PROJECT ON ALTERNATE DISPUTE RESOLUTION

ARBITRATION:MEANING SCOPE AND TYPES

U.I.L.S, PU, CHD.

SUBMITTED TO: DR.JASNEET

SUBMITTED BY: ABHILASH CHAGTI ROLL NO: 133/10

ACKNOWLEDGEMENT
I am equally grateful to my teacher DR.JASNEET. She gave me moral support and guided me in different matters regarding the topic. She had been very kind and patient while suggesting me the outlines of this project and correcting my doubts. I thank her for all support. Last but not the least, I would like to thank my parents and my partner who helped me a lot in gathering different information, collecting data and guiding me from time to time in making this project .Despite of my parent's busy schedules, they gave me different ideas in making this project unique. I and my friend put a team effort to complete this project. Thanking you

CONTENTS
Introduction to ADR Meaning of Arbitration Types of Arbitration 1) Ad-Hoc Arbitration 2) Institutional Arbitration 3) Contractual Arbitration 4) Statutory Arbitration 5) Domestic Arbitration 6) International Arbitration 7) Foreign Arbitration

Scope of Arbitration

INTRODUCTION TO ADR

During the British times the judicial system was very expensive and time consuming. Due to these reasons the peoples faith on such method of justice was diminished. After the independence there was need to change such judicial method and a method of alternative method to settle the dispute was being adopted .even the international community laid stress on such method to solve the dispute .thus ADR (alternate dispute resolution) is the only mechanism or way to get rid of such demerits of the present legal system. Thus ADR adopted various Procedure to solve the dispute some of these are : I. II. III. IV. V. VI. VII. VIII. IX. Arbitration Negotiation Mediation Conciliation Mini trial Mini trial Expert appraisal Neutral evaluation Hybrid arbitration

Alternative dispute resolution (ADR) (also known as external dispute resolution in some countries, such as Australia) includes dispute resolution processes and techniques that act as a means for disagreeing parties to come to an agreement short of litigation. It is a collective term for the ways that parties can settle disputes, with (or without) the help of a third party. Despite historic resistance to ADR by many popular parties and their advocates, ADR has gained widespread acceptance among both the general public and the legal profession in recent years. In fact, some courts now require some parties to resort to ADR of some type, usually mediation, before permitting the parties' cases to be tried .The rising popularity of ADR can be explained by the increasing caseload of traditional courts, the perception that ADR imposes fewer costs than litigation, a preference for confidentiality, and the desire of some parties to have greater control over the selection of the individual or individuals who will decide their dispute.

MEANING OF ARBITRATION

Arbitration is a legal process, which takes place outside the courts, but still results in a final and legally binding decision similar to a court judgment. Parties involved in arbitration are effectively opting out of the court system and submitting their case for resolution by a neutral, third party arbitrator. Arbitration is generally faster, less expensive and more informal than going to court. It also has the advantage of being private and confidential. Arbitration is a legal process, which results in an award being issued by the arbitrator or arbitrators. Arbitration awards are final and binding on the parties and can only be challenged in very exceptional circumstances. An award has a status very much like a court judgment and is enforceable in a very similar manner. The closing decades of the twentieth century saw arbitration gain worldwide acceptance as the normal means of resolving commercial disputes. National laws on arbitration have been modernized on all continents. The Arbitration & Conciliation Act, 1996 is one such step by India to make the arbitration law more responsive to contemporary requirements, taking into account the Model law and Rules adopted by the United Nations Commission on International Trade Law (UNCITRAL). International treaties on arbitration have been signed or adhered to with impressive success. With the gradual removal of political and trade barriers and the rapid globalization of the world economy, new challenges have been created for arbitration institutions in response to the growing demand of parties for certainty and predictability, greater rapidity and flexibility as well as neutrality and efficacy in the resolution of disputes. Arbitration is a legal process, which takes place outside the courts, but still results in a final and legally binding decision similar to a court judgment. Arbitration is a flexible method of dispute resolution, which can give a quick, inexpensive, confidential, fair and final solution to a dispute. It involves the determination of the dispute by one or more independent third parties rather than by a court. The third parties, called arbitrators, are appointed by or on behalf of the parties in dispute. The arbitration is conducted in accordance with the terms of the parties' arbitration agreement, which is usually found in the provisions of a commercial contract between the parties. For an arbitration to take place, the disputing parties must agree to take their dispute to arbitration. In practice, this agreement is often made before the dispute arises and is included as a clause in their commercial contract. In

signing a contract with an arbitration clause, the parties are agreeing that their dispute will not be heard by a court but by a private individual or a panel of several private individuals. If parties have agreed to arbitration, they will generally have to go to arbitration rather than court as the courts will normally refuse to hear their case by staying it to force the reluctant party to honour their agreement to arbitrate. Advantages Among the available dispute resolution alternatives to the courts, arbitration is by far the most commonly used internationally. The reasons for this are clear: Final, binding decisions While several mechanisms can help parties reach an amicable settlement - for example through mediation or conciliation - all of them depend, ultimately, on the goodwill and cooperation of the parties. A final and enforceable decision can generally be obtained only by recourse to the courts or by arbitration. Because arbitral awards are not subject to appeal, they are much more likely to be final than the judgments of courts of first instance. Although arbitral awards may be subject to being challenged, the grounds of challenge available against arbitral awards are limited. The award given by the arbitrator is equivalent to a decree of a court of law and the same can be executed directly, without making it a decree of the court. The government enacted the Arbitration and Conciliation Act, 1996 (the 1996 Act) in an effort to modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation modeled on the lines of the UNCITRAL Model Law. This Act repealed all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act). Its primary purpose was to encourage arbitration as a cost-effective and quick mechanism for the settlement of commercial disputes. The 1996 Act covers both domestic arbitration and international and commercial arbitration.. Arbitration in India is still evolving. One of the objectives of the 1996 Act was to achieve the twin goals of cheap and quick resolution of disputes, but current ground realities indicate that these goals are yet to be achieved.

Scope of Arbitration

Arbitration customarily has been used for the settlement of disputes between members of trade associations and between different exchanges in the securities and commodities trade. Form contracts often contain a standard arbitration clause referring to specific arbitration rules. Numerous arrangements between parties in industry and commerce also provide for the arbitration of controversies arising out of contracts for the sale of manufactured goods, for terms of service of employment, for construction and engineering projects, for financial operations, for agency and distribution arrangements, and for many other undertakings. The usefulness and significance of arbitration are demonstrated by its increasing use by the business community and the legal profession in many countries of the world. An advantage of arbitration can be the speed with which controversies can be resolved by arbitration, compared with the long delays of ordinary court procedure. The expert knowledge of arbitrators of the customs and usages of a specific trade makes testimony by others and much documentation unnecessary and thereby eliminates some expenses generally associated with court procedures. The privacy of the arbitration procedure also is much valued by parties to the controversy; situations unfavourable to the partys credit or deficiencies in manufactured goods revealed in arbitration proceedings do not become known to outsiders. There are, however, disadvantages in the arbitration process. Because in Anglo-American practice abitrators generally do not have to provide any reason to accompany an award, it has been difficult to develop guidelines for the conduct of business relations. Moreover, this uncertainty makes the arbitral decision less predictable. Further obstacles to the wider use of commercial arbitration are the divergences in municipal laws and court decisions that result in different interpretations of similar arbitration questions and the fact that awards usually are not published.

TYPES OF ARBITRATION

Arbitration is categorized on the basis of arbitrator being settling dispute between the disputed parties. Thus sometimes the arbitrator is appointed priory with an agreement as in commercial disputes and sometimes at later stage. Thus on such basis arbitration can be categorized into 7 types: 1) 2) 3) 4) 5) 6) 7) Ad-Hoc Arbitration Institutional Arbitration Contractual Arbitration Statutory Arbitration Domestic Arbitration International Arbitration Foreign Arbitration

1)Ad-Hoc Arbitration : In ad hoc arbitration, the procedures have to be agreed upon by the parties and the arbitrator. This requires co-operation between the parties and involves a lot of time.When a dispute is in existence, it is difficult to expect cooperation among the parties. . thus when s dispute or difference arose between the parties in course of the commercial transaction and the same could not be settled friendly by negotiation or conciliation in such ad hoc arbitration may be sought by the conflicting parties. 2)Institutional Arbitration: The procedural rules are already established by the institution. Formulating rules is therefore no cause for concern. The fees are also fixed and regulated under rules of the institution.. the institution will have ready facilities to conduct arbitration, trained secretarial/administrative staff, as wellas library facilities. There will be professionalism in conducting arbitration. In institutional arbitration, the arbitral institutions maintain a panel of arbitrators. The parties can choose the arbitrators from the panel. Such arbitral institutions also provide for specialized arbitrators. In institutional arbitration, many arbitral institutions such as the International Chamber of Commerce (ICC) have an experienced committee to scrutinize the arbitral awards. Before the award is finalized and given to the parties, the experienced panel scrutinizes it. As a result, the possibilities of the court setting aside the award is minimal, because the scrutiny removes possible legal/technical flaws and defects in the award. In

institutional arbitration, the arbitrators are governed by the rules of the institution, and they may be removed from the panel for not conducting the arbitration properly. In institutional arbitration, as the secretarial and administrative staffs are subject to the discipline of the institution, it is easy to maintain confidentiality of the proceedings. 3)Contractual Arbitration: Contractual arbitration is private and binding. Here, the parties have chosen to go to arbitration instead of through a court trial. There is no appeal process in traditional arbitration and thus the award of the arbitrator is final except for the most extraordinary circumstances. In contractual arbitration the parties have agreed pursuant to a contract between them that in the event of a dispute, the matter will be arbitrated. Generally there will be a set of rules or procedures incorporated into the arbitration clause that dictate how the parties will proceed. Under an arbitration scenario the parties have agreed to arbitrate after the dispute has arisen. The parties must then choose which set of rules and procedures to follow to guide the proceedings. 4)Statutory Arbitration : : When a law specifies that if a dispute arises in a particular case it has to be referred to arbitration, the arbitration proceedings are called statutory arbitration. An example of a law which provides for statutory arbitration is the Land Acquisition Act, 1894. The statutory arbitration differs from others because of following reasons : 1)consent of parties is not necessary 2)it is a compulsory arbitration 3)it is binding on parties as law of land. It is mandatory arbitration imposed by operation of law. It is speedier and economical settlement of dispute 5)Domestic Arbitration : Domestic Arbitration takes place in India when the arbitration proceedings, the subject matter of the contract and the merits of the dispute are all governed by Indian Law, or when the cause of action for the dispute arises wholly in India or where the parties are otherwise subject to Indian jurisdiction. In the domestic arbitration, the cause of action for the dispute should

have arisen wholly in India or the parties are otherwise subject to Indian jurisdiction. Domestic arbitration is an attractive option for the settlement of disputes. In a domestic arbitration: 1) The arbitration takes place in India 2) The subject matter of contract is in India 3) The merits of the dispute are governed by the Indian Law. 4) The procedure of arbitration is also governed by the Indian Law. In the Indian Arbitration and Conciliation (Amendment) Bill 2003, the definition of the term domestic arbitration was given as: Domestic Arbitration means an arbitration relating to a dispute arising out of legal relationship whether contractual or not, where none of the parties is: i) An in individual who is a nationality of , or habitually resident in, any country other than India; or ii) A body corporate which is incorporated in any country other than India; or iii) An association or a body of individuals whose central management and control is exercised in any country other than India; or iv) The Government of a foreign country Where the place of arbitration is in India and shall be deemed to include international arbitration and international commercial arbitration where the place of arbitration is in India. 6)International Arbitration: International Arbitration can take place either within India or outside India in cases where there are ingredients of foreign origin relating to the parties or the subject matter of the dispute. The law applicable to the conduct of the arbitration and the merits of the dispute may be Indian Law or foreign law, depending on the contract in this regard, and the rules of conflict of laws. The most significant contribution of 1996 Act is the categorical definition of international commercial arbitration. Clause(f) of sub-section (1) of section 2 of the 1996 Act defines international commercial arbitration as 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:

a) An individual who is a national of, or habitually resident in or any country other than India b) A corporate body which is incorporated in any country other than India c) A company or an association or a body of individuals whose central management and control is exercised in any country other than India d) The government of foreign country .thus international arbitration can take place in India in accordance with the same procedure as domestic arbitration. Arbitration becomes international when at least one of the parties involved is resident or domiciled outside India or the subject matter of the dispute is abroad. In International arbitration the law applicable may be the Indian Law or a foreign law, depending on the terms of contract in this regard and the rules of conflict of laws. 7)Foreign Arbitration: when the arbitration proceeding in conducted in a place outside india it is called foreign arbitration . in such arbitration a foreign award is sought to be enforced.