Types of Arbitration in India

What is Arbitration?

When parties to a legal dispute mutually consent to hand over their matter to a third person called arbitrator for resolution, it is called arbitration. It is another form of alternative dispute resolution governed by the Arbitration and Conciliation Act, 1996. The scope of arbitration makes it clear that arbitration is not the opposite but synonymous to litigation. It is just a process with more convenience while deciding legal disputes. Since arbitrators follow the applicable rules while deciding a matter through arbitration, the decision, i.e. the arbitration award, is usually final. The courts can only set aside the arbitration award with substantial irregularities such as fraud, bias and misconduct by the arbitrator. The difference between arbitration and mediation is that arbitration award is a third party’s decision, while mediation agreement is the outcome of mutual understanding of parties to dispute and the mediator is there to find a convenient way out for them. The kinds of arbitration as explained below throw some light on the process involved.

The Role of Arbitration in Present Day Legal Framework 

Arbitration assists in the settlement of disputes provided that it is done beyond the normal judicial procedure. Arbitration has been described as an expeditious, efficient, and less costly approach to the resolution of disputes compared to the institution of litigation. This tends to show that arbitration is becoming popular since there is increased usage of arbitration in commercial contracts. As the world becomes a smaller place with globalization, arbitration is preferred when it comes to implementing international contracts to avoid cases that may take a lot of time in courts in different countries. 

Role of Arbitrators 

Arbitrators are very influential in the way they decide on a particular dispute. In contrast to judges of the courts, arbitrators are chosen depending on their specialization in the subject sphere and, as a result, most of the conflicts are solved more effectively. In many cases arbitrators are also specialized in the field of the dispute which adds to the neutrality and swiftness of an arbitration process. 

Types of Arbitration

The kinds of arbitration agreement may be categorized based on the territorial jurisdiction, i.e. the place whereby matters are being dealt with. It may also depend upon the laws agreed upon to apply to the legal relationship of parties concerned. Based on this, the types of arbitration in India are classified.

1- Domestic Arbitration

When there is a dispute among two parties sharing a legal relationship whereby both of them are residing or located in India, such a resolution of dispute through arbitration is termed as domestic arbitration. In such cases, there is least confusion regarding applicable laws for deciding the matters. The arbitration lawyers in India help with the representation of parties before the arbitration tribunal. The benefit of domestic arbitration is that it is quicker than a regular court case, particularly in India, which has a large number of pending cases.

2- International Arbitration

When one of the parties belongs to countries other than India and the dispute is being resolved through arbitration as per Indian laws, it is called international arbitration. Presence of an international element is obvious in such cases. The matters under international arbitration are usually resolved beyond Indian territory. This type of arbitration ensures that both parties from different jurisdictions are not prejudiced by bias or partiality of the other party.

3- International Commercial Arbitration

Where there is an international element in a commercial dispute whereby one of the parties (individual or body corporate) is Indian, resolution of disputes arising is done through laws as agreed upon in the contract. Where there is a lack of specific terms regarding dispute resolution or an agreement to follow Indian laws, the arbitration and mediation rules applicable in India are followed thereby. Such an arbitration process is called International commercial arbitration. Most of these arbitrations occur in major business correspondences such as in international business transactions, investments, and in business combination exercises like mergers and acquisitions.

4- Institutional Arbitration

Types of arbitration include when there is a particular institution selected by the parties to contract in the arbitration clause, such an institution is responsible for dispute resolution through arbitration. In such cases, parties may not be required to go through the hassle of selecting the arbitrator while the institution takes charge for such tasks. Institutional arbitration helps efficient dispute resolution.

5- Ad-Hoc Arbitration

When there is no contractual compulsion and parties agree for deciding matters via arbitration through mutual consent, it is termed as ad-hoc arbitration. It is one of the most common types of arbitration in India. In such cases, parties to dispute may mutually decide the process to be followed during arbitration. This form of arbitration provides open and flexible procedure; it may also result in prolongation of the process of arbitration as the parties cannot decide on procedures or arbitrators.

6- Fast Track Arbitration

Section 29B of Arbitration and Conciliation Act, 1996 provides for fast track procedure of arbitration. Among the other kinds of arbitration, this is the most efficient way of dispute resolution through arbitration. Things are usually summed up in documents to speed up things. Since fast-track arbitration is time-bound, it is most advantageous in business combinations where time is always a vital factor.

7- Contractual Arbitration

A contract is an official document in which several terms are agreed upon by the parties. Sometimes, parties to a contract include an arbitration clause which clarifies referring any dispute to arbitration before heading towards the courts. In such cases, terms mentioned in the arbitration clause decide the way parties go ahead with dispute resolution through an arbitrator. This type of arbitration is most often applied in commercial enterprise, construction, and even employment contract relations.

8- Statutory Arbitration

There are some laws or statutes which specify dispute resolution through arbitration only. While dealing with legal relationships under such laws, arbitration is the way out for settling the disputes. Some examples of statutory arbitration are the Electricity Act, 2003 or Railway Act where arbitration is the only method of resolving the dispute.

9- Foreign Arbitration

When one of the parties is Indian and they have mutually agreed to follow rules of a foreign land through arbitration while dealing with legal disputes, it is called foreign arbitration. In such cases, regardless of whether the arbitration takes place in India or or the other country, foreign arbitration laws are followed. This type of arbitration is often used when entering into international business and dealing with cross border contracts. This is done either with applying certain rules of foreign arbitration bodies or with referring to the laws of the foreign state.

Nevertheless, the goal of the arbitration is to offer the disputing parties a conclusive settlement of the matter more quickly and on less strict terms than with court litigation. 

Arbitration and Court Intervention 

However, there are circumstances in which all the arbitration proceedings are performed with the possibility of the court’s involvement. Courts can play a part in the appointment of arbitrators, recognition, and enforcement of awards and the determination of the existence or nullity of an arbitration clause or award. According to the Arbitration and Conciliation Act, 1996, the circumstances under which an award can be challenged are rather confined, and thus arbitration remains an effective way of solving disputes. 

Arbitration Clauses in Contracts 

Inclusion of arbitration clauses in contracts is especially important when determining how the dispute should be settled in the future. These clauses can prescribe the procedures for arbitration, the manner of selection of the arbitrators or the place of arbitration. When there is a proper clause inserted in arbitration it helps to avoid delay and ensures that the disputes are sorted out easily. 

Enforcement of Arbitration Awards 

Another advantage of arbitration is that the decisions made by the arbitrators are final and can be easily enforced. According to the Arbitration and Conciliation Act, 1996, Indian courts can recognize as well as enforce both domestic as well as international arbitration awards. The New York Convention also has a function for the implementation of cross-jurisdictional foreign arbitration awards. 

Difference Between Types of Arbitration

It is pretty clear that all the kinds of arbitration explained above have one or the other specific feature which differentiates one from another. It may be the location, the specific tribunal, the mutual decision of the parties, etc. But the main part is that arbitration is a kind of alternate dispute resolution for settling matters without court interference. Thus, there is no clear line of differentiation among the types of arbitration agreement. The scope of arbitration still remains the same regardless of which kinds of arbitration are being followed. 

Summary of Differences:

• Jurisdiction: Domestic arbitration is where both the parties belong to India while international arbitration is where one of the parties or both parties belong to foreign country. Foreign arbitration operates where the arbitration proceedings are done under foreign law. 

• Management: While institutional arbitration operates under the regulation of a specific arbitration institution, ad-hoc arbitration falls under the control of the parties engaged in the arbitration proceeding. 

• Nature of Dispute: International commercial arbitration deals essentially with cross-border commercial disputes while foreign arbitration can involve any type of dispute under the laws of foreign countries. 

• Process: While fast-track arbitration is quicker and legal formalities are fewer, conventional arbitration is relatively slower with thorough scrutiny. 

• Governing Rules: Contractual arbitration is the process that is agreed upon by the parties while statutory arbitration is the one that is provided by the law. 

These differences show that arbitration is a flexible process that may be adjusted to meet the requirements of the parties depending on their location, the nature of the conflict, and the set procedure. 

Through the alternate dispute resolution mechanism one can get all his/her legal disputes resolved without going through the long traditional court procedure. There are various alternate dispute resolution platforms available both online and offline. To know more about the alternate dispute resolution process you should consult with an ADR specialist.