File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

A Comparative On Legal Issues In International Commercial Arbitration In India

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 procedural rules.

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 contract terms.

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 "alternative."

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.

Research Objectives
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 legislation.1

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 secretly.

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 disputes.

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

  1. The Arbitration And Conciliation Act, 1996

    In 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."
  2. 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 courts.

    "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
  3. 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 order."

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:
  • Enforceability of Arbitration clause/ Arbitration agreement:
  • The place of Arbitration and hearing:
  • Conflict of laws:
  • Country to country difference in substantive and procedural laws:
  • The selection procedures and numbers of Arbitrators:
  • Public policy of different countries:
  • Recognition and Enforcement of Award:

Recent Scenario
Take of High Court and Supreme Court of India on ICA
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 differing judgments.
  • 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 interim decrees.
  • 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 Enterprises Dispute.
  • 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 matters.

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 arbitral award.

  • 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.
References: Webiography
  • Susan Gualtier, International Commercial Arbitration, GLOBALEX (19th December 2021, 5:00PM)
  • BRITANNICA (Last Visited on 19th December 2021)
  • WHITE CODE MEDIATION AND ARBITRATION CENTER (Last Visited on 19th December 2021)
  • MONDAQ (Last Visited on 20th December 2021)
  • GLOBAL LEGAL INSIGHTS (Last Visited on 20th December 2021)
  • PRACTICAL LAW (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

Law Article in India

Ask A Lawyers

You May Like

Legal Question & Answers

Lawyers in India - Search By City

Copyright Filing
Online Copyright Registration


How To File For Mutual Divorce In Delhi


How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

Increased Age For Girls Marriage


It is hoped that the Prohibition of Child Marriage (Amendment) Bill, 2021, which intends to inc...

Facade of Social Media


One may very easily get absorbed in the lives of others as one scrolls through a Facebook news ...

Section 482 CrPc - Quashing Of FIR: Guid...


The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of t...

The Uniform Civil Code (UCC) in India: A...


The Uniform Civil Code (UCC) is a concept that proposes the unification of personal laws across...

Role Of Artificial Intelligence In Legal...


Artificial intelligence (AI) is revolutionizing various sectors of the economy, and the legal i...

Lawyers Registration
Lawyers Membership - Get Clients Online

File caveat In Supreme Court Instantly