Introduction:
The dearth of effective delivery of legal remedies to those in need is one of India’s major flaws in its legal system and law enforcement organisations. The number of pending cases is significantly higher than the number of cases that have been resolved. The main cause of this situation is an increase in the number of offenses as well as the length of time it takes the judiciary to resolve cases. Dispute resolution is a crucial aspect of any legal system, and one of the most important requirements of a peaceful society or group is the resolution of conflict cases through nonviolent means, of which arbitration is one. Arbitration is the most thorough and cooperative method of resolving disputes resulting from local and international economic connections, in which the parties jointly agree to resolve the problem by signing a contract.
What is Arbitration?
Arbitration is a technique by which parties can opt to resolve their disagreement through an agreement (usually predetermined) rather than going through the formal apparatus of judicial processes. It’s commonly referred to as an out-of-court settlement.
The technique of unraveling a conflict between people by supporting them in attaining an established legal resolution, according to the dictionary. It is a legal way for mediating disputes outside of the courts in which the disputants submit their dispute to one or more arbitrators, whose outcome(the “award”) they accept to be bound by. Simply, When the parties agree to have their concerns addressed through the mediation of a third party, but with all the legalities of a judicial decision, this is known as arbitration.
Alternative Dispute Resolution (ADR) includes arbitration. ADR procedures have several advantages, including lower costs, better procedural flexibility, increased confidentiality, increased possibility of settlement, choice of forum, choice of remedies, and so on. Arbitration, on the other hand, is one of the most well-known and commonly used forms of alternative dispute resolution. Arbitration is a legal practice that facilitates the fair resolution of disagreements between two or more parties by ordaining an impartial third party whose outcome is impeding on all parties.
Arbitration can be used to resolve any commercial dispute, including tort actions, that arises out of or relates to a contract. Public policy, on the other hand, would prohibit the referral of matrimonial, criminal, insolvency, anti-competition, or commercial court matters to arbitration. Employment contracts are also not captive to arbitration, but director-company disagreements are (as there is no master-servant relationship here). In general, substances covered by statutory remedies administered by statutory tribunals are not subject to arbitration.
Importance of Arbitration
Arbitration has gained a lot of traction in India these days, and people are more interested in it because it is a cost-effective and time-efficient process. The growth of arbitration was slow in the beginning because most people were unaware of the benefits it offers over the traditional litigation process. From the 1996 Arbitration and Conciliation Act to the 2019 amendment, there has been a lot of progress in the field of arbitration. International advances such as the UNCITRAL Model Law, which permits countries to keep up with worldwide changes in the field of arbitration, have enabled domestic progress in arbitration.
To bring the national legislation up to international standards, certain clauses have been added or changed. The most recent arbitration change was passed in 2019, with the Arbitration and Conciliation Amendment Act of 2019.
The establishment of ACI in 2019 resulted in legislative reform to that established arbitral tribunals and deciding the issues like the minimum qualification that is required about the nomination of an arbitrator, as well as to decipher a diversity of supplementary rules governing arbitrators. Furthermore, the authority given to the high courts and Supreme courts to designate arbitral tribunals will be judged by the ACI.
In comparison to the settlement of disputes in a court of law, the arbitration method of dispute settlement allows the disputed parties to hear their problems in a private meeting in an informal manner and tries to settle the disputes in a shorter time frame, with fewer complexities, and at a lower cost. This mechanism is adaptable, making it easier to schedule hearings at a convenient location and time for all parties involved. The rules and procedures involved in this process have been simplified to provide efficient solutions to the disputants. The parties have no right of appeal in arbitration, which is a unique feature. This method is also widely accepted, and the award can be enforced in the majority of countries. After the final decision on the particular dispute, no further arguments or discussions are permitted.
The result reached in arbitration is quick because the law governing arbitration has set a deadline for reaching a decision. When a dispute is referred to arbitration, it is conducted using a secret investigation process and a closed hearing, which keeps the issue private and avoids unwanted gossip. The arbitration may be in the same field as the dispute, and the concerned parties pick an expert who has specialized and experience in the subject matter. The lawsuit is less expensive due to the simple procedure and rapid resolution of the disagreement. Land law is limited to national territory, but arbitration law arose from international trade law and business, and disputes can be resolved by an international institution that is convenient for business people and firms from various nations and societies.
Commercial disagreements are notoriously stagnant to be deciphered in Indian courts. Arbitration can save a lot of time. Thanks to recent modifications to the Arbitration and Conciliation Act 1996, all India seated arbitrations must now be completed within 12 months of the tribunal’s creation (Act). The parties can extend the 12-month period for another 6 months with their affiliation, after which only the Court can grant an extension. Under Indian procedural law, parties have a variety of procedures for appealing a decision. A decision reached via arbitration, on the other hand, cannot be overturned. The losing party may seek to have the award annulled in Indian courts; however, unlike an appeal, such set-aside actions do not constitute a full-fledged analysis of the credits.
Arbitration permits parties to customize manners to the distinct occurrences of a dispute. In practice, parties often prefer institutional arbitration and follow the institution’s usual standards and functions.
Foreign parties entering into India-related contracts frequently choose foreign institutions such as the SIAC or Singapore International Arbitration Centre, the International Chamber of Commerce (ICC), or the London Court of International Arbitration (LCIA) because India lacks reliable arbitration institutions. With the development of the Mumbai Centre of International Arbitration (MCIA) and the planned establishment of similar institutes in other Indian cities, this may alter in the future.
Parties can send their disagreements to a neutral forum through arbitration. This is especially appealing in the context of international bargains. Hearings in arbitration are normally held in private, and the knowledge that a party is involved in arbitration procedures is kept hidden. The only time certain aspects of arbitration may be made public is if there are concurrent tribunal proceedings (e.g.when a party seeks interim relief from the courts in support of an arbitration or challenges an arbitration result in court). With a few exceptions, Indian court sessions are virtually usually open to the community.
If a side chooses arbitration over litigation, it must also choose the arbitration’s ‘seat.’ The seat of an arbitration is its legal location, and it decides the arbitration legislation that will apply to it. If the seat is in London, for example, the English Arbitration Act, 1996, will govern to the exclusion of all further national arbitration legislation. In the same way, if the seat is in Mumbai, Part I[1] of the Act shall apply in its entirety.
Part II of the Act[2] requires an arbitration recognition issued by a foreign seated tribunal to be executed in India if the award debtor’s assets are located in India. While the speed and surety with which such enforcement actions have progressed in contemporary years, there is no set time limit for enforcing a foreign award in India. Any disregard to awards issued in India-seated arbitrations, on the other hand, must be finalized within 12 months of the conflicting side attaining notice.
A party’s capacity to secure interim relief is critical to arbitration’s effectiveness (e.g. A party may seek a freezing injunction to deter the opposing party from spreading its assets while the arbitration is pending). Interim relief can be granted by Indian courts in assistance of arbitration, even arbitrations held outside of India. Before the arbitral board is created, parties can seek interim relief from Indian courts.
Conclusion
The rise of arbitration represents a significant shift in the approach to legislating and resolving disputes in a short period, with separate articles inside commercial contracts paving the way for the most appropriate and effective remedy without resorting to the courts. People have begun to understand the pure concept of it as well as its effectiveness in the enforcement of the law from a different perspective, resulting in the term “democracy” gaining much more important in people’s lives and society.
References:
[1] The Arbitration & Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India).
[2] supra note. 1.
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