ARBITRATION PROCEDURE

WHAT IS ARBITRATION?
Arbitration involves the determination of a matter in dispute by the judgment of one or
more persons, called arbitrators. Arbitration is the reference of the dispute or difference between
parties foe determination, after hearing both sides in a judicial manner, by the arbitrator. In
popular parlance, arbitration may be defined as a private process set up by the parties as a
substitute for the court litigation to obtain a decision on their dispute.

The object of arbitration is settlement of dispute in an expeditious, convenient,

inexpensive and private manner. Arbitration is a process of dispute resolution in which a neutral
third party (called the arbitrator) renders a decision after a hearing at which both parties have an
opportunity to be heard. It is the means by which parties to a dispute get the same settled through
the intervention of a third person, but without having recourse to court of law. An arbitrator is
basically a private judge appointed with consent of both the parties.

PRELIMINARY INFORMATION
The process of arbitration is governed by the arbitration and conciliation Act, 1996. The
act has been bought into force with effect from 25 January, 1996. The act is broadly based on the
model law on arbitration adopted by the United Nations commission on international trade law
(UNCITRAL).

It extends to the whole of India: except that certain parts are applicable within the State of
Jammu and Kashmir only if they relate to international commercial arbitration.

TYPES OF ARBITRAION
The Indian Arbitration and Conciliation Act, 1996 applies to both domestic arbitration in
India and to international arbitration. Section 2(1)(f) of the Act defines "International
Commercial Arbitration" as arbitration relating to disputes arising out of legal relationships,
whether contractual or not, considered as commercial under the law in force in India where at
least one of the parties is: an individual who is a national of, or habitually resident in any country
other than India; or
 1. a body corporate which is incorporated in any country other than India; or
 2. a company or an association or a body of individuals whose central management and
control is exercised in any country other than India; or
 3. The Government of a foreign country.

ARBITRATION AGREEMENT
The act defines arbitration agreement as “ an agreement by the parties to submit to
arbitration all or certain disputes which have arisen between them in respect of a defined legal
relationship whether contractual or not.”

The essentials of an Arbitration Agreement are:

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  It must be in writing.
 It must have all the essential elements of a valid contract.
 It must refer a dispute, present or future, between the parties.
 It may be in the form of an arbitration clause or in the form of a separate agreement. It is
not necessary that an arbitrator should be named in the arbitration agreement.

ARBITRAL TRIBUNAL
The ‘arbitral tribunal’ means a ‘sole arbitrator’ or a panel of arbitrators.

ARBITRATOR
A person of any nationality who is appointed by the parties themselves by their mutual
consent to act as a judge to decide their dispute out of the court is called an arbitrator. The act
gives the parties the freedom to fix the number of arbitrators, provided that such number shall
not be even number. If they fail to determine the number of arbitrator, the arbitral tribunal shall
consist of a sole arbitrator.

COMPOSITION OF ARBITRAL TRIBUNAL

 Number of arbitrators: Any number, as long as it is an even number, else a single
arbitrator may be appointed.
 Any nationality unless otherwise agreed by the parties. Impartial and independent.
 Each party may appoint one arbitrator, and the two appointed arbitrators shall appoint the
third arbitrator who shall act as the presiding arbitrator.
 One or more experts may be appointed to report on specific issues.
 If one party fails to appoint arbitrator within 30 days, or if the two appointed arbitrators
fail to agree on the third arbitrator, then the Chief Justice of High Court may appoint any
person or institution.
 Chief Justice of High Court will pay due regard to any qualifications required of the
arbitrator by the agreement of the parties and any other considerations required to appoint
an independent and impartial arbitrator.
 In case of International commercial arbitration, CJ will be CJ of India.

JURISDICTION OF ARBITRAL TRIBUNAL

 “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators.
 It can rule on its own jurisdiction, i.e. for questions regarding existence or validity of
arbitration agreement. So arbitration clause is an agreement that is independent of other
terms of contract.
 So if A.T. rules that contract is null and void, that does imply invalidity of the arbitration
clause.

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ARBITRATION PROCEDURE
1. Submission of Statements of Claim and Defense:
The claimant should submit statement of claims, points of issue and relief or remedy sought. The
respondent shall state his defense in respect of these particulars. All relevant supporting
documents must also be submitted. Such claim or defense may be amended or supplemented any
time.

2. Hearings and written proceedings:

After submission of documents and defense, unless the parties agree otherwise, the Arbitral
Tribunal can decide whether there will be oral hearing or proceedings can be conducted on the
basis of documents and other materials. However, if one of the parties requests, the hearing shall
be oral. Sufficient advance notice of hearing should be given to both the parties.

3. Settlement during arbitration:

It is permissible for parties to arrive at mutual settlement even when arbitration is proceeding. 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. Such Arbitral Award shall have the same force as any other Arbitral Award.

4. Arbitral Award:
The decision of Arbitral Tribunal is termed as 'Arbitral Award'. The arbitrator can decide the
dispute ex aequo et bono (In justice and in good faith) if both the parties expressly authorize him
to do so. The decision of Arbitral Tribunal will be by majority and the arbitral award shall be in
writing and signed by the members of the tribunal. The award must state the reasons unless the
parties agree otherwise. The award should be dated and place where it is made should be
mentioned. Copy of award should be given to each party.

5. Cost of Arbitration:
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.

6. Intervention by Court:
One of the major defects of the 1940 Arbitration Act was that the party could access court almost
at every stage of arbitration - right from appointment of arbitrator to implementation of final
award. The New 1996 Act has drastically curtailed the right of appeal and such appeal to the
court is now only on restricted grounds In some cases, if an objection is raised by the party, that
objection is decided upon by the Arbitral Tribunal itself, after which the arbitration proceedings
are resumed and the aggrieved party can approach the Court only after the Arbitral Award is
made. Parties to all kinds of international contracts mostly prefer arbitration as the favored
alternative of resolving their disputes because it promises freedom from the national courts of the
other party, among other advantages above mentioned.

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ADVANTAGES OF ARBITRATION

Final, binding decisions - While several ADR mechanisms can help parties reach an amicable
settlement, all of them depend ultimately, on the goodwill and mutual collaboration of the
parties. However, a final and enforceable decision may be obtained by recourse to arbitration.

Limited right of appeal - Although arbitral awards may be subject to being challenged, the
grounds of challenge available against arbitral awards have been limited by the new Arbitration
and Conciliation Act, 1996.

Speed and economy - Arbitration is faster and less costly than litigation. The restricted scope for
challenge against arbitral awards, as compared with court judgments, provides the edge.
Arbitration ensures that the parties will not subsequently be tangled up in a protracted and
expensive sequence of appeals.

Flexibility of procedure - Further, arbitration also offers the parties the freedom and flexibility
to decide on the number of hearings, selection of arbitrators, the venue of arbitration, procedure
that may be conducted within an agreed time frame expeditiously and as economically as the
circumstances allow.

Confidentiality - Unlike trials, arbitration hearings do not take place in public and only the
parties themselves receive copies of the awards.

Neutrality - As per the arbitration agreement signed by the parties, arbitration may take place in
any country, under any law in any language and with arbitrators of any nationality. With this
flexibility, it is generally possible to structure a neutral procedure offering no unwarranted
advantage to any party.

Specialized competence of arbitrators - The Judicial system of any country will not permit the
parties to a dispute to select their own judges. On the other hand, arbitration presents the parties
an opportunity to nominate persons of their choice as arbitrators, provided they are independent.
This enables the parties to have their disputes resolved by people who have specialized
competence in the relevant field.

International recognition of arbitral awards - Arbitral awards enjoy much larger global
recognition than judgments of national courts. Over 160 countries have pledged adherence to the
"1958 New York Convention" and its provisions have been incorporated into the domestic laws
of the contracting States. The Convention facilitates enforcement.

CONDUCT OF ARBITRAL PROCEEDINGS

 The parties shall be treated with equality and each party shall be given a full opportunity
to present their case.
 The parties are free to agree on the procedure to be followed by the arbitral tribunal in
conducting its proceedings.

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  Failing any agreement, the A. T. may conduct the proceedings in the manner it considers
appropriate.
 It has the power to determine admissibility, relevance, materiality and weight of any
evidence
 Location may be decided by parties, failing which, decision may be taken by A. T.
 The arbitral proceedings for a particular dispute shall commence on the date on which a
request for arbitration is received by the respondent.
 Any language/s; failing which A.T. may decide.
 A.T. may order any documentary evidence to be accompanied by translation.

HEARING & WRITTEN PROCEEDINGS

 A.T. may decide whether to conduct oral or written proceedings.
 Parties shall be given sufficient advance notice of any hearing/meeting of the arbitral
tribunal for inspecting documents, goods or other evidence.
 All statements / documents / applications / other information supplied to the A.T. by one
party shall be communicated to the other party.
 Any expert report or evidentiary document on which the A.T. may rely in making its
decision shall be communicated to the parties.
 If claimant fails to communicate his claim, A.T. will terminate the proceedings.
 If the respondent fails to communicate his defense, proceedings will continue, without
assuming admission of claim.
 If a party fails to appear at an oral hearing or to produce documentary evidence, the A.T.
may continue the proceedings and make the arbitrat award on the evidence before it.

ARBITRAL AWARD
A judgment or final decision of arbitrator on matters referred to him is called the arbitral
award.

Form & Contents of Award:

 An arbitral award shall be made in writing and shall be signed by the members of the
arbitral tribunal.
 An arbitral award shall state the reasons upon which it is based unless so agreed by
parties.
 The arbitral award shall state its date and the place of arbitration.
 After the arbitral award is made, a signed copy shall be delivered to each party.
 The A.T. may, make an interim award on any matter.
 If arbitral award is for the payment of money, the A.T. may include interest at reasonable
rate on whole or part of the sum, for whole or any part of period between cause of action
and date of award.
 If not stated, interest will be 18%p.a. from date of award to date of payment.

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COST OF ARBITRATION
Cost of arbitration shall be fixed by A.T.
A.T. will specify:
 Party entitled to costs
 Party which will pay costs
 Amount and method of calculating it
 Manner in which it shall be paid.
Costs will include:
 Legal fees/expenses
 Fees/expenses of arbitrators/witnesses
 Fees of the institution supervising the arbitration.

CASE LAW: References from Supreme Court of India & Bombay High Court

Case 1:
Omnia Technologies P. Ltd. …Petitioner Vs W.M.A. Van Loosbroek …Respondent.

Case 2:
World Sport Group (India) Private Limited Vs Board of Control for Cricket in India (BCCI).