Party Autonomy in

International Commercial
Arbitration

Submitted by:

1. Aarushi Arya 19PGPIM061

2. Aditya Singh 19PGPIM063
3. Chitrang Negi 19PGPIM074
4. Parv Kulshrestha 19PGPIM086
5. Shubham Samdani 19PGPIM099
6. Vipul Panwar 19PGPIM111
Introduction:
International commercial arbitration is an alternative method of resolving disputes
between private parties arising out of commercial transactions conducted across national
boundaries that allows the parties to avoid litigation in national courts.

Increase in international trade and investment is accompanied by growth in cross-border

commercial disputes. Given the need for an efficient dispute resolution mechanism,
international arbitration has emerged as the preferred option for resolving cross-border
commercial disputes and preserving business relationships. With an influx of foreign
investments, overseas commercial transactions, and open ended economic policies acting as
a catalyst, international commercial disputes involving India are steadily rising. This has
drawn tremendous focus from the international community on India’s international
arbitration regime. Due to certain controversial decisions by the Indian judiciary in the last
two decades, particularly in cases involving a foreign party, the international community has
kept a close watch on the development of arbitration laws in India. The Indian judiciary has
often been criticized for its interference in international arbitrations and extra territorial
application of domestic laws in foreign seated arbitrations. However, the latest developments
in the arbitration jurisprudence through recent court decisions clearly reflect the support of
the judiciary in enabling India to adopt the best international practices. Courts have adopted
a pro-arbitration approach and a series of pro arbitration rulings by the Supreme Court of
India (“Supreme Court”) and High Courts have attempted to change the arbitration landscape
completely for India. From 2012 to 2018, the Supreme Court delivered various landmark
rulings taking a much needed pro arbitration approach such as declaring the Indian
arbitration law as seat-centric; removing the Indian judiciary’s power to interfe re with
arbitrations seated outside India; referring nonsignatories to an arbitration agreement to
settle disputes through arbitration; defining the scope of public policy both in domestic and
foreignseated arbitration; and determining that even fraud is arbitrable. In furtherance of this
approach, measures have been taken by the Indian government in support of the ‘ease of
doing business in India’, and after two aborted attempts in 2001 and 2010 to amend the
arbitration law, on October 23, 2015, the President of India promulgated the Arbitration and
Conciliation (Amendment) Ordinance, 2015 (“Ordinance”). The Ordinance incorporated the
essence of major rulings passed in the last two decades and most of the recommendations of
246th Law Commission Report, and have clarified major controversies that arose in recent
years.

International Commercial Arbitration:

Meaning Section 2(1)(f) of the Act defines an ICA as a legal relationship which must be
considered commercial,8 where either of the parties is a foreign national or resident, or is a
foreign body corporate or is a company, association or body of individuals whose central
management or control is in foreign hands. Thus, under Indian law, an arbitration with a seat
in India, but involving a foreign party will also be regarded as an ICA, and will be subject to
Part I of the Act. However, where an ICA is held outside India, Part I of the Act would have
no applicability on the parties (save the stand-alone provisions introduced by the Amendment
Act, unless excluded by the parties, as discussed later) but the parties would be subject to Part
II of the Act. The Amendment Act has deleted the words ‘a company’ from the purview of the
definition thereby restricting the definition of ICA only to the body of individuals or
association. Therefore, by inference, it has been made clear that if a company has its place of
incorporation as India then central management and control would be irrelevant as far as its
determination of being an “international commercial arbitration” is concerned.

Notably, the scope of Section 2 (1) (f) (iii) was determined by the Supreme Court in the case
of TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd.,9 wherein, despite TDM
Infrastructure Pvt. Ltd. having foreign control, it was concluded that “a company
incorporated in India can only have Indian nationality for the purpose of the Act”. Thus,
though the Act recognizes companies controlled by foreign hands as a foreign body corporate,
the Supreme Court has excluded its application to companies registered in India and having
Indian nationality. Hence, in case a corporation has dual nationality, one based on foreign
control and other based on registration in India, for the purpose of the Act, such corporation
would not be regarded as a foreign corporation. In a recent case, where the Indian company
was the lead partner in a consortium (which also included foreign companies) and was the
determining voice in appointing the chairman and the consortium was in Mumbai, the
Supreme Court held that the central management and control was in India.10

Party Autonomy:
A basic principle in international commercial arbitration is that of party autonomy. It is
described by the authors of Redfern and Hunter in the following terms: "Party autonomy is
the guiding principle in determining the procedure to be followed in an international
commercial arbitration. It is a principle that has been endorsed not only in national laws, but
by international arbitral institutions and organisations. The legislative history of the Model
Law shows that the principle was adopted without opposition..."

Dispute settlement is an important area in international contract and trade. Settlement either
by litigation in court or by alternative dispute resolution (ADR) is contemplated by
contractual parties in international transactions.

Arbitration is the usual ADR mechanism that is used for dispute settlement in international
commercial transactions. In contrast to the public nature of litigation, arbitration is a private
and closed procedure limited to the parties concerned. In considering the relationship
between litigation and arbitration, there is also a need to refer to the role of the state court in
arbitration, particularly regarding the extent of assistance and intervention in the process of
arbitration and enforcement of awards.
International Commercial Arbitration With Seat In India:
Notice of arbitration Arbitration is said to have commenced when the notice of arbitration
requires the other party to take steps in connection with the arbitration or do something on
his part in the matter of arbitration. Under Section 21 of the Act, a notice of arbitration has to
be served to the other party, requesting that the dispute be referred to arbitration. The day on
which the respondent receives the notice, arbitral proceedings commence under the Act. In a
Notice of Arbitration, a party communicates: a) an intention to refer the dispute to
arbitration; and b) the requirement that other party should do something on his part in that
regard. This will generally suffice to define the commencement of arbitration under the Act.

Arbitration is the usual ADR mechanism that is used for dispute settlement in international
commercial transactions. In contrast to the public nature of litigation, arbitration is a private
and closed procedure limited to the parties concerned. In considering the relationship
between litigation and arbitration, there is also a need to refer to the role of the state court in
arbitration, particularly regarding the extent of assistance and intervention in the process of
arbitration and enforcement of awards. Arbitration officially recognized. In the U.S. the
Federal Arbitration Act (FAA) was enacted in 1925, "to overrule the judiciary's longstanding
refusal to enforce agreements to arbitrate" and secures arbitration in accordance with the
terms agreed by the parties. Therefore, an arbitration agreement is an indispensable
requirement. An arbitration agreement can either be entered into with a primary transaction
agreement such as a sales or construction agreement, or can be included as an arbitration
clause in the primary agreement. A fundamental premise of arbitration is the necessity for
the parties to agree to arbitrate a dispute rather than proceed to litigation. An arbitral award
is final and binding. Arbitration has also been recognized by the international business
community as a useful and important device for resolving disputes. The arbitrators are private
individuals selected by the parties on a case-by-case basis. An arbitrator is usually a specialist
in the field of dispute, such as an engineer for building and construction disputes, an
accountant for monetary disputes, and a medical doctor for medical malpractice. In almost
all cases, however, a lawyer is also selected as one of the arbitrators.

As mentioned, arbitration is a private dispute settlement mechanism. In contrast to litigation

with a judge acting as a state organ, arbitration is settled by a private individual. However,
does an arbitrator have the necessary power to settle all cases? The arbitrator is delegated
authority by the parties who select the arbitrator. Within the ambit of the delegated authority,
the arbitrator can exercise the discretion for settling disputes. Even within this ambit,
however, the arbitrator is under some limitation by law and public policy. Where is the line
set dividing these limits from the agreement of the parties and discretion of the arbitrator?
Taking into consideration recent case law, this line is moving, and the sphere of party
autonomy is gradually expanding. But how is this expansion taking place? More specifically,
how are regulatory statutes and public policy being relaxed to govern arbitration in such fields
as antitrust laws, securities regulations, RICO, patent acts, taxes, punitive damages,
bankruptcy, labor, the Carriage of Goods by Sea Act (COGSA), and others? By reviewing many
aspects of case law, particularly by focusing on U.S. case law, these tendencies can be
scrutinized.

An arbitration agreement is usually made by two parties such as a seller and buyer in a sales
agreement, an owner and contractor, or a contractor and subcontractor in a construction
agreement. In the case of a construction project, if a subcontractor claims against a contractor
to extend the completion date in an arbitration between the two parties, the contractor will
not determine by itself because it relates to the completion date in the prime contract with
the owner. The contractor then asks the owner to participate in the arbitration between the
contractor and the subcontractor. The owner may refuse to participate in the arbitration
because the owner he did not agree to arbitration with the subcontractor, though the owner
agreed to arbitration with the contractor. The facts and the law may be similar in the two
arbitrations, and if they are consolidated, a conclusion can be reached in one procedure.
Otherwise, with separate arbitration procedures, different conclusions may be reached. In
such a case, if one party asks the court to consolidate the arbitration between the owner and
the contractor, and the arbitration between the contractor and the subcontractor, how does
the court decide the case? Does the court agree to consolidate the arbitrations or deny
consolidation? In the U.S., there is no uniform procedure; some states allow consolidation
under a state act, and others. Most state and federal courts require an agreement by parties
on consolidation of arbitration. The parties themselves decide the method and scope of
arbitration; party autonomy is recognized.
Classwide arbitration is a counterpart of class action in litigation, and is a kind of extended
style of multiparty arbitration, which usually involves fewer than ten parties. On the other
hand, there may be a great many members, such as 800, involved in classwide arbitration. As
in a class action, many arrangements need to be made in classwide arbitration. Should the
parties set all requirements and procedures? These details require scrutiny; sometimes court
involvement may be necessary.
Conclusion:
1. The application of the principle of party autonomy to determine the freedom of the parties' to
agree on the procedure to be adopted in an arbitration can be a complex matter.
2. Where the applicable procedural rule is agreed upon prior to the constitution of the tribunal, in
the arbitration agreement itself, it is doubtful that it can be changed by the parties without the
consent of the arbitral tribunal itself.
3. Where the arbitration agreement is silent on the procedural rule, the parties freedom to adopt
a procedural rule during the course of the arbitration will be dependent on the lex arbitri and the
institutional rules chosen by the parties to govern the arbitration (if any).
4. The lex arbitri may confer freedom of the parties to establish the relevant procedural rule (as
for example does article 19(1) of the Model Law). But this may be circumscribed by institutional
rules which the parties may have incorporated in their arbitration agreement. 5. In cases where
the parties do not have an unfettered right to establish the applicable procedural rule but require
the consent of the arbitral tribunal, the arbitral tribunal should be cautious before it seeks to
impose a rule at variance with to that agreed upon by the parties. In deciding whether to make an
order in terms of the parties agreement the tribunal should carefully consider the reasons
underlying the parties agreement, insofar as it is aware of them, and the position of the arbitral
tribunal itself.

International arbitration represents the future of alternative dispute resolution because it offers
many advantages to parties, including the ability to designate the governing law and avoid being
subject to a foreign jurisdiction's law. Ultimately, however, the parties do not always make the
final decision as to what law will apply to their dispute. The decision is left to the arbitral tribunal
by arbitration practice, national laws, and all international arbitration institutional rules. In recent
years, particularly since the adoption of the New York Convention, arbitration has been given new
life because arbitration awards are almost always enforced and rarely reviewed. Consequently,
the wide latitude given to arbitrators in making the final decision regarding what law to apply is
problematic if that freedom results in an application of a law other than the parties' designated
choice. m Public policy and mandatory national laws have arisen as a defense to strictly adhering
to the parties' choice of law provision. In practice, however, while pure party autonomy is not
followed all the time, the parties' reasonable expectations as to the applicable law are met
because arbitrators rarely derogate from the parties' choice. When the arbitral tribunal considers
public policy or a mandatory national law in contravention of the parties' agreement, these
limitations very rarely trump party autonomy. Since international arbitration is not purely domestic,
parties enter arbitration agreements seeking to limit potential liability to discrete and tangible
amounts. Parties to private contractual agreements have expectations that are better safeguarded
when arbitrators apply pure party autonomy rather than inject an element of instability and
uncertainty by applying a different method and hence, a different law. Thus, the current practice
conforms to current expectations and we are not so far from predictable choice of law after all.