This Article has been written by Mr. Aamish Priyam, a student studying BA LLB from SS. JAIN SUBODH LAW COLLEGE, Jaipur. The Autor is 2nd year law student.
Introduction:
An arbitration agreement is a written agreement between parties to submit their disputes to an arbitrator or a panel of arbitrators instead of resolving their disputes through the traditional court system. In India, arbitration agreements are governed by the Arbitration and Conciliation Act, 1996.
Under Indian law, an arbitration agreement must be in writing, either as a separate agreement or as a clause within a larger contract. The agreement must clearly identify the disputes that are subject to arbitration, and the parties must agree to the appointment of the arbitrator or arbitration panel.
Once an arbitration agreement is in place, any dispute that falls within the scope of the agreement must be referred to arbitration rather than to the courts. The arbitrator or arbitration panel will then hear both sides of the dispute and make a binding decision known as an “arbitration award”.
Arbitration agreements are often used in commercial contracts, as they can provide a faster, more efficient, and more cost-effective way of resolving disputes than going through the court system. However, it’s important to ensure that any arbitration agreement is carefully drafted to ensure that it covers all potential disputes and that the chosen arbitrator or arbitration panel is impartial and capable of handling the dispute in question.
Features:
-
- Definition: An arbitration agreement is a written agreement between parties to submit present or future disputes to arbitration.
-
- Form: The arbitration agreement must be in writing, either in the form of an agreement signed by the parties or in the form of an exchange of letters, emails, or any other means of communication that provides a record of the agreement.
-
- Scope: The arbitration agreement should clearly specify the disputes that are subject to arbitration. Any dispute that is not covered by the agreement will not be subject to arbitration.
-
- Appointment of Arbitrator: The agreement should provide for the appointment of arbitrator(s). The parties can either agree on a specific arbitrator or provide a mechanism for appointing arbitrators.
-
- Seat of Arbitration: The agreement should specify the seat of arbitration, which is the place where the arbitration proceedings will be held. The seat of arbitration will determine the applicable laws and procedural rules.
-
- Governing Law: The agreement should specify the governing law of the arbitration agreement, which is the law that will govern the validity, interpretation, and enforcement of the agreement.
-
- Language: The agreement should specify the language(s) in which the arbitration proceedings will be conducted.
-
- Confidentiality: The agreement may include provisions for maintaining the confidentiality of the arbitration proceedings.
-
- Enforcement: An arbitration agreement is enforceable under Indian law, and a court will refer parties to arbitration in accordance with the agreement, unless it is found to be null and void, inoperative or incapable of being performed.
Types of Arbitration Agreement:
Arbitration is classified based on the territorial governance and the laws agreed upon by the parties involved. In India, the types of arbitration are as follows:
-
- Domestic Arbitration: This type of arbitration occurs when two parties, who are bound or located in India, have a disagreement. The applicable laws are usually clear, and arbitration attorneys in India represent the parties before the arbitration bench.
-
- International Arbitration: When one of the parties is from a country other than India, and the dispute is being resolved according to Indian laws, it is called transnational arbitration. Typically, the dispute is resolved outside India.
-
- International Commercial Arbitration: This type of arbitration applies when there is a transnational element in a commercial dispute, and one party is Indian. The resolution is based on the laws agreed upon in the contract, or if there is no agreement, Indian arbitration and agreement rules apply.
-
- Institutional Arbitration: When the parties name a specific institution in the arbitration clause of their contract, that institution is responsible for resolving the dispute through arbitration. This type of arbitration is efficient since the institution handles the tasks of selecting an adjudicator.
-
- Ad-Hoc Arbitration: This arbitration type is used when the parties agree to resolve the dispute through arbitration without contractual coercion. In such cases, the parties mutually decide on the arbitration process.
-
- Fast Track Arbitration: Section 29B of the Arbitration and Conciliation Act, 1996 provides for fast-track arbitration, which is the most effective way of resolving disputes through arbitration. The effects are added to documents to speed up the resolution process.
-
- Contractual Arbitration: When parties include an arbitration clause in their contract, any dispute is resolved through arbitration before the courts. The arbitration clause determines the arbitration process.
-
- Statutory Arbitration: Some laws or bills specify arbitration as the means of resolving disputes. In such cases, arbitration is the way to settle the dispute.
-
- Foreign Arbitration: When one of the parties is Indian, and the parties agree to follow foreign arbitration laws while resolving legal disputes, it is called foreign arbitration. In such cases, foreign arbitration laws apply, regardless of whether the arbitration occurs in India or another country.
Importance of Arbitration Agreement:
-
- Confidentiality: Arbitration proceedings are generally confidential, which can be particularly important in commercial disputes where the parties may not want details of the dispute to become public knowledge.
-
- Expertise: Parties can select an arbitrator who has expertise in the relevant area of law or industry, which can lead to more informed decisions.
-
- Speed: Arbitration proceedings are typically faster than court proceedings, which can save parties time and money.
-
- Flexibility: Parties can agree on the procedures to be followed in arbitration, which can make the process more flexible and tailored to their specific needs.
-
- Finality: Arbitration awards are generally final and binding, which provides parties with a degree of certainty that may not be available through court proceedings.
Important Cases:
-
- Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012):
This case involved a dispute between Bharat Aluminium Co. and Kaiser Aluminium Technical Services Inc. over a contract that included an arbitration clause. The issue was whether a court could intervene in the arbitration proceedings if the arbitrator exceeded their jurisdiction. The Supreme Court held that the court could intervene if the arbitrator exceeded their jurisdiction.
-
- Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. (2013):
In this case, the parties had entered into a contract with an arbitration clause. The issue was whether the arbitration clause was void because the signatory did not have the authority to sign the contract. The Supreme Court held that an arbitration clause would not be void merely because the signatory lacked authority to sign the contract.
-
- Enercon (India) Ltd. v. Enercon GmbH (2014):
This case involved a dispute between Enercon (India) Ltd. and Enercon GmbH over a contract that included an arbitration clause. The issue was whether the Indian courts had jurisdiction to grant an anti-arbitration injunction to prevent the arbitration proceedings from taking place. The Supreme Court held that the Indian courts did not have jurisdiction to grant an anti-arbitration injunction.
-
- Vijay Karia & Ors. v. Prysmian Cavi E Sistemi SRL & Ors. (2020):
This case involved a dispute over a share purchase agreement between the parties that included an arbitration clause. The issue was whether the arbitration clause was valid and enforceable, and whether the dispute was arbitrable. The Bombay High Court held that the arbitration clause was valid and enforceable, and that the dispute was arbitrable.
-
- Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd. & Ors. (2021):
In this case, the parties had entered into a share purchase agreement that included an arbitration clause. The issue was whether the Indian courts had jurisdiction to entertain a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (which deals with interim measures) when the seat of arbitration was outside India. The Supreme Court held that Indian courts did have jurisdiction to entertain such a petition, even if the seat of arbitration was outside India.
Conclusion:
An arbitration agreement is a crucial tool for resolving disputes between parties in a timely, efficient, and cost-effective manner. By clearly specifying the scope of disputes subject to arbitration, appointing impartial arbitrators, and specifying the seat of arbitration, governing law, and language, parties can ensure that their arbitration agreement is effective and enforceable under Indian law. The different types of arbitration agreements, such as institutional, ad-hoc, fast-track, contractual, statutory, and foreign arbitration, offer parties flexibility in choosing the most suitable method for resolving their disputes. The importance of arbitration agreements lies in the confidentiality of proceedings, the expertise of arbitrators, the speed and flexibility of the process, and the finality of arbitration awards. Overall, arbitration agreements provide a valuable alternative to traditional court proceedings and can benefit businesses and individuals alike.
References:
Aishwarya Says:
Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.
IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.
The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.
If you would also like to contribute to my website, then do share your articles or poems to aishwarya@aishwaryasandeep.com
Join our Whatsapp Group for latest Job Opening