Arbitration and its Challenges in India
Date : 20 Oct, 2020
Post By Advocate Chirag Alagh
A brief introduction to Arbitration
Arbitration is an alternative method of dispute resolution with the help of a private and independent third party. The arbitrator is a neutral and unbiased party who can assist the parties reach an amicable solution without causing discord between parties. Sometimes, instead of an individual, there exists an arbitration tribunal which comprises an odd number of arbitrators to avoid the possibility of a tie. The decision of an arbitrator or an arbitration tribunal is final and binding and enforceable just like a decree of a Court.
What are the advantages of arbitration?
There are various advantages to arbitration which are as follows:
Agreeableness and Fairness:
It is fair because if both the parties involved in the arbitration agreement to the arbitrator, it results in a fair outcome as compared to a traditional system. It is also fairer because in a traditional method of legal trial neither party has any choice in the process of selection of a judge or jury. Arbitration is also a more agreeable method of dispute resolution because the solution is arrived at by mutual decision of the parties.
Time Efficient: Any dispute resolution through arbitration is way easier than the complex traditional trial process. This is because every date for arbitration proceeding can be obtained without any formal submissions.
Less Expensive: An arbitration is always less costly than a trial process. This is due to the reason that the fee of an arbitrator is generally split between both parties. The cost of preparation of documentation is also much less in an arbitration process. Additionally, the seat of arbitration can be decided as per the convenience of both the parties which reduces the costs incurred in the travelling process by the parties.
Confidentiality: The process of arbitration is generally a very private process and thus, if the parties mutually desire any privacy, such confidentiality can be maintained by the parties
Finality: Once the arbitration proceeding is over, the award is binding and final and there is no procedure to appeal. This gives the arbitration award finality. With the traditional system of the trial process, the parties and the advocates keep appealing and thus there remains some time before finality is received.
What is the mechanism of arbitration in India? The system of arbitration involves the following steps:- An agreement with an arbitration clause: - Before the process of arbitration begins, it is mandatory that the parties have in place between them an arbitration agreement with an arbitration clause. In the absence of such an agreement, if the parties mutually agree to invoke arbitration, it is considered valid. Notice of arbitration: - Once the arbitration clause is invoked or where the parties consent to opt for arbitration, a notice of arbitration is sent to the defaulting party against by the party aggrieved by such default. Appointment of an Arbitrator or an Arbitral Tribunal: - Once the notice for arbitration is received by the opposite party, an arbitrator is appointed by both the parties in accordance with the manner specified in the arbitration agreement. In some cases, an arbitral tribunal can be appointed where the number of arbitrators present will be odd in number. This negates the possibility of a situation of a tie and gives finality to the award. Statement of Claim: - Once the arbitrator or the arbitration tribunal is appointed, the affected party drafts a Statement of Claim. Details regarding the facts of the dispute between the parties and the amount of compensation that is being claimed from the opposite party is mentioned in the Statement of Claim. A statement of counterclaim can be filed by the opposite party including the reply to the Statement of Claim. This process usually requires the help of lawyers. Hearing: - Once the drafting process is over, the individual arbitrator or the Tribunal hears both the parties and takes the evidence. Passing of the Award: - On hearing both the parties, the Arbitrator or the Tribunal passes an award and that award is binding on both the parties. It can be enforced just like a decree of the Court. Execution of Award: - Once the Tribunal passes the award, it has to be executed. This enforcement has to be done with the help of a lawyer. What are the challenges of institutional arbitration in India? There are four major challenges to institutional arbitration in India:- Prevailing misconceptions about institutional arbitration:- The existing misconceptions about institutional arbitration are many which include the notion that the institutional arbitration is generally more expensive than the ad hoc arbitration. Additionally, it is also believed that institutional arbitration is inflexible. However, the rules made by these institutions are quite flexible in nature and do not take away the entire autonomy of the parties over the process of arbitration. This lack of awareness poses to be a major challenge. No Government support:- It is common knowledge that the government is one of the major beneficiaries of the arbitration clauses in its contracts with private contractors. But the government does not do anything to promote institutional arbitration. This acts as a deterrent for the private individuals to opt for institutional arbitration also. Delays and judicial intervention: - The judiciary has time and again intervened in the process of arbitration and that has discouraged the parties from picking India as a seat for arbitration thereby reducing the scope of development of institutional arbitration in India. The author of this beautiful blog is Advocate Chirag Alagh having experience of 1 year in handling such matters from his experience he wants to share this beneficial information for the individuals having any issues with respect to the arbitration matters.
