Arbitration as a method of adjudication is gaining foothold primarily due to factors like Confidentiality, Choice of Law, Seat of Arbitration, Choice of Panel/Institution, Pre-decided and customised procedure etc. It can be carried on through an ad-hoc basis or through the submission of the dispute to an arbitral institution.
This post throws light on the process generally followed throughout arbitrations held in India. Some steps may differ in each arbitration as arbitration rests on the cornerstone of party autonomy i.e. the parties are free to choose the way their arbitration will run.
Agreement to Arbitrate
An Arbitration is the creature of contract. The dispute resolution is primarily governed by the contract. The contract specifies the seat/place of arbitration, the governing law, the procedural law, the preferred arbitral institution, if any, etc. The clause can be modified to some extent. However, it must be kept in mind that consent of the parties is essential for submitting the dispute to arbitration.
The Arbitration Act covers even an arbitration clause in a contract. It mandates an arbitration agreement to be in writing. An oral agreement or oral evidence of a written agreement is not evidence to prove the existence of an arbitration agreement.
Notice of Arbitration
The Notice must include a demand that the dispute is referred to arbitration, the details of the parties and the contract, the nature of the claim and the relief or remedy sought. The Arbitration Act does not specify contents or form of the notice to commence an arbitration. A communication claiming a disputed amount and contemplating arbitration in the alternative is sufficient notice of a request for arbitration.
The date of service of an arbitration notice is regarded as the date of commencement of the arbitration. The first formal step taken by a party in any arbitration proceeding is the commencement. It is effectively also one of the most important steps undertaken for a variety of reasons.
It is integral to note that any party that commences arbitration proceedings after expiry of the limitation period would not be entitled to initiate arbitration. Limitation under Section 43(2) of Arbitration Act is computed from the date of reference of the dispute to arbitration. The date of service of notice is regarded as the date of commencement of the arbitration.
Appointment of Arbitrator
The notice sent under Section 21 i.e. the arbitration notice includes request to appoint an arbitrator. An arbitrator is selected by the mutual agreement of the parties, at the same time being impartial and independent. The list of arbitrators is considered. An arbitrator who specializes in a particular field can be shortlisted.
An application to the High Court or Supreme Court, as the case maybe, can be made, if one party does not agree on the appointment of an arbitrator within 30 days of receipt of the arbitration notice.
Statement of Claims
In the case of institutional arbitration, the claim is sent to the Arbitral Institution. And in case of Ad Hoc Arbitration, it is directly sent to the arbitrator. The Arbitration Act requires the submission of statement of claim.
Statement of Defense/Counterclaims
After the other party of the dispute receives the statement of claims, he/she is entitled to submit a Reply or statement of counterclaims or appoint a second arbitrator (if required). It is just like a reply raised to an application. The Respondent can suitably reply to the various contentions and raise additional contentions if desired, also called the counterclaim.
Arbitral Proceedings
Alike in the civil courts, at a trial, an arbitral tribunal examines the case, analyzes the evidence, and hears witnesses. The arbitrator can decide upon the course of the procedure to be adopted. The presiding arbitrator has the power to fix a date after which no evidence would be accepted.
The parties may agree the manner in which the proceedings to take evidence are to be conducted. The trial is held rather as a meeting between two individuals. The participants are: the arbitrators, the parties and their counsels. Third parties are generally not allowed to attend the trial. The arbitrators undertake to keep the information about the trial confidential.
Award
Whenever the Arbitrator finds that the evidence is sufficient to satisfy the facts of the case, and upon arbitral tribunal’s clarification of the case to the extent being sufficient for material resolution, the arbitral tribunal issues an award. The award is not appealable. It can, however, be challenged on limited grounds under Section 34. The challenge to an award will be discussed in my further posts in detail.
