Arbitration and Conciliation

Arbitration and Conciliation

·         Arbitration is a method for settling disputes privately, but its decisions are enforceable by law.

·         An arbitrator is a private extraordinary judge between the parties, chosen by mutual consent to sort out controversies between them.

·          Arbitrators are so called because they, have an arbitrary power; for if they observe submissions and keep within due hounds their sentences are definite from which there is no appeal.

·         Arbitration offers greater flexibility, prompt settlement of national and international private disputes and restricted channels of appeal than litigation.

·         In the words of Richard Cobden "At all events, arbitration is more rational, just, and humane than the resort to the sword."

·         Arbitration is a simplified version of a trial involving no discovery and simplified rules of evidence.

·          Either both sides agree on one arbitrator, or each side selects one arbitrator and, the two arbitrators elect the third to comprise.

·         Arbitration hearings usually last only a few hours and the opinions are not public record.

·         Arbitration has long been used in labour, construction, and securities regulation, but is now gaining popularity in other business disputes.

·          Litigation is expensive, time consuming and full of complexities.

Kinds of Arbitration

Adhoc Arbitration: In the course of a commercial transaction if a dispute arises and could not be settled amicably either by way of mediation or conciliation, the parties have the right to seek Adhoc arbitration. It is a process entrusted to a non-institution with all the procedural laws set out in specific agreement of the parties for that particular arbitration only.

Institutional Arbitration: In this kind of arbitration there will be a prior agreement between the parties regarding the institution that they will refer to in order to resolve their disputes in the course of a commercial transaction.

 Contractual Arbitration: In the present scenario, where the number of commercial transactions as well as the number of disputes are increasing, the parties entering into a commercial transaction prefer to incorporate an arbitration Clause in their agreement. The arbitration Clause provides that if in future any dispute arises between the parties they will be referred to a named arbitrator(s).

 Statutory Arbitration: If by operation of law the court provides that the parties have to refer the matter to arbitration it is termed as Statutory Arbitration. In this kind of arbitration the consent of the parties is not required. It is more of a compulsory arbitration and it is binding on the parties as the law of the land.

The Arbitration and Conciliation Act, 1996 provides two alternate methods of ADR: Arbitration and Conciliation.

·         Arbitration may be conducted ad hoc or under institutional procedures and rules.

·         Institutional arbitration is conducted under the guidance and well-tested rules of an established arbitral organization whereas under Adhoc arbitration, the parties have to draft their own rules and procedures to fit the needs of their dispute.

·         There are number of national and international organizations set up with the main object of settling commercial disputes by way of arbitration and other alternative dispute resolution mechanism.

·         These organizations lay down rules for the conduct of arbitration. These rules, however, cannot override the Act.

·         These organizations handle the arbitration cases of the parties and provide valuable services like administrative assistance, consultancy and recommending names of arbitrators from the panel maintained by them.

·         The Act contains general provisions on arbitration, enforcement of certain foreign awards, conciliation and supplementary provisions.

·         The three schedules reproduce the texts of Geneva Convention on the execution of Foreign Arbitral Awards, 1927, the Geneva Protocol on Arbitration Clause, 1923 and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

·                        The Act differs from previous Acts in many ways.

·         Firstly, where there is an arbitration agreement, the judicial authority is required to direct the parties to resort to arbitration as per the agreement, provided the application for that purpose is made before or when a written statement on the merits is submitted to the judicial authority by the party seeking arbitration.

·         Secondly, the grounds on which award of an arbitrator may be challenged before the court has been severely trimmed.

·         For e.g., a challenge will now be permitted only on the basis of invalidity of the agreement, want of jurisdiction on the part of the arbitrator or want of proper notice to a party of the appointment of the arbitrator or of arbitral proceedings or a party being unable to present its case.

·         At the same time, an award can now be set aside if it is in conflict with “the public policy of India” — a ground which covers, inter–alia, fraud and corruption.

·         Thirdly, the powers of the arbitrator himself have been amplified by inserting specific provisions on several matters, such as the law to be applied by him, power to determine the Venue of arbitration failing agreement, power to appoint experts, power to act on the report of a  party, power to apply to the court for assistance in taking evidence, power to award interest, and so on.

·         Fourthly, obstructive tactics sometimes adopted by parties in arbitration proceedings are sought to be thwarted by an express provision where under a party who knowingly keeps silent and then suddenly raises a procedural objection will not be allowed to do so.

·         Fifthly, the role of institutions in promoting and organizing arbitration has been recognized.

·         Sixthly, the power to nominate arbitrators has been given (failing agreement between the parties) to the Chief Justice or to an institution or person designated by him.

·         Seventhly, the time limit for making awards has been deleted.

·          Eighthly, present provisions relating to arbitration through intervention of court when there is no suit.

Advantages of Arbitration over Litigation

1. Arbitration carries a number of advantages over usual method of dispute resolution of redressal through a court of Law.
2. Arbitration promises privacy. In a civil court, the proceedings are held in public.
3. Arbitration provides liberty to choose an arbitrator, who can be a specialist in the subject matter of the dispute. Thus, arbitrators who are sector specialists can be selected who resolve the dispute fairly and expeditiously.
4. The venue of arbitration can be a place convenient to both the parties. Likewise the parties can choose a language of their choice.
5. Even the rules governing arbitration proceedings can be defined mutually by both the parties.
6. A court case is a costly affair. The claimant has to pay advocates, court fees, process fees and other incidental expenses. In arbitration, the expenses are less and many times the parties themselves argue their cases. Arbitration involves few procedural steps and no court fees.
7. Arbitration is faster and can be expedited. A court has to follow a systematic procedure, which takes an abnormally long time to dispose of a case.

8. A judicial settlement is a complicated procedure. A court has to follow the procedure laid down in the Code of Civil Procedure, 1908 and the Rules of the Indian Evidence Act. An Arbitrator has to follow the principles of natural justice. The Arbitration and Conciliation Act, 1996 specifically states that the Arbitral Tribunal shall not be bound by The Code of Civil Procedure, 1908 and The Indian Evidence Act, 1872.

9. Section 34 of the Act provides very limited grounds upon which a court may set aside an award. The Act has also given the status of a decree for the award by arbitrators. The award of the arbitrators is final and generally no appeal lies against the award.

10. In a large number of cases, ‘Arbitration’ facilitates the maintenance of continued relationship between the parties even after the settlement. It is quicker, cheaper, and more user-friendly than courts. It gives people an involvement in the process of resolving their disputes that is not possible in public, formal and adversarial justice system perceived to be dominated by the abstruse procedure and recondite language of law. It offers choice – choice of method, of procedure, of cost, of representation, of location. Because often it is quicker than judicial proceedings, it can ease burdens on the Courts. Because it is cheaper, it can help to curb the upward spiral of legal costs and legal aid expenditure too, which would benefit the parties and the tax payers.

 In this juncture, few things are most required to be done for furtherance of smoothening the mechanisms.

Few of them are:

• Creation of awareness and popularizing the methods is the first thing to be done.
• NGOs and Medias have prominent role to play in this regard.
• For Court – annexed mediation and conciliation, necessary personnel and infrastructure shall be needed for which government funding is necessary. Training programmes on the mechanism are of vital importance. State level judicial academies can assume the role of facilitator or active doer for that purpose. While the Courts are never tired of providing access to justice for the teeming millions of this country, it would not be incorrect to state that the objective would be impossible to achieve without reform of the justice dispensation mechanism. There are two ways in which such reform can be achieved – through changes at the structural level, and through changes at the operational level:
• Changes at the structural level challenge the very framework itself and require an examination of the viability of the alternative framework for dispensing justice. It might require an amendment to the Constitution itself or various statutes.
• On the other hand, changes at the operational level requires one to work within the framework trying to identify various ways of improving the effectiveness

of the legal system.

·         Needless to say, this will considerably reduce the load on the courts apart from providing instant justice at the door-step, without substantial cost being involved.

·         This is also avoiding procedural technicalities and delays and justice will hopefully be based on truth and morality, as per acknowledged considerations of delivering social justice.