Chapter - VIII: Conclusion
Chapter - VIII: Conclusion
Conclusion
CONCLUSION
"Every human benefit and enjoyment, every virtue, and every prudent act,
is founded on compromise and barter. We balance inconvenience, we
give and take, we remit some rights that we may enjoy others; and we
chose to be happy citizens rather than subtle disputants”.
- Edmund Burke
(Speech on Conciliation with America, 22 March 1775.)
Business is fragile for buyer and audacious for seller. Despite the agreed
atrociousness of the commerce world, the business dealings are moving swiftly and with
buoyancy even in the modern global economy. It is natural that business implies
controversies and disputes. Dispute is coterminous with business operations. The
tradition of settlement of disputes through a neutral third party appointed by the parties
has strong origin in India. There are arbitration tribunals recognized even in the ancient
legal texts and digests. This third party’s dispensation of justice is not only a symbol of
moral and ethics disposition but also an authoritative legal settlement.
In the present globalized era, International commercial has established itself as the
best method of determining complex commercial disputes all over the world due to which
States have modernised their laws of arbitration to facilitate this new need. International
Commercial arbitration is a private method of dispute resolution, which is chosen by the
parties themselves as an effective way of putting an end to disputes between them,
without recourse to the courts of law. It is conducted in different countries and against
different legal and cultural backgrounds, with a striking lack of formality in which there
are no national flags or other symbols of State authority.677 As already stated, the
economy of India is the eleventh largest economy in the world by nominal GDP and the
fourth largest by Purchasing Power Parity (PPP).
India has been one of the fastest growing economic powers in recent times with
an expected growth of 8.5% in its GDP for the year 2010-11.678 (But in view of
677
Alan Redfern and Martin Hunter, International Commercial Arbitration, Sweet & Maxwell, 4th.
Editionn. 2004, p.1.
678
http://timesofindia.indiatimes.com/business/india-business/GDP-to-grow-at-8.5-in-2010-11-says-
Pranab/articleshow/5714174.cms.
economic slowdown, the growth rate did not touch the expected figure) Arbitration
occupies a prime position in commercial dispute resolution in India. Its relevance and
importance have been recognized by the prime bodies and over the years great effort has
been made to modernize the law to adapt to the needs of the business environment.679
The factors affecting the demand and supply for dispute resolution need to be
considered when analysing the efficiency/effectiveness in its provision. For those who
demand dispute resolution mechanisms, three factors may be considered as relevant:
(i) the ex-ante guidance effect,
(ii) the objective determination of the disputants interests, and
679
A.K.Bansal, Shivani sidhu and Kanika Bansal, International Commercial Arbitration-Practice &
Procedure, Universal Law Publishing Co. ND (2012) P.517.
680
See Buscaglia, Edgardo (1996), "Introduction to Law and Economics of Development," Law and
Economics of Development, New Jersey: JAI Press
681
Ibid. at 56
682
Norms are here understood as coordinating mechanisms for social interaction. Refer to Buscaglia,
Edgardo (1996), "Introduction to Law and Economics of Development," Law and Economics of
Development, New Jersey: JAI Press, pp. 24-29; and to Cooter, Robert (1996) "The Theory of Market
Modernization of Law", International Review of Law and Economics, Vol. 16, No 2, pp. 141-172
(iii) The reinforcement of the assigned rights and obligations. Factor 1 represents a
public good while factors 2 and 3 can be considered as non-public (i.e. private dispute
resolution can provide these services).
“Top-down” approaches to law making may cause social rejection of the formal legal
system among marginalized segments of the populations in developing countries who
perceive themselves as “divorced” from the formal framework of public institutions.683
This “divorce” reflects a gap between the “law in the books” and the “law-in-action”684
This divorce between formal and informal rules is usually rooted in the lack of formal
system's benefits (i) (ii) and (iii) as stated above.
683
The “Law and Development” movement is ascribed to Seidman (1978), Galanter (1974), and Trubek
(1972). These authors generally sponsored a comprehensive and centralized legislative reform covering the
modernization of the public and private dimensions of the law through international transplants from “best
practice” legal systems. Also Refer to K. Pistor's latest work.
684
See Buscaglia, Edgardo (1996), "Introduction to Law and Economics of Development," Law and
Economics of Development, New Jersey: JAI Press, pp. 24-29
for certain types of conflicts. Yet many other types of disputes involving, for example,
fundamental rights and the public interest remain unresolved. This state of affairs
damages the legitimacy of the state, hampers economic interaction, and negatively affects
the poorest segments of the population.685
Hon’ble J.J. Spiegelman AC, Chief Justice of New South Wales in his opening
address to the International Commercial Arbitration Conference held at Sydney, Australia
on 10-08-2007, elucidated on the vitality of the international system for commercial
dispute resolution. The Hon’ble Chief Justice stated that the multi-faceted process
known as globalisation has brought with it a widespread recognition of the benefits
potentially available from reducing national barriers to mutually advantageous exchange
by trade and investment. The rapid expansion of such commercial interaction inevitably
brings with it the need for dispute resolution. Parties to a commercial contract have
chosen a jurisdiction. The autonomy of the parties should be respected for the same
reasons that that has been accepted by the large number of nations that have adopted the
New York Convention. It will be interesting to see whether nations approach this
Convention as if it were an application of the commercial autonomy of the parties who
have chosen a specific forum for resolution of disputes, or whether the element of
national sovereignty involved with the formal courts will lead nations to adopt the
traditional territorial approach that has be devilled any attempt to produce a regime for
enforcement of judgments. Issues of national sovereignty remain the dominant theme
whenever the Institutions of one nation are faced with the exercise of the sovereign power
of another nation as manifest in the courts of that other nation.
685
Buscaglia, Edgardo (1996), "Introduction to Law and Economics of Development," Law and Economics
of Development, New Jersey: JAI Press, pp. 24-26.
behaving in the same manner. There is no law of nature which says that this form of
enlightened self-interest will continue.
In the world before World War I, when international communications had been
revolutionised by wireless telegraphy over international cable connections and a
substantial decline in transportation costs, the benefits of globalisation were as obvious as
we believe them to be today. That globalised world changed very quickly into war and
national autarky, at great cost. No-one should assume a similar regression is impossible
today. For all of those who are involved as practitioners in the resolution of international
commercial disputes, whether as lawyers or arbitrators or judges, the contribution that we
can make to the maintenance of the system is twofold.
Firstly, to ensure that the public and political decision makers are aware of the benefits of
the system.
Secondly, to ensure that the system actually delivers the benefits of which it is capable.
The costs and uncertainties of international commercial dispute resolution are
capable of being minimized, and brought into some kind of reasonable relationship with
the costs and uncertainties of domestic commercial dispute resolution, only if all of us
who are involved in the process are committed to the just, quick and cheap resolution of
such disputes. Business lawyers have been described as “transaction cost engineers” who
facilitate commercial intercourse by reducing future transaction costs. Well drafted
commercial arrangements avoid conflict with regulatory regimes, anticipate and therefore
avoid disputes and create structures for dealing with the unknown or the unanticipated.
By such involvement transaction lawyers add value to commercial transactions. The same
is true of dispute resolution processes. The cost structure of most economic activity has
been transformed over recent decades by new management techniques, by technology
and by the reduction in barriers to trade through microeconomic reform, both domestic
and international. Lawyers are not and will not be immune to these pressures. The same
is true of commercial arbitrators. Both lawyers and arbitrators must be seen to deliver a
cost effective service or they may very well find themselves bypassed by the
requirements of commerce. Judges as well as arbitrators must be sensitive to the costs
that the procedures for dispute resolution impose upon the parties. That is particularly the
case in international commerce; Judges as well as arbitrators must be sensitive to the
costs that the procedures for dispute resolution impose upon the parties. That is
particularly the case in international commerce, the benefits of which can be substantially
undermined by the transaction costs that arise whenever something goes wrong.
Many believe that commercial arbitration mimics court processes too often and to
a greater extent than it should. This restricts to a significant degree the extent to which
arbitration delivers in fact on its potential to be cost effective. There is little evidence
that commercial arbitration is in fact quicker and cheaper than decision-making processes
by commercial judges. It is possible for it to be so but it does not seem to happen as much
as it should.
The international regime for commercial arbitration does have one advantage
because it avoids the proclivity to engage in venue disputation that has badevilled such
litigation in Australia, England and North America, but not yet elsewhere. The
burgeoning case law on anti-suit injunctions and then anti-anti-suit injunctions and,
inevitably, anti-anti-anti-suit injunctions, reflects the simple proposition that when it
comes to the procedure of courts and the quality of judiciaries, parties believe that where
a case is determined matters. This is so even if the disputation involves considerable
expenditure that is, on any objective view, completely wasteful. Avoiding venue
disputation is a real cost and time advantage for choosing the international arbitration
regime. There is of course a long history of tension – one hopes that in this day and age it
is a creative tension – between courts and arbitrators who have on occasions treated each
other as if they were trade rivals in the dispute resolution business. One need not believe
that is a prevalent attitude today, but one cannot say that it has completely disappeared.
In Raguz v Sullivan,686 President Mason and Spielmann J. referred to the
traditional hostility of common law judges to commercial arbitration in the period up to
the middle 19th century, until the famous case of Scott v Avery687 upheld the validity of
arbitration agreements which made an award a condition precedent to any right of action
under a contract. As we said in that judgment, the canny Scot, Lord Campbell, explained
that hostility by the fact that judicial salaries were almost entirely dependent upon court
fees and, accordingly, English judges had a personal financial incentive to maximise the
number of cases that were brought in the courts. That incentive did not disappear until the
mid-19th century. It was never a feature of Australian judicial practice, although the first
686
(2000) 50 NSWLR 236
687
House of Lords, 811, 854
Chief Justice of New South Wales, Sir Francis Forbes, had to suppress the wishes of his
fellow judges to establish such a system here. Only those judges who are historians can
look back wistfully to the days when being a judge was a route to substantial wealth.
As the judgment in Raguz clearly shows, Australian commercial judges have,
generally, become active proponents of alternative dispute resolution mechanisms,
including commercial arbitration. This was manifest most recently in the judgment of the
Full Federal Court last year in Comandate Marine Corp v Pan Australia Shipping Pty
688
Limited Of course there will be exceptions, but there is no doubt that throughout
Australia commercial judges do not manifest the kind of hostility to commercial
arbitration that may once have been the case. This is in part a function of the managerial
role that judges have assumed over recent decades with respect to both individual case
management and case load management within their courts.
By comparison with the past, judges do not sit back as neutral umpires allowing
parties to take as much time as they like but, particularly in commercial litigation, insist
on the early disposition of the real issues in dispute in the most economical manner
possible. Often enough that involves support for alternative dispute resolution processes.
When it comes to international commercial litigation, Australian judges are conscious of
the advantages of arbitration from the point of view of enforcement. They are also aware
that arbitration has certain other advantages, particularly to those parties who wish, for
perfectly appropriate commercial reasons, to ensure confidentiality. Of course one
person’s privacy is another person’s secrecy and there are many people, not simply trade
rivals, who have an interest in knowing what is going on.
There is, of course, express provision for judicial supervision of commercial
arbitration. Many arbitrators may remain doubtful that judicial expressions of support are
fully reflected in the exercise of these powers. One should recognise that one may be in
no different position to those numerous trial judges who complain about the intervention
of appellate courts, or administrators who complain about judicial review. Courts have
specific statutory powers, indeed duties, with respect to commercial arbitration. The
statute must, of course, be applied in accordance with its terms. However these statutory
powers should be regarded as conferring a supervisory jurisdiction principally directed to
maintaining the integrity of the process of arbitration. This is an essential function which
688
(2006) 157 FCR 45
the courts perform in a number of different spheres of conduct – notably in other
supervisory jurisdictions such as administrative law.
The statutory power to review creates an appeal on a question of law. That does
not mean that whenever such a question exists the power to intervene must be exercised.
The exercise of the discretion to make orders raises distinct issues. Whenever a court’s
intervention is concerned with matters of personal and institutional integrity, the system
of commercial arbitration is enhanced. Practitioners should accept that arbitrations do go
wrong, sometimes fundamentally so. Arbitrators can manifest bias. Arbitrators have
been known to commit errors of so fundamental a kind as, on any view, to justify
intervention by a court. It cannot be suggested that a light-handed but effective
supervisory jurisdiction interferes in any way with the autonomy of the parties which is
the underlying rationale of commercial arbitration and the reason why it has acquired a
broad level of acceptance in dispute resolution. The party’s choice was not, however, to
select arbitration per se, but to select arbitration by persons and by procedures that
manifest a high degree of integrity.
Knowledge that the integrity of arbitration can be assured by a light-handed but
effective supervisory jurisdiction, enhances the confidence of the commercial community
with respect to the arbitration process. Accordingly, a supervisory intervention should be
welcomed by arbitrators, rather than treated with suspicion.
The confidence of the commercial community in arbitration depends, in large measure,
on the knowledge that the process will work as intended. That can only occur if both the
personal integrity of the individuals conducting arbitrations and the institutional integrity
of the processes is assured. Sometimes that requires the exercise of a supervisory
jurisdiction after the event. Plainly, the process of selecting arbitrators and agreeing upon
the rules pursuant to which the arbitration will be conducted plays an important role in
maintaining the confidence of the commercial community in this regard. The recognition
that institutions are fallible and sometimes need to be corrected in retrospect is not an
insight unique to arbitration.
The very existence of a supervisory jurisdiction assists in maintaining confidence
in the system by ensuring that, on those few occasions when that confidence may not be
fulfilled, that the failure is capable of correction. Such a jurisdiction is not a threat to
commercial arbitration. It is a desirable, indeed an essential part of its effective operation.
It is necessary for commercial judges to bear in mind the need to support, to the extent
that they are able while acting in accordance with law, the autonomous choice of the
parties to refer disputes to arbitration. Furthermore, a significant advantage of
commercial arbitration is the potential it has, albeit not always realised, for being more
cost efficient than the processes of a formal adversary system. It is not desirable for the
courts to insist upon the replication of the procedures with which they are familiar in
commercial arbitrations although, it appears, that many who practice in arbitration are
continually pushing the process in that direction. Such tendencies are a matter of concern
to many of us.
The recent decision in BHP Billiton Limited v Oil Basins Limited689 requires
arbitrators to give reasons, in certain circumstances, in the same form as is required from
a judge. However, It is to be noted that there are a number of cases on the subject, not
referred to in the judgment, which were the subject of comprehensive exposition two
decades ago by Tom Bingham in an address in which he set out in point form the
different requirements of reasons by a court and reasons by an arbitrator.690
There is much wisdom in his Lordship’s analysis.
The relationship between courts and arbitrators should remain one of
collaboration which is how the relationship has developed over recent years. Indeed,
many of the ideas for case management now regularly employed in commercial litigation
were first developed in commercial arbitration. Most recently, the addition in Australian
Commercial List Practice Note of a stopwatch system was an ideal to be picked up from
commercial arbitration. It deserves more widespread use in both spheres of dispute
resolution.
With respect to collaboration, the Hon’ble Chief Ju tice raised the possibility of
permitting judges of the Supreme Court to be appointed as commercial arbitrators, where
parties wished that to occur. Such an option has long existed in England, although it is
very rarely used. Tom Bingham, the current senior Law Lord, when he was a commercial
judge, did once sit as a commercial arbitrator in a dispute between two of the United
Kingdom’s major corporations. He told that that had been a successful exercise, because
those corporations wanted to have a senior commercial judge resolve their disputes, but
689
(2007) VSCA 255
690
Bingham “Reasons and Reasons and Reasons: Differences Between a Court Judgment and an Arbitral
Award” (1988) 4 Arbitration International 1 reprinted in Australia in (1997) 16 The Arbitrator 19.)
to do so in private. It may be possible that the availability of an option of this character
may be useful in establishing Australia as a desirable venue for international commercial
arbitration. This idea was worth pursuing so long as the arbitration community regarded it
as a valuable addition to the Australian scene.691
In USA, a new paradigm for commercial arbitration is proposed. That model
centres on a redefined relationship between reasoned awards and the judicial standards
for vacatur. Central among the issues presented by the evolution of commercial
arbitration to centre stage of the American civil justice system is the question of whether
commercial arbitrators should provide the parties to the process with substantive
reasoned awards revealing their mode of decision. Unlike in labour arbitration, and
contrary to the prevailing practice in other industrialized countries, commercial
arbitrators in the United States seldom articulate their reasons for decision in their written
awards. Thus, commercial arbitration awards issued in the United States typically do not
set forth the key facts material to the issue(s) in dispute, do not identify the relevant law
and contract language, and do not demonstrate how the arbitration tribunal applied the
pertinent law and contract language to the material facts in order to resolve the
controversy before it.692
Though the alternate justice dispensation system in the form of A.D.R. has been
serving the cause of the needy, still new species of seekers of justice from entrepreneurial
society proliferated both in the national and international segments. The New
International Economic Policy gave birth to globalization, liberalization and privatization
which in turn forced the emergence of ‘On-Line Dispute Resolution’. Information
Technology revolutionized the E-commerce and consequently an expeditious dispute
settlement on-line. This fraternal and inextricable consanguinity between cyber regime
and commerce regime justly warrants effective management of ‘On-Line Arbitration’.
691
The Honourable J J Spigelman Ac, Chief Justice Of New South Wales, Opening Address To The Joint
Conference Of Acica And Acla, Sydney, 10 August2007(http://Papers.Ssrn.Com/Sol3/Papers. Cfm?
Abstract_Id=1806789) (Visited On 2-3-12)
692
Stephen L Hayford, ARTICLE: A New Paradigm for Commercial Arbitration: Rethinking the
Relationship Between Reasoned Awards and the Judicial Standards for Vacatur, The George Washington
Law Review (1998) (https://litigation-essentials.lexisnexis.com) VISITED on 2-2-12
Online arbitration can provide an effective and convenient method to mitigate
costly litigation and uncertainty on cyber disputes. The importance of out –of-court
resolution in cyberspace is reflected in several community initiatives and E.U legislation,
such as the Directive on E-commerce, the Directive on E-Signatures, and community
initiatives. Even as technology and tools available are being developed to improve the
capabilities and effectiveness of online arbitration. On-line arbitration is still in the
threshold of development in the E.U. Most O.D.R providers are located in the United
States and Canada and are privately-run for profit organization. However, online
arbitration is still fraught with many risks in comparison to traditional arbitration. Online
arbitration may provide consumers less due process than regular courts. Many consumers
are forced to waive their rights and do not have the assurance that procedural guarantees
such as independence and impartiality, due process and transparency. The fee charged to
consumers is still high and they do not guarantee the other party’s cooperation. In order
to boost online arbitration, legal framework must be improved. To begin with, the New
York Convention must be amended to expressly include the modern means of
communication to satisfy the form and writing requirements, and incorporate the
UNCITRAL Model Law. The use of online arbitration requires a change of national laws
to include “writing” and “form” in relation to arbitration agreement and awards to include
electronic data. The Commission Recommendation 2001/31/EC should be transformed
into a Directive in order to harmonize national laws and guarantee that all out-of-court
bodies involved in consensual resolution of consumer disputes adhere to the principles of
impartiality, effectiveness, fairness and transparency. Particular rules to ensure
procedural guarantees unique to the online environment are necessary, especially in the
case of consumer arbitration. Another possibility would be the creation of an EU Court
for arbitration or cyber court to deal with online issues. The cyber court should be tasked
with issues related to the enforcement and recognition of awards, interpretation of the
provisions and mandatory laws, and issues dealing with the violation of procedural
guarantees.
The world of O.D.R is a changing and uncertain world. According to the survey
undertook within the framework of the White Book in Mediation in Catalonia, the
technological chapter of this has showed that today there are less than 30% of those
ODR service providers existing only five or six years ago. The survey has been coherent
with the ODR concept employed and therefore it has excluded systems which fall outside
this e. g. internal complaint systems.
What it may be intuited is that ODR initiatives should gain strength in order to
position themselves in the globalised market of conflicts. Perhaps, this could be
accomplished with the provision of ODR mechanisms used in conjunction with other off-
ODR systems. Again, this is particularly important in the consumer domain where ODR
services may be an item to add to seals of quality, codes of conduct, formation activities,
or publicizing activities. In a way, it recalls some of the notions promoted within the e-
commerce Directive as regards self-regulation entities.
It can be noted that those entities providing these kinds of off-ODR services enjoy
a certain stable position in their territorial market of reference. This is the case with
Confianza Online in Spain but also with Better Business Bureau in the EEUU and
Canada providing seals of quality to B2C activities providing a seal of quality regarding
privacy activities. Disputes seem to be some of the most employed controversies in ODR
systems as we have seen in our research. It may be noted that consumers take the most of
these systems since they are far better off with inexpensive services as compared with
businesses. Yet, it seems that companies are not fully devoted to ODR and they may even
be opposite to such systems. Bodies are mostly located in the United States as well as in
Europe whereas other continents lay far behind.
However, ODR platforms do not take into account the different tools that the web
2.0 enables. ODR providers do not base their services in cutting-edge technology and it
appears that ODR entrepreneurs may not see the need for losing time and resources to
adapt platforms to the standards of web 2.0. It has been pointed out that ODR would be
one of the biggest beneficiaries of web 2.0 technologies. Twitter, Wikis, Face book,
Flickr or You tube are well known examples of this and are not used as with ODR
systems. The results of the research indicate that ODR practice is far from using web 3.0
tools. For example, ODR platforms rely particularly on concerns. However, web 3.0
relies on a preference for the treatment of real-time data and is concerned with systems
interoperability. Even though the limited use of this, we should be far from hopeless. For
one thing, some of the characteristics of consumer mediation, such as the standard claims
typology and a low value of the disputes suggest the consumer domain to be a convenient
arena for ODR.693
INDIAN EXPERIENCE:
Indian rules of arbitration for long were contained in three different enactments,
namely, the Arbitration Act of 1940, the Arbitration Act of 1937 and the Foreign Awards
Act of 1961. Arbitration under these measures was widely considered to be
antediluvian. India’s adoption of the Arbitration and Conciliation Act of 1996 was based
on the UNCITRAL Model law, with the intent to modernise arbitration and honour its
commitment to the international mercantile community, augment its reputation as a
possible forum for settlement of international commercial arbitration disputes.
The recognition and enforcement of awards is of great importance for the success
of international commercial arbitration.Today, “if parties to arbitration cannot be sure
that at the end of the arbitration proceedings, that the award will be final and that they
will be able to enforce the award, if not complied with voluntarily, an award rendered in
their favour will only be a pyrrhic victory.”694
In Konkan Railway Corporation Vs. Mehul Construction Co.695 the Supreme Court
while comparing the 1940 Arbitration Act to the present Arbitration Act of 1996,
concluded that the statute of 1996 limits intervention of the Indian Courts with the
arbitral process to the minimum. In this regard, the subsequent conclusions of the Apex
Court in the ONGC vs. Saw Pipes696 and Venture Global vs. Satyam Computers 697
create contradictions. To conclude it can simply be said that the merits of these
decisions have a need to be revisited.
693
( Josep Suquet 1 , Marta Poblet1 , Pablo Noriega 2, Sílvia Gabarró 1, Online Dispute Resolution in
2010: a Cyberspace Odyssey? UAB Institute of Law and Technology UAB Campus, B Building, Faculty
of Law 08193 Bellaterra, Spain 2 Artificial Intelligence Research Institute (IIIA-CSIC) UAB Campus
08193 Bellaterra, Spain {Josep.Suquet, Marta.Poblet, Silvia.Gabarro}@uab.cat {[email protected]}
(http://ceur-ws.org/Vol 684/ODR2010 proceedings.pdf)
694
Julian D.M.Lew, Loukas Mistellis and Stefan Kroll, Comparative International Commercial Arbitration,
Kluwer Law International, 2003, p.688.
695
.(AIR 2000 SC 2821),
696
(2003) 5 Scc 705
697
(2008) 4 SCC 190.
allow an award to be set aside “Where there is an error apparent on the face of the
arbitration award giving rise to a substantial question of law.” This would give losing
parties an opportunity to approach courts in an attempt to save themselves from the
inevitability of the arbitral award.
In Max India Ltd. Vs. General Binding Corporation698 the Delhi High Court
refused to exercise the jurisdiction for granting interim relief in an international
commercial arbitration, where the contract between the parties stipulated that”
The arbitration shall be conducted before one arbitrator mutually appointed by the
parties, failing which Max India shall be entitled to appoint one arbitrator and GBC shall
be entitled to appoint one arbitrator and the two arbitrators so appointed shall jointly
appoint a third arbitrator who shall preside as the chairman. Such arbitrations shall be
conducted in the English language. The venue of the arbitration shall be Singapore.”
Herein the petitioner (MAX) filed a petition under Sec-9 of the Arbitration and
Conciliation Act, 1996, and subsequently the court restrained the respondent (GBC) from
implementing the terms of agreement entered into by GBC ‘directly’ or ‘through’ its
holding company with Cosmo Films regarding the sale of its commercial prints finishing
business. In view of the above clause, GBC filed an application challenging the
jurisdiction of the court to entertain the petition under Sec-9 of the 1996 Act. The
698
(2009) 3 Arb LR 162 (DEL) (DB)
Supreme Court had relied on its decision in ABC Laminate Pvt. Ltd. Vs. A.P.
699
Agencies, where it was held that where parties to the contracts agreed to submit the
dispute arising from the contract to a particular jurisdiction. It was not necessary to use
words such as ‘alone’, ‘only’ and ‘exclusive’. That is to say reference to the jurisdiction
amounted to exclusion of other jurisdictions.
Subsequently, it was held that since parties had specifically agreed to arbitrate in
Singapore, the contract would be governed by the laws of Singapore and therefore only
the courts in Singapore would have such jurisdiction. Therefore the court dismissed the
petition under Sec-9 of the 1996 Act filed by MAX being not maintainable. In appeal,
the court upheld the decision and held that, the purpose of arbitral process remains to be a
fair resolution of disputes by an impartial tribunal. It gives liberty to the parties to agree
how their disputes will be resolved. The said decision attempts to reach to a policy of
restricting judicial intervention in international commercial arbitration. Furthermore,
recently in April 2010 the LCIA has established its seat in India and has introduced the
“London Court of International Arbitration India Arbitration Rules”.This is the first ever
instance where an international arbitration institution has drafted international
commercial arbitration rules exclusively tailored for India.. Much to the need of
international commercial arbitration in India, these rules have brought in a draft arbitral
clause which purposely excludes Part-1 of the Indian Arbitration and Conciliation Act,
1996.700
The Indian Arbitration and Conciliation Act of 1996 was certainly a much
required and tremendous effort to consolidate and amend the Indian law on arbitration
and enforcement of foreign awards in tune with the developments in the international
community. The UNCITRAL Model Law ignited and spurred the enactment of the Act
has encompassed within its parameters domestic arbitration, domestic conciliation,
international commercial arbitration, international commercial conciliation and
enforcement of foreign awards. While several amendments are being considered to the
1996 Act as suggested by the Law Commission of India particularly changes which deal
exclusively with the aspect of delayed proceedings as most of the proposed changes are
699
AIR 1989 SC 1239
700
(Harsh Sethi and Arpan Kr Gupta, International Commercial Arbitration and Its Indian Perspe)ctive,
Universal Law Publishing Co. New Delhi (2008) p.283-285)
to be made in Part I of the Act of 1996, it is yet to be seen how these amendments are
going to influence foreign awards. However, the most significant forward step for India
has taken a change in the legislative and judicial attitude towards the notion of ‘foreign
award’ as it is now “International award” i.e. an award transcending all national borders
and an environment in which international commercial arbitration can prosper.
However, fact remains that fourteen years after the enactment of the Indian
Arbitration and Conciliation Act, 1996, arbitration in India is at a junction where it has to
choose between the concepts of ‘party autonomy’ and finality of arbitral award’ or “mere
lawful by-pass of a domestic law to be a violation of the Indian Public Policy”. The
global financial crisis of 2008-2009 did not leave any country unharmed. On the other
hand, it is fact that India’s economy grew at 6.1% in the quarter ending June 2009 which
is amongst the highest growth rates in the world. It appears that India has sufficiently
outgrown itself; therefore, it is time that the cloth of ‘public policy’ is tailored, so that
India can acquire its rightful place as an economic powerhouse. It is hoped that the
concepts “party autonomy” and “finality of arbitral award” will be optimistically
addressed by the Indian judiciary and will be strongly nailed in the upcoming legislation
on arbitration by the Indian Parliament.702 There is an increasing trend of using
arbitration clause of the I.C.A by various business organizations. But many more of
public undertakings and Government Departments have yet to do it. Public sector units
701
(Prof. Dr. S.Dwarakanath,Enforcement of Foreign Awards under Indian Arbitration and Conciliation
Act, 1996 – Recent developments, (2012) – AILD September 20121)
702
http://www.icaindia.co.in/icanet/quterli/oct-dec2000/ICA_oct5.htm (visited on 12-3-12)
and government departments should use the arbitration services of the Indian Council of
Arbitration to resolve commercial disputes.
To minimise the intervention of courts in the arbitration process, the Government had
brought about judicial reforms by adopting the United Nations Commission on
International Trade Law Model Law on International Commercial Arbitration in its
statute.
From the above analysis, it is clear that globalization of the Indian economy in the
early nineties and the consequent economic reforms necessitated the existence of
effective dispute resolution mechanisms to quickly settle commercial disputes. The 1996
Act was enacted to achieve this purpose of quick and cost-effective dispute resolution.
Arbitration occupies a prime position in commercial dispute resolution in India. An
examination of the working of arbitration in India reveals that arbitration as an institution
is still evolving, and has not yet reached the stage to effectively fulfil the needs
accentuated with commercial growth. Viewed in its totality, India does not come across
as a jurisdiction which carries an anti-arbitration bias. Notwithstanding the interventionist
instincts and expanded judicial review, Indian courts do restrain themselves from
interfering with arbitral awards.703
However, there are still inherent problems that hindered in the working of
successful arbitration in India which are multi-fold – starting from requirement for
amendment of certain provision of law to changing the mind-set of the stakeholders who
are judges, arbitrators, lawyers and parties involved. Based on the identified problems,
the following recommendations can be made:
(i) Universities in India could create a separate faculty or department for arbitration
law to encourage specialized study and incisive research. Presently, none of the 259
universities in India has a separate faculty or department of arbitration law; nor is
arbitration law taught as a specialized subject in any of the law colleges.
(ii) All stakeholders - arbitrators, judges and lawyers- should make efforts to change
general attitude towards arbitration. Despite the 1996 Act’s prohibition of judicial
703
Asian International Arbitration Journal, 2008, vol.4, at p 81-82.
intervention, (i.e. ‘no judicial authority shall intervene except where so provided in [that]
part.’) courts continue to intervene in direct defiance of the agreement of the parties.
Power vested in the Chief Justice of a High Court (or any person or institution
designated by him) for appointment of an arbitrator under Section 11 of the 1996 Act is
not being used properly. The practice of appointing retired judges has recently come
under strong criticism from the proponents of the alternate dispute resolution mechanism.
There is reason for complaint that the appointment of arbitrators is widely perceived as
avenues of patronage of superannuated judges. This practice should be corrected. Unless
this is corrected, the legitimacy of Section 11 is bound to be seriously undermined. For
instance, in the panels of arbitrators who may be selected by those having disputes,
maintained by the American Arbitration Association, lawyers dominate in commercial
fields of arbitration, college professors make up the second largest group of arbitrators,
and physicians, dentists, accountants, managers and other professionals serve as
arbitrators in cases recorded in the Encyclopaedia Americana. Retired judges will not fit
the bill for these categories.
In NALCO Ltd. vs. Pressteel Fabrications (P) Ltd.705, the Supreme Court of India has
recently expressed a hope that suitable legislative action would undo this situation.
704
Excerpt from the article ‘Arbitrating Commercial and Construction. Contracts’ published in ICA’s
Arbitration Quarterly and webcasted in ICA’s official website
705
(2004) 1 SCC 54
(iii) The Court refused to impose any condition on the applicant pending disposal of
its application for setting aside the award under Section 34, reasoning being that any such
order would run counter to the letter and spirit of the Act. Nevertheless, the court did take
judicial notice of the injustice that could be caused to the beneficiary of an arbitral award
due to the ‘automatic’ stay by mere challenging of awards. The Arbitration and
Conciliation (Amendment) Bill, 2003, appears to have partially remedied this flaw, but
the Bill has not yet been taken up for consideration and passed by the Parliament.
(iv) The government should disseminate knowledge of the benefits of alternate dispute
resolution mechanisms to foster growth of an international arbitration culture amongst
lawyers, judges and national courts. The real problem in enforcing foreign awards around
the globe despite the enabling provision of the New York Convention, 1958, is not a legal
one; but it is a lack of awareness particularly, amongst lawyers and judges, of the benefits
of international arbitration and of its true consensual nature.
In fact, judicial interventions with arbitral proceedings and awards in India have come to
constitute a distinct branch of Law, i.e. the ‘law of arbitration’. This trend clearly
frustrates the foundational aim of providing for arbitration clauses - which is to ensure
speedy and efficient dispute-resolution in the commercial context.
(vi) Provisions in the arbitration laws in India that require entire arbitral tribunals to
impart effective interim measures at par with the authority of a national court should be
amended, and an effective mechanism for carrying out these provisions should be put in
place. Although the 1996 Act confers powers on arbitral tribunals to issue interim relief,
there is variance in the degree and efficacy of these interim measures. Under the 1996
Act, the arbitral tribunal is possessed of limited powers to direct interim measures,
pertaining to: -
(a) Protection of the subject matters in dispute; and
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http://www.legalserviceindia.com/article/l296-Indian-Domestic-Arbitration.html
1. Both lawyers as well as litigants should be made to realise the importance of
arbitration methods for speedy resolution of commercial disputes, and encourage
parties for settlement of disputes through resolution process.
2. There is an urgent need to professionalise arbitration in India as observed by Ms
Louise Barrington, former Director of International Chamber of Commerce.
3. That enforcement of a foreign award may be denied on public policy grounds
‘only where enforcement would violate the State’s most basic notions of morality
and justice’. If the arbitration law does not contain a statutory procedure for
speeding up the arbitral process–at least after one year–or for control of the
excessive charge of fee by the arbitrators, the State must step in and make some
law for speeding up arbitration. The amendments which the 176th Report of the
Law Commission had proposed addressed these questions. The arbitration has to
be completed in one year, if not, the court will monitor it by fixing dates and
during the interregnum, when the court is moved and it passes orders, there shall
be no stay of the arbitral proceedings.
The prospect of a civil court setting the time schedule for retired judges of the
superior courts (whose award would any way go under the Act before the civil
courts, if challenged) should be a deterrent and if once this amendment comes into
force, arbitration in India will be quite fast, if not faster than elsewhere, and the
mechanism we have proposed for speeding up arbitration is unique and there are
no parallel provisions elsewhere in any other country.
4. An amendment to the Arbitration and Conciliation Act, 1996 to be made for
absolute enforceability of foreign awards in India. Art. 1(2) of the UNCITRAL
Model Law on international commercial arbitration should be added to our
Arbitration Act. This will provide safety measures to any party requiring interim
measures etc. The present act of Supreme Court dismissing foreign awards under
‘public policy’ has got criticism from various ends.
5. To establish a regional branch of the Permanent Court of Arbitration (PCA) for
South Asia in New Delhi in recognition of the contributions made by India to the
cause of peaceful settlement of disputes through strict adherence to international
law, a policy that India has vigorously and faithfully pursued over the years.
6. In order to boost online arbitration, legal framework must be improved. To begin
with, the New York Convention must be amended to expressly include the
modern means of communication to satisfy the form and writing requirements,
and incorporate the UNCITRAL Model Law. The Commission Recommendation
2001/31/EC should be transformed into a Directive in order to harmonize national
laws and guarantee that all out-of-court bodies involved in consensual resolution
of consumer disputes adhere to the principles of impartiality, effectiveness,
fairness and transparency.
7. Sufficient number of On-Line Service Providers should be encouraged and
established to deal with the increasing number of cases in E-commerce.
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