The Arbitration Act
The Arbitration Act governs arbitration in India, including, typically, statutory arbitrations. The UNCITRAL Model Law on International Commercial Arbitration 1985 is the basis for the Arbitration Act. Arbitration is "a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. In other words, arbitration is a form of dispute settlement, where parties can avoid resolving their dispute in the public litigation. It is used mainly in solving disputes arising out of commercial matters. Arbitration should not be confused with mediation. In the arbitration, the arbitrator obliged to determine the dispute by reference to certain rules, rather than to seek compromise which is mediator's task.
Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties. Local courts can intervene in domestic arbitration proceedings. This includes the power to issue interim orders, order evidence to be produced directly to the tribunal and appoint arbitrators.
Appointment of arbitrators
Parties normally mention in their arbitration clause whether disputes will be adjudicated by a sole arbitrator or by a panel consisting of an odd number of arbitrators. The default provision is for a sole arbitrator. If the parties fail to agree on the appointment of arbitrators, they have the option under section 11 of the Arbitration Act to have the arbitrator(s) appointed by the court.
The Limitation Act 1963 applies to all proceedings under the Arbitration and Conciliation Act, just as it applies to proceedings in the Indian courts, except to the extent expressly excluded by the Arbitration and Conciliation Act. Any arbitration proceedings commenced after the limitation period (three years from the date on which the cause of action arose) will be time barred.
There are two types of Arbitration: 1. Voluntary Arbitration 2. Compulsory Arbitration
Voluntary arbitration is conducted independently from any influence of institutions and according to the rules chosen by the parties. In this type of process, the arbitrators are appointed by case-by-case basis, usually by parties. One option is that the parties select an appointing authority who will appoint arbitrators for the proceeding. The composition of the tribunal can vary from one to several arbitrator depending on procedural rules.
Compulsory arbitration process organized by permanent institutions, the process is more bound to the rules of the said institution. The institution provides arbitral services and normally appoints the arbitrators. One example of this kind of institution is the International Chamber of Commerce.
Benefits of Arbitration
Arbitration proceedings are far less formal than a trial. Unlike trials, which must be held in a courtroom, parties can agree to have arbitrations in any convenient setting of their choosing. Also, the rules of procedure and evidence are greatly relaxed and simplified, making the overall process much less formal than a typical trial and giving the parties more control.
Disadvantage of Arbitration
Disadvantage of Arbitration: The disadvantages are – (i) No power to Arbitrator to issue summons, examine witnesses, taking evidence etc. (ii) Chances of bias of arbitrator are high as the arbitrator is appointed by the parties themselves. One of the parties which is in dictating position may force the arbitrator of his choice, (iii) enforcement of Arbitration award can be only through Court. Arbitrations have also become time consuming and expensive and, even after an arbitral award, one party or the other tends to challenge the award in court.
India has continuously tried to amend its legislation regarding arbitration to meet the nations’ needs and its growing market. A change in the very culture of the Indian Arbitration is required. There needs to be a change in the perspective wit which arbitration is viewed. If India implements changes to regulate these major issues, it can be a preferred international arbitration destination.