This article has been authored by Siddharth Malik, a fifth-year student at Himachal Pradesh National Law University, Shimla.
Alternative Dispute Resolution (hereinafter referred to as ADR) has a primeval heritage in India. It is preferred by citizens all over the world to settle their disputes through Tribunals of their choice. This has been a constructive resolution practice for quite a few reasons. An equivalent of it in the old Indian system is the ‘Peoples Court’ which is known as the ‘Panchayat’. Arbitration has since long been viewed as a mode of settling controversies, much favored in the civil law. In ancient times, the Greeks provided particular importance to arbitration. Situation had a different face in England, the attitude of English law towards arbitration has witnessed a shift from stiff opposition to moderate welcome and adopting it as an important mechanism in recent years. The Common Law Courts hesitated in referring disputes to extra-judicial determination. When the people began using the term “Arbiter”, its use was constricted to denote a person to whom a dispute was referred to despite taking care of any law in force. Later, the improved definition meant a reference to a person designated by an established system for a non-judicial settlement of a dispute. It was still regulated by the laws. The term was coined by the Romans. It simply means an arrangement where parties abide by the judgment of a designated person in order to end an ongoing dispute instead of taking the same to a judicial court of law.
The judgment given by the Apex court in the case of Food corp. of India v. Joginder Pal, loudly proclaims that the introduction of the ADR system has brought about a revolution in the administration of justice. This is a contemporary upheaval can deliver advanced results to a conflict expeditiously and at a cost much lower than in conventional litigation.
History of Arbitration
It was in 1794, when the arbitration process was for the very first time agreed to be used by the United States and the Great Britain to resolve the disputes related to amity, commerce and navigation, between the two nations, popularly known as The Jay’s Treaty 1794. It sought to settle all those issues, which were unresolved since the American Independence. When there was very little known of the International Arbitration system, this treaty gave a strong impetus and is generally known as “the start of modern International Arbitration”. The second instance could be drawn from the other treaty known as the Treaty of Ghent, between the same two nations.
Many International Treaties and Conventions have been enacted for promoting ADR worldwide. Some of them are as follows:
Dispute resolution outside of courts is an old and a well-practiced idea: Communities across the globe have for long been using the non-judicial ways of resolving conflicts. New entrant in this scenario is the extensive proliferation and promotion of ADR models, and the escalating use of ADR methods as a means to realize goals broader than the settlement of definite disputes.
Legal history gives the indication that man has been trying to make legal procedures-cheap, easy and convenient, for getting justice. In reaching resolution of disputes, ancient system of dispute resolution has made remarkable contribution in regard with disputes related to family, social groups, trade or property. An informal way of mediation was the Council of Village, consisting of elders, where disputes were resolved by them. These village level Councils played the leading role in settling disputes. These disputes were easily solved and the results of the Council were accepted by everyone. But this system lost its significance due to political and communal elements.
International Commercial Arbitration
With the progression of globalization, liberalization systems and fast headway in worldwide business connections, it is progressively relevant to have an adaptable and speedy technique for settling disputes. Arbitration is a favored procedure of dispute resolution picked by parties, wherein parties deliberately consent to present their case to an impartial outsider and consent to be limited by his/her choice.
The scope and applicability of section 2(1)(f) of The Arbitration and Conciliation Act, 1996 which narrates International Commercial Arbitration was determined by the Supreme Court in the case of TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd, where the issue was whether the 1996 Act applies to an Indian-incorporated company having foreign control. The Supreme Court concluded that, “a company incorporated in India can only have Indian nationality for the purpose of the Act.”
Arbitrability under Indian Law
Arbitration and Conciliation Act, 1996 involves the Indian laws on arbitration. The act is formulated considering the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976. The act also mentions that in order to make the India’s economic reforms effective, the provisions regarding the dispute resolution must be in consonance with the International command.
The parties have right to choose the law that will govern their dispute under International Commercial Arbitration. If that law is not defined properly, then the arbitral tribunal will incorporate the rules which it deems fit for disposing of the dispute. Though in cases of domestic arbitration, the substantive laws of India have to be adhered to while resolving the disputes.
The Arbitration and Conciliation Act, 1996 does not provide definition of the word “Arbitration”. The literal meaning is that “settlement” of differences or disputes by mutual understanding or agreement by the parties, where the rights and liabilities of the parties are determined with a judicial point of view, which are binding on them.
The Bombay High Court in the case of Jivaji Rao v. Khimji Poonja & Company, put forth the judgment that for the resolution of a dispute, arbitration is the advertence of the same between two or more parties to a person elected by said parties or designated under statutory authority. From a wider prospective, this dispute resolution mechanism by a mutually chosen Tribunal i.e. an Arbitrator or an Arbitral Institution, is nothing but a mere ancillary to the ordinary judicial machinery.
The idea behind the ruling by the Supreme Court in TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd, is that the companies with Indian nationality incorporated in India ought not to derogate from Indian Law and turn to foreign law and place it in the forefront of their arbitration as it would be against public policy and contrary to the intent of the Legislature. This should be irrespective of where the central management and control of the company is employed.
The above deliberation puts forth that arbitration has gained importance in the last few years as an important mode of resolving disputes, since it provides a time effective remedy and it also involves fewer complex structures, along with being fairly less expensive. The Arbitration and Conciliation Act, 1996 provides for detailed provisions related to domestic and international commercial arbitration. Many conventions regarding arbitration have been formulated at the International level and the Indian laws are in conformity to the provisions contained in those conventions. Indian Courts have also stated the difference between the domestic and international commercial arbitrations with the help of case laws.