ADVANTAGES AND DISADVANTAGES OF INSTITUTIONAL ARBITRATION

BY: OYSHEE GUPTA

ROLL NUMBER: 950
STREAM: B.A.LL.B.(Hons.)
SUBMITTED TO: DR. P.P.RAO

ROUGH DRAFT SUBMITTED IN PARTIAL FULFILLMENT OF PROJECT FOR THE SUBJECT

INTERNATIONAL TRADE LAW
MARCH 2016
CHANAKYA NATIONAL LAW UNIVERSITY
NYAYA NAGAR, MITHAPUR,
PATNA, BIHAR 800001

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INTRODUCTION
Arbitration may be defined as the process by which a dispute or difference between two or more
parties as to their mutual legal rights and liabilities is referred to and determined judicially with
binding effect by the application of law by one or more persons instead of a court of law.
Arbitration is only an alternative to litigation and it also co-exists with it.
The object of arbitration is to provide fair and impartial resolution of disputes at a fast rate and at the
same time, it allows freedom to the parties to agree upon the manner in which their disputes should
be resolved, subject only to safeguards imposed in public interest.
In India, Arbitration as a mode of resolution of disputes came to be adopted from the medieval times
when trade and commerce between traders in India and outside started growing. Arbitration existed
in the form of informal agreements where disputing parties would agree to and listen to the decision
of a respected elder, whom they trusted implicitly.
Prior to 1996, in India, laws governing arbitration were encompassed in three enactments. Whilst the
Arbitration Act, 1940 contained general provisions pertaining to arbitration, the Arbitration (Protocol
and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961 dealt
with the enforcement of foreign arbitration awards. These legislations did not prevent disputing
parties from approaching the courts at any stage of arbitration. This factor and the interpretational
interplay between three different enactments ensured that simplicity, speed and efficiency, were
never going to be there. In fact the Supreme Court of India, while referring to the 1940 Act, observed
that the way in which the proceedings under the Act are conducted and without an exception
challenged in courts, has made lawyers laugh and legal philosophers weep in view of unending
prolixity, at every stage providing a legal trap to the unwary.
Post 1996, following much persuasion from the various bodies of trade, the Arbitration &
Conciliation Act, 1996 was promulgated. Commendably, the Act was based on the United Nations
Commission on International Trade Law (UNCITRAL) Model Law, which was recommended by the
General Assembly of the United Nations to all countries. The influence of the UNCITRAL Model
Law ensured some uniformity of the Act with arbitration worldwide, which was not entirely
unwelcome as the Indian economy was undergoing a sea-change following the crisis of 1991. It was,
at that time, the Act limited the manner in which a party could approach the courts, and significant
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power was given to the arbitral tribunal, including the power to rule on its own competence. This
resulted in rejection at the threshold of all sorts of miscellaneous applications that would normally
clog the courts.
As the Indian economy was on the verge of massive expansion, and foreign investment into India
was beginning to swell, a demand for institutional arbitration suddenly arose. Yet despite the surge in
foreign investment, the growth of institutional arbitration in India was relatively slow off the block.
Of late, however, a large number of well-known and internationally recognized institutional
arbitration centers-such as the International Chamber of Commerce, the London Court of
International Arbitration and the Permanent Court of Arbitration-have opened centers in India.
In an institutional arbitration, the arbitration agreement designates an arbitral institution to administer
the arbitration. The parties then submit their disputes to the institution that intervenes and administers
the arbitral process as provided by the rules of that institution. The institution does not arbitrate the
dispute. It is the arbitral panel which arbitrates the dispute.
All arbitral institutions do not provide the same services. Some institutions of high reputation simply
offer a set of rules and guidelines, and no other arbitral services. One such illustration is the London
Maritime Arbitrators Association (LMAA). There are other institutions, which provide rules and a
roster of qualified arbitrators but are not involved in the appointment of arbitrators; an example is the
Society of Maritime Arbitrators in New York.
Certain groups of institutions supervise the whole arbitration process from the notification to the
defending party of the claimants request for arbitration to, and including, the notification of the
arbitral award to the parties. For instance the International Court of Arbitration of The International
Chamber of Commerce.
OBJECTIVES
The objectives of the researcher are as follows:
To explore the concept of Institutional Arbitration after studying the concept and need for
arbitration

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 To study how the above has influenced the International Trade Law and applicability of the
same(with reference to India)

SCOPE OF STUDY
The scope of the study will be:
To understand the concept of Institutional Arbitration under the light of UNCITRAL model
law
To study the advantages and disadvantages of the same by studying certain Institutions of
Arbitration in the field of International Trade Law
To study the scope of Institutional Arbitration in India

HYPOTHESIS
The hypothesis proposed by the researcher is that the Indian Arbitration and Conciliation Act, 1996
has infused a fresh lease of life into the Indian institutional arbitration. Being based on the
UNCITRAL model, it is at par with international standard of arbitration. The arbitral institutions in
India also fulfill the basic requirements to an acceptable level though there does exists ample scope
for improvement. With a constrained ambit of public policy, conceivably by applying the French
concept of international public policy (international arbitral awards can be set aside if recognition or
execution is contrary to international public policy), the scope of institutional arbitration in India is
infinitude.

RESEARCH METHODOLOGY
The researcher has used doctrinal method of research. The researcher has confined her study to
various books and scholarly articles related to International Trade Law and Alternative Dispute
Resolution.
Sources of data:a. Secondary source- Reference books by S.C.Tripathi, Avtar Singh, P.C.Rao, William Sheffield,
NBER Research Paper (Working Paper No. 4136) and legal data resources such as JSTOR,
Westlaw etc.

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TENTATIVE CHAPTERIZATION
CHAPTER 1: INTRODUCTION
CHAPTER 2: DEVELOPMENT OF INSTITUTIONAL ARBITRATION UNDER UNCITRAL
CHAPTER 3: FEATURES OF INSTITUTIONAL ARBITRATION-STUDY OF ARBITRAL
INSTITUTES
CHAPTER 4: ADVANTAGES AND DISADVANTAGES OF THIS ARBITRATION MECHANISM
CHAPTER 5: SCOPE OF INSTITUTIONAL ARBITRATION IN INDIA
CONCLUSION, CRITICISM AND SUGGESTIONS
BIBLIOGRAPHY

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