LAW OF ARBITRATION

Arbitration and Conciliation Act 1996

It extends to the whole of India except the state of
J&K for domestic arbitration and extends to the
whole of India including J&K as far as the act relates
to international commercial arbitration.

It is deemed to have come into force on 25
th
January
1996.
The purpose of the Arbitration Act is to provide quick
redressal to commercial disputes

It is an alternate dispute resolution.

An arbitrator is basically a private judge appointed
with the consent of both the parties.

The present act is based on the Model Law drafted by
United Nations Commission on International Trade
Laws (UNCITRAL), both on domestic arbitration as
well as international commercial arbitration, to provide
uniformity and certainty to both category of cases.

Matters not referable to arbitration :
Suits for divorce or restitution of conjugal
rights.

Taxation

Non-payment of admitted liability

Criminal matters

Arbitration agreement : Sec-7 of the Act states :-

In this part, arbitration agreement means an agreement by the
parties to submit to arbitration all or certain disputes which have
arisen or which may arise between them in respect of a defined
legal relationship whether contractual or not.

An arbitration agreement may be in the form of an arbitration clause
in a contract or in the form of a separate agreement.

An arbitration agreement shall be in writing.

An arbitration agreement is in writing if it is contained in
a. A document signed by the parties
b. an exchange of letters telex, telegrams or other means of
telecommunication which provide a record of the agreement. Or
c. An exchange of statements of claim and defence in which the
existence of the agreement is alleged by one party and not denied by the
other.
d. The reference in a contract to a document containing an arbitration
clause constitutes an arbitration agreement if the contract is in writing
and the reference is such as to make that arbitration clause part of the
contract.
Court must refer the matter to arbitration in
certain cases.

If a party approaches court despite the existing
arbitration agreement the other party can raise
objection. However, such objection must be
raised before submitting his first statement on
the substance of dispute.

Such objections must be accompanied by the
original arbitration agreement or its certified
copy

On such application it is mandatory for the
judicial authority to refer the matter to
arbitration
Appointment of arbitrator: Sec-11 of the Arbitration Act states

A person of any nationality may be an arbitrator unless otherwise
agreed by the parties.

The parties are free to agree on a procedure for appointing the
arbitrator.

If a party fails to appoint an arbitrator with a notice period of 30 days
the other party can file an application before the court for
appointment of arbitrator.

Sec-10 state that the parties are free to determine the number of
arbitrators provided that such number shall not be an even number.

Failing the determination of the number of arbitrators by the parties,
the arbitral tribunal shall consist of a sole arbitrator.

Sec-20 states that the parties are free to agree on the place of
arbitration.

Sec-22 states that the parties are free to agree on the language of the
arbitration.

Commencement of arbitral proceedings

Sec-21 states that the arbitral proceedings in respect of a particular
dispute commences on the date on which a request for the dispute to be
referred to arbitration is received by the respondent.

An arbitration is expected to be independent and impartial

If there are some circumstances due to which his independence and
impartiality can be challenged, he must disclose the circumstances
before his appointment.

When Circumstances exist that give rise to justifiable doubts as to the
arbitrators independence or impartiality, or he does not possess the
qualifications agreed to by the parties his appointment can be
challenged.

The challenge to appointment has to be decided by the arbitrator
himself.

If he does not accept the challenge the proceedings can continue and the
arbitrator can make the arbitral award.

The challenge in court can be made only after the arbitral award is
made.

Conduct of arbitral proceedings

The arbitral tribunal should treat the party equally and
each party should be given full opportunity to present
his case.

The arbitral tribunal is not bound by the code of Civil
Procedure or the Indian Evidence Act.

The parties to arbitration are free to agree on the
procedure to be followed by the arbitral tribunal.

If the parties do not agree to the procedure the
procedure will be as determined by the arbitral tribunal

The tribunal also has powers to determine the
admissibility , relevance , materiality and weight of any
evidence.
The claimant should submit statement of claims,
points of issue and relief or remedy sought.

The respondent shall state his defence in respect of the
above

A respondent may file a statement of counter claims.

All relevant documents must be submitted.
Statement of claims reply thereof, counter statement of
claims can be amended or supplemented any time
before the publication of the award.

It is permissible for parties to arrive at mutual
settlement even during the arbitration proceedings


If the parties settle the dispute by mutual consent the
arbitration shall be terminated.

If both the parties agree the settlement can be recorded in the
form of an arbitral award which shall have the same force as
any other arbitral award.

The decision of the arbitral tribunal will be by majority.

The arbitral award shall be in writing and signed by the
members of the arbitral tribunal.

The date and place of the award must be mentioned.

Copy of the award should be given to each of the parties.

The arbitral award must state reasons for the award unless the
parties have agreed that no reason for the award has to be
given.
Cost of arbitration:

Cost of arbitration means reasonable cost relating to fees and
expenses of arbitrators and witnesses, legal fees and expenses ,
administration fees of the institution supervising the arbitration
and other expenses in connection with the arbitral proceedings.

The tribunal can decide the cost and share of each party.

The tribunal may refuse to deliver its award if the parties refuse
to pay the cost.

In the above case of non-payment any party can approach the
court.

The court will decide the cost of arbitration, ask the parties to
deposit such amount, the same being paid to the arbitrator by the
court, they will deliver the award.
Sec-5 of the act clarifies that notwithstanding anything
contained in any other law for time being in force in matters
governed by this act, the judicial authority can intervene only as
provided in this act and in no other way.

Sec-34 of the act states :

Recourse to a court against an arbitral award may be made only
by an application for setting aside such award in accordance
with Sub-section 2 and 3.

An arbitral award may be set aside by the court only if
a. The party making the application furnishes proof that
i. A party was under some incapacity or
ii. The arbitration agreement is not valid under the law to
which the parties have subjected it or , failing any
indication thereon, under the law for the time being in
force, or
iii. The party making the application was not given
proper notice of the appointment of any arbitrator or of
the arbitral proceeding or was otherwise unable to
present his case
iv. The arbitral award deals with a dispute not contemplated
by or not falling with in the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration.

-provided that , if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only
that part of the arbitral award which contains decisions on
matters not submitted to arbitration may be set aside. Or

v. The composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties , unless such agreement was in conflict with a
provision of this part from which the parties can not derogate
or failing such agreement, was not in accordance with this part
or
b. The court finds that
i. The subject matter of dispute is not capable of settlement by
arbitration under the law for the time being in force or
ii. The arbitral award is in conflict with the public policy of
India.
An award is in conflict with the public policy of India
if the making of the award was induced or affected by
fraud or corruption or in violation of confidentiality
norms or evidence norms.

An application for setting aside the award under Sec-
34 can not be made after three months have elapsed
from the date when the aggrieved party have received
the award.

However, if the court is satisfied that there was
sufficient reasons for the aggrieved party not to make
the application within the said period of three
months, court may grant another 30 days for filing of
the application and not thereafter.

Enforcement of award:

Where the time for making an application
to set aside the arbitral award under Sec-
34 has expired, or such application having
been made, it has been refused, the award
shall be enforced under the Code of Civil
Procedure as if it was a decree of a court.
Appeal:

An appeal shall lie from the following order and from
no other to the court authorized by law to hear appeals
from original decrees of the court passing the order,
namely

a. Granting or refusing to grant any measure under Sec-9

b. Setting aside or refusing to set aside an arbitral award under
Sec-34

No second appeal shall lie from an order passed in
appeal under this section. Hereafter the right lies only
to appeal to the SC.
Enforcement of foreign awards:

The foreign awards which can be enforced in India are:-
a. New York Convention award made after 11
th
Oct. 1960
b. Geneva Convention award made after 28
th
July 1924
c. Party which intends to enforce a foreign award has to produce
the arbitral award and agreement of arbitration to the district
court having jurisdiction over the subject matter of the award.

The enforcement of the award can be refused by the
court only if the party against whom it is invoked
requests the court and furnishes to the court proof that
the party was under some incapacity , or the agreement
was not valid or the party was not given proper notice of
appointment of the arbitrator or the arbitral proceedings
or the decision contains matters beyond the scope of
arbitration.

The foreign award is enforceable through court as if it is
a decree of a court.
If the court declines to enforce the
arbitral award appeal can be made to the
High Court and thereafter to SC.

The aggrieved party is open to approach
the international court of justice in case
the award is under the New York
Convention or Geneva/Paris Convention.
ICC's international Court of Arbitration, which was founded in 1923,
is the institution which rules on economic disputes throughout the
world. The Court of Arbitration deals with differences of opinion
between companies in different countries quickly, impartially, in total
confidentiality and with legal competence The Court of Arbitration
has a decisive advantage in relation to the legal procedures by virtue
of its speed. The parties have a free choice of arbitrator, location and
language of the hearing as well as the applicable law. The decisions
of the Court of Arbitration are definitive and binding.

The arbitrators are nominated from a group of 75 members in 57
countries. The Court of Arbitration itself ensures the organization
and functioning of the hearings and provides assistance to the
arbitrators if the need arises. It oversees the procedures, assists with
problems and ensures that the decisions are complied with. The
secretariat assists the parties and arbitrators with support in French,
English, Arabic, German, Spanish, Italian, Polish and Russian.


Parties who would like to call in the Court of Arbitration in the event of
a dispute should include this provision in their contract at the
negotiation phase - that is to say well before the slightest indication of a
conflict is apparent. The ICC therefore recommends that a clause
concerning the facility to refer the matter to a court of arbitration in the
event of conflict be included when drawing up the contract. It can be
formulated as follows: "Any disputes resulting from or in connection
with this contract will be ultimately decided in accordance with the
regulations of the Court of Arbitration of the International Chamber of
Commerce by one or more arbitrator(s) appointed in accordance with
this regulation."

To facilitate smooth arbitration, parties may find it useful to stipulate in
the arbitration clause
the law governing the contract
the number of arbitrators
the place of arbitration
the language of arbitration







Parties should also consider the possible need for special provisions in the
event that arbitration is contemplated among more than two parties. In
addition, the law in some countries may lay down certain requirements for
arbitration clause.

Here it may be noted that the ICC International Court of Arbitration does not
resolve disputes, but names independent arbitrators to carry out this task. Its
role is to organise and supervise, to help in overcoming obstacles that
arbitrators may encounter in international disputes and to ensure that awards
are enforced.

Parties are free to submit disputes to arbitrators of their choice and to fix the
place of language of the arbitration, as well as the law applicable to the
dispute. Awards are final and binding. Arbitration is faster than court
proceedings.


The request for arbitration should be sent to :

The Secretariat of the International Court of Arbitration
38 Cours Albert 1er
75008 Paris
FRANCE
Tel.: +33 1 49 53 29 05
Fax: +33 1 49 53 29 33

It may also be sent through any of the ICC's National Committees including
Indian National Committee, although the request is deemed filed at the date it
is received by the Secretariat of the Court in Paris.

B. NUMBER OF COPIES

The request and attached documents is supplied in as many copies as there are
other parties, plus one for each arbitrator and one for the Secretariat. For
example, if there is one defendant and if the agreement provides for 3
arbitrators, five copies should be sent