Arbitration Dispute Resolution in India

Arbitration Dispute Resolution in India

 

Summary:
  • The arbitrator acts as a trial court judge, which makes things much easier for a party’s settlement. It differs from regular dispute resolution which goes through litigation lawyers and comes in front of a court judge.
  • Arbitration dispute resolution is widely used in the following types of cases; the most popular is family law, labour disputes and business disputes.
  • Arbitration dispute resolution is definitely more neutral because both sides can equally speak and talk about their issues clearly. This process makes things work out easily and in an expedited manner.

Arbitration- How does it differ from the other methods of dispute resolution?

Arbitration first came into effect in India in 1996, based on the UNICTRAL model law, focusing on providing effective and dispute resolutions. It’s a process of trials, where a third party that constitutes a single or more than one member, are known as Arbitrators, they hear each side of the story or the issues and finally come up with a solution, and then finally a final statement.

According to the statistics, we have more than 31 million cases pending in different Courts in India. There are currently more than 59,272 cases pending in the Hon’ble Supreme Court of India, round about 3.8 million cases pending in the High Courts and 27 million pending before the lower Courts.

Instead of the typical legal action, the arbitrator acts as a trial court judge, which makes things much easier for each party’s settlement. It differs from regular dispute resolutions, the standard process of going through litigation lawyers, which comes forward to a court judge. Then the judge decides what the final result is.

This process can become extremely tedious. However, this new way of arbitration dispute resolution is much better and is a cost-friendly alternative, and people tend to use this way for smaller matters. It’s not just cost-friendly but a more expedited way to solve your legal issues.

Recommended reading: Corporate Services Advisory

Advantages of Arbitration Dispute Resolution and Redressal

  • There are many advantages to Arbitration. Firstly, fairness means both parties agree to the arbitrator, which results in a fair outcome for both parties, different from a traditional trial where none of the parties has any control over the judge. Arbitration dispute resolution allows parties to choose their best arbitrator, and they can determine which one is better for their issue by speaking to them and seeing which one they are more comfortable with.
  • Timeliness, a legal resolution through Arbitration is much quicker than waiting for a date; it’s a much faster process, making it easier for many people as they want their issues to be solved as soon as possible. Furthermore, Arbitration dispute resolution is less formal and much more flexible. It’s a much more straightforward process; the arbitrator is just a call away, making it so much easier for everyone.
  • The cost, Arbitration dispute resolution does not include witnesses, and it doesn’t require much thought on who has to come and what precisely the witnesses will say. Both the parties tend to split the cost of the arbitrator; this makes it much cheaper so that everyone can afford it. Next comes confidentiality; the legal arbitration process is more private than a trial because it’s in a specific setting that you choose.
  • A lot of people appreciate arbitrating their legal disputes, and that is why it is seen that most agreements between big companies choose to have Arbitration as their dispute redressal solution as going to courts and speaking in front of a judge can get people very worried or scared.

In the setting, you choose mostly a familiar environment; there are not many people around, and you choose the people you want to be there. Therefore, the level of comfort increases, making it somewhat more accessible for you. Also, finally, another thing that makes it easier is that neither of the parties can file an appeal to the arbitrator’s decision; this is a plus point as it makes it easier for each party member to move on quicker. Agreeableness: There is often no middle ground; each party comes up with a simple mutual agreement, making things simpler for everyone. Finally, the procedures are highly simplified; the parties don’t need to spend vast amounts of money hiring lawyers for the representation, the legal outcomes are much more adaptable, and the results are much faster.

Recommended reading: Tax advisory & services in India

Disadvantages of Arbitration as a Dispute Redressal Resolution:

  • There are also some disadvantages of Arbitration dispute resolution to consider; firstly, you cannot file an appeal against the arbitrator’s decision, the arbitration decision is final. Nobody can go through an appeal process at all. Second, you cannot appeal the final decision; even if one of the parties feels like this decision is biased or unfair, nothing can be changed once the decision is made. Unlike going through the legal courts where you can appeal if you are not happy with their decision.
  • Another disadvantage is the evidence that’s provided; the judge tends to have specific regulations to follow when it comes to accepting and even looking for particular types of evidence.
  • On the other hand, arbitrators can accept any evidence they are willing to look at everything and see what is helpful for them. Also, there is a lack of cross-examination. The arbitration process typically includes documents but not witnesses, so this rules one thing out; it could be suitable for some but bad for others.
  • Also, there could be a lack of consistency, you could argue that the arbitrator is biased, but nothing could be done about it. Another disadvantage could be lack of evidence because, as said before, Arbitration is not evidence-based, the arbitrator could be biased again.

Furthermore, it’s not public, and the cases are dealt with much more accurately and privately. This could be a disadvantage to one of the parties. It’s not very transparent. The issue isn’t public, so there is an evident lack of transparency, which is relevant for some and irrelevant for others. Hence finding the right person is the key, the right person for both parties. This mutual agreement should be there before choosing your arbitrator.

Recommended reading: Legal entity in India

Types of Disputes where Arbitration Is used Most:

  • Arbitration dispute resolution is widely used in the following types of cases; the most popular is family law, as people want their family issues to be dealt with more discreetly, so they tend to choose the route. Another common place where Arbitration dispute resolution is used is in labour disputes and business disputes. Again, people want it to be dealt with faster and in a more private manner.
  • There are several techniques that we can use in alternative dispute resolution. These include the following, Arbitration: it tends to resemble a particular type of litigation in a way that both parties have to appear in front of a neutral party which then come soot with the final decision.
  • Next, mediation involves a simple and accurate third party; this mediator helps with discussions between each of the parties, making it easier for communication; however, the mediator doesn’t have to come up with any decisions; they help in communication bring the two parties together. Negotiation is when two or more parties enter this and reach a good compromise for all.
  • In this process, a negotiation occurs with the help of a third party who is neutral. However, mediators do not issue orders as an arbitrator does. Instead, they assist parties to settle. Conciliation is also a dispute resolution process that usually involves creating a positive relationship between the parties regarding a dispute. Conciliation tries to direct parties towards achieving a satisfactory common agreement.
  • Although this method also seems familiar to the process of mediation, the conciliator’s role is quite direct in resolving and achieving the actual resolution of a dispute and even advises and provides parties specific remedies by making proposals for a settlement. The Merriam Legal Dictionary defines conciliation as -the settlement of a dispute by mutual or friendly agreement to avoid litigation.
  • The fourth mode of Alternate Dispute Resolution is negotiation, which is a process where parties themselves or with the assistance of their counsels find solutions that they agree with and mostly giving offers without any legal counsel’s assistance.

Recommended reading: Type of corporate contracts

Key Highlights of Arbitration and Conciliation (Amendment) Act 2015

The Arbitration and Conciliation (Amendment) Act 2015 has brought many modifications that would be of utmost importance in supporting international Arbitration in the country. One of the essential provisions that permit the arbitral organizations to create their own directives consistent with the above-mentioned Act is to ensure that prompt, efficacious, and successful arbitrations. However, for international commercial Arbitration and institutional Arbitration, there is no limit set on the fee structure.

One of the most argued amendments is that the disputes under Arbitration have to be resolved in one year. However, with the parties’ consent, this timeline can be extended by a different timeline of six months. Although, the timely disposal within six months is further given incentives for by increasing the tribunal fee, and if the Arbitration is delayed, it is penalized by up to 5% per month for each month of delay. The amendment also provides for proceedings in an expedited manner under which the parties can give their concurrence for settling the dispute within six months without any oral hearing or formalities without filing any written pleadings.

Another amendment that holds significant importance is being neutral whilst promoting proceedings. So far as directing the arbitrator is concerned, the amendments have made sure that the arbitrator has enough time for arbitrations that they are presiding over. This has been made sure by stipulating guidelines by the International Bar Association under the fifth and the seventh schedule in accordance to including of the conflict of interest as a schedule to the Act.

Recommended reading: Corporate law and NCLT

Key benefits of using Arbitration for dispute resolution

Arbitration dispute resolution is definitely more neutral, and both sides can equally speak and tell their issues in a very different sort of way. The benefit of using Arbitration is to resolve a dispute is that it’s less stressful in a way that you don’t have to go to the courts, a negotiation is set on the table through your arbitrator, and things work out easily and in an expedited manner. Both sides can speak their mind and figure out their middle ground themselves. The decision is final once made; nobody can argue when the final decision is made.

Where does Arbitration take place?

It takes place in a common setting, like a simple board room or a conference room. Many times, Arbitration is held at the office or home of the arbitrator, which is commonplace for both, depending on where the parties have decided or a common setting where it’s comfortable yet right for the situation.

The date of the hearings is normally chosen according to the convenience of the parties, and unlike the Courts where the dates are assigned according to the convenience of the Courts, due to this, a lot of time-saving is possible. Although, it’s regardless to say that the hassle of courts can really be very tiresome and stressful.

Recommended reading: Claim as Financial Creditor

Conclusion

It can be certainly said that since the past few years its seen that India is absolutely on the right path of instituting faith in its legal system, which is the most important and primary condition for any country to become an arbitration hub internationally. Regardless to say that the regular work done in context to improving arbitration laws to keep up with the different social-economic changes is highly important and needs constant work done in this regard. However, it is relevant to note that India has already done a great deal of work recently. It is commendable how individuals, companies and other legal entities have started to make a conscious effort in choosing the ADR methods to resolve their disputes and not straightaway file Court cases and increase the burden on the Courts.

FAQs

 Yes. The LCA allows the parties in an arbitration to attend arbitration proceedings personally as well as authorize their representatives, such as lawyers, to attend the proceedings.

 The parties mutually decide the number of arbitrators and the procedures for the appointment of the arbitrators. If the parties do not concede to a mutual decision in regards to the arbitrators, then three arbitrators would be appointed. In case of a failure to appoint an arbitrator, an arbitrator can be appointed by the president of the arbitration centre or any Court that has the jurisdiction.

 An arbitration agreement exists independently of the contract made. Any extension, rescission of the contract or modification, unenforceability or invalidity of the contract would not affect the invalidity of the arbitration clause in the contract.

 The parties have to abide by the provisions of the LCA 2010, rules of arbitration centre if the Arbitration is an institutional arbitration and also any directions or decisions of the arbitral tribunal and competent court. Carrying out voluntary arbitral awards is encouraged by the arbitral tribunal by the State.

 Unless otherwise mentioned by any other specific law from the date of infringement of legal rights or interests, Arbitration should be initiated in 2 years.

Cookies on NRI Legal Services Sites

We use cookies for a number of reasons, such as keeping NRI Legal Services Sites reliable and secure, personalising content and ads, providing social media features and to analyse how our Sites are used.

Manage cookies