Arbitration

Definition of Arbitration Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. In the sub-continent Arbitration process is widely used . In many parts of the country, disputing matters are taken to the Panch or the Panchayet to be resolved. Arbitration is less costly than a court trial thus people in the rural areas takes the option frequently. Arbitration is perhaps one of the most oldest method of resolution of disputes still in common use. Arbitration begins with an agreement, made either when a contract is made, or after a dispute has arisen. When a decision is made and an award or the result is given it may be or may not be honoured by the disputing parties. A valid award is given based on the arbitrator decision in respect of matters referred to him in accordance with that arbitration agreement. Should a party fail to honour the award, the other party may still seek relief from the courts. The Arbitrator is an independent, impartial but knowledgeable neutral, jointly appointed by the parties, who pay his fees and expenses. The arbitration is held in private, at a time and place that suit the parties, and the public and press are not admitted; however, some writers have suggested that this might change as various human rights statutes take effect. Arbitration is practised, in one form or another, in nearly every country of the world, and frequently in the resolution of disputes between countries. Most countries have their own Arbitration Act, Ordinance or similar, and over 30 countries have adopted the UNCITRAL Model Law, promulgated by the United Nations Commission on International Trade Law in 1985 Before 1996, Arbitrations were governed by Arbitration and Conciliation Act of 1940. In 1996 a new Act was passed which brought changes in the said law . One of the important changes the new Arbitration and Conciliation Act of 1996 brought in was it stated and compared the analogous provisions in the earlier enactment of the Arbitration Act of 1940 is relating to `enforcement of awards'. In the new Act of 1996, the legislature has wisely incorporated two provisions: 1. Conferring finality to the Arbitral award under Section 35 & 2. Enforcement of awards in the same manner as if it were a decree of the court under Sec 36. Section 35 gave the final recognition to the arbitral award as final and binding, unless impeached on the grounds set out under Section 34. Previously in the Act of 1940, the award was implied yet there was confusion or confrontation at times on the point of recognition of the award unless and until decreed.

Arbitration Agreement Section 2(a) of the Arbitration Act of 1940 states that, Arbitration Agreement means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not. The arbitration agreement or the arbitration clause in an agreement is called Submission. An arbitration agreement is a written contract in which two or more parties agree to settle a dispute outside of court. The arbitration agreement is ordinarily a clause in a larger contract. The dispute may be about the performance of a specific contract, a claim of unfair or illegal treatment in the workplace, a faulty product, among other various issues. People are free to agree to use arbitration concerning anything that they could otherwise resolve through legal proceedings. An arbitration agreement can be as simple as a provision in a contract stating that by signing that contract you are agreeing to arbitration in the case of any future disputes. For example, a business owner can ensure that potential dispute costs remain low by requiring anyone doing business with them to sign an agreement to arbitrate instead of litigate--to settle the matter out of court. In the case of more complicated business matters, a mandatory arbitration clause may be necessary.

Principal Characteristics of Arbitration

The principal characteristics of Arbitration are: 1. Arbitration is consensual: 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. In contrast to mediation, a party cannot unilaterally withdraw from arbitration. 2. The parties choose the arbitrator(s): Under the WIPO Arbitration Rules, the parties can select a sole arbitrator together. If they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator. 3. Arbitration is neutral: In addition to their selection of neutrals of appropriate nationality, parties are able to choose such important elements as the applicable law, language and venue of the arbitration. This allows them to ensure that no party enjoys a home court advantage. 4. Arbitration is a confidential procedure: The WIPO Rules specifically protect the confidentiality of the existence of the arbitration, any disclosures made during that procedure, and the award. In certain circumstances, the WIPO Rules allow a party to restrict access to trade secrets or other confidential information that is submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal. 5. The decision of the arbitral tribunal is final and easy to enforce: Under the WIPO Rules, the parties agree to carry out the decision of the arbitral tribunal without delay. International awards are enforced

by national courts under the New York Convention, which permits them to be set aside only in very limited circumstances. More than 140 states are party to this Convention. Essential Elements of Arbitration 1. A valid arbitration agreement must fulfil all the essential elements of a valid contract. In order it to be binding and accepted by law it must be in writing. 2. Though signatures of the disputed parties are not necessary but the document must show mutual agreement to agree upon the settlement of disputes by arbitration. 3. The agreement may or may not have the name of the person, working as the arbitrator mentioned. 4. The agreement may be to refer present difference or possible future differences to arbitration. 5. If there is an arbitration clause in the arbitration contract and for some reason the contract comes to an end due to frustration or some other form of fraud or misrepresentation, still the arbitration clause may be binding in the eyes of law. If there is no clause then there is no binding. 6. The agreement to refer disputes to arbitration is not valid if it lacks the essential elements of a contract, that is, if it is done through fraud or coercion. 7. The construction of an arbitration agreement cannot be thwarted by narrow pedantic interpretation. Who can & cannot refer disputes to Arbitration

An arbitration agreement is a valid contract, thus it can only be referred for dispute resolution by arbitration by persons who is capable of forming a contract. The persons who can refer to arbitration are enumerated in the following: 1. A partner with the proper authority by the other partners can refer disputes to arbitration. 2. The manager of a Hindu joint family can submit for arbitration for the petition of joint family property. 3. A trustee may refer disputes to arbitration The persons who cannot refer to arbitration are as follows: 1. A minor or a lunatic cannot refer disputes to arbitration. 2. In a suit or proceeding, the next friend or guardian cannot enter into any compromise on behalf of a minor without the courts permission. 3. An agent cannot refer disputes to arbitration unless especially authorised 4. Solicitors and advocates have no implied authority to submit arbitration on behalf of their clients.

5. An insolvent cannot submit to arbitration. Matters which can be referred to Arbitration All disputes which can be decided by the civil suit can also be decided by arbitration. Following matters can be referred to arbitration: 1. Disputes relating to money or property. 2. Amount of damage payable for breach of contract. 3. Maintenance payable to the wife after divorce. 4. Terms of separation between husband & wife. 5. Questions of law. Matters which cannot be referred to Arbitration As per general practice, matters involving personal rights, disputes regarding compliments or dignity, moral questions or questions of public law cannot be resolved by arbitration. Following matters cannot be referred to arbitration: 1. Matrimonial matters, like divorce or conjugal rights. 2. Insolvency matters, Ex- declaring a person insolvent. 3. Criminal offences. 4. Dissolution or winding up of a company. 5. Matters relating to guardianship of minors or lunatics. 6. Testamentary matters like validity of a will Types or Methods of Arbitration The Arbitration Acts states thats there is 3 types or methods of Arbitration. They are: 1. Arbitration without the intervention of the court. 2. Arbitration through the court when no suit is pending. 3. Arbitration a suits Arbitration without the intervention of the court

This is a case where the arbitration proceedings take place outside the court and there is no suit pending but the award of the arbitrator can be filed in court and executed through the court as if it is a decree of the court. Section 3 to 25 of the Act relates to such types of Arbitration

Arbitration through the court when no suit is pending

If there is an arbitration agreement, the parties may proceed with the arbitration independently of any court. Though in section 20 of the Act, certain other alternative procedures are also stated. When there is an arbitration agreement and no suits pending, then any party is free to apply to the court for filing the arbitration agreement. The court then issues a notice asking the parties to show cause as to why the agreement should not be filed. If no sufficient cause is present the court then orders to file the agreement and an arbitrator is appointed by the parties or in case of disagreement, by the court. Arbitration a suits

In section 21 to 25 of the Act, if there is a suit pending, then the parties may decide to settle the matter by arbitration. In any suit if the parties agree to resolve the matter through arbitration, the parties may at any time before the judgement is preannounced apply in writing to the court for an order of reference. With the order of reference, the arbitration takes place in the same manner as an arbitration without the intervention of the court Statutory Arbitration

Some statues provide for compulsory arbitration in dispute arising out of matters concerning the Cooperative Societies Act, 1912, The industrial relation Act etc. These are called Statutory arbitration. In such cases the statues concerned generally provides for the procedures according to which the compulsory arbitration is conducted. In cases where the procedures are not mentioned, it will follow the rules stated in the Arbitration Act. Advantages of Arbitration Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings. Such as: 1. When the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed (as one cannot "choose the judge" in litigation). 2. Arbitration is often faster than litigation in court. 3. Arbitration can be cheaper and more flexible for businesses. 4. Arbitral proceedings and an arbitral award are generally non-public, and can be made confidential. 5. Due to the provisions of the New York Convention of 1958, arbitration awards are generally easier to enforce in other nations than court judgments. 6. In most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability

Disadvantages of Arbitration Some of the disadvantages include: 1. Cost: Although parties generally pay for the services of the arbitrator and/or an arbitration agency, if one is selected, the speed, efficiency and reduced formality and procedures associated with arbitration leads to a process that is quicker and cheaper than litigation. 2. Limited rights of appeal: Arbitration statutes provide for limited grounds of appeal and fewer means to delay, challenge or overturn an arbitrators claimed mistake or error. 3. Lack of full formal discovery: In arbitration, all the procedural discovery methods available in a judicial proceeding, such as, depositions, written interrogatories, requests for admissions and the like are available only if it is specifically provided for by the agreement of the parties or by the rules adopted. 4. Waiver of right to jury: The constitutionally protected right to a jury trial is a fundamental and valuable right that is waived when parties select arbitration. An Arbitration Agreement, unless a different intention is expressed within, shall be deemed to include the provisions set out in the following: ** 8 points in the book. Pg-492