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1. What do you understand by Arbitration?

What are the objectives of the


Arbitration Act? What are the essentials for Arbitration Agreement?

Ans. Arbitration, a form of alternative dispute resolution (ADR), 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. It is a settlement technique in which a
third party reviews the case and imposes a decision that is legally binding for both sides.
[1]
Other forms of ADR include mediation[2] (a form of settlement negotiation facilitated
by a neutral third party) and non-binding resolution by experts. It is more helpful,
however, simply to classify arbitration as a form of binding dispute resolution, equivalent
to litigation in the courts, and entirely distinct from the other forms of dispute resolution,
such as negotiation, mediation, or determinations by experts, which are usually non-
binding. Arbitration is most commonly used for the resolution of commercial disputes,
particularly in the context of international commercial transactions. The use of arbitration
is far more controversial in consumer and employment matters, where arbitration is not
voluntary but is instead imposed on consumers or employees through fine-print contracts,
denying individuals of their right to access the courts.

Arbitration can be either voluntary or mandatory and can be either binding or non-
binding. Non-binding arbitration is, on the surface, similar to mediation. However, the
principal distinction is that whereas a mediator will try to help the parties find a middle
ground on which to compromise, the (non-binding) arbitrator remains totally removed
from the settlement process and will only give a determination of liability and, if
appropriate, an indication of the quantum of damages payable.

Objectives of the act:-

• To comprehensively cover domestic and international arbitration and conciliation


• To ensure that arbitral award is enforced in similar manner as decree of the court
• To ensure that settlement agreements of parties will have the same status as that
of awards or decrees.
• To ensure that supervisory and intervensionary rules of the courts are minimized
• To make provision for an arbitral procedure which is fair, efficient and capable of
meeting the needs of the specific arbitration.
• To ensure that the arbitral tribunal remains within limits of the jurisdiction.
• To permit an arbitral tribunal to use meditation, conciliation or other procedures
during the arbitral proceedings to encourage settlement of disputes.
• To provide that the settlement agreement reached by the parties as a result of
conciliation proceedings will have the same status and effect as an arbitral award
on agreed terms on the substance of the dispute rendered by an arbitral tribunal.
• To provide that, for purposes of enforcement of foreign awards, every arbitral
award made in the country to which one of the two international conventions
relating to the foreign arbitral awards to which India is a party applies, will be
treated as a foreign award.
Essentials of Arbitration Agreement:-

1t must be in writing: Like the old law, the new also requires the arbitration agreement
must be in writing.

An arbitration agreement is in writing, if it is contained in:


• A document signed by the parties,
• An exchange of letters, telex, telegrams
• Or other means of telecommunication, providing a record of agreement,
• Or an exchange of claims and defense in which the existence of the agreement is
alleged by one party and not denied by the other.
• The document containing an arbitration clause may be adopted by "reference", by
a contract in writing.

It should be in the form of an arbitration clause in a contract or it may be in the


form of a separate agreement.

It must have all the essential elements of a valid contract: An Arbitration agreement
stands on the same footing as any other agreement. Every person capable of entering into
a contract may be a party to an arbitration agreement. The terms of the agreement must
be definite and certain; if the terms are vague it is bad for indefiniteness.

The agreement must be to refer a dispute, present or future, between the parties to
the arbitration: If there is no dispute, there can be no right to demand arbitration. A
point to which there is no dispute cannot be referred to arbitration. The dispute may relate
to act of omission or commission.