UNIT- III

ARBITRATION, CONCILIATION AND ADR (ALTERNATIVE DISPUTE

RESOLUTION) SYSTEM
ARBITRATION – MEANING, SCOPE AND TYPES

Development of arbitration law in India

The first attempt to introduce arbitration law in India by the British East India Company, Act IX 1850
was promulgated. This was followed by multiple acts but were found inexpedient therefore
the Arbitration Act, 1940 was introduced, which was based on English Arbitration Act, 1934. The Act
of 1940 was comprehensive on the subject but only dealt with domestic awards and left out the
enforcement of international awards. Thus, the Arbitration Act 1940, was not effective in achieving its
purpose, hence, this ineffectiveness was expressed in the case Guru Nanak Foundation vs Rattan Singh
& Sons (1981), where justice D.A. Desai voiced those complex court proceedings impelled jurists to
find an alternative resort, which is less expensive, more informal, more effective and less time
consuming, to dissolve disputes avoiding the procedural claptrap, and this took them to Arbitration Act
1940. But the way proceedings are conducted under this Act and are challenged before the court without
an exception has made the lawyer laugh and the philosopher weep. The proceedings have become
highly technical and prolonging at every stage due to legal traps. Thus, the alternative resolution for
solving disputes has been clothed, by the decision of the court, with ‘legalese’ of unforeseeable
complexity.

Nearly half a century after finally acting on the criticism, India adopted the United Nations Commission
on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985,
and enacted the Arbitration and Conciliation Act, 1996.

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more
arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a
private dispute resolution procedure instead of going to court.
Definition of Arbitration
Arbitration is a dispute resolution process agreed between parties in which the dispute is submitted to
one or more arbitrators who issue an award. It is an alternative dispute resolution (ADR) mechanism
because it allows the parties to resolve their dispute outside of State courts, i.e., without litigation.
Among alternative dispute resolution methods, arbitration is defined as a jurisdictional means of
settling disputes because of the power given to arbitrators to decide a case and issue an award. Different
from mediation and negotiations, the parties have no say on the solution found by the arbitral tribunal,
which is imposed on them in a final and binding manner.

Principle Characteristics/ Scope of Arbitration

 Arbitration is consensual:
An arbitral proceeding can only take place if both the parties to the disputes have agreed to it.
Generally, parties insert an arbitration clause in the contract for future disputes arising from non-
performance of contractual obligations. An already existing dispute can also be referred to
arbitration if both the parties to the dispute agree to it (submission agreement).
 Parties choose the Arbitrators:
Under the Indian Arbitration Act parties are allowed to select their arbitrator and they can also
select a sole arbitrator together who will act as an umpire. However, the parties should always
choose an arbitrator in an odd number.

 Arbitration is neutral:
Apart from selecting neutral persons as arbitrators, the parties can choose other important
elements of proceeding such as the law applicable, language in which the proceedings should be
conducted, the venue for arbitration proceedings. All these things ensure that no party enjoys a
home court advantage.
 Decision of the Arbitral Tribunal is final and easy to enforce.

Kinds of Arbitration

Arbitration is a way to resolve disputes between the parties outside the courts and it is an alternative
method of dispute resolution. There are two types of agreements under the arbitration process. The one
is the agreements which states that, if any dispute arises then, it will be settled through the means of the
arbitration process and other agreements which are entered after the disputes arise which states that the
parties mutually agree to settle the dispute amongst themselves through the process of arbitration. The
arbitrator is the authorized person who resolves the disputes between the parties and renders the
arbitration award. The decision of the arbitrator is final and legally binding on both parties. Arbitration
can be classified into two types, voluntary or mandatory arbitration or binding or non-binding.

Arbitration can be made compulsory only when it is mentioned in legislation or when the parties impose
on each other and enter into an agreement that all the future disputes be settled through arbitration. The
arbitration which is not binding is similar to the ADR mechanism that is mediation in which the
decision cannot be imposed on the parties. In arbitration, there are limited rights given to parties for
review and appeal of the award given by the arbitrator.

TYPES OF ARBITRATION

 Domestic arbitration
 International arbitration

Domestic arbitration: The arbitration which happens in India and both the parties to the dispute also
belongs to India and the dispute is decided concerning the substantive law of India. In this type of
arbitration process, the dispute must arise in India, and parties are subjected to the Indian jurisdiction.
International arbitration: The arbitration which takes place within the territory of India or outside India
or it has any element which has foreign origin is termed as international arbitration. The facts and
circumstances of the disputes between the parties decide that of which origin the law should apply to the
dispute.
International Commercial Arbitration

It is defined as the substitution of many burning questions for a smouldering one. International
Arbitration is considered to be commercial if it related to disputes arising out of a legal relationship
irrespective of their contractual nature and are considered as commercial under the law in force in India
and where at least one of the parties is:
 1. A national of, or habitual resident in, any country other than India or
2. A body corporate which has to be incorporated in any foreign country, or
3. An association or a body of individuals whose core management and control in a country which
is not India or
4. the government of a country other an India. In International Commercial Arbitration the arbitral
tribunal is bound to decide the conflict according to the rules of law chosen by the parties as
applicable to the substance of the dispute; any designation by the parties of the law or legal
system of a given country can be interpreted, unless it has been expressed otherwise, one which
directly refers to the substantive law of that country and does not refer to its conflict of laws
rules.

Generally, in India the types of the arbitration process are classified into three:

 Ad hoc arbitration
 Institutional arbitration
 Fast track arbitration

Ad hoc arbitration refers to the process in which the parties mutually arrange the arbitration for the
settlement of the dispute. The parties are free to submit their own set of rules and procedures as they don’t
have to follow any set guidelines of any arbitration institution. The essence of the ad hoc arbitration is the
geographical jurisdiction.
Institutional arbitration refers to the arbitration process which is carried out by an arbitration institution.
These institutions have their own set of rules and give a framework for the arbitration to settle the dispute
between the parties. It has its form of administration to assist in the process.
Fast track arbitration is the remedy to the lengthy and tedious process of arbitration. The time is the
main essence of fast track arbitration. In this process, all the methods which consume time in an arbitration
process have been removed and the process is made much simpler. The arbitration process is also called
private process as it is not similar to the court proceedings it takes place privately.

DISTINCTION BETWEEN LAWS OF 1940 and 1996

Arbitration is a mode of alternative dispute resolution method. It is a very efficient and popular method
which helps in easy delivery of justice. The person who resolves the dispute between the parties in known
as an arbitrator.
The first legislative council in India was formed in 1834. The first Indian arbitration Act was passed on
1st July, 1899. The act was based upon the British arbitration act. The applicability of the act was only on
the presidency towns such as Calcutta, Bombay and Madras.
ARBITRATION ACT OF 1940
The British introduced a new arbitration act as the previous one was considered complex and bulky. 9the
new act was enforced on 1st July 1940 and was known as ‘The Arbitration Act 1940’. This act was
applicable to the entire of India. The 1940 act received a lot of criticism.
THE ARBITRATION AND CONCILIATION ACT, 1996
The Arbitration Act, 1940 was replaced with the Arbitration and Conciliation Act, 1996. It was enforced
on 22nd August, 1996. The basic motive of this legislature was to provide speedy remedy to the parties
with minimum court interference. This act covered both domestic and international (under the New York
convention and the Geneva Convention) arbitration.
THE ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2015
The 2015 bill amends the Arbitration and Conciliation Act, 1996. This act deals with the original
jurisdiction of the courts. It states that for all arbitration matters would be principal civil court or the high
court of original jurisdiction. Under this act, it gives the power to the courts to refer the parties for
arbitration. The act also allows the court to provide interim relief even before the arbitral proceedings is
over. Further, the act also allows the setting aside of the award in case it violates the public policy of
India.
THE ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2019
The 1996 act was further amended on 9th August, 2019. The act provides that the Supreme Court in cases
of international arbitration and the High Court in cases of domestic arbitration to delegate the power of
appointment of arbitrators to arbitral institutions setup by the council. Further a new part was introduced
by this act (Part IA). The main aim of this amendment was to improve the quality of arbitration in India.
The basic difference in 1940 and 1996 Act was that in the former one a party could commence
proceedings in court by moving an application under Section 20 for appointment of an arbitrator and
simultaneously could also move an application for interim relief under the Schedule read with Section
41(b) of the 1940 Act. The later one does not contain any provision similar to Section 20 of the 1940
Act but the court can pass orders even before the commencement of the arbitration proceedings.
Another difference was that in the former act, there was no requirement to give reasons for an award
until and unless agreed by the parties to arbitration.

UNCITRAL MODEL LAW

The Uncitral Model Law on Arbitration, is an international legal framework that provides a set of
provisions on international commercial arbitration conduct and management.
With the advent of globalization, the world saw the interconnection of people and businesses from
different parts of the globe and while this led to great partnerships and successful enterprises, it also
created a realization for the need to adopt alternate mechanisms for dispute resolutions as traditional
courts were unable to handle the growing number of conflicts and disputes that had to be governed on an
international platform and resolved as quickly and quietly as possible. This led to the popularity of
arbitration, as a method of Alternate Dispute Resolution (ADR), but there was a disparity between states
and countries regarding the rules regulating the process and the standards that parties could expect. As a
response to this, the United Nations Commission on International Trade Law (UNCITRAL) adopted the
Model Law on International Commercial Arbitration on 21st June 1985. The Model Law was adopted
with the plea that all states, while setting up their own domestic legislation on arbitration, give due
consideration to the Model Law in order to preserve uniformity in the law of arbitral proceedings and to
keep in mind the specific needs of international commercial arbitration.
Some features of the Model Law are:

 Keeping in mind the disparities existing in countries with relation to international arbitration, the
Model Law lays down certain rules and provisions aimed at creating uniformity in international
commercial arbitration. However, the provisions are also applicable to domestic arbitration and
can be used as a guide to enact modern laws governing domestic arbitration.
  The Model Law defines the substantive aspects of international commercial arbitration by defining
“international” – when parties to an agreement have different places of business, or if the place of
arbitration, place of performance of contract, place of subject matter of dispute is not domestic,
and “commercial” – certain business relationships as illustrated in the Model.
 The Model Law also addresses the territorial scope of an arbitral tribunal and the enforceability
of an arbitral award. The Model Law enacted in a state would apply if the seat of arbitration is
within the territory of that state and the arbitral award pronounced would have global enforcement.
However, keeping in mind ‘party autonomy’ in arbitration, the Model Law allows for parties to
choose the procedural law applicable to govern their dispute.
 The Model Law also limits the interference of the court, in the spirit of arbitration, allowing
judicial intervention only for appointment of arbitrators, challenge and termination of an
arbitrator, jurisdiction of an arbitral tribunal, and the setting aside of an arbitral award. It also
allows court assistance in taking evidence, recognition of the arbitration agreement, and
enforcement of arbitral awards.
 The Model Law emphasizes the importance of the arbitration clause or agreement which must be
present if parties to a dispute want to proceed with arbitration as a means of resolution. The Model
also clarifies the contents of the clause and the recognition of these clauses by the courts.
 With regard to the arbitral tribunals the Model Law states rules on their composition, jurisdiction
and conduct of proceedings by the tribunals, keeping in mind the freedom that they have and the
will of the parties.
 When it comes to awards, the Model Law sets out rules to be followed for the pronouncement of
award, the enforcement of award and setting aside or challenge of the award.

The Model Law was enacted keeping in mind the necessary features in order to eliminate difficulties in
regulating international arbitration by providing uniformity in some procedural and substantive practices
of arbitration.
While enacting the Arbitration and Conciliation Act, 1996, the lawmakers in India took into consideration
the UNCITRAL Model Law and this can be seen in the Preamble to the Act which specifies that the
provisions of the Act are in consonance to and in furtherance of the UNCITRAL Model Law. As a result
of this adherence to the Model Law, many of the provisions in the Act of 1996 are in line with the Model
Law.

 The Act applies to both domestic and international commercial arbitration, so both the terms have
been defined with the definition of international commercial arbitration being quite similar to the
definition provided in the Model Law, with the addition of a few new sub-clauses.
 The Act also provides for the existence of an arbitration agreement between parties for the
commencement of arbitration proceedings. Chapter 2 of the Act lays down the specifications for
the arbitration agreement and the intervention of the courts with respect to the agreement.
 Chapters 3 and 4 of the Act deals with the composition and jurisdiction of the arbitral tribunals
and once again the provisions are in line with the Model Law. The Act empowers the tribunals to
rule on its own jurisdiction and allows arbitrators to pronounce awards with limited intervention
from the courts.
 Chapter 5 of the Act makes provisions on the conduct of arbitral proceedings keeping in mind the
freedom of arbitrators and the will of the parties, much like the Model Law.
 Chapters 6 and 7 deal with the rules to be followed for the pronouncement of award, the
enforcement of award and setting aside or challenge of the award, and this is important because it
allows for the intervention of the court but only in certain circumstances which are mentioned
under Section 34(2).
  Chapter 8 states that arbitral awards are final and binding on the parties and all courts and once
again it is in consonance with the principles of arbitration and the Model Law.

It is therefore evident that the Indian law on arbitration, the Arbitration and Conciliation Act, 1996,
follows the UNCITRAL Model Law almost down to the T but with the amendments to the Act in 2005
and 2019, the Act has set out to make India a hub for international Commercial Arbitration and in doing
so has deviated from some of the rules of arbitration like judicial intervention.
India has not adopted the United Nations Commission on International Trade Law Model Law on Cross-
Border Insolvency (UNCITRAL Model Law). It is notable that only a few countries that have adopted
the UNCITRAL Model Law have specified a 'reciprocity' requirement for recognition of insolvency
proceedings.
India is currently a member of UNCITRAL with her current term due to expire in 2022.

ARBITRATION AND EXPERT DETERMINATION

Arbitration and expert determination are the most common alternative dispute resolution procedures.
They are found in very many contracts, for example disputes in relation to the following:

 rent reviews under leases;

 service charges under leases;
 land values under option agreements;
 square footage calculations of completed units under agreements for lease;
 calculation of overage;
 share valuations and completion accounts in share sales;
 works under agreements for lease; and
 Partnership and shareholder disputes.

We are very commonly asked for advice on the differences between arbitrators and experts and
suitability of each for particular situation. Here are an explanation and some guidelines.

ARBITRATION

What is arbitration?

Arbitration is similar to court proceedings but without the potentially quite long wait for a hearing date
and usually with a simplified procedure.

What governs the arbitration?

Arbitration is governed by an agreement to arbitrate, usually found in the contract that is the subject of
the arbitration together with the Arbitration Act 1996 (referred to as ‘AA 1996’ below). A
comprehensive arbitration provision sets out the following.

 The types of disputes that will go to arbitration.

 The number of arbitrators (usually one).
 The body who is to nominate the arbitrator or less often named arbitrators.
 What institution’s rules apply, if any?
  The nationality of the ‘seat’ of arbitration, see below. The nationality of the seat of the
arbitration dictates which arbitration statute applies to the arbitration. If the seat is England or
Wales AA 1996 applies.
 The arbitration provision does not need to state that the arbitration will be binding, because AA
1996 provides for that.

The only essential provision is an agreement to determine specified types of dispute by arbitration. If
any other provisions are lacking AA 1996 rides to the rescue allowing the courts to set the arbitration up
and the arbitrator to do the rest. Specifying the number of arbitrators, setting out the nominating body
and providing for the seat of arbitration is sensible though, because needing to use the courts will add to
the cost and delay the arbitration.

How long does arbitration take?

The quickest arbitration is probably a 100 day procedure. This is comparable to expedited court
proceedings, but can usually be commenced more quickly than court proceedings.

How expensive is arbitration?

The arbitrator is usually paid an hourly rate and overall an arbitration is probably slightly cheaper than
court proceedings.

EXPERT DETERMINATION

What is expert determination?

The procedure for expert determination is considerably less formal than arbitration. It may simply
consist of submissions to the expert by both parties, sometimes with a ‘right of reply’ and with the
expert then issuing their determination.

What governs expert determination?

As with arbitration, expert determination is governed by the agreement to appoint them. Here however
neither AA 1996 nor any other Act rescues parties who have not put their minds to equipping the expert
with everything that they need to make a binding determination.

The expert determination provision should contain all of the following:

 The types of disputes that will go to expert determination.

 An agreement that the expert is an expert not an arbitrator.
 The number of experts, usually one.
 The body who is to nominate the expert or less often the named experts.
 A requirement that the expert provides a written determination, usually within an agreed
timescale.
 A provision to deal with what happens if the expert dies or becomes incapable.
 Procedural rules (number of submissions, etc.) or a provision stating that the expert can dictate
these.
 Requirements that the parties produce evidence for the expert.
 A provision to deal with what happens if the expert dies or becomes incapable.
  Procedural rules (number of submissions, etc.) or a provision stating that the expert can dictate
these.
 Requirements that the parties produce evidence for the expert.

How long does expert determination take?

The expert’s determination can be issued very quickly, perhaps a week or two following the final
parties’ submission. This is a particularly attractive feature.

How expensive is expert determination?

The expert will charge an hourly rate and given the simpler procedure costs will be lower than those of
arbitration. This is another attractive feature.

EXTENT OF JUDICIAL INTERVENTION IN ARBITRATION

The evolution of arbitration law in India has a long-running history. Modern Arbitration was first
introduced during British India in 1772 through the Bengal Regulations. However, the eventually
Arbitration and Conciliation Act, 1996 came into being. In the initial stage, when a dispute arises with
regard to the appointment of an arbitrator, necessarily requires the court’s intervention. During the
proceedings, the court’s intervention is required to assist the proceedings. The court can provide assistance
by providing interim protection or otherwise. Finally, when the arbitral award is declared, judicial
intervention is required for either the enforcement of the award or to challenge it.
Legislative intent behind the 1996 Act
The 1996 act only came into being after two ordinances were passed after the New Economic Policy of
1991 was functioning. The scheme of the 1996 act is such that the supervisory role of the courts in the
arbitration proceedings and arbitral awards would be reduced. It is mentioned in the preamble of this Act
that it’s based on the UNCITRAL Model Law. However, not all safeguards provided by the UNCITRAL
Model Law were incorporated in this Act. Under Article 16 of the Model law provided that Arbitration
Tribunals may rule in its own Jurisdiction and jurisdictional issues were to be decided as preliminary
issues by the arbitral tribunal, before appealing to the Court. This was eliminated from the Act.

Judicial intervention in Arbitration Law

Three ways in which judicial intervention in arbitration takes place:-

 Before proceedings- Section 5 of the 1996 act

 During proceedings- Section 9 of the 1996 Act
 After proceedings- with regard to arbitral awards

Judicial intervention before Arbitration Proceedings

 The extent of judicial intervention statutorily permitted is laid under Section 5 (Notwithstanding
anything contained in any other law for the time being in force, in matters governed by this Part,
no judicial authority shall intervene except where so provided in this Part.) of the Arbitration and
Conciliation Act, 1996. Interestingly this section is analogous to Article 5 of UNCITRAL Model
Law. It is also inspired by the English Arbitration Act 1996 as well. However, a significant amount
of unnecessary judicial intervention is practiced in reality while applying the Arbitration Law.

Judicial intervention during Arbitration Proceedings

 There are various sections involved where the judiciary steps in during proceedings as
well. Section 9 of the Act lays down interim measures that can be granted by the Court. Section
17 of the Act on the other hand empowers arbitral tribunals to make orders as per the section.
Section 9 confers the same powers to judicial authorities and courts. However, the purpose of both
sections is absolutely different.

Judicial Intervention with regard to Arbitral Award

One of the most significant provisions of the Act is Section 34. This Section lays down the permissible
grounds upon which an arbitral award can challenge. The Court doesn’t entertain appeal over arbitral
awards. This section is also a testament to the limited scope of judicial intervention that is statutorily
allowed.
Sections 34 encompass 4 important sub-sections that lay down the permissible grounds for setting aside
an arbitral award. Presently, the pendency of a petition under this section renders an arbitral award
unenforceable.

INTERNATIONAL COMMERCIAL ARBITRATION

Introduction

Indian law provides provision for dispute resolution by way of International Commercial Arbitration.
This mechanism is aimed at resolving commercial disputes between an Indian entity and a foreign entity
within the framework of Indian Arbitration Laws. The arbitration proceedings can be governed by the
rules of arbitration institutions or the courts have the power to appoint arbitrators under the provisions
of section 11 of the Arbitration and Conciliation Act 1996. By way of arbitration, business disputes
between parties are settled through mutually agreed-upon terms. The parties submit the dispute to one or
more arbitrators who settle the dispute by making a binding decision on the dispute. Thus, arbitration is
a way of settling the dispute outside the courts in an efficient and timely manner.

International Commercial Arbitration

As per section 2 (1)(f) of The Arbitration and Conciliation Act, 1996 (amended in 2015), “international
commercial arbitration” means an arbitration relating to disputes arising out of legal relationships,
whether contractual or not, considered as commercial under the law in force in India and where at least
one of the parties is,

 An individual who is a national of, or habitually resident in, any country other than India; or
 A body corporate which is incorporated in any country other than India; or
 An association or body of individuals whose central management and control is exercised in any
country other than India; or
 The Government of a foreign country.

Objectives of International Commercial Arbitration

Arbitration is a progressing alternative to the legal system and aims to fill up gaps that persist in the
conventional court proceedings. Various legal aspects of commercial arbitration in India include,
provision of a Neutral Dispute Resolution Forum against the local courts, providing parties with
commercial expertise to adjudicate the tribunal, unlike courts that merely exercise general jurisdiction.
The law in India provides parties with an enforceable award as opposed to jurisdictional uncertainties in
litigation and the arbitration procedure is speedy avoiding the delays and appeals that always persist in
the court system. In addition, the parties are not subject to public trials, thereby upholding the
confidentiality of the parties.

Arbitration Agreement

Arbitration resolves the dispute following adjudicatory procedures affording the parties an opportunity to
be heard. Thus, arbitration agreements usually take the form of clauses in commercial contracts providing
for arbitration of future disputes and include submission agreements covering arbitration of existing
disputes.

International Arbitration Legislation

The UNICITRAL Model Law was adopted in 1985 and was subsequently revised in 2006. There are
more than 60 countries that have adopted this model law that allows comprehensive legislative treatment
of the international arbitral process. The Model upholds the validity and enforceability of arbitration
agreements (Arts. 7-9) by providing a guideline for competent arbitrators (Art 16) and the absolute
judicial non-interference (Art 5). The parties have the choice of arbitral seat (Art 1(2), 20), appointing of
the arbitrators (Art 10-15) and the provisional measures (Art 17) to be taken. The Model only lays down
an objective procedure for arbitration (Art 18-26), and evidence taking (art 27) as per the applicable
substantive law (Art 28) to come to a concluding arbitral award (Art 29-33). Most importantly, the model
enforces the recognition and enforcement of foreign arbitral awards including bases of non-recognition
(Art 35-36).

Drafting International Arbitration Agreements

Business lawyers and law firms work closely with clients for drafting and review of international
arbitration agreements. During such drafting, important considerations include provisions such as, but
not limited to, definition of arbitration clause, scope of the disputes submitted to arbitration, stating an
arbitral institution and its rules, the seat of the arbitration, venue of the arbitration, method of appointment
of the arbitrator, number and qualifications of the arbitrators, language of the arbitration, applicable law
and jurisdiction.

International Commercial Arbitration with Seat outside India

There is no generally applicable procedural code that applies to ICA worldwide. Each procedure is
tailored to specific cases that are distinct from litigation. Thus, specific country based institutional rules
apply. This can be seen in the judgment of Bhatia International v/s. Bulk Trading in which it was held
that Indian courts have the right to use their jurisdiction to test the significance of an arbitral award made
in India, even if the actual law of the contract is foreign. The court recognized that Part 1 of the Arbitration
and Conciliation Act, 1996 gives effect to UNCITRAL Model Law allowing courts to grant interim relief
even when the seat of international commercial arbitration is outside India.

International Commercial Arbitration with Seat in India

The international commercial arbitration process in India begins with a notice of arbitration, which is
sent from one party to another to represent the intention of the party to settle the dispute through
arbitration. Under section 8 of the Arbitration and Conciliation Act, 1996 (the Act), if the party before a
judicial authority, applies along with the original copy of the arbitration agreement, on the date of
submitting its first statement itself, then the judicial authority must accept such application. As per the
Act, section 9 allows interim relief to be granted to the parties by the court. In addition, section 17 allows
the same for the arbitral tribunal. These provisions provide security to the party seeking relief until the
final decision is given.

Appointment of Arbitrator

Section 11 of the Act allows appointment of arbitrators where within 30 days, each party nominates one
arbitrator and subsequently the two appoint the third one. Their nationality is decided by the parties. An
arbitrator must act independent and impartial manner. Where he is found to be partial and dependent, then
his appointment can be challenged. Moreover, he must possess the qualifications agreed to by the parties
and solve the dispute in a time-bound period.

The parties must be flexible in terms of the procedure, place, and language of the arbitration as the arbitral
tribunal decides the sequence the evidence is to be examined. The parties can also settle the dispute
through mutual consent or the arbitral tribunal. In case a party is not satisfied with the decision of the
tribunal it can make an application to the court under section 34 to set aside the arbitral award. Or, an
appeal can be filed for refusal to provide interim relief under section 9 and section 17 and to set aside the
arbitral award under section 34.

Conclusion

With changing time, there is an increase in international dealings and contracts that increased the need
for international arbitrations to resolve disputes at an international level. It also provides security to the
parties where they can easily enter into agreements at an international level. The BALCO case judgment
is a very good precedent in this matter. According to it parties while entering into arbitration do not face
any inconvenient procedures. Thus, parties not only adhere to the domestic judicial system but also engage
in international commercial arbitration for absolute redressal.

ARBITRATION AGREEMENTS - ESSENTIALS AND KINDS

Arbitration agreements
The formation of an arbitration agreement takes place when two parties, enter into a contract and in which,
the contract states that any dispute arising between the parties have to be solved without going to the
courts with the assistance of a person, who would be a neutral person, a third party, appointed by both of
the parties, known as the Arbitrator, who would act as a judge. The arbitrator so appointed should have
been previously mentioned in the contract that they made. They should also state who should select the
arbitrator, regarding the kind of dispute the arbitrator should give decisions on, the place where the
arbitration would take place. Furthermore, they should also state the other kinds of procedures mentioned
or that has to be required during an arbitration agreement.

The parties are generally required to sign an Arbitration Agreement. The decision taken by the arbitrator
regarding any issue, is binding on both the parties, as stated by the agreement. In any event, where one
party decides that an agreement must be made prior to entering the contract, it can be stated that the
agreement was made to deviate from the hassles of the court. These agreements are like contingent
contracts, which means that these agreements shall only come into force or become enforceable if any
dispute happens, and on the basis of the same dispute between two parties mentioned in the contract. It
also takes place or is enforceable in the light of any dispute that arises between the parties to the contract.

Essentials of an Arbitration Agreement

 There must be a dispute that should take place, only then the agreement will be valid. The presence
of a dispute amongst the parties is an essential condition for the contract to take place. When the
parties have already settled the dispute, in no case, they can invoke the arbitration clause to refute
the settlement.
 Another essential is the written agreement. An agreement related to the arbitration must always
be in writing. An arbitration agreement will be considered as a written agreement when:

1. It has been signed by both parties and it is in the form of a document.

2. It can be the exchange of the telex, the letters, the telegrams, or any other means of
communication which provides the record of the exchange and the agreement for arbitration.
3. There must be an exchange of statements between the parties that gives the statement of claim
and defence in which the existence of the agreement of the arbitration is agreed by one of the
parties and which is not defined by the other party.

 The third essential intention. The intention of the parties while forming the contract is of utmost
importance and it forms the basis of the agreement. There have been no prerequisite citations of
terms such as an “arbitrator” or “arbitration” to be made in the agreement. Therefore, it is
necessary to note that the intention of both parties plays a very important role in such an
agreement. However, one must keep in mind that even if the words have not been mentioned, the
intention must show that both the parties have agreed to come to the terms with the Arbitration
Agreement.
  The fourth essential element is the signature of the parties. The signature of the parties is an
essential element to constitute an arbitration agreement. The signature can be in the form of a
document signed by both the parties to the contract which comprises all the terms and conditions,
or it can also be in the form of a document which is signed by only one party to the contract which
contains the terms and acceptance by the other party to the contract. It will be sufficient if one
party puts up a signature in the agreement and the other party accepts that.

Some common elements included in the Agreement other than the essential agreements
The following are some of the common elements included in an arbitration agreement, which is generally
not considered as an essential element, but shall be included if the parties want it to be mentioned in the
contract.

1. Seat of Arbitration- the seat here means the place. Therefore, this clause states that there will be a
place of arbitration in the case of the dispute. This provision is an important one, especially in the
case of an international commercial arbitration, as this seat helps in determining the procedural
laws that govern the procedure of the arbitration. However, the seat of the arbitration does not
have to be the same place as the hearing of the proceedings. It is the place where the arbitration
takes place, even though it differs from the place of the hearings.
2. Procedure for appointing the Arbitrators- the procedure is the same as mentioned in the Arbitration
Act. It states that any person, irrespective of the nationality, may be appointed as an arbitrator,
unless the parties agree to something otherwise. The parties can themselves agree for the
appointment of an arbitrator.
3. Language- The language plays an important role while making an agreement. It is necessary that
the language which has been chosen in the contract doesn’t have to be the one that is not
understood by both parties. There must not be any sort of communication gap and that the
agreement made by the parties are of such a manner that each and every clause mentioned in the
contract is actually understood by both the parties signing the contract. Picking the language which
can be understood by both parties is important because then it would save both the parties, the
cost of a translator.
4. Number and Qualifications of Arbitrators- The Act allows the parties to determine the number of
the arbitrators, with the only condition that the number shall not be an even number, but an odd
number of arbitrators, so that the decision can be made even if there is a disagreement amongst
the arbitrators.
5. Type of Arbitration- The parties have the choice to choose between the institutional and the ad
hoc (which means it is created for that specific purpose) kind of arbitration. Institutional means
that agreeing to be bound by the rules of the arbitration institutions ad hoc means that the parties
themselves agree to arrange an arbitrator.
6. Governing Law- It is important to mention the substantive law that they want to be governed by
as failing to mention this substantive law might be a huge issue in the future disputes arising
between the parties, if any.
Kinds of arbitration agreement:
In general, the arbitration agreement provides the basis for arbitration. It is defined as an agreement to
submit present or future disputes to arbitration.
This generic concept comprises two basic types:
a) A clause in a contract, by which the parties to a contract undertake to submit to arbitration the disputes
that may arise in relation to that contract (arbitration clause); or
b) An agreement by which the parties to a dispute that has already arisen submit the dispute to arbitration
(submission agreement).
The arbitration clause therefore refers to disputes not existing when the agreement is executed. Such
disputes, it must be noted, might never arise. That is why the parties may define the subject matter of the
arbitration by reference to the relationship out of which it derives.
The submission agreement refers to conflicts that have already arisen. Hence, it can include an accurate
description of the subject matters to be arbitrated. As we shall discuss later, some national laws require
the execution of a submission agreement regardless of the existence of a previous arbitration clause. In
such cases, one of the purposes of the submission agreement is to complement the generic reference to
disputes by a detailed description of the issues to be resolved.
Validity
What are the validity requirements for an arbitration agreement?
The arbitration agreement must be in writing. It may be in the form of an arbitration clause in a contract
or in a separate agreement. There is no particular form for an arbitration agreement and the courts will
look at the wording to determine whether the parties intended to enter into an arbitration agreement. The
agreement need not use the words ‘arbitration’, ‘arbitrator’ or ‘arbitral tribunal’ in order to be
considered a valid arbitration agreement.
Reference: Matters that may be referred to arbitration - restrictions under specific laws

Generally, all disputes which can be decided by a civil court, involving private rights, can be
referred to arbitration. Thus, disputes about property or money, or about the amount of damages
payable for breach of contract etc., can be referred to arbitration. However, according to the
general practice, following matters are not referred to arbitration.

a. Matrimonial matters, like divorce or restitution of conjugal rights;

b. matters relating to guardianship of a minor or other person under disability;
c. testamentary matters, for example, questions about the validity of a will;
d. insolvency matters, such as adjudication of a person as an insolvent;
e. criminal proceedings;
f. questions relating to charities or charitable trusts;
g. matters falling within the purview of the Monopolies and Restrictive Trade Practices
Act;
h. Dissolution or winding up of a company.
(The list is not intended to be exhaustive).

Broadly, the reasons underlying this position is that matters involving morality, status and public
policy cannot be referred to arbitration.

Interim measures, etc., by Court.

A party may, before or during arbitral proceedings or at any time after the making of the arbitral award
but before it is enforced in accordance with section 36, apply to a court—
(i) For the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely: —
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration
agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the
dispute in arbitration, or as to which any question may arise therein and authorizing for any of the
aforesaid purposes any person to enter upon any land or building in the possession of any party, or
authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may
be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the
Court shall have the same power for making orders as it has for the purpose of, and in relation to, any
proceedings before it.
(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim
measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period
of ninety days from the date of such order or within such further time as the Court may determine
(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-
section (1), unless the Court finds that circumstances exist which may not render the remedy provided
under section 17 efficacious.

ARBITRATION TRIBUNAL
An arbitral tribunal or arbitration tribunal, also arbitration commission, arbitration committee or
arbitration council is a panel of unbiased adjudicators which is convened and sits to resolve a dispute
by way of arbitration. The tribunal may consist of a sole arbitrator, or there may be two or more
arbitrators, which might include a chairperson or an umpire.

Arbitral tribunals refer to panels of one or more arbitrators responsible for adjudicating disputes between
parties. However, unlike judges sitting in national courts, whose powers are usually clearly defined under
the relevant national laws and procedures, an arbitral tribunal’s jurisdiction, powers and duties are
prescribed by:

i. the agreement between the State parties to the relevant treaty;

ii. the agreement between the parties to the dispute;
iii. the applicable arbitration rules, e.g. the International Centre for Settlement of Investment Disputes
(ISCID) Arbitration Rules or the United Nations Commission on International Trade Law
(UNCITRAL) Arbitration Rules; and
iv. the law of the place/seat of arbitration, or, if it is an ICSID arbitration, the ICSID Convention;

(Collectively referred to in this note as the “applicable legal framework”).

Members selected to serve on an arbitration panel are typically professionals with expertise in both law
and in friendly dispute resolution (mediation). Some scholars have suggested that the ideal composition
of an arbitration commission should include at least also one professional in the field of the disputed
situation, in cases that involve questions of asset or damages valuation for instance an economist.
Arbitral tribunals are usually constituted (appointed) in two types of proceedings:

 ad hoc arbitration proceedings are those in which the arbitrators are appointed by the parties
without a supervising institution, relying instead on the rules has been agreed upon by the
parties and or procedural law and courts of the place of arbitration to resolve any differences
over the appointment, replacement, or authority of any or all of the arbitrators; and
 institutional arbitration proceedings are those in which the arbitrators are appointed under the
supervision of professional bodies providing arbitration services, such as the American
Arbitration Association (which conducts international proceedings through its New York-
based division, the ICDR), the Australian Fair Work Commission, the LCIA in London or
the ICC in Paris. Depending on their establishing statutory or treaties, these kind of
institutions can be capable of supervising the appointment of arbitration commissions in one
country or on an international scale. This type of arbitration avoids the need for parties to
involve local courts and procedures in the event of disagreement over the appointment,
replacement, or authority of any or all of the arbitrators.
Permanent arbitration committees tend to have their own rules and procedures, and tend to be more
formal. They also tend to be more expensive, and, for procedural reasons, slower.
Appointment
The parties are generally free to determine their own procedure for appointing the arbitrator or arbitrators,
including the procedure for the selection of an umpire or chairperson. If the parties decline to specify the
mode for selecting the arbitrators, then the relevant legal system will usually provide a default selection
process. Characteristically, appointments will usually be made on the following basis:

 If the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the arbitrator not
later than (for example) 28 days after service of a request in writing by either party to do so

 If the tribunal is to consist of three arbitrators:

1. each party shall appoint one arbitrator not later than (for example) 14 days after service of a request
in writing by either party to do so, and
2. the two so appointed shall forthwith appoint a third arbitrator as the chairperson of the tribunal.

 If the tribunal is to consist of two arbitrators and an umpire-

1. each party shall appoint one arbitrator not later than (for example) 14 days after service of a request
in writing by either party to do so, and
2. the two so appointed may appoint an umpire at any time after they themselves are appointed and
shall do so before any substantive hearing or forthwith if they cannot agree on a matter relating to
the arbitration.
Most arbitration clauses will provide a nominated person or body to select a sole arbitrator if the parties
are unable to agree (for example, the President of the relevant jurisdiction's Bar Association, or a
recognized professional arbitration organization such as the LCIA, or a relevant professional
organization). In default of such a provision, where the parties are unable to agree, an application for an
appointment is usually made to the court.
Normally a well drafted arbitration clause will also make provision for where a party to the dispute seeks
to cause delay by refusing to make or agree an appointment. Often this will allow the "non-defaulting"
party to appoint a sole arbitrator and for the arbitration to proceed on that basis.
Chairperson and umpire
Where the tribunal consists of an odd number of arbitrators, one of them may be designated as the umpire
or chairperson. The selection of title carries some significance. When an arbitrator is "chairperson", then
they will not usually exercise any special or additional powers, and merely have a presidential function
as the tribunal member who sets the agenda. Where a member of the tribunal is an umpire, they usually
do not exercise any influence on proceedings, unless the other arbitrators are unable to agree — in such
cases, then the umpire steps in and makes the decision alone.
Arbitrator advocates
In some legal systems, it used to be common for each party to the dispute to appoint an arbitrator and for
those two arbitrators to appoint a third arbitrator (who may or may not be called an umpire). However,
the two arbitrators appointed by the parties to the dispute would essentially act as advocates for the party
who appointed them, and the umpire would effectively act as a sole arbitrator. Such systems can lead to
difficulty, as other countries may be reluctant to enforce an arbitration award where two of the three
"arbitrators" are clearly unable to demonstrate impartiality or independence. The standards for enforcing
such awards are set out in the New York Convention, as interpreted by local law.
QUALIFICATIONS OF AN ARBITRATOR

 Confidence of the parties

 Impartiality
 Technical and legal qualification
 Non conflict of interest
 Adjudication of the arbitral agreement

POWERS OF AN ARBITRATOR

 The arbitrator has a power to administer an oath to the parties. It is necessary for him to act as a
quasi-judicial authority
 Power to take interim measures
 According to section 25, an arbitrator has an power to proceed to ex-party
 Power to appoint an expert
 Power to make awards

DUTIES OF AN ARBITRATOR

 To be independent and impartial

 To fix a time and place for arbitration, which is convenient to the parties
 Duty to disclose
 Duty to efficiently resolve the dispute
 Duty to determine the rules for the procedure

Jurisdiction of arbitration tribunals

It would not be appropriate to say that an arbitral tribunal has statutory jurisdiction. The tribunal
determines its jurisdiction to adjust the needs of the parties. The arbitral agreement mainly determines
the ambit of jurisdiction of the arbitral tribunal. The focal of party-autonomy declares that when the two
parties have the remedy to resolve their disputes on their own then they have the remedy to show this
right to any third party, to determine overt that squabble.
Thus it is very essential to contemplate a well-drafted agreement because it results in giving complete
strength to the tribunal to determine matters related to the jurisdiction. The Arbitration and Conciliation
Act, 1996 also specifically mentions the jurisdiction to determine explicit matters in Section 17 of the
Act.
 Appointment of a guardian for a person who is of unsound mind or minor age in between the
process of arbitration
 Safety/Security/ Confinement/ provisional injunction of the subject matter of the arbitration.
There are some cases in which the competency of the arbitral tribunal is contingent on gaining
questions.

Grounds for challenge of an arbitrator

(a) An arbitrator may be challenged only if circumstances exist that, from the perspective of a
reasonable third person having knowledge of the relevant facts, give rise to justifiable doubts as to his
impartiality or independence, or if he does not possess qualifications agreed to by the parties.
(b) An arbitrator shall decline to accept an appointment or, if the arbitration has already been
commenced, refuse to continue to act as an arbitrator if he or she has any doubts as to his or her ability
to be impartial or independent.
(c) Justifiable doubts necessarily exist as to the arbitrator’s impartiality or independence if there is an
identity between a party and the arbitrator, if the arbitrator is a legal representative of a legal entity that
is a party in the arbitration, or if the arbitrator has a significant financial or personal interest in the
matter at stake.
(d) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated,
only for reasons of which he becomes aware after the appointment has been made.
(e) The parties are free to agree on a procedure for challenging an arbitrator, subject to mandatory court
control of the challenge as provided for by the arbitration law in force at the seat of the arbitration.
Rules of procedure in arbitration

There are no such rules on the procedure for conducting the arbitration proceedings. The parties are free
to agree on the procedure to be followed by the arbitral tribunals in conducting its proceedings. If no such
procedure agreed by the parties, the tribunal is authorized to conduct the proceedings in such a manner it
considers appropriate.

The arbitral tribunal is expressly not bound to apply any provisions of the Civil Procedure Code 1908 and
the Evidence Act, 1872. If under arbitration agreement it is mentioned, the arbitration is to be administered
by arbitral institute, the rules of that institution become part of the arbitration clause by implication. The
rules of arbitral tribunal includes power to determine the admissibility, relevance, materiality and weight
of any evidence.
Matters of procedure are normally determined either by the law of the seat of the arbitration, or by the
tribunal itself under its own inherent jurisdiction (depending on national law). Procedural matters
normally include:

 mode of submitting (and challenging) evidence

 time and place of the hearing
 language and translations
 disclosure of documents and other evidence
 use of pleadings and/or interrogatories
 use of legal advisors
 the appointment of experts and assessors

Court Assistance

Local courts can assist tribunals in arbitration proceedings. This includes the power of providing interim
order and appointment of arbitrator if the parties are unable to agree on the appointment of arbitrator.
If a party makes any default, refuses to give evidence or guilty of contempt of arbitral proceedings shall
be subject to penalties or punishment by the order of the court on the representation of arbitral tribunal.

Distinction between conciliation, negotiation, mediation and arbitration

Alternate Dispute Resolution (ADR) is a dispute resolution method that employs non-adversarial (i.e. out
of court) ways to adjudicate legal controversies. ADR methods are informal, cheaper and faster, in
comparison to the traditional litigation process. It includes arbitration, conciliation and mediation.

The primary difference between arbitration, conciliation and Mediation is based on the role played by the
third party who is selected by the parties seeking a settlement, in consensus. That Arbitration is the
process by which parties select an independent person, who renders a decision regarding the case.
Conversely Conciliation attempts to make parties come to an agreement about the problem at hand.
In Mediation, the mediator acts as a facilitator who helps the parties in agreeing.

Arbitration, Conciliation and Mediation are such methods of resolving industrial disputes out of the
court. So, look at the article to understand the differences between Arbitration, Conciliation and
Mediation.

For Differences amongst Arbitration, Conciliation and Meditation:

Definition of Arbitration:
Arbitration is a powerful means of resolving disputes between the organization and its employees. It is a
process in which an independent third party analyses the bargaining situation, listens to both parties and
collects necessary data and make recommendations which are binding on the parties concerned.

Arbitration is proved successful in resolving disputes between labour and management. The parties
themselves establish arbitration and decision is acceptable to them. The decision taken by the arbitrator
is accompanied by a written opinion providing reasons supporting the decision.

Further, the procedure is comparatively expeditious than courts and tribunals. However, the process is a
bit expensive, and if there is a mistake in selecting an arbitrator, the judgement becomes arbitrary.

Definition of Conciliation:
Conciliation can be described as the method adopted by the parties for resolving the dispute, wherein
the parties out of their free consent appoint an unbiased and disinterested third party, who attempts to
persuade them to arrive at an agreement, by way of mutual discussion and dialogue.

Conciliation is characterized by the voluntary will of the parties who want to conciliate the dispute. Its
basic component is confidentiality in which the parties and the conciliator are not permitted to share or
disclose to the external party, anything associated with the proceedings.

The conciliator plays an advisory role, wherein he/she suggests potential remedies to the problem. The
conciliation process completes with a settlement between the parties which is final and binding upon the
parties.

Definition of Mediation:
Mediation is a form of alternate dispute resolution, wherein parties mutually appoint an independent and
impartial third party, called as the mediator who helps the parties in reaching an agreement which is
mutually accepted by the parties concerned.

Mediation is a systematic and interactive process, which employs negotiation techniques to assist the
parties in finding the best possible solution to their problem.

As a facilitator, mediator attempts to facilitate discussion and build an agreement between the parties
with an aim to settle the dispute. The decision made by the mediator is not binding like an arbitral
award.
Comparison Chart:
Basis for Arbitration Conciliation Mediation
Comparison

Meaning Arbitration is a dispute Conciliation is a method of Mediation is a

settlement process in resolving dispute wherein process of
which an impartial third an independent person helps resolving issues
party is appointed to study the parties to arrive at the between parties
the dispute and hear both negotiated settlement. wherein a third
the parties to arrive at a party assist them
decision binding on both in arriving at an
the parties. agreement.

Enforcement An arbitrator has the A conciliator does not have The decision made
power to enforce his the power to enforce his by the mediator is
decision. decision. not enforceable
like an arbitral
award.

Regulated by The Arbitration and Arbitration and Conciliation Code of Civil

Conciliation Act, 1996 Act, 1996 Procedure, 1908

Prior Agreement Required Not Required Not Required

Available for Existing and future Existing disputes. Existing disputes.

disputes.
 Example Damages in case of breach Resolving disputes between Commercial
of contract, matters of the contractors and transactions in
right to the office, time subcontractors etc. patents, trademark
barred claims etc. licenses, Joint
ventures and R &
D Contracts,
music and film
contracts etc.

Negotiation is the most informal method of dispute resolution. The only participants in the negotiation
process are the parties to the contract and their designated negotiators. The goal of a negotiator is to
resolve the dispute on the best terms for the party that he or she represents. When parties attempt to resolve
a dispute by negotiation, it is not certain that the process will result in a resolution. The parties and their
negotiators must deal face to face with each other in a manner that promotes the parties’ interests, yet
preserves the parties’ relationship. In a successful negotiation, the parties and their negotiators reach a
resolution of the dispute based on the parties’ interests.

Negotiation is where two parties in contention or dispute (battle) arrive at a settlement between themselves
that the two of them can concur on. Negotiations are reached through conversations made between the
parties or their delegates without the inclusion of the outsider. Each gathering ought to counsel or see a
legal advisor before settling down the issue, so they are very much aware of their privileges and
obligations in regard to the issue or dispute they are happy to fathom.

Negotiation and Mediation is more affordable and less tedious than Court activity. An agreement is
empowered however the parties are allowed to seek after different cycles on the off chance that they can't
agree.
CONFIDENTIALITY

Introduction

Confidentiality is one of the primary reasons parties opt for arbitration to resolve their disputes. They
wish to keep the evidence as well as the procedure confidential too. Various jurisdictions have their own
perspective and understanding of confidentiality as there is no confidentiality clause in the UNCITRAL
Model Law. Until now, the general obligation on the advocates not to disclose attorney-client
communication, advice, etc. under section 126 of the Indian Evidence Act, 1872 did not offer sufficient
comfort to the parties in the dispute, thereby inhibiting the growth of arbitration. Although, section 79
of the Arbitration and Conciliation Act, 1996 talks about confidentiality; however, it is only restricted to
conciliation.

‘Confidentiality’ Under the Indian Arbitration Act

Section 42A of the Indian Arbitration Act deals with the aspect of confidentiality. Sec 42A provides that
“Notwithstanding anything contained by any other law for the time being in force, the arbitrator, the
arbitral institution and the parties to the arbitration agreement shall maintain the confidentiality of all
arbitral proceedings except award where its disclosure is necessary for the purpose of implementation
and enforcement of award.”
Sec 42A was inserted via the 2019 amendment act based on the recommendation given by the High-
Level Committee Report. The HLC observed that there was no express provision on confidentiality and
that confidentiality is practised in some manner, globally. The provision has various shortcomings too.

Drawbacks of Section 42A

Exclusion of Witnesses, Stenographers and other parties:

The section provides that only arbitrators, the arbitral institution and parties are obligated to abide by
the principle of confidentiality. However, this section does not talk about witnesses, stenographers or
any other person who is witness to the arbitration proceedings. Ergo, the confidentiality provision does
not apply to them, which is a massive drawback in this provision.

Court Intervention

Court intervention may be initiated by the parties relating to a particular arbitration proceeding under
various sections of the Arbitration Act. The provision is silent on such matters. The only exception to
this provision is disclosure for implementation and enforcement of the award.

Third Parties seeking a reference to proceedings

There is always a possibility that third parties may approach the court to seek reference to the arbitration
proceedings as they are directly or indirectly affected by such proceedings. In the case of Mahanagar
Telephone Nigam Ltd Vs. Canara Bank, the Supreme Court of India allowed non-signatories to claim
such reference by establishing their degree of involvement. The court as well as the parties shall require
confidential data from the proceedings to establish such a claim. However, because of Section 42A it
seems impossible to do so as the use of word ‘notwithstanding’ shows that this is a non-obstante clause.
Ergo, the courts in India would have to carve out a new rule of divulging confidential data in a court
proceeding. They would need to strike a balance between the interest of the parties and confidentiality.
The courts in the UK and Singapore have also considered this facet.

The Public Interest Test

The aspect of confidentiality remains ambiguous under the international arbitration regime because
there is no uniform confidentiality provision. UNCITRAL is also silent on such aspects. For example,
Article 37(1) of the International Centre For Dispute Resolution (ICDR) Rules requires the arbitrators
and the parties to keep the award and proceedings confidential. However, it is subject to an agreement
between the parties to the contrary. In comparison, Article 6 of Appendix 1 and Article 2 of Appendix 2
of the International Chamber of Commerce (ICC) Rules require the arbitrators and the arbitral
institution to maintain confidentiality but is silent about the parties’ duty with regards to confidentiality.

Similarly, the English Commercial Court in The Chartered Institute of Arbitrators v. B allowed the
exception of public interest to allow disclosure of documents in an arbitrator’s disciplinary proceedings.
This shows that the principle of public interest prevailed in the maintenance of the quality of arbitrators
over the principle of confidentiality. The court had also delved into the harm which the institution
would face if public access is granted.

Therefore, the principle of public interest can be a legitimate and natural exception to Section 42A;
however, in the absence of a legal provision, the Indian courts have to establish such a principle.
Conflict with Indian Domestic Laws

The non-obstante clause is a conflict with several Indian domestic laws, rules and regulations. When
the arbitral party is a company, there are several SEBI regulations as well as Companies Act provisions
which could lead to a conflict. For example, the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015requires the companies to make disclosures by periodic filing, reports
and any information that enables the investors to check on the performance of the company. Likewise,
the Companies Act, 2013 mandates the companies to submit the board of directors report, annual return,
CSR policy and financial statements on its website. The company is also required to disclose
information about any merger, acquisition or amalgamation plans to the National Company Law
Tribunal (NCLT).

A literal interpretation of Section 42A would mean that the companies need not make such disclosures
if it relates to an arbitration proceeding. The companies can take undue advantage of this provision by
refusing to disclose certain information even if such disclosure is not even remotely related to the
arbitration proceedings.

Infringement on Party Autonomy

One of the advantages of arbitration is party autonomy. Parties are at liberty to decide the procedure of
arbitration, the applicable laws, appointment of arbitrators and all aspects related to arbitration. Section
42A infringes upon the very concept of party autonomy. Generally, the arbitration provisions are
‘subject to an agreement by the parties’ but section 42A has no such provision. The non-obstante clause
makes it even worse for party autonomy as they will have to follow this provision mandatorily.

No Consequences for Violation

Section 42A lack the principle of ‘Ubi Jus Ibi Remedium’. There are no consequences for the violation
of confidentiality. This is contrary to the basic principle of where there is a right, there is a remedy. The
2019 amendment does not have any remedy available to the parties whose confidentiality is violated by
anyone, creating a significant setback for the arbitration in India.

Electronic Depository
Section 43K of the Act says that the Arbitration Council of India shall maintain an electronic depository
of arbitral awards made in India. However, the Act does not specify who will have access to such
depository. This does not in the least reflect on the recommendations given by the committee. The
High-Level Committee had recommended the creation of such depository and said that only the courts
would have access to such awards. This raises a genuine concern with regards to the confidentiality and
protection of data.

Conclusion
Insertion of an explicit confidentiality provision is a good start towards making India a global
arbitration hub. However, there are too many complications to such provisions. The non-obstante clause
seems to have created more problems than solutions. The provision seems to ignore the conflict between
the arbitration agreement and the Arbitration Act. This gives rise to many questions such as- (i) What if
parties had already incorporated the confidentiality clause in their arbitration agreement even before the
amendment?; (ii) Does the amendment have a retrospective effect or will such provision lead to another
tussle like the 2015 amendment?.
The Act is silent on whether any dispute with respect to confidentiality can be raised and, if yes, who
has the jurisdiction – the tribunal or the courts.

The Act also fails to provide for the confidentiality of court proceedings arising from arbitration
proceedings. The Act should have covered such aspects. These factors would help the parties to
maintain proper confidentiality of their proceedings. Without such provisions, as soon as a party
approaches the court, the proceedings will become public knowledge, thereby defeating the purpose of
confidentiality.

India already has a Data Protection Bill, 2019 tabled in the parliament. If passed, Section 42A will again
create a tussle with the Act because of its nature. The government has completely ignored such factors
which will do more damage than provide adequate remedy for the arbitral parties, especially when the
parties are from a different jurisdiction.
The Act fails to address such concerns of the parties with regards to the publication of awards. Various
international arbitral institutions have provisions with regards to the publication of awards. The question
of whether the publication of awards with the consent of the parties will amount to a violation of
Section 42A finds no answers in the Arbitration Act.

RESORT TO ARBITRAL OR JUDICIAL PROCEEDINGS

The parties shall not initiate, during the conciliation proceedings, any arbitral or judicial proceedings in
respect of a dispute that is the subject matter of the conciliation proceedings except that a party may
initiate arbitral or judicial proceedings where, in his opinion, such proceedings are necessary for
preserving his rights.
Costs. — (1) upon termination of the conciliation proceedings, the conciliator shall fix the costs of the
conciliation and give written notice thereof to the parties. The fee of the conciliator and any assistance
provided pursuant to rule 4(2) (b) and fees and charges for any administrative assistance pursuant to rule
8 shall be fixed by the conciliator in accordance with the Schedule:
Provided that the ICADR may, on request from the conciliator, fix the fee of the conciliator at a figure
higher than that set out in the Schedule if, in exceptional circumstances of the case, this appears to be
necessary.
(2) For the purpose of sub-rule (1), “costs” means costs relating to—
(a) the fee and expenses of the conciliator and witnesses requested by the conciliator with the consent of
the parties;
(b)· any expert advice requested by the conciliator with the consent of the parties;
(c) any assistance provided pursuant to rule 4(2) and rule 8;
(d) any other expenses incurred in connection with the conciliation proceedings and the settlement
agreement.
(3) Where more than one conciliator is appointed, each conciliator shall be paid separately the fee set out
in the Schedule.
(4) The costs shall be borne equally by the parties unless the settlement agreement provides for a different
apportionment. All other expenses incurred by a party shall be borne by that party.
 DISPUTE RESOLUTION BOARD
An independent panel of impartial professionals providing guidance to resolve project issues and mitigate
their impact during an active construction project.
An agreement between the owner and the party constructing the project creates the board and describes
its role and responsibilities. A separate agreement between the owner, contractor and board members
outlines the terms of the board's retention.

The members of the board are usually selected by one of two methods:
 Mutual selection of all board members by the contracting parties.
 Each party selects one board member and those board members select the third member.

Ideally the board is retained at or before the start of the construction and remains involved for the entire
project duration. It customarily meets with the project participants on a regular basis to discuss project
status and concerns.
The board provides guidance but does not act as a decision maker unless the parties' contract outlines a
procedure for the board to formally hear and resolve disputes.

A dispute board, dispute review board (DRB) or dispute adjudication board (DAB) is a forum for
dispute resolution, typically comprising three independent and impartial persons selected by the
contracting parties. The significant difference between Dispute Review Boards and most other Alternate
Dispute Review techniques (and possibly the reason why or Dispute Review Boards have had such
success in recent years) is that the Dispute Review Board is appointed at the commencement of a project
before any disputes arise and, by undertaking regular visits to the site, is actively involved throughout the
project (and possibly any agreed period thereafter).

A Dispute Board becomes a part of the project administration and thereby can influence, during the
contract period, the performance of the contracting parties. It has 'real-time' value. The idea behind a
standing Dispute Resolution Board is that it may be called upon early in the evolution of any dispute
which cannot be resolved by the parties and be asked to publish decisions or recommendations on how
the matters in issue should be settled. It is usual (but not compulsory) that an opportunity remains for the
matter to be referred to arbitration or to the courts if the Dispute Review Board's decision does not find
acceptance by the parties. Thus, a Dispute Resolution Board may be likened to the United Kingdom's
adjudication process, either under statutory-compliant contracts or under the regime established by statute
itself.
The terms Dispute Board or Dispute Review Board are generic terms and include (a) the Dispute Review
Board (DRB) which is a device that originated in the USA and provides non-binding recommendations);
(b) the Dispute Adjudication Board (DAB) which is a device emerging from the earlier USA model, but
which provides a decision that has interim-binding force); and (c) the Combined Dispute Board (CDB),
which is a hybrid of Dispute Review Boards and Dispute Adjudication Boards which was created by
the International Chamber of Commerce in 2004. Various other terms have been used such as Dispute
Settlement Panel, Dispute Mediation Board, Dispute Avoidance Panel and Dispute Conciliation Panel.
Fundamentally these different varieties of Dispute Review devices are the same, each providing early
adjudication based on the contractual bargain between the parties.
A Dispute Review Board is a creature of contract; the parties establish and empower a Dispute Review
Board with jurisdiction to hear and advice on the resolution of disputes. Within the United Kingdom it is
entirely possible for the contracting parties to establish a Dispute Review Board to adjudicate construction
contract disputes within the statutory requirement for adjudication. As yet, there are no statutory
requirements for Dispute Review Boards to be established to adjudicate disputes under construction
contracts.
While the origins of Dispute Review Boards are found in the construction industry, their ambit is far wider
than construction and Dispute Review Boards are now found in the financial services industry,
the maritime industry, long-term concession projects, operational and maintenance contracts. The scope
for Dispute Review Boards has been described as substantial. The emergence of the International
Chamber of Commerce as an active supporter of Dispute Boards, as well as the Dispute Board Federation
and the Dispute Resolution Board Foundation, makes it highly probable that dispute boards will be
established in a range of industries that, until now, have not used adjudication to any great extent.

LOK ADALAT
‘Lok Adalat’ is a system of conciliation or negotiation. It is also known as ‘people’s court’. It can be
understood as a court involving the people who are directly or indirectly affected by the dispute or
grievance. ‘Lok Adalat’, established by the government settles dispute through conciliation and
compromise. The First ‘Lok Adalat’ was held in Chennai in 1986. ‘Lok Adalat’ accepts the cases which
could be settled by conciliation and compromise and pending in the regular courts within their jurisdiction.
The concept of Lok Adalat (People’s Court) is an innovative Indian contribution to the world
jurisprudence. The introduction of Lok Adalats added a new chapter to the justice dispensation system of
this country and succeeded in providing a supplementary forum to the victims for a satisfactory settlement
of their disputes. This system is based on Gandhian principles.

It is one of the components of ADR (Alternative Dispute Resolution) systems. In ancient times, the
disputes were referred to “Panchayats”, which were established at the village level. Panchayats resolved
the disputes through arbitration. It has proved to be a very effective alternative to litigation.

This concept of the settlement of disputes through mediation, negotiation or arbitration is conceptualized
and institutionalized in the philosophy of Lok Adalat. It involves people who are directly or indirectly
affected by dispute resolution.

Need of Lok Adalats: As we know that justice delayed is justice denied. This statement becomes true if
we see the backlog of pending cases before courts of different hierarchy. It resulted into delay just icing
in India. Mounting arrears of cases has brought the judiciary and the judicial process at the verge of
collapse. In this given state of affairs, the mechanism of Lok Adalats is the only option left with the people
to resort to for availing cheap and speedy justice. Lok Adalats effectively deal with the magnitude of
arrears of cases. ‘Lok Adalat’ has in view the social goals of ending bitterness rather than pending disputes
restoring peace in the family, community and locality.

Person Formal Court ⎯→ wastage of time & money

Lok Adalat ⎯→ saves time as well as money so ‘Lok Adalat’ is favorable to poor
Sections of the society
Origin of Lok Adalats
Camps of Lok Adalats were started initially in Gujarat in March 1982 and now it has been extended
throughout the Country.
The evolution of this movement was a part of the strategy to relieve heavy burden on the Courts with
pending cases and to give relief to the litigants. The first Lok Adalat was held on March 14, 1982 at
Junagarh in Gujarat. Maharashtra commenced the Lok Nyayalaya in 1984.

The advent of Legal Services Authorities Act, 1987 gave a statutory status to Lok Adalats, pursuant
to the constitutional mandate in Article 39-A of the Constitution of India. It contains various
provisions for settlement of disputes through Lok Adalat.

This Act mandates constitution of legal services authorities to provide free and competent legal services
to the weaker sections of the society and to ensure that opportunities for securing justice are not denied
to any citizen by reason of economic or other disabilities.

There is no court fee payable when a matter is filed in a Lok Adalat. If a matter pending in the court of
law is referred to the Lok Adalat and is settled subsequently, the court fee originally paid in the court on
the complaints/petition is also refunded back to the parties. The persons deciding the cases in the Lok
Adalats are called the Members of the Lok Adalats, they have the role of statutory conciliators only and
do not have any judicial role; therefore, they can only persuade the parties to come to a conclusion for
settling the dispute outside the court in the Lok Adalat and shall not pressurize or coerce any of the parties
to compromise or settle cases or matters either directly or indirectly. The Lok Adalat shall not decide the
matter so referred at its own instance, instead the same would be decided on the basis of the compromise
or settlement between the parties. The members shall assist the parties in an independent and impartial
manner in their attempt to reach amicable settlement of their dispute.

Salient features of Lok Adalat

 It is based on settlement or compromise reached through systematic negotiations.

 It is a win - win system where all the parties to the dispute have something to gain.
 It is one among the Alternate Dispute Resolution (ADR) systems. It is an alternative to "Judicial
Justice".
 It is economical - No court fee is payable. If any court fee is paid, it will be refunded.
 The parties to a dispute can interact directly with the presiding officer, which is not possible in the
case of a court proceeding.
 Lok Adalat is deemed to be civil court for certain purposes.
 Lok Adalat is having certain powers of a civil court.
 The award passed by the Lok Adalat is deemed to be a decree of a civil court.
 An award passed by the Lok Adalat is final and no appeal is maintainable from it.
 An award passed by the Lok Adalat can be executed in a court.
 The award can be passed by Lok Adalat, only after obtaining the assent of all the parties to dispute.
 Code of Civil Procedure and Indian Evidence Act are not applicable to the proceedings of Lok
Adalat.
 A Permanent Lok Adalat can pass an award on merits, even without the consent of parties. Such
an award is final and binding. From that no appeal is possible.
  The appearance of lawyers on behalf of the parties, at the Lok Adalat is not barred. (Regulation
39 of the Kerala State Legal Services Authority Regulations, 1998.

Nature of Cases to be referred to Lok Adalat

1. Any case pending before any court.
2. Any dispute which has not been brought before any court and is likely to be filed before the court.
Provided that any matter relating to an offence not compoundable under the law shall not be settled in
Lok Adalat.

Lok Adalats have the competence to deal with a number of cases like:

1. Compoundable civil, revenue and criminal cases

2. Motor accident compensation claims cases
3. Partition Claims
4. Damages Cases
5. Matrimonial and family disputes
6. Mutation of lands case
7. Land Pattas cases
8. Bonded Labour cases
9. Land acquisition disputes
10. Bank’s unpaid loan cases
11. Arrears of retirement benefits cases
12. Family Court cases
13. Cases, which are not subjudice

How to Get the Case Referred to the Lok Adalat for Settlement

(A) Case pending before the court.

(B) Any dispute at pre-litigate stage.

The State Legal Services Authority or District Legal Services Authority as the case may be on receipt of
an application from any one of the parties at a pre-litigation stage may refer such matter to the Lok Adalat
for amicable settlement of the dispute for which notice would then be issued to the other party.

Levels and Composition of Lok Adalats:

At the State Authority Level -

The Member Secretary of the State Legal Services Authority organizing the Lok Adalat would constitute
benches of the Lok Adalat, each bench comprising of a sitting or retired judge of the High Court or a
sitting or retired judicial officer and any one or both of- a member from the legal profession; a social
worker engaged in the up liftment of the weaker sections and interested in the implementation of legal
services schemes or programmes.

At High Court Level -

The Secretary of the High Court Legal Services Committee would constitute benches of the Lok Adalat,
each bench comprising of a sitting or retired judge of the High Court and any one or both of- a member
from the legal profession; a social worker engaged in the upliftment of the weaker sections and interested
in the implementation of legal services schemes or programmes.

At District Level -

The Secretary of the District Legal Services Authority organizing the Lok Adalat would constitute
benches of the Lok Adalat, each bench comprising of a sitting or retired judicial officer and any one or
both of either a member from the legal profession; and/or a social worker engaged in the upliftment of
the weaker sections and interested in the implementation of legal services schemes or programmes or a
person engaged in para-legal activities of the area, preferably a woman.

At Taluk Level -

The Secretary of the Taluk Legal Services Committee organizing the Lok Adalat would constitute benches
of the Lok Adalat, each bench comprising of a sitting or retired judicial officer and any one or both of
either a member from the legal profession; and/or a social worker engaged in the upliftment of the weaker
sections and interested in the implementation of legal services schemes or programmes or a person
engaged in para-legal activities of the area, preferably a woman.

National Lok Adalat

National Level Lok Adalats are held for at regular intervals where on a single day Lok Adalats are held
throughout the country, in all the courts right from the Supreme Court till the Taluk Levels wherein cases
are disposed off in huge numbers. From February 2015, National Lok Adalats are being held on a specific
subject matter every month.

Permanent Lok Adalat

The other type of Lok Adalat is the Permanent Lok Adalat, organized under Section 22-B of The Legal
Services Authorities Act, 1987. Permanent Lok Adalats have been set up as permanent bodies with a
Chairman and two members for providing compulsory pre-litigative mechanism for conciliation and
settlement of cases relating to Public Utility Services like transport, postal, telegraph etc. Here, even if
the parties fail to reach to a settlement, the Permanent Lok Adalat gets jurisdiction to decide the dispute,
provided, the dispute does not relate to any offence. Further, the Award of the Permanent Lok Adalat is
final and binding on all the parties. The jurisdiction of the Permanent Lok Adalats is upto Rs. Ten Lakhs.
Here if the parties fail to reach to a settlement, the Permanent Lok Adalat has the jurisdiction to decide
the case. The award of the Permanent Lok Adalat is final and binding upon the parties. The Lok Adalat
may conduct the proceedings in such a manner as it considers appropriate, taking into account the
circumstances of the case, wishes of the parties like requests to hear oral statements, speedy settlement of
dispute etc.

Mobile Lok Adalats are also organized in various parts of the country which travel from one location to
another to resolve disputes in order to facilitate the resolution of disputes through this mechanism.

Benefits of Lok Adalat

The benefits that litigants derive through the Lok Adalats are many.
1. First, there is no court fee and even if the case is already filed in the regular court, the fee paid will
be refunded if the dispute is settled at the Lok Adalat.
2. Secondly, there is no strict application of the procedural laws and the Evidence Act while assessing
the merits of the claim by the Lok Adalat. The parties to the disputes though represented by their
advocate can interact with the Lok Adalat judge directly and explain their stand in the dispute and
the reasons therefore, which is not possible in a regular court of law.
3. Thirdly, disputes can be brought before the Lok Adalat directly instead of going to a regular court
first and then to the Lok Adalat.
4. Fourthly, the decision of the Lok Adalat is binding on the parties to the dispute and its order is
capable of execution through legal process. No appeal lies against the order of the Lok Adalat
whereas in the regular law courts there is always a scope to appeal to the higher forum on the
decision of the trial court, which causes delay in the settlement of the dispute finally. The reason
being that in a regular court, decision is that of the court but in Lok Adalat it is mutual settlement
and hence no case for appeal will arise. In every respect the scheme of Lok Adalat is a boon to the
litigant public, where they can get their disputes settled fast and free of cost.
5. Last but not the least, faster and inexpensive remedy with legal status.