Abstract
The paper deals with how the Indian Apex Court interprets the Arbitration and Conciliation Act of 1996 while incorporating the New York Convention rules of arbitration and the UNCITRAL Model.
Introduction
Arbitration is like a well-tailored men’s suit, specifically made to order and dimensions of the party.
Similarly, if the parties mutually consent to arbitration to resolve any dispute arising from the said contract or the decided terms, then they can invoke the arbitration clause, subject to the validity of the contract and the clause.
The arbitration clause needs to be in writing. The validity of the arbitration clause is not to be checked by the courts appointing the arbitrator. The arbitrator or the institute can judge the validity to reduce the supervision of courts on arbitral proceedings.
This is deemed possible by the Doctrine of Kompetence-Kompetence developed by the German and Swiss Courts.
The Guide to Arbitration
The Arbitration Act represents the principles of modern arbitration, which seek to give effect to the mutual intention of the parties to resolve their disputes by a neutral third-party arbitral tribunal, whose decision is final and binding on all the parties.
Arbitration law allows the parties to design arbitral procedures, which ensures efficiency and expediency of the arbitration process. One of the reasons that business and commercial entities prefer arbitration is because it obviates cumbersome judicial processes, which can often prove expensive, complex, and interminable.
Most legal jurisdictions have also recognized and adopted legal approaches that favor arbitration at both the domestic and international level. In the process, national courts have given effect to principles such as the separability presumption and jurisdictional competence of the arbitral tribunal.
Modern arbitration law does not completely restrict the role of national courts in the arbitration process, but gives priority to the arbitral tribunal to decide on disputes and issues pertaining to arbitration agreements as well as the substantive rights of the parties. The Arbitration Act reflects these aspects of modern arbitration law.
What an Arbitration Agreement Is
An arbitration agreement is the foundation of arbitration, as it records the consent of the parties to submit their disputes to arbitration.
In Bihar State Mineral Development Corporation v. Encon Builders, the Hon’ble Supreme Court enlisted the essential elements of an arbitration agreement as follows:
- There must be a present or future difference in connection with some contemplated affair;
- There must be the intention of the parties to settle such disputes by a private tribunal;
- The parties must agree in writing to be bound by the decision of such tribunal; and
- The parties must be ad idem.
Section 2(b) of the Arbitration Act defines an “arbitration agreement” to mean an agreement referred to in Section 7. Section 7 defines an “arbitration agreement” to mean 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.
It provides that an arbitration agreement could be in the form of an arbitration clause in a contract or in the form of a separate agreement. Further, Section 7 mandates that an arbitration agreement shall be in writing.
According to Section 7(4), an arbitration agreement is in writing if it is contained in:
- a document signed by the parties;
- an exchange of letters, telex, telegrams, or other means of telecommunication including communication through electronic means which provide a record of the agreement; or
- an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
Section 7(5) provides that a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
These are the basics of what modern arbitration law is, as interpreted by the Apex Court.
Conclusion
A tailored suit and arbitration may suit the body, but it cannot be afforded by everyone. Arbitration is more expensive than litigation and has a greater paperwork burden on the counsels.
There are still areas of improvement pertaining to court supervision and the monetary nature of the initiation of arbitral proceedings.
