INTRODUCTION
In today’s modern legal era, where courts are over-burdened with an ever-growing backlog of cases, the need for alternative mechanism of dispute resolution has never been so high. With large number of matters pending in courts, parties often find themselves entangled in lengthy and costly litigation processes. Amidst this judicial burden, arbitration emerges as a practical, efficient and business-friendly solution to resolve disputes without even entering a courtroom.
Hon’ble Supreme Court emphasised it in ENERCON (INDIA) LTD AND ORS vs ENERCON GMBH AND ANR (2014)-
“The Arbitration and Conciliation Act is a code intended to facilitate expeditious resolution of disputes and to avoid unnecessary delays.”
MEANING
Arbitration is the dispute resolution process outside of the courtroom, where parties agree to present dispute to neutral third-party, known as Arbitrator. The arbitrator then carries out proceedings, give both parties opportunity of being heard and give binding decision at the end known as Arbitral Award. Arbitration law in India is governed by the Arbitration and Conciliation Act, 1996. The act aims to establish the procedures for resolving disputes by arbitration or conciliation, both in domestic and international commercial settings.
Whereas International Arbitration refers to arbitration proceedings that extends beyond country’s-border comprises parties from different countries; dispute arising from international commercial contracts; application of international treaties, convention etc. This is commonly used in commercial transactions, infrastructure projects, foreign investments, and joint ventures.
ARBITRATION AND CONCILIATION ACT, 1996
This act is the primary legislation governing arbitration in India. Enacted to modernize India’s arbitration law in line with International Standards. The adoption of the 1996 Act aligned with the Model Law on International Commercial Arbitration by UNCITRAL and recommendations from the 76th Report of the Law Commission of India in 1978, aiming to modernise the outdated Arbitration Act of 1940.
The Act divided in four parts-:
Part l – which states the provisions regarding the arbitration process, the functioning of arbitration tribunals, the execution of arbitral awards and appeals.
Part ll – deals with the enforcement of foreign awards under the New York and Geneva Convention.
Part lll – Provisions related to the conciliation proceedings, conciliation agreement and the conciliator.
Part lV– states the powers of the High Courts and the Central Government.
Over the years, several amendments have been made in 2015, 2019, and 2021 to strengthen institutional arbitration, reduce delays, and make India global arbitration hub.
ROLE OF GENEVA AND NEW YORK CONVENTION
Two major international treaties the Geneva Convention, 1927 and the New York Convention, 1958 both plays a vital role in recognition and enforcement of foreign arbitral awards in India. The inclusion of these conventions allows India to honour its international obligations and ensures that arbitral awards made in foreign countries that are signatories to these treaties can be enforced in India as if they were decrees of an Indian court. Among the two, the New York Convention is more widely adopted and preferred due to its broader scope and simpler enforcement mechanism. This framework builds international confidence in India’s arbitration regime and is crucial for promoting cross-border trade, investment, and legal cooperation.
PROCESS OF ARBITRATION
It involves the main stages of arbitration-:
- Arbitration Agreement- According to Section 7, an arbitration agreement is a contract between parties to resolve disputes through arbitration relating to a defined legal relationship which must be in writing and can take the form of a signed document, exchange of correspondence providing a record of the agreement, or through statements of claim and defence where the existence of the agreement is acknowledged. It can be in the form of an arbitration clause in a contract or a separate agreement.
2. Invocation of Arbitration- When dispute arises one party serves notice to other, invoking the arbitration clause. The notice send by the party is invitation to resolve a dispute between the parties without involving any other authority. The notice involves details of parties, their relationship, demand for arbitration, remedy and many more needed information.
3. Selection of Arbitrators- The parties may agree on a single arbitrator or a panel of arbitrators. As per Section 11, arbitrators are appointed by agreement or by court if party fails to do so. The selected arbitrators must be neutral, independent and impartial.
4. Preliminary Hearing- An initial meeting which is held to finalise procedure, timeline and clarifies issues in dispute which ensures efficiency and clarity in conduct.
5. Exchange of Information- Each party presents their supporting documents, evidence, witness statement and arguments. The claimant files Statement of Claim and respondent replies with Statement of Defence.
6. Hearing- The parties present their oral arguments, witness may be called including cross-examination, evidence is presented.
7. Arbitral Award- According to section 31, after considering the evidence and arguments presented, the arbitrators will render a decision, known as an arbitral award. This decision is final and binding on the parties unless challenged under section 34.
8. Enforcement of Arbitral Award- According to section 36, the arbitral award can be enforced through the courts, if necessary, as it carries the same weight as a court judgment.
WHY TO CHOOSE ARBITRATION
Arbitration offers several advantages that make it a preferred method of dispute resolution in today’s legal landscape. It is faster and more efficient than traditional court litigation, helping parties avoid lengthy delays and procedural complexities. Arbitration also ensures confidentiality, which is particularly important in sensitive commercial matters, and allows parties to choose expert arbitrators with specialised knowledge relevant to the dispute. The process is flexible and promotes finality, as arbitral awards are binding and have limited scope for appeal. In the context of international arbitration, its importance is even greater—offering a neutral forum for resolving cross-border disputes, reducing the risk of jurisdictional bias, and ensuring that awards are enforceable globally under the New York Convention, to which over 160 countries, including India, are signatories. This provides security and predictability for international investors and businesses, making arbitration a vital tool in fostering global trade and investment.
CONCLUSION
In today’s fast-paced and increasingly globalised world, arbitration stands out as a smart, efficient, and business-friendly alternative to traditional litigation which offers confidentiality, speed, expert decision-making, and enforceability across borders. With India’s legal system embracing arbitration more than ever, now is the right time to resolve disputes through this modern mechanism.
In conclusion, the Arbitration has become an important tool in resolving disputes in various industries both domestically and internationally. The Act has also helped to reduce the burden on the courts and provided parties with a more efficient and cost-effective means of resolving disputes. If you want to go for trusted legal guidance and effective representation in arbitration matters Madhu Law Associates is the best way. Known for its in-depth legal expertise, strategic approach, and commitment to client success.
