ARBITRATION AS THE SCIENCE OF DISPUTE RESOLUTION AND ITS SCOPE POST-2020
Auhor: Balabavithra M 
Co-Author: Sri Vasavi Devi S 
 School of Law, SASTRA Deemed to be University.
School of Law, SASTRA Deemed to be University.
Arbitration is not just a mechanism to solve commercial disputes and problems with the trade practices, but also the method that helps a law aspirant to understand the major idea behind the application of the law itself. Arbitration gives a pleasing way to study the functioning of the dispute resolution mechanism in the long run. Extraordinarily, in some countries, Arbitration is used to solve a large number of employment disputes and consumer disputes. Issues that demonstrate an ethical facet are also solved through arbitration in a less time-consuming manner. This article explains how arbitration is very detail-oriented in its problem-solving mechanism.
The Article broadly discusses the history behind arbitration in India in comparison with the rest of the world. The article envisages the scope of arbitration post-2020 by comparing the present and the past standards of India with the global standards at a wide range. The Article explains the duties and important role of the arbitrator in solving a problem. The proximity of understanding is increased when methods and procedures of arbitration are explained along with its advantages and disadvantages. The expose also evaluates the functions of the statutes governing it in India and the other parts of the Earth.
Keywords: Arbitration, history, procedure, Arbitrator, Scope, International laws, Indian by-laws
ARBITRATION AS THE SCIENCE OF DISPUTE RESOLUTION AND ITS SCOPE POST-2020
Arbitration is the judging of a dispute between people or groups by someone who is not involved. Arbitration is the out-of-court resolution of a dispute between parties to a contract, decided by an impartial third party (the arbitrator) and there will be a final and binding decision known as an “award. Arbitration is faster and more cost-effective than litigation. The etymology of arbitration, as per middle English arbitracioun is borrowed from Anglo-French arbitracion, borrowed from Latin arbitrātiōn-, arbitrātiō, from arbitrārī “to consider, judge, ARBITRATE” + -tiōn-, -tiō, the suffix of verbal action is described.
A process of dispute resolution in which a neutral third party (the arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. Where arbitration is voluntary, the disputing parties select the arbitrator who has the power to render a binding decision.
In the case of Collins v. Collins, the court gave the definition of arbitration which reads as follows, “An arbitration is a reference to the decisions of one or more persons either with or without an umpire, a particular matter in difference between the parties.”
In the case of Wauregan Mills Inc. v. Textile Workers Union of America, the court defined arbitration as, “An arrangement for taking and abiding by the judgment of selected persons in some disputed matter, instead of carrying it to established tribunals of justice, and is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation.”
HISTORY OF ARBITRATION
King Solomon was the first arbitrator, according to the biblical theory. He tried to resolve the issue of finding the true mother of a baby boy. Two women were claiming the custody of a baby boy. One day, two women gave birth to baby boys, one of the babies died that night. The two mothers claimed the surviving baby boy as theirs and none of them was ready to relinquish their claim. To find out the truth, King Solomon told that it would be best to cut the baby boy into two halves and give one to each one of them. One mother agreed to cut the baby but the other mother was willing to give the baby boy to the former mother rather than to see the baby killed. King Solomon announced that the other mother who showed love towards the baby was the true mother and declared to return the baby to her. The concept of arbitration can be traced not only in the most primitive society but also in modern civilization. Commercial arbitration was known to the desert caravans in Marco Polo’s time and was a common practice among Phoenician and Greek traders.
Arbitration appears at the very dawn of Greek history. Homer described a scene in the Iliad, a poem composed during the eighth century BC. There is a dispute between the killer and the representative that took place in public in the market square. The two then appealed to a man ‘versed in the law’ to give a decision.
Initially, when Philip II of Macedon (father of the Great Alexander) tried to settle the dispute over the ownership of the island of Halonesus, it was denied. But there were several examples of arbitration was found in the Greek history, especially in the periods of Macedonian and Hellenistic. The territorial disputes between states and between individuals, disputes related to boundaries were resolved by the arbitration between 300 B.C and 100 B.C. Under Alexander and his successors, arbitration was employed frequently to resolve the quarrels and to preserve peace by the communities of the eastern world of the Mediterranean.
During the middle age, the arbitration reached a high degree of development among the Italian states. Arbitrational clauses had been interested in the interstate arbitration during the Greek arbitration. Then during this age, the “clauses compromissories” were inserted in the treaties of alliance or treaties of peace, and friendship for any future difficulties would arise between the parties, to be resolved by arbitrations.
In ancient times, the industrial controversies as in such matters as master and servant relationship, terms of employment, wages, and working conditions also been settled by the arbitration. In England, arbitration was used as a common means of settling the disputes of merchants and traders to avoid the courts. In 1698, there was the earliest recorded evidence relating to the written law of arbitration that happened in England.
The Chamber of Commerce of New York was organised in 1786, one of the first disputes submitted to the earliest known American Arbitration Tribunal involving the wages of seamen. After World War 1, there came new changes that modernized the arbitration law in America. Previously, the Conferences of 1899 and 1907 laid down the path to establish the Permanent Court of Arbitration at the Hague and to adopt conventions which provided the machinery for the administration of the arbitration. In 1926, the American Arbitration Association was created which faded out the existence of the Arbitration Society of America (1922) and the Arbitration Foundation (1925). After World War 2, due to the economic changes and the development of international trade which made the United Nations more concerned about the trade and to ensure the steady ensue of negotiation. The United Nations Commission on International Trade Law adopted the UNICTRAL Arbitration Rules for the first time in 1976.
Arbitration in India.
India has a long history of arbitration, people in ancient times voluntarily submitted their dispute to a group of wise men of a community called panchayat and they will be binding the decision made by the panchayat. During British rule, in 1772 the Bengal Resolutions created the modern arbitration laws in India. The 1st Indian Arbitration Law came into force in 1899 fundamentally based on the British Arbitration Act, 1889. The application of the Act was limited only to the presidency towns of Calcutta, Bombay, and Madras.
Until the Arbitration and Conciliation Act, 1996 (hereinafter referred as “the Act”) was enacted, there were three legislations namely:
- The Arbitration (Protocol and Convention) Act, 1937,
- The Indian Arbitration Act, 1940 and
- The Foreign Awards (Recognition and Enforcement) Act, 1961.
RECENT DEVELOPMENTS IN THE FIELD OF ARBITRATION
In International Arbitration
- Appellate procedure introduced in China – For the first time in China, the Shenzhen Court of International Arbitration (SCIA) introduced the optional procedure of appeal. In case of the award issued by the arbitration is unjust, the parties could move to the Court.
- Video conferencing protocol – Korean Commercial Arbitration Board International (KCAB INTERNATIONAL) released a draft for the introduction of video conferencing in the arbitration proceedings to tackle the problem of lengthy and incomplete pending proceedings.
- Transparency in the appointment – The Stockholm Chamber of Commerce (SCC) provides the criteria or factors on which the arbitrators are appointed to achieve transparency in the appointment of arbitrators. Following this, the International Chamber of Commerce (ICC), International Court of Arbitrators, Milan Chamber of Arbitration, and Vienna International Arbitral Centre (VIAC) also taken similar steps towards transparency.
In Indian Arbitration
- Sec. 87 of the Act was struck down by the Hon’ble Supreme Court – In Hindustan Construction Company Limited & Anr. v Union of India, the court dealt with the issue of automatic stays on the enforcement of arbitral awards. Sec. 87 of the Act by 2019 amendment stated that the application of the 2015 amendment shall not apply to the cases commenced on or prior to the 2015 amendment and shall apply only to the cases commenced on or after the 2015 amendment.
The Supreme Court observed the insertion of sec. 87 and the deletion of sec. 26 of the 2015 amendments, by observing that sec. 36 of the Act was corrected by the 2015 amendments. The court observed that the ruling in the case of the BCCI v. Kochi Cricket Private Limited which clarified that the amendment in sec. 36 of the Act would apply when the awards are challenged under sec. 34 of the act. Further, the court observed that the sec. 87 of the 2019 Amendment Act is contrary to the object of the 2015 Amendment Act. The court struck down sec. 87 of the Act by the 2019 amendment as being “manifestly arbitrary” under the Constitution of India.
- Significant changes brought by the 2019 amendment
- Constitution of Arbitral institution – Prior to the amendment, the parties are free to choose their arbitrators. But after the amendment, under Sec. 11 of the Act, the Hon’ble Supreme Court will designate the arbitral institution in case of the international commercial arbitration and in other domestic arbitration, the High Court of respective shall designate the arbitral institution. If the arbitral institution is not available, the Chief Justice of the High Court may maintain the panel of the arbitrators in the place of the arbitral institution.
- The requirement of qualification and experience – There are no specific eligibility criteria is specified under Sec. 11 of the Act. But, under Sec. 43J of the Arbitration and Conciliation Amendment Act, 2019 (hereinafter referred as the Amendment Act) provides the requirement of qualification, experience, and norms for accredited to be an arbitrator under the 8th Schedule.
- Arbitration Council of India – The Arbitration Council of India, an independent body shall be constituted under Sec. 43C of the Amendment Act with the duty to frame policies for grading arbitral institution, promote the institutional arbitrations, and to frame norms to maintain the quality of the arbitrators.
- Faster remedy – Sec. 29 of the Amendment Act provides the time limit to complete the arbitral proceedings with the intention to save time and to provide a faster remedy.
- Confidentiality – Sec. 42A of the Amendment Act requires that the arbitrators, arbitral institution, and the parties shall keep the documents and arbitration proceedings. The section provides an exception to the arbitral awards for the implementation and enforcement of the same.
PROCEDURE OF ARBITRATION IN INDIA
The following is the general process of arbitration in India.
- Arbitration tribunal – If the parties choose to settle their dispute through arbitration, then the next step would be the parties deciding the number of arbitrators. The number of arbitrators in the tribunal shall be odd. If one party appoints an arbitrator and the other party appoints another arbitrator, then both arbitrators have to decide the appointment of presiding arbitrator. The appointment shall be made as specified in the arbitration clauses or agreement, where it is expressly mentioned.
- Hearing of parties – The arbitral tribunal shall begin the proceeding by fixing the dates decided by the parties. The tribunal shall hear the claims and counterclaims of the parties and if it requires may hear the witness and shall examine any documents submitted as evidence in the proceedings.
- Proceedings – In India, there are no rules of procedure is provided under the Act. The parties may require the proceedings to be conducted in such a manner as they agreed in the arbitration agreement. Otherwise, the arbitrator is authorized to decide in which appropriate manner the proceedings be conducted. If it is not an institutional arbitration, then the arbitral tribunal is not bound to specific rules and procedures as is it is not bound by the Civil Procedure Code (hereinafter referred as CPC) and Indian Evidence Act
- Award – After hearing the parties and witnesses, if any, the tribunal shall deliver its judgment, known as an award. The award shall be final only when both the parties to the dispute agree to the terms of the arbitrational award and it is binding on the parties.
- Enforcement of awards – Under Sec. 36 of the Amendment Act, 2015, the arbitral awards shall be enforced in accordance with the CPC as it were a decree of the court.
TYPES OF ARBITRATION
Arbitration is of two types namely,
- International Arbitration
- Domestic Arbitration
- INTERNATIONAL ARBITRATION
- In International arbitration, one of the parties to the dispute or the subject matter of the dispute is foreign in origin.
- The arbitration may happen in India or outside India.
- Depending upon the facts and circumstances of the case and upon the contract between the parties, the question of which law is applicable shall be decided.
INTERNATIONAL COMMERCIAL ARBITRATION (hereinafter referred as ICA)
- According to sec 2(1)(f) of the Act, ICA is arbitration concerning the disputes which arise out of the legal relationships, notwithstanding its contractual nature, can be considered as commercial under the law in force in India and where one of the parties to the dispute is
- A national of or a resident in any foreign country or
- A body corporate which is incorporated in any foreign country or
- An association or a body of individuals whose central management or control is in any foreign country or
- The government of a foreign country.
- In ICA, the dispute in hand is to be decided by the arbitral tribunal by applying the laws of the country which the parties chose or laws of any given country can be applied which refers to the substantive law of the country, unless and until it is expressly provided by the parties.
- DOMESTIC ARBITRATION
- It is the type of arbitration which happens in India, both the parties of the dispute are Indians and the subject matter of the dispute is in India.
- The proceedings shall be in accordance with the substantive law of India.
- Types of arbitration recognized in India:
- Institutional Arbitration – In this type of arbitration, the parties choose an institution to settle the dispute between them. The rules of such institution shall be interpreted in the dispute.
- Ad-hoc Arbitration – In this arbitration, the parties are themselves agree to and arrange the arbitration. Usually, this type of arbitration happens in international arbitration as well. The rules of the proceedings shall be in accordance with the laws of the country in which it happens.
- Fast-track arbitration – Sec. 29B of the Act provides the fast track method of arbitration. The proceedings shall be completed and the award shall be decided within six months. This method of arbitration is time-saving than other types of arbitration.
ROLE OF ARBITRATOR
The arbitrator is the officially assigned person to settle a dispute, especially for a commercial cause. The following are the duties of an efficient arbitrator in the process of settling a dispute.
- Duty to act fairly – An arbitrator should act fairly to both the parties and he/she should not render any favours to one of them separately. An arbitrator should follow the principle found in the maxim audi alterem partem. Audi alteram partem (or audiatur et altera pars) is a Latin phrase meaning “listen to the other side”, or “let the other side be heard as well”. It is the principle that no person should be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against them.
- Adherence to the principle of natural justice – An arbitrator should staunchly follow the rules of natural justice. The principles of equity, law, and fair play in action should adhere. The parties should be given the opportunity to be heard equally.
- Hearing in presence of both the parties – The hearing should be conducted in the presence of both the parties and no document should be accepted in the absence of either of them.
- Duty to consider vital documents – The arbitrator should insist on the production of the agreement/document and cannot ignore any important material document while arriving at the solution.
- The arbitrator must act within the submission – The arbitrator’s roles and duties are provided within the contract and the Arbitration Act. He/she cannot go out of the way and reject any part of the document which causes disregard to his authority.
- Arbitrator to decide on his skill and knowledge – The 2019 Amendment has introduced the VIII Schedule which specifically provides that only a certain specific class of persons holding certain qualifications would be eligible to be accredited as an arbitrator including:
- Advocates chartered accountants, cost accountants, and company secretaries, or officers of the Indian legal service, or officers with a law degree or an engineering degree, officers having senior-level experience of administration [all with 10 years of experience], or a person having an educational qualification at the degree level with 10 years of experience in a technical or scientific stream in the fields of telecom, information technology, intellectual property rights or other specialized areas [both in the government and in the private sector].
- Significantly, any person having been convicted of any offense involving moral turpitude or an economic offense would conflict with these norms.
- The arbitrator cannot delegate his functions – One who has any authority to do any act for another must execute it himself, and cannot transfer it to another. The trust and confidence reposed in the party, cannot be assigned to a stranger, whose ability and integrity were not so well thought of by him for whom the act was to be done. Arbitrators cannot refer their arbitrament to others, nor to an umpire, to whom no submission was made.
- Power to proceed ex parte – The arbitrator can proceed to an ex parte only when a due notice is provided by the absent party.
- Duty to act within a reasonable time – If the arbitrators were delayed in a proceeding by illness or unexpected absence abroad, they would be open to removal, even though they had not personally flawed. An arbitrator may be incompetent or guilty of misconduct and yet not be guilty of such delay.
- A proper hearing – The minimum requirements of a proper hearing should include:
- each party must have notice that the hearing is to take place and of the date, time, and place of holding such hearing;
- each party must have a reasonable opportunity to be present at the hearing along with his witnesses and legal advisers if any, if allowed;
- each party must have an opportunity to be present throughout the hearing;
- each party must have a reasonable opportunity to present statements, documents, evidence, and arguments in support of his own case;
- each party must be supplied with the statements, documents, and evidence adduced by the other side;
- each party must have a reasonable opportunity to cross-examine his opponent’s witnesses and reply to the arguments advanced in support of his opponent’s case.
- each party to arbitration reference is entitled to advance notice of any hearing and of any meeting of the arbitral tribunal as provided under sec. 24 of the Act.
ADVANTAGES & DISADVANTAGES OF ARBITRATION
Strengths of arbitration:
- Neutrality and fairness – In the arbitration proceedings, the parties can choose the arbitrator to settle their dispute amicably. The arbitrator should be an independent and unbiased person to achieve neutrality in the arbitration.
- Confidentiality – As Arbitration is a private proceeding, the parties’ information and documents are submitted before the arbitrator remains confidential unless it is related to the court proceedings. The documents are prevented from disclosure to third parties.
- Faster resolution – Usually the arbitration procedure is a speedy and time-saving method of dispute resolution mechanism and in comparison, with the litigation procedure in court as the dates of the sittings are decided by the parties. In India, the case has to be decided within 12 mons which further can be extended to 6 months on the consent of the parties under the Act.
- Cost-effective – One of the main advantages of arbitration is cost-efficiency. Parties usually spend less money in the arbitration than in the litigation procedure as there are court fees, lawyer’s fees, travel expenses, and other expenses in the long run.
- Interim relief and award – In arbitration also, a party can obtain interim relief to obtain the other party from doing something against him. The parties are agreed to the award delivered by the arbitrator is final and shall be binding in case of binding arbitration. The award is based on the agreement between the parties so there is a final award until both parties are satisfied and the parties are having control over the arbitration.
- Flexible and simple procedures – If the parties chose institutional arbitration in case of international arbitration, they can choose the rules and procedures of the institutions like the Singapore International Arbitration Centre (SIAC), International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA) and Mumbai Centre of International Arbitration (MCIA).
- Informal environment – Unless the adjudication in court, there is no formal process involved in the arbitration proceedings. There is a friendly environment between the parties as they want to settle the dispute amicably and they can express their opinions to the arbitrator without any complicated formal procedure.
- Enforcement – In India, the awards shall be enforced by following the provisions of the CPC
- . In International Arbitration, the enforcement of the award is based on the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
- No appeal – The right to appeal in the arbitration is not available to the parties as the parties agreed to give up the right. But in rare circumstances, there is small scope for the right to appeal. However, no scope of appeal is available to correct or amend the award.
- Cross-cultural barrier – In the International Arbitration, one of the biggest drawbacks is to overcome the discrepancy in the language and culture of the two countries or states. There are no standard guidelines for the process of arbitration of such cases which results in the lack of consistency.
- Judicial intervention – In India, the judicial intervention prolongs the process of the arbitration including the enforcement of awards and appeals even though the judicial intervention is prohibited under Sec. 5 of the Act.
- Lack of evidence – There is no formal evidence process in the arbitration proceedings. The arbitrator may consider the evidence based on the information received from the parties at the trial.
- No cross-examination – If any information or document is presented by the witness in a case, then there is no option to cross-examine the witness.
- Discovery is limited – In the event of arbitration not filed until litigation has already begun, both parties lose the cost-saving advantage of limited discovery.
SCOPE OF ARBITRATION
The Hon’ble Supreme court in Booz-Allen& Hamilton Inc v. SBI Home Finance Ltd & Ors held that the Arbitration and conciliation Act, 1996 includes all categories of dispute and states that “The Arbitration and Conciliation Act, 1996 does not specifically exclude any category of disputes as being not arbitrable.”Arbitration is one of the fast-emerging mechanisms of dispute resolution. Arbitration is not a new concept to Indian laws. The history of arbitration can be traced back to the Indian laws and even the Hindu and the Muslim laws respectively. Arbitration does not confine its domain within the domestic affairs but also to the International affairs of this nation. The heights of arbitration have not been fully discovered yet and the process of its growth and zenith is impeccable when it comes to resolving conflicts.
To increase the success of arbitration awareness, research and better implementation are necessary. A prominent infrastructure to facilitate these three is necessary. Having analyzed the aforesaid measures, the present Indian laws need to provide a section/clause specially dedicated to resolving the disputes through arbitration.
Awareness: The Lack of awareness is the top reason for the failure of arbitration in India. Post-2020 a major part of small-scale businessmen and other small-scale commercial legal concerns are expected to sort arbitration for their redressal. The exceptional success of arbitration lies in the awareness that the citizens hold concerning their rights, especially while seeking justice. The higher the awareness about the need and significance of arbitration, the higher is the reduction of the burden to the courts of law in our country.
Research: The deep research and study of arbitration help us form better laws and provide a convenient method to resolve these disputes. Furthermore, this research can also come up with innovative methods to reduce the intervention of courts in the arbitration proceedings.
Implementation: Better implementation of arbitration is possible only through efficient arbitrators. In a country like India where the human recourses are not uniform in their moral beliefs a capable arbitrator is necessary to communicate the motive of both the parties and arrive at a fair award for them. The implementation of such an award can be made only when the parties are made to understand the core values and are provided with high proximity of beliefs that the redressal was fair.
From the above suggestive measures, it is understood that arbitration in India can be made successful only when the judicial system provides it’s supporting hand.
Several things have changed since the beginning of 2020 and many new fields of science and technology have evolved which proves that several new dimensions of disputes will be faced by the court of law. If the arbitration mechanism is properly utilized the precious time of the Indian courts can be fruitfully utilized for other major disputes. Another major hindrance to the arbitration is the lack of consistency in its proceedings and decision making. Since 2020 has proved that the citizens expect a quicker remedy and a fair solution, arbitration in India is predicted to be moving towards a more conventional and planned consistent method in its proceedings.
The majority of arbitration proceedings are intervened by the court of law for various reasons. It is to be understood that arbitration not only reduces the burden of the court but also makes sure that the disputes are more effectively solved. This cannot be achieved unless the government provides enough training and awareness. In the present day, only big cities have proper arbitration facilities and when the government comes forward to increase the facilities to smaller towns, the growth of judicial reliefs and the faith in a fair trial can be restored in the minds of the citizens. Thus, when the government intervenes in this regard a predominant amount of aggrieved parties will tend to move towards arbitration for a remedy post-2020.
The judicial system in India is prone to delay in the redressal. Hence, the predominant number of aggrieved parties chose arbitration. Especially business tycoons in resolving the commercial disputes prefer arbitration over a judicial remedy or any other alternate dispute resolution for an effective solution. Arbitration addresses the problem with its root cause and renders a very satisfying and apt remedy. The solution not only satisfies the parties but also provides an accurate solution to eradicate these patterns of disputes in the future.
Hence, arbitration is the science of dispute resolution mechanisms as it not only provides the solution for the dispute at hand but also helps cut the pattern of the same dispute. Thus, with a cable arbitrator, even the most crucial problems can be resolved through the arbitration mechanism.
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