An Introduction to

Arbitration as an Alternative
Dispute Resolution System
Disputes are inevitable
• All law is for order.
• Order is conducive to development.
• Disputes block development, disturbs
peaceful life, if not resolved at the earliest,
they will develop into a conflicts and they
will be beyond control.
• Not to know dispute resolution is to be
functionally illiterate.
• Different methods of dispute resolution are tried
by the mankind.
• The principal among them are
– adversarial method
– inquisitorial method
– ADRs
Adversarial Method
• Involves pitching one party against the other to
derive truth.
• Contradicting claims of the parties are tested
against each other.
• A decision is imposed by a third powerful body,
usually the state.
• It is formal there is no party autonomy. This
decision making process is not collaborative.
Inquisitorial System
• The court is expected to conduct the
inquiry with the assistance of the parties.
• Not widely prevalent in India.
• The emphasis is not on establishment of
claim but is on finding out truth.
Alternative Dispute Resolution
processes (ADRs)
• Collaborative and participative.
• Expeditious and less expensive
• Non-judgmental and no problem of execution
• They are
– arbitration,
– negotiation,
– mediation,
– conciliation and
– hybrids of these methods.
All disputes need not go to
courts
• Docket explosion problem
• Whether generalist courts have
competence to decide all kinds of
disputes.
• Why every dispute is to be taken to courts
• Courts’ time is precious and it is to be
rationed for deserving cases
Words of wisdom
• “The main field of justice in not litigation
but non-litigation”-Lord Devlin
• “Discourage litigation, persuade your
neighbours to compromise whenever you
can, point out to them how the nominal
winner is often the real looser- in fees,
expenses and waste of time” - Abraham
Lincoln
Arbitration and Conciliation Act,
1996
• The law of arbitration in India was
contained in the Arbitration (Protocol and
Convention) Act, 1937,
• The Arbitration Act, 1940 and the Foreign
Awards (Recognition and Enforcement)
Act, 1961.
• The arbitral process obtaining there under
was profusely abused by the disputants.
M/s. Guru Nanak Foundation v. M/s. Rattan
Singh and Sons, 1981
• Interminable, time consuming, complex and
expensive court procedures impelled jurists to
search for an alternative forum, less formal,
more effective and speedy for resolution of
disputes avoiding procedural claptrap and this
led them to the Arbitration Act, 1940. However,
the way in which the proceedings under the Act
are conducted and without exception challenged
in courts, has made lawyers laugh and legal
philosophers weep.
What is arbitration?

• Lord Romilly M.R. has defined arbitration as “a reference

to the decision of one or more persons, of some matter
or matters in difference between the parties.”
• According to Lord Halsbury “it is an agreement made by
two or more parties between whom some difference has
arisen or may thereafter arise whereby they opine
another person to adjudicate upon such dispute and
agree to be bound by his decision.”
• It is a private tribunal chosen by the parties.
Types of arbitration:

• Domestic arbitration: It is held under the

provisions of the domestic law, in India to
resolve a dispute arising out of legal
relationship, whether contractual or not.
International commercial
arbitration:
• An arbitration relating to disputes arising out of legal
relationships, whether contractual or not, considered as
commercial under the law in force in India and where at
least one of the parties is-
• An individual who is a national of, or habitual resident in,
any country other than India;
• A body-corporate which is incorporated in any country
other than India;
• A company, an association or a body of individuals
whose central management and control is exercised in
any country other than India; or
• The government of a foreign country.
Ad hoc arbitration
• Arbitration conducted according to the
procedure agreed by the parties, or as laid
down by the arbitral tribunal at a
preliminary meeting.
• No institution is specified to supervise the
proceedings or at least to supply the
procedural rules for the arbitration.
Institutional arbitration:
• refers to an arbitration administered by an
arbitral institution. Eg., Indian Council of
Arbitration, New Delhi (ICA), International
Centre for Alternative Dispute Resolution
(ICADR), Arbitration Centre Bangalore
(Domestic and International), Federation
of Indian chamber of Commerce and
Industry (FICCI).
Statutory arbitration:
• arbitration conducted in accordance with
the provisions of certain special Acts

Fast-track Arbitration: is aimed at

achieving timely results, thereby lowering
the costs and difficulties associated with
traditional arbitration.
• Look-sniff Arbitration- is a hybrid
arbitration, it is also known as quality
arbitration.
• Flip-flop arbitration- parties formulate
their respective cases before hand and
then invite the arbitrator to choose one of
the two.
Why arbitration?

• It is an alternative to court litigation

• It is private dispute resolution mechanism
agreed upon by the parties
• Freedom to choose the arbitrator
• It is controlled by the parties- party
autonomy
• Results in final binding award.
• The award is enforceable as a decree of a
court.
• Choice of venue
• Informal procedure
• Equal treatment
• Expeditious and less expensive
• Confidentiality
• Avoids uncertainties of court
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.
Arbitrability:

• Whether the applicable law (chosen by

parties either in the contract or by the
choice of site of arbitration) permits the
arbitration of the subject dispute.
Disputes that cannot be
arbitrated
• Heinous crimes, probate and succession
certificates, questions of genuineness of a
will, appointment of guardians, matrimonial
matters like divorce, declaration of age,
winding up of companies, etc.
Appointment of arbitrators

• Parties are free to decide on number of

arbitrators.
• In arbitration with three arbitrators, each
party shall appoint one and the two
appointed arbitrators shall appoint the
third.
• When parties fail to appoint, the Chief
Justice or his designate is empowered to
appoint arbitrators
Jurisdiction of the Tribunal:
• The arbitral tribunal can decide the
questions of its own jurisdiction and also
objections with respect to the existence or
validity of the arbitration agreement.
Law Applicable:
• domestic arbitration- the substantive law
applicable in India.
• international commercial arbitration, the
law agreed by the parties, otherwise the
law which tribunal considers most
appropriate given all circumstances
surrounding the dispute.
Procedure before the tribunal:

• The tribunal has to accord equal treatment

to the parties in providing full opportunity
to present their case in accordance with
the principles of natural justice.
• The Act has given maximum possible
arbitral autonomy.
• The tribunal is not bound by CPC &
Evidence Act unless parties agree
otherwise.
Arbitral award:
• The award whether interim or final shall be
in writing.
• It shall state the reasons upon which it is
based.
• It is final and binding on the parties.
• It will be enforced as a decree of the court.
Setting aside the award
• on proof of the following:
– A party was under some incapacity.
– Arbitration agreement is not valid under law to
which the parties have subjected it, failing any
indication of law, under the law for the time
being in force.
– The party making application was not given
proper notice of appointment of arbitrator or
arbitral proceeding or was otherwise unable to
present his case.
– Award deals with dispute not contemplated by
/ not falling within the terms of submission /
contains decisions on matters beyond the
scope of submission
– The composition of tribunal or arbitral
procedure was not in accordance with
agreement / or the agreement is in conflict
with the Act.
– The subject matter is not capable of
settlement by arbitration under the law for the
time being in force.
• Arbitral award is in conflict with public
policy of India.
• ‘Public policy’
– Fundamental policy of Indian law
– The interest of India
– justice / morality and
– If it is patently illegal.
Enforcement of Foreign Awards:
• A foreign award is binding for all purposes
on persons as between whom it was
made.
• It will be enforced as a decree.
• Thank you