ARBITRATION

Arbitration, in law, is a form of Alternative Dispute Resolution - specifically, a legal alternative to litigation,
whereby the parties to a dispute agree to submit their respective positions (through agreement or hearing)
to a NEUTRAL third party called the Arbitrator (s) or Arbiter (s) for resolution.
The essence of arbitration is the settlement of disputes by a tribunal chosen by the parties themselves,
rather than by the Courts constituted by the State. The popularity of arbitration as a mode of settling
disputes is due to the fact that "the arbitration is regarded as speedier, more informal and cheaper than
conventional judicial procedure and provides a forum more convenient to the parties who can choose the
time and place for conducting arbitration and the procedure. Further, where the dispute concerns a
technical matter, the parties can select an arbitrator who possesses appropriate special qualifications or skills
in the trade"
Arbitrators and judges are similar in the business of dispensing justice - the judge in the public sector and the
arbitrator in the private sector.
The first stage in arbitration is the formulation of the arbitration agreement whereby the parties agree to
submit their present or future differences to arbitration. In case of any dispute, one of the parties to the
contract must file a request for Arbitration and pay the required fee to an Arbitration Institution referred to
in the agreement that provides Arbitration services. Often the Arbitration Institution will suggest an
arbitrator or arbitrators to which the parties must agree. The arbitrator may be an attorney, judge, or
business person.
After the parties have defined their dispute, there will be a hearing, often at the arbitrator's office, where the
parties present evidence and witnesses in a fairly informal manner without the formal rules of evidence used
in court litigation. After the evidence has been presented, the arbitrator reaches a decision and usually later
sends the parties a written reasoned opinion (an award).
In India arbitration has a very ancient heritage. Indian civilization expressly encouraged the settlement of
differences by Tribunals chosen by the parties themselves. An equivalent in the old Indian system for
arbitration is Panchayat. In the Western world also arbitration has a very long history. The Greeks attached
particular importance to arbitration. Submission of disputes to the decision of private persons was
recognized also under the Roman law known by the name of compromysm (compromise),
It was the exigencies of business that brought about an increasing demand for commercial arbitration in
England. The realities of business in due course brought about a change in judicial attitude. In India the
history of statute relating to arbitration begins with the regulations under the East India Company made for
the Presidency of Bengal, Madras and Bombay. These regulations were later expanded in the Civil Procedure
Act of 1859. In 1940, an Arbitration Act was passed for the whole of British India. On 26.01.1950 the Act was
extended to the whole of India except the Part B States. That Act was repealed by the Arbitration and
Conciliation Ordinance 1996 (Act 8 of 1996) which came into force on 25.01.1996 and on its expiry
Arbitration and Conciliation Ordinance (Act 11) of 1996 and thereafter during the Parliament session in 1996
came to be enacted as the Arbitration and Conciliation Act, 1996.
Since Arbitration is based upon either contract law of the law of treaties, the agreement between the parties
to submit their dispute to arbitration is a legally binding contract. All arbitral decisions are considered to be
final and binding. This does not, however, void the requirements of law. Any dispute not excluded from
Arbitration by virtue of law (e.g. criminal proceedings of compoundable nature) may be submitted to
arbitration.
The relevance of arbitration, its importance and its needs can never be over-emphasized. The rapid and
phenomenal growth of commerce and industry and the complex and varied problems thrown out by them
can find solution only through arbitration. Conventional courts are ill equipped to meet the needs.
MAJOR KINDS OF ARBITRATION

(1) Ad-hoc Arbitration: When a dispute or difference arises between the parties in course of commercial
transaction and the same could not be settled friendly by negotiation in form fo conciliation or
mediation, in such case ad-hoc arbitration may be sought by the conflicting parties. This arbitration is
agreed to get justice for the balance of the un-settled part of the dispute only.
(2) Institutional Arbitration: This kind of arbitration there is prior agreement between the parties that in
case of future differences or disputes arising between the parties during their commercial transactions,
such differences or disputes will be settled by arbitration as per clause provide in the agreement.
(3) Statutory Arbitration: It is mandatory arbitration which is imposed on the parties by operation of law. In
such a case the parties have no option as such but to abide by the law of land. It is apparent that
statutory arbitration differs from the above 2 types of arbitration because (i) The consent of parties is not
necessary; (ii) It is compulsory Arbitration; (iii) It is binding on the Parties as the law of land; For Example:
Section 31 of the North Eastern Hill University ACt, 1973, Section 24,31 and 32 of the Defence of India
Act, 1971 and Section 43(c) of The Indian Trusts Act, 1882 are the statutory provision, which deal with
statutory arbitration.
(4) Domestic or International Arbitration: Arbitration which occurs in India and have all the parties within
India is termed as Domestic Arbitration. An Arbitration in which any party belongs to other than India
and the dispute is to be settled in India is termed as International Arbitration.
(5) Foreign Arbitration: When arbitration proceedings are conducted in a place outside India and the Award
is required to be enforced in India, it is termed as Foreign Arbitration

ADVANTAGES OF ARBITRATION OVER LITIGATION

(1) Speed: Arbitral tribunals usually take less time than national courts to reach a final decision. Litigation
may take anything between five to fifteen years to resolve a dispute, sometimes even longer. Arbitration
proceedings on the other hand may be completed even within three to six months (In fast track
arbitration, hearing may be conducted on daily basis). Further, even Arbitrators can make interim
awards.
(2) Cost-effective: The relative speed of arbitration compared with litigation keeps lawyers' costs down.
Parties generally pay less in the long run for arbitration than if they take their case to national courts.
This is more so in cases of institutions/organizations/corporations which are prone to litigation. Wasting
time is thus not in the arbitrators' financial interest.
(3) Accessible: The Disputes-Settlement-Trust is there for everybody in business. It is accessible to persons,
companies and organisations of of all sizes, not just major corporations.
(4) Confidential: The arbitration proceedings respect your privacy. In contrast with ordinary courtroom
proceedings under public and media gaze, Arbitration Tribunals do not divulge details of an arbitration
case and keep the identities of the parties completely confidential. This protects large corporations
against negative publicity, which they might attract irrespective of whether they win or lose in litigation.
This also avoids the disclosure of trade secrets and potentially embarrassing information.
(5) Enforceable awards: In our country, an order made by an arbitration tribunal has the force of a decree.
Thus, it can be executed in the same manner in which a court decree can be executed. The results are
binding and not open to appeal as litigation is.
(6) Freedom of Choice: A known evil is always better than an unknown one. In arbitration proceedings
parties can choose their arbitrator, whereas they cannot choose their judge in litigation. Thus, in
arbitration proceedings they can rest assured of the temperament of the arbitrator whereas they are
totally at the mercy of "Judge". Further the chosen arbitrator can be an expert in the topic in dispute,
which a judge seldom is. This makes arbitration especially useful in complex, technical commercial
disputes.
(7) Reducing the Psychological Costs of Litigation: The speed of arbitration and the informality of the
process, couples with a less-confrontational discovery process minimizes and allows the parties to
quickly get on with their lives.
(8) Non Formal: Rules of Civil Procedure do not apply to the arbitration proceedings thereby making them
non formal and flexible. The parties are at liberty as far as presentation of their case is concerned. They
can proceed even without a lawyer and present their case in their own language according to their own
convenience. Arbitration proceedings are neither bound to court rooms nor court timings thus, providing
the flexibility which cannot be provided by traditional method of dispute resolution.

Other Advantages to the Beneficiaries

(9) No fetters attached: The Arbitrators are not bound by precedent and have great leeway in such matters
as - active participation in the proceedings, accepting evidence, questioning witnesses, and deciding
appropriate remedies. Arbitrators may visit sites outside the hearing room, call expert witnesses, seek
out additional evidence, decide whether or not the parties may be represented by legal counsel and
perform many other actions not normally within the purview of a Court. It is this great flexibility of action
which combined with the costs and prompt delivery of justice usually far below those of traditional
litigation makes Arbitration so attractive.
(10)Exceptions: Arbitrators have wide latitude in crafting remedies in the arbitral decision with the only real
limitation being that they may not exceed the limits of their authority in their award. An example of
exceeding arbitral authority might be awarding one party to a dispute the personal automobile of the
other party when the dispute concerns the specific performance of a business- related contract.
(11)Parties can Restrict Arbitrators: It is open to the parties to restrict the possible awards that the
arbitrator can make. If this restriction requires a straight choice between the position of one party or the
position of the other, then it is known as PENDULUM Arbitration or FINAL OFFER ARBITRATION. It is
designed to encourage the parties to moderate their initial positions so as to make it more likely they
receive a favorable decision.
(12)Experts to participate or decide: To ensure effective arbitration and to increase the general credibility of
the arbitral process, arbitrators will sometimes sit as a panel usually consisting of three arbitrators. Often
the three consist of an expert in the legal area within which the dispute falls (such as contract law in the
case of a dispute over the terms and conditions of a contract), an expert in the industry within which the
dispute falls (such as the construction industry, in the case of a dispute between a homeowner and his
general contractor) and an experienced arbitrator.