Law > Civil Laws > Alternate Dispute Resolution > International Commercial Arbitration
Everybody has their own opinion and views, hence there may be a conflict of opinions. In today’s society, such conflicts are inevitable and a quick, easy, and strong mechanism for resolution of such conflicts at minimum cost is need of time. Such a mechanism reduces the burden on the judiciary. Arbitration, Mediation, Conciliation, Negotiations, Lok Adalats are some methods that can be used in such situations. These methods are collectively known as the Alternate Dispute Resolution (ADR) System. Arbitration is a procedure in which parties submit present or future disputes, to one or more arbitrators (arbitral tribunal) 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. The decision given by the arbitral tribunal is called an award. In this article, we shall study International Commercial Arbitration in detail.
Different kinds of arbitrations are as follows:
- Domestic Arbitration: Domestic arbitration is that type of arbitration, which happens in India, wherein both parties must be Indians and the conflict has to be decided in accordance with the substantive law of India.
- International Arbitration: When arbitration happens within India or outside India containing elements which are foreign in origin in relation to the parties or the subject of the dispute, and the dispute is decided in accordance with substantive law in India or any other country, then it is called as International Arbitration.
- Institutional Arbitration: When an arbitral Institution conducts arbitration in accordance with the prescribed rules of such institution, it is called Institutional Arbitration.
- Ad-hoc Arbitration: If the parties agree among themselves and arrange for arbitration, it is called Ad-hoc Arbitration without having an institutional proceeding. It can either be domestic, international, or foreign arbitration.
- Statutory Arbitration: It is mandatory arbitration, which is imposed on parties by the operation of law. There are many central and State Acts which make arbitration mandatory.
- Fast Track Arbitration: Fast track arbitration is a method, which is time-dependent in the provision of the arbitration and conciliation act. Its procedure is established in a way that it has abandoned all the methods, which consume time.
International Arbitration:
Arbitration is an alternative to litigation. Arbitration is a procedure in which parties submit present or future disputes, to one or more arbitrators (arbitral tribunal) 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. The decision given by the arbitral tribunal is called an award.
Domestic arbitration is that type of arbitration, which happens in a particular country (say India), wherein both parties must be of the same country (say Indians) and the conflict has to be decided in accordance with the substantive law of that country only (say India).
When arbitration happens within a particular country or outside the country containing elements which are foreign in origin in relation to the parties or the subject of the dispute, and the dispute is decided in accordance with substantive law in that country or any other country, then it is called as International Arbitration.
‘international arbitration’ is often taken to mean ‘international commercial arbitration’. Companies frequently include international arbitration agreements in their commercial contracts with other businesses, so that if a dispute arises with respect to the agreement they are obligated to arbitrate rather than to pursue traditional court litigation.
‘International arbitration’ has been defined by the UNCITRAL Model Law in Article 1(3) as follows:
An arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties have their places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;
(ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or
(c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.
The UNCITRAL Model Law has defined the term ‘commercial’ in footnote to the Article 1 as follows:
“The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing”
Section 2(f) of the Arbitration and Conciliation Act, “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 for 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
- a company or ail association or a body of individuals whose central management and control is exercised in any country other than India; or
- the Government of a foreign country;
International Arbitration Rules:
Most international arbitration institutions provide rules which govern the resolution of disputes to be resolved via arbitration. The best-known rules of arbitration include those of
- the International Chamber of Commerce (“ICC”),
- the London Court of International Arbitration (“LCIA”),
- the International Centre for Dispute Resolution of the American Arbitration Association (“ICDR”),
- the rules of the Singapore International Arbitration Centre (“SIAC”) and
- the Hong Kong International Arbitration Centre (“HKIAC”).
Investment Arbitration:
A relatively recent phenomenon, “investment arbitration” is one of the types of arbitration that is growing the most rapidly. It concerns the institution of arbitration proceedings by foreign investors against States on the basis of bilateral or multilateral investment treaties, or domestic laws providing consent to arbitration by the State. It may be the only recourse in response to the expropriation of private investments by a State.
Investment arbitrations are often resolved under the rules of the World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”) or the United Nations Commission on International Trade Law (“UNCITRAL”) rules. Many arbitrations involving Russian businesses take place under the rules of the Stockholm Chamber of Commerce (“SCC”).
Enforcement of International Arbitration Awards:
International arbitration awards can be enforced in most countries under the New York Convention, which entered into force on 7 June 1959. Over 168 countries have ratified the New York Convention today, meaning that arbitration awards can be enforced in all major countries in the world.
Case Laws:
Conclusion:
International arbitration has grown in importance in the last few decades, in tandem with globalization. It is primarily used to resolve disputes arising from commercial contracts, especially contracts with an international element. The primary laws on the basis of which international arbitration lawyers argue a case are the governing law of a contract, or the law of tort relating to a contract, the arbitration laws of the seat of arbitration, and the New York and Washington convention (alternatively known as the ICSID Convention).
This process provides a way of dispute resolution for the parties of different culture, languages, and legal rules under one common procedure which is a binding on the disputed parties.