Let’s take a small example. Mr X and Mr O had come into an agreement and signed a contract wherein Mr X had to deliver a decided quantity of goods to Mr O on a decided time. However, on the day of the delivery, instead of delivering the goods, Mr X one-sidedly revoked the contract due to some technical errors in the demands of Mr O. Due to this, Mr O asked Mr X for compensation since the non-delivery of the goods caused a huge loss to Mr O, but Mr X denied to fulfil this claim and this created a dispute between Mr X and Mr O. Now what should Mr O do?
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 For this, the Arbitration and Conciliation Act of 1996 came into force which repealed the act of 1940.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.
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