog and Podcast Series on International Commercial Arbitration. appeared first on LexForti .