International Commercial Arbitration - India and the World


Posted On : August 23, 2022
International Commercial Arbitration - India and the World
Arbitration is a mode of alternative dispute resolution without having a traditional courtroom setup. The idea is to resolve disputes expeditiously so that parties involved can move on and carry on with their other business. But how to deal with legal matters that have international elements? Especially in the absence of international courts with binding effect. In such cases, international commercial arbitration comes to the rescue of parties concerned. Know in detail how commercial arbitration in India is proceeded with when one or both parties have international status.
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In India, commercial disputes are usually subjected to arbitration rather than moving the courts of law. That is the case when both the parties to a legal dispute are individuals, associations, or companies located in India. The confusion arises when one of the parties to dispute are citizens of, or located/ registered in a foreign country. Matters in court are not only restricted to proving the case but there are a lot of legal formalities that need to be taken care of unlike alternative dispute resolution. Whether it is domestic or international business transactions, discrepancy and legal disputes are obvious. Then how does commercial arbitration in India take place when foreign parties are involved? More importantly, which country’s laws are followed in such cases?

 

International commercial arbitration cases in India are governed by either Indian laws or foreign laws based on the facts of the matter and agreement among parties concerned. The Arbitration and Conciliation Act, 1996 has special provisions for dealing with commercial disputes having international aspects. The idea of bringing these laws was not only the introduction of arbitration rules in India but also clarity regarding international disputes to be resolved through arbitration.

 

What is International Commercial Arbitration in India?

The section 2 (1)(f) of the Arbitration and Conciliation Act, 1996 provides the international commercial arbitration definition - India. The main ingredients of international commercial arbitration section are:

  • Arbitration
  • Disputes out of legal relationships
  • Commercial matters
  • Parties having international element
  • One of the parties may be national of or habitually resident in a foreign country;
  • Body corporate incorporated in a foreign country;
  • Association or body of individuals having central management and control in another country;
  • Foreign government.

With the above definition of commercial arbitration having foreign connection to one of the parties, things get a bit confusing. In simple words, if one party is a company registered in India having a commercial contract with another incorporated in another country, it can be said to be the subject of international commercial arbitration as per the above definition.

Gaining clarity with the above definition brings in another round of doubts as the question arises:

 

Why do we need an International Commercial Arbitration definition?

The reasons are solutions available in the Arbitration Act regarding commercial arbitration in India with parties having foreign connection:

  • To recognize international elements in the commercial arbitration.
  • To legally resolve commercial disputes without referring to Indian or foreign courts.
  • To have an arbitrator appointed by the apex court (or an institution, as required) in case it is identified to be an international commercial arbitration while parties failed to mutually decide on an arbitrator.
  • To have a clarity on upholding terms of an arbitration agreement among the parties over any international commercial arbitration case laws.
  • To know the laws applicable to such international commercial disputes.
  • To grant High Courts the right to decide questions of subject matter.

 

Laws Applicable to International Commercial Arbitration Cases in India

While dealing with the legal disputes in arbitration in India, the arbitration lawyers are well aware of the laws applicable to a dispute. Thus, resolving such disputes is not much of a tough nut to crack. But when there is an international dispute, the first task is to decide the laws which need to be employed for dealing with the commercial legal issue. Given below are the rules laid in Arbitration and Conciliation Act, 1996 regarding applicable laws:

  • As agreed to by the parties to dispute in international commercial arbitration, India being the place of such dispute.
  • If parties have agreed to a certain country’s laws, the confusion around conflict of laws, or in simple words, the private international law will not be touched.
  • If parties fail to decide on the laws of a particular nation, the arbitration tribunal may decide the applicable laws for dispute resolution based on the related facts.

 

International Commercial Arbitration with Seat in India

The following rules need to be followed by parties if the seat of international commercial arbitration is India:

  • Serving the notice of arbitration to convey willingness for dispute resolution through international commercial arbitration.
  • If parties wish to resolve their dispute through arbitration agreement, the court can not deny the same under the veil of another case law, etc.
  • Interim relief, i.e. relief until the final decision comes, can be granted to the parties by the international commercial arbitration tribunal.
  • Regarding appointment of arbitrators, the parties may have the arbitrator of any nationality, or someone who is not a national of either of the countries, as agreed.
  • Respecting the flexibility of the process, the arbitrator has to promote independence and impartiality during the process.
  • Regarding an arbitral award after international commercial arbitration India, it has the same effect as the domestic one. Rules regarding appeals follow the same.
  • Even if foreign law is being employed for international commercial arbitration India, the Indian courts have jurisdiction to check the defects thereunder.

 

Hence, it can so far be understood that international commercial arbitration is the convenient way out for resolving several disputes arising in commerce on a day-to-day basis. Had there been no law empowering resolution of international disputes arising in business, globalization would be a myth. The international lawyers in India are dutiful to support the smooth run of international commercial arbitration cases in India. Cross-border disputes should be resolved with due diligence, especially when they are related to trade and commerce. For, such cases lay the ground for ease of business in a particular country since trade is not limited to buying and selling but resolving the legal disputes that arise during such transactions.

 

Written By:
Ridhi Khurana

Ridhi Khurana

Gurgaon

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