Arbitration 101

We are happy  to share the next episode of the ELP Podcast Series. India’s intent to elevate arbitration as the preferred mode of dispute resolution is complemented with developing jurisprudence in the country. In the first episode of the “Arbitration 101” series, Abhileen Chaturvedi, Partner at Economic Laws Practice (ELP) reflects on the legislative landscape of the arbitration regime in India.  

The session is moderated by his colleague, Ria Dalwani, Senior Associate at ELP. Please enjoy listening-in and we look forward to bringing to you our next episode on the scope of court intervention in arbitrations. 

Transcript

FAQ ON INTERNATIONAL ARBITRATION IN INDIA

Q. What is the most common mechanism of resolution of commercial disputes in your jurisdiction?

A. The most common mechanism of dispute resolution in large scale commercial contracts is arbitration. While commercial courts exist in all the districts in India for adjudication of commercial disputes between the parties, over the past couple of decades, Indian parties have generally preferred arbitration as the preferred mechanism of resolution of commercial disputes between the parties. 

 Q. What is arbitration?

A. Arbitration is the mechanism under which parties agree to resolve commercial disputes which may have arisen under a defined legal relationship between the parties, outside of the court system. In an arbitration proceeding, parties have the right to elect a neutral arbitrator or arbitrators who will hear evidence from the parties, apply the relevant laws and render a final decision. 

Arbitration decisions are binding subject to a challenge procedure which is set out in most of the laws concerning arbitration across the world. The challenge procedure is however limited to only certain scenarios as may be set out in the relevant law and is not an exhaustive review of the final decision of the arbitrator/arbitrators, i.e., award.

 Q. Would the presence of an arbitration clause in a contract eliminate the jurisdiction of courts over a commercial dispute?

A. If the parties have agreed that if there is any dispute the same shall be resolved by arbitration, kindly check the contract for an arbitration clause therein. If there is no such clause you may have to initiate legal action in court at appropriate jurisdiction. You may still request the opponent to enter into a separate arbitration agreement.

 Q. Why is arbitration the more preferred mechanism of resolution of commercial disputes in your jurisdiction?

A. There are certain inherent features of an arbitration process because of which parties generally prefer arbitration over litigation. Some of these are:

a)       the ability to agree on a procedure for the arbitration proceeding.

b)      the right of the parties to choose an arbitrator who may have the subject matter expertise.

c)       the right of the parties to choose a venue for the arbitration proceeding.

d)      the expeditious nature of an arbitration proceeding. 

e)      confidentiality of an arbitration proceeding.

 Q. Is there any time limit for pronouncement of an arbitral award in India?

A. The Arbitration Act provides a statutory time frame of 6 months within which parties shall complete filing of their pleadings. 

After the filing of pleadings is completed, the arbitral tribunal is expected to pronounce the award within a period of 12 months which is extendable by a further 6 months with the consent of the parties. If the arbitration proceedings are yet not completed, a party to the arbitration proceedings can make an application to the Court, asking for directions to extend the time period for pronouncement of the award. 

Parties involved in time sensitive disputes, may opt for fast-track arbitral proceedings as provided under the Arbitration Act. In a fast-track proceeding, a sole arbitrator shall deliver the award within six months of his/her appointment. The procedure adopted is generally restricted to document only proceedings, with oral hearings requested by the arbitrator only when necessary.

 Q. At what stages in an arbitration is court intervention likely to occur?  

A. Courts have the jurisdiction to intervene and aid the parties at certain stages of the arbitration. Generally, the jurisdiction of a court is invoked for (i) reference of disputes to arbitration; (ii) granting interim measures; (iii) assistance in constitution of the tribunal; (iv) assistance in taking evidence; (v) extending the time limit to make an award; (vi) decision on applications for setting aside/annulment of arbitration awards; (vii) enforcement of awards  

(i)      Reference of Disputes to Arbitration 

a.       If disputes that are subject matter of an arbitration agreement are pursued before a Court by one party, an application can be made before the Court seeking reference of disputes to arbitration. The judicial authority must compulsorily refer the parties to arbitration in a matter which is the subject of an arbitration agreement, if the party seeking reference makes the application at the appropriate stage.  

(ii)    Court assistance in constitution of the tribunal

a.       There are situations when the parties are unable to agree to the appointment of an arbitrator in accordance with the procedure for appointment provided in the agreement. In such a scenario, the parties can prefer an application before the High Court and seek assistance of the court to constitute the tribunal. 

 Q. Are decisions of emergency arbitrators recognized in India?

A. Yes. In context of an arbitration seated in New Delhi, an order was passed by an ‘emergency arbitrator’ under the arbitration rules of the Singapore International Arbitration Centre. The Supreme Court, inter alia, held that the order passed by the emergency arbitrator in the India seated arbitration, is enforceable under the Arbitration Act.   

 Q. Can a final award passed by an arbitral tribunal be challenged before the courts?  

A. Yes, the Arbitration Act allows the award debtor to prefer an application before the appropriate court to set aside an award passed by an arbitral tribunal. The application must be filed within the time limit provided in the Arbitration Act. The limited grounds on which an award can be set aside, are set out in the Arbitration Act and we will reflect upon them in the latter sessions.