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Scope of Arbitration in Legal Field/Merits And Demerits of Arbitration

Every coin has two sides with numerous advantages and disadvantages. The main aim of this article is to shed light on the concept of arbitration and its merits and demerits in relation to the traditional method of litigation.

What is Arbitration?

Indian courts are overburdened with pending cases. We all know about that, so if there is any dispute and you go to court, it might take you years to resolve it. Businesses, particularly their lawyers, understand this, which is why, whenever a business agrees to enter into an agreement or commercial operations with the other party, they include an arbitration clause in the agreement because they know that if there is a dispute in the future, they don't want to waste their resources, time, and money on a court proceeding, which could take years, and time is money, which is why they include an arbitration clause in the agreement.

They agree that if there is a future issue, they will resort to arbitration rather than court. They will appoint a private judge, an arbitrator, who will render an arbitral award binding on both parties after hearing both sites.

In India, arbitration is mostly done by ad hoc method and is very popular as compared to institutional arbitration, which is still lacking to build a strong base in India. As we discussed earlier in the article, the aim of arbitration is to have minimal involvement from any judicial authority.

It is also being defined under Section 5 of the Arbitration and Conciliation Act of 1996. When the 2015 amendment passed, it was left to the opinion of the Supreme Court or the High Court whether to appoint a tribunal in case the parties did not appoint an arbitrator.

Merits of Arbitration:

If we compare the process of arbitration to traditional litigation, the costs incurred in the legal process are very low, as not much legal setup is required. Whatever costs are incurred are divided between both parties. This makes the whole legal process more affordable.

Everything is with the respective court or judge during the litigation procedure, including the hearing date that they will provide. Sometimes the parties have to wait a long period of time for the discord to be settled. Essentially, the comfort or convenience of the parties is not prioritised as much as the procedure of arbitration, where both parties can decide on the availability of their respective schedules for themselves and their witnesses.

The process of arbitration stays confidential; it is between the parties and the neutral person, whereas the judgement of the court is a part of the public record that anyone can read or access.

Demerits of Arbitration:

An arbitration decision given by the arbitrator is considered final as there is no process of appeal in the arbitration process. It limits the outcome, as whichever party feels that the award is biased or unfair, they cannot do anything.

A judge has to adhere to correct protocol while accepting evidence during the litigation process. In comparison, the arbitrator can consider whatever information that the arbitrator believes is being brought to them. Arbitration is non-binding because there is no mechanism for appeal, which can be a trap for parties because it can occasionally lead to a dead end.

There is a criticism of an arbitrator that, because the parties choose the arbitrator, there is a possibility that the arbitrator will pass the award in favour of a party that they perceive is more likely to hire them in the near future, creating ambiguity concerning fairness.

Arbitration and litigation each have pros and cons. The best option is determined by each party and the circumstances of the disagreement. Arbitration is frequently quicker and less expensive than litigation, and it provides a more confidential and flexible process that gives parties more influence over the outcome. Overall, before deciding to arbitrate a disagreement, the needs of the parties must be acknowledged.

Written By: Manthan Tyagi (4th year BA LLB)

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