ARBITRATION AND IT'S DIFFERENT TYPES

by Lipika Sharma


KINDS OF ARBITRATION

Arbitration, a type of alternative dispute resolution (ADR), is a means for disputes to be settled outside the court. Any or more persons (the arbitrators, arbiters, or Arbitral Tribunal) will decide the case, which would then make the arbitration award. An arbitration award is both legally binding and enforceable in the court. In contrast to the traditional approach to a court process that usually takes place in a trial, it needs to proceed through a long procedure that generally leaves either or both parties financially drained. An arbitration process is not structured and does not require a court trial and will save the parties much time.


TYPES OF ARBITRATION

Depending on the terms of the arbitration agreement, the subject matter of the arbitration dispute and the laws governing such arbitration, arbitration may be classified into various types, like-


1. Domestic Arbitration

The word ‘Domestic Arbitration’ has not been specified in the 1996 Act. Section 2(7) provides that an arbitral award made under Part I shall be considered to be a domestic award. According to the Section 22, Part 1 applies when the place of arbitration is in India. It is discernible from the juxtaposition of certain provisions that domestic arbitration implies an arbitration under which arbitration is performed. Through the juxtaposition of these provisions, it is visible that domestic arbitration implies arbitration under which the arbitral proceedings are held in India, and in compliance with Indian substantive and procedural law, and the cause of action of the dispute has occurred entirely in India, or when the parties are entitled to Indian jurisdiction.[1]


2. International Commercial Arbitration-

Section 2(1)(f) of the Arbitration and Conciliation Act defines an ICA as a legal relationship which must be considered commercial, 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. Therefore, arbitration between two Indian parties does not fall within the definition of ICA.

When arbitration happens within India or outside India involving foreign origin elements in relation to the parties or the subject matter of the dispute, it is termed as International Arbitration. The applicable law can be Indian or international according to the nature and circumstances of the case and the contract between the related parties in this regard. It is necessary to satisfy the concept of international arbitration if either of the parties to the conflict are domiciled outside India, or if the subject matter of the dispute is outside India.


3. Institutional Arbitration

The Arbitration and Conciliation Act, 1996, expressly acknowledges the position of arbitral institutions. Section 6 specifies that, in order to facilitate the conduct of the arbitral proceedings, the parties or the arbitral tribunal can with the consent of the parties, provide for the administrative resistance of an acceptable institution. However, section 2(8) allows it specifically to facilitate the adoption of institutional laws. There are presently 23 recognized arbitral bodies in India offering services for domestic and international commercial arbitration. The most prominent among these are the Indian Council of Arbitration (ICA), the Federation of Indian Chambers of Commerce and Industry (FICCI), the Bengal Chamber of Commerce and Industry (BCCI), Indian Chamber of Commerce, the East India Cotton Association Ltd., the Cotton Textiles Export Promotion Council, etc.[2]

Some of the arbitral agencies are dealing with particular disputes such as the Bengal Chamber of Commerce which mainly administers arbitration in jute trade. The East India Cotton Association and the Cotton Textiles Export & Promotion Council deal with disputes in the area of international silk cotton trade. And foreign institutions are having cases of arbitration concerning Indian rights.[3]


4. Statutory Arbitration-

Arbitration can be pursuant to an arbitration agreement reached by the parties or may be subject to a law expressly providing for arbitration in terms of issues covered by that legislation. The arbitration is called statutory arbitration in the above situation, where the reference to arbitration emanates from enactment of the Parliament or a State legislature. It is conducted in compliance with the requirement of an enactment which explicitly provides for arbitration in respect of disputes occurring in connection with matters covered by the concerned enactment by-laws or Rules rendered there under law. Under such a situation, the parties as such have no choice but to obey the law of the land. It is evident that statutory arbitration differs from other types of arbitration on the grounds that, in the absence of the consent of the parties, it is a compulsory form of arbitration and binds the parties as law of the land. For example- the Cantonments Act, 1924, the Indian Electricity Act, 1910, the Land Acquisition Act, 1894, the Railways Act, 1890 and the Forward Contracts Regulation Act, 1956, etc. are the legislative provisions dealing with statutory arbitration.[4]


5. Fast Track Arbitration or Documents Only Arbitration

Documents only arbitration is not oral and is focused entirely on the statement of accusation and the statement of defence, and the claimant’s written reply, if any. It also contains the documentation submitted by the parties and their salon of claims and a list of references to the documents or any evidence given by them. The written submission can take the form of a letter from the party or its representative to the tribunal, or maybe a more formal document produced by lawyers. Fast track arbitration is a time-bound arbitration of trials and will not enable for laxity or scope for extensions of time and delays, Fast track arbitration is ideally placed in such cases that may be resolved on the basis of documents where oral testimony and witnesses are not needed. The shortened time period renders them cost-effective.


6. Ad-hoc Arbitration

Ad-hoc Arbitration is decided to by the parties themselves and conducted without reference to an arbitral institution. This may be international arbitration or domestic arbitration. In ad hoc arbitration, if the parties cannot decide about who should be the arbitrator or one of the parties is reluctant to participate in the appointment of the arbitrator, the other party shall use Section 11 of the Arbitration and Conciliation Act, 1996, under which the arbitrator shall be appointed by the Chief Justice of the High Court or the Supreme Court or its designate. In case of domestic arbitration, it will be the Chief Justice of the High Court or his designate. In the event of international arbitration it would be Chief Justice of India or his designate.

Ad-hoc arbitration implies the arbitration should not be held according to the rules of an arbitral institution. As the parties have no obligation to submit their arbitration to an arbitral institution’s rules, they are free to state their own rules of procedure. Ad-hoc Arbitration’s geographical jurisdiction is important because most arbitration disputes will be settled in compliance with the national law of arbitration’s seat.


7. Look-Sniff Arbitration

Institutions specializing in specific types of disputes have their own special regulations to satisfy the specific arbitration criteria of their specialized fields. Look -Sniff Arbitration is a hybrid arbitration, which is also recognized as quality arbitration. It is a mixture of expert opinion and arbitral procedure. Upon the consideration of evidence and examination of goods or commodities that are the subject of the dispute before the arbitrator, who is chosen on the basis of his professional skills, qualifications and experience in a specific field of industry or trade, the arbitrator shall decide the dispute and makes his award. The award may relate to the quality or price of the goods or both. For example, Rules of the London Court of International Arbitration (LCIA) require the arbitrator to determine the quality of the goods and their prevailing price on his own.


8. Flip-Flop Arbitration

This form of arbitration originates with an arbitration dispute in the United States, which dealt with a baseball player. In such arbitration, the parties shall prepare their case in advance. They then ask the arbitrator to pick one of the two. On the evidence produced by the parties, the arbitrator determines which submission is the right one, and instead gives an award favor of that party. Once all parties have presented their separate claims to the arbitrator, he renders an award either benefiting the complainant or the respondent. It is also called ‘Pendulum Arbitration’.

[1] Domestic and International Arbitration, Legal Services India, http://www.legalservicesindia.com/article/511/Domestic-&-International-Arbitration.html. [2] Dispute Resolution Process in India, Indian Law Institute. [3]India Council of Arbitration , http://www.icaindia.co.in/icanet/rules/commercialarbitration/arbitration&conciliation/chapter1a.html [4] Statutory Arbitrations and Conciliation

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