This Research Paper Talks about "International Commercial Arbitration and its
Legal issues." International commercial arbitration is a method of settling
disputes that arise from international commercial contracts. It is used as an
alternative to litigation and is primarily governed by the terms previously
agreed upon by the contracting parties, rather than national legislation or
Most contracts include a clause stating that any disputes
arising from the contract will be resolved through arbitration rather than
litigation. At the time of the contract, the parties can specify the forum,
procedural rules, and governing law. Arbitration can take two forms:
"institutional" or "ad hoc." The type of arbitration will be determined by the
This paper majorly deals about the legal issues arising in
international commercial arbitration law in India and also provides the
historical background of International Commercial Arbitration. For better
understanding of the concept this paper includes the comparative analysis of
international commercial arbitration of China, USA, South Africa, and India.
Further this paper also tries to provide certain suggestions for resolving the
issues relating to ICA
The behavior of people living together in society must be regulated by law. The
reasons are self-evident, societal conflict has grown exponentially with the
expansion of society. Human conflicts are unavoidable as a result of society's
growth. As a result of this undesirable scenario, powerful, simple, and rapid
systems for resolving such conflicts are required.
It is also important that
conflicts be handled for the least amount of money and as promptly as possible,
in order to lessen the strain on the judiciary while yet ensuring prompt justice
in such unavoidable instances. As a result, ADR procedures have arisen as
separate alternatives to courts created under state writ, earning the term
For cases that are referred for outside court settlements, the alternative
dispute resolution system provides a faster and less expensive solution.
Non-adjudicatory ADR processes are those dispute resolution procedures that fall
under the umbrella of ADR and do not involve the ADR neutral making a final and
binding determination of the dispute's factual or legal issues, but rather
involve the parties cooperating and the ADR neutral assisting them in finding a
mutually acceptable solution.
The Objective behind this Research Paper is to find out:
- What is International Commercial Arbitration
- What are the Legal Issues faced by the ICA in India
International Commercial Arbitration (ICA)
ICA is a method of resolving disputes that arise from international contracts.
It is utilized as an alternative for litigation and is controlled mostly by
prior agreements between the contracting parties rather than national
legislation or procedural rules. The majority of contracts contain a dispute
resolution clause that stipulates that any contract-related issues would be
settled through arbitration rather than litigation. At the time of the contract,
the parties might define the forum, procedural procedures, and controlling
International arbitration has a long and illustrious history. Even though there
were precedents in the late 18th century, modern commercial arbitration is a
true creation of the city. Commodities were the first contracts to be referred
to arbitration, as is well known. Because the disagreements involved perishable
commodities in the majority of cases, they had to be resolved quickly and
London became the center for nautical and financial concerns,
insurance, commodities, and then metals in the sixteenth century. Arbitration as
an institution emerged from merchants and trader's habits of referring disputes
over account and other things to arbitration for resolution. The Arbitration Act
was passed by the UK Parliament in 1889.
This Act was largely declaratory of
preceding acts (the 1854 Act, the Civil Procedure Act of 1833, and the
Arbitration Act of 1698), as well as business and convincing practice. Other
Acts of 1924, 1930, and 1934 led to the Arbitration Act of 1950, which was a
Consolidation Act of 1950. Others included the years 1975 and 1979. The
Arbitration Acts of 1950-1979 focused on filling up the gaps in an incomplete
arbitration agreement and defining the HC's powers.
Evolution of ICA in India
India would not have been introduced to the idea of ICA, among other economy-
boosting strategies and mechanisms, if Indian markets had not been opened to the
global economy. The liberalization, privatization, and globalization model
allowed for an infusion of international trade, which prompted Indian
corporations to enter into contracts with foreign companies, prompting the govt.
to enact legislation allowing for alternative dispute settlement. By 1995, the
govt. had resolved to promote the use of arbitration as a means of resolving
It sponsored a bill before India's Parliament for the purpose, which
resulted in the passage of the Arbitration and Conciliation Act, 1996. India,
like other nations that followed the UNCITRAL Model in developing their
arbitration laws, established a legislative framework with the goal of providing
uniform arbitration laws.3
ICA In India: Legislative Approach
The Arbitration And Conciliation Act, 1996In the realm of arbitration, it was felt that the Act of 1940 contained a number
of legal and practical deficiencies. In this regard, on July 27, 1977, the
Secretary of the Department of Legal Affairs made a proposal stating that,
because the Public Accounts Committee had expressed dissatisfaction with the
working of the Arbitration Act due to its delay, enormous expenses, and length
of time spent, the govt. wanted to take another look at the provisions of the
Arbitration Act, 1940 to see if the enormous delay and disproportionate costs
incurred in arbitration proceedings could be avoided. In 1977, the matter was
brought to the Indian Law Commission for review. As a result, the Law Commission
of India issued its 76th report in November 1978.
The Apex Court observed in Food Corporation of India v. Joginderpal4 that "law
of arbitration" must be simple with less technicality and more responsive to the
actual reality of the situations, responsive to the canons of justice and fair
play, " As a result of the command of law issued by the nation's top court, the
Legislation Commission, lawmakers, and philosophers took the issues seriously
enough to contemplate modifying the law."
Foreign Awards Under Arbitration And Conciliation Act, 1996 The 1996
Arbitration and Conciliation Act provides statutory backing for the
enforcement of international arbitral awards issued in countries that
have signed either the Geneva Convention of 1927 or the New York
Convention of 1958. It must be a foreign arbitral award issued under the
Geneva Convention or the New York Convention to be enforced in Indian
"An arbitral award not made in a convention, country will not be considered a
foreign award, and as such, a new action will have to be launched on the basis
of the award," the SC said in Bhatia International v. Bulk Trading.5
Judicial Approach Towards ICA In India The two pillars of arbitration law
are party autonomy and award finality. If judicial involvement is used to
deceive these two slabs, arbitration law will fail to realize its ultimate
objectivity and lose its spirit.
The 1996 Act's principal goals are to ensure quick arbitration and little court
intrusion. Intervention by a judicial authority is likewise prohibited. In
accordance with Section 5 of the Act. All other countries that have accepted the
UNCITRAL Model which have legislation that include this essential requirement.
"To minimize the supervisory function of courts in the arbitral process,"
according to the 1996 Act's Statement of Objects and Reasons, and "to provide
that every final arbitral award be enforced in the same manner as a civil court
ICA - A Comparative Study
China is a global trade leader with a history of favoring ADR over court
proceedings. The present Chinese arbitration system evolved at a breakneck pace.
In response to the current predicament, the Chinese instituted a method of
continuous development. Instead of being adopted by a well-established govt, the
system was developed alongside it. As a result, Chinese culture and policies
during the PRC's formation period had a significant impact on the development of
Chinese modern arbitration. The following traits reflected these influences:
- To begin with, prior to the passage of the Arbitration Law, domestic arbitration commissions accepted arbitration requests based on administrative law and rules rather than the parties' voluntary arbitration agreement.
- Second, domestic arbitration commissions' authority was limited to disputes occurring solely between Chinese legal and natural persons living in China. Foreign-related disputes were only heard by the CIETAC and the CMAC.
- Thirdly, the arbitration commissions were overseen by governmental administrative authorities, and its members were generally recruited from such agencies. Domestic arbitration adopted forum level and geographical jurisdiction as well.
- Finally, previous to the Arbitration Law, the arbitration commissions' awards were not enforceable by the parties. If a party is unhappy with an arbitration award, it can file a civil action before the people's Court. With the enactment of the Arbitration Law, China's domestic arbitration system underwent significant changes.
Alternative conflict resolution activities in the USA are not a new chapter in
the country's history. It began as an amicable resolution method for industrial
disputes in New York in 1768. It was widely accepted as a technique for settling
disputes outside of court in both domestic and international business.
The SC of
the United States declared in a judicial statement that arbitration should be
encouraged by the courts for the resolution of disputes, and that arbitrators'
decisions should have the same binding standing as a court ruling. The SC
originally endorsed arbitration in 1854, when the court supported the right of
an arbitrator to give binding rulings. 'Arbitrators are the judges appointed by
the parties to decide the subject submitted to them, definitively and without
appeal,' wrote Justice Grier for the Court.
The Federal Arbitration Act is a legislative legislation of the USA that was
originally enacted in 1925. Because of the adoption of the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, it has
been revised several times. Every state in the United States has its own
arbitration statutes based on the Uniform Arbitration Act of 1955.
Singapore is well-known as the most popular location for international business
arbitration for the resolution of transitional disputes. The SIAC is a
well-known and efficient system for international commercial arbitration, and
the SIMC gathers competence in commercial mediation.
Issues Involved in ICA
In ICA, choice-of-law problems are crucial. It's important to distinguish
between four different types of choice-of-law difficulties that can emerge in
international arbitration.When the parties have different legal systems, there
is an automatic conflict of laws, and the substantive law to be applied in a
specific issue must be chosen. Many times, the parties' original agreement will
specify the substantive law to be applied in arbitration. However, when the
parties cannot agree on a choice of law for the resolution of their dispute,
challenges arise in defining the applicable law.
Major issues involved in ICA are as follows:
Take of High Court and Supreme Court of India on ICA
- Enforceability of Arbitration clause/ Arbitration agreement: http://example.com/enforceability
- The place of Arbitration and hearing: http://example.com/place-of-arbitration
- Conflict of laws: http://example.com/conflict-of-laws
- Country to country difference in substantive and procedural laws: http://example.com/country-differences
- The selection procedures and numbers of Arbitrators: http://example.com/selection-procedures
- Public policy of different countries: http://example.com/public-policy
- Recognition and Enforcement of Award: http://example.com/enforcement-of-award
Since the formalization of arbitration laws governing ICC, there has always been
a debate about which instances constitute or meet the criteria for being
classified as an international dispute. The outlook on what can be called an
international case has been cemented to some extent by diverse precedents and
- Prior to the 2015 modification to the Act, the HCs, which have limited
jurisdiction over international arbitration issues, frequently intervened in
such processes and used their authority to strike aside arbitral awards and even
- The SC has not backed away from intervening in cases where competent
arbitral tribunals adjudicating over the relevant international dispute have
already made the award for the case, as in Venture Global Engineering V. Satyam Computers
Services, but the same was then justified through the application of sections 9
and 34 of the Act, primarily because the parties to the case had not included
the application of Part I of the Act in their agreement.
- For a long time, the Apex Court was unsure about the criteria of an
international case in terms of the parties' nationality/residence.
Nonetheless, the same was clarified in the Court's decision in the Amway
- The courts in India have reduced the level of interference in
arbitration conflicts by amending the Act in 2015, 2019, and 2021, and have
worked to make the tribunals independent and methodical enough to deal with
all cases that come their way.
- These amendments have improved the quality of arbitration procedures and
the provisions that surround them by modifying the structure of essential
features such as arbitrator's and tribunal's independence and impartiality,
limiting the judiciary's involvement in these disputes, and budgeting the
costs associated with arbitration, among other things.
Human conflicts and disagreements are an unavoidable part of life. People may
have disagreements about their personal, family, economic, and political life.
The reason and objective of the ICA system is to offer a fast, fair, and
efficient environment for resolving disputes involving international commercial
The three steps of the legal framework for the resolution of such
international commercial disputes can be summarized as follows: The forum's
jurisdiction, the applicable law, and the recognition and execution of foreign
- In India, there should be a solid and codified legislation that governs the ICA.
- In India, the statutory framework for the enforcement of foreign awards and international commercial arbitration should be strengthened.
- The measures relating to the setting aside and appeal of foreign awards must be adequate and effective.
- The enforcement authorities that deal with ICA should be appropriately regulated.
- Susan Gualtier, International Commercial Arbitration, GLOBALEX
https://www.nyulawglobal.org/globalex/International_Commercial_Arbitration.html (19th December 2021, 5:00PM)
- BRITANNICA https://www.britannica.com/topic/arbitration/International-commercial-arbitration (Last Visited on 19th December 2021)
- WHITE CODE MEDIATION AND ARBITRATION CENTER https://viamediationcentre.org/readnews/MTE2Ng==/Evolution-of-International-Commercial-Arbitration-in-India (Last Visited on 19th December 2021)
- MONDAQ https://www.mondaq.com/advicecentre/content/3718/International-Commercial-Arbitrations-Between-China-And-India (Last Visited on 20th December 2021)
- GLOBAL LEGAL INSIGHTS https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/usa (Last Visited on 20th December 2021)
- PRACTICAL LAW
https://uk.practicallaw.thomsonreuters.com/3-381-2028?transitionType=Default&contextData=(sc.Default)&firstPage=true (Last Visited on 21st December 2021)
- Food Corporation of India v. Joginderpal, AIR 1981 SC 2075
- Bhatia International v. Bulk Trading, (2002)4 SCC 105
- Venture Global Engineering V. Satyam Computers, 2017 SCC Online SC 1272