1

ADVANTAGES OF
INTERNATIONAL ARBITRATION



SUBMITTED TO:
Mrs. SWATI MEHTA
(FACULTY: INTERNATIONAL COMMERCIAL ARBITRATION)



SUBMITTED BY: ABHISHEK MATHIAS
ROLL No. 04
SEMESTER VII-B



HIDAYATULLAH NATIONAL LAW UNIVERSITY
RAIPUR (C.G.)
Submitted on: 26.10.2013

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CONTENTS
Acknowledgements 3
List of Abbreviations 4
Introduction 5
Objective 6
Research Methodology 6
Arbitration: Meaning 7
Advantages of International Arbitration 9
Advantages of using an Arbitral Institution
to administer Arbitration Proceedings 15

Conclusion 17
Bibliography 18

3

ACKNOWLEDGMENTS
At the outset, I would like to express my heartfelt gratitude and thank my teacher, Mrs. Swati
Mehta for putting her trust in me and giving me a project topic such as this and for having the
faith in me to deliver.
My gratitude also goes out to the staff and administration of HNLU for the infrastructure in
the form of our library and IT Lab that was a source of great help for the completion of this
project.

Abhishek Mathias
Semester VII

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LIST OF ABBREVIATIONS
& And
AIR All India Reporter
Art. Article
Co. Company
Honble Honourable
ICA International Court of Arbitration
ICC International Chamber of Commerce
KB Kings Bench
Ltd. Limited
Supp Supplement
U/s Under Section
UNCITRAL United Nations Commission for
International Trade Law


5

INTRODUCTION
Arbitration is a flexible, consensual process for resolving business disputes in a binding,
enforceable manner. The decision makers are called arbitrators, or collectively the arbitral
tribunal. The arbitral tribunal comprises one or more independent individuals selected by the
parties or appointed through a mechanism that the parties have agreed upon. An arbitral
tribunals substantive decision is called an award. Awards in international arbitrations are not
subject to any appeal (save in a very limited number of jurisdictions) and can be enforced
under both domestic and international enforcement regimes including, notably, the 1958 New
York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The parties to arbitration are free to agree on whether to use the Rules of the ICC
International Court of Arbitration, the rules of another arbitral institution or no rules at all.
Arbitration is the only alternative to court litigation for achieving a final, binding and
enforceable resolution of a dispute. Due to its numerous advantages over litigation,
arbitration has become the preferred and most widely used mechanism for resolving
international commercial disputes.

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OBJECTIVE
The objective of this paper is to look into the advantages of international arbitration and the
change it brought about in the dispute settlement mechanism by relaxing the stringent judicial
procedures and emphasizing on party autonomy subject to the rules and the law agreed upon
by the parties to an arbitration agreement.

RESEARCH METHODOLOGY
This project report is based on analytical and descriptive Research Methodology. Secondary
and Electronic resources have been largely used to gather information and data about the
topic.
Books and other reference as guided by Faculty have been primarily helpful in giving this
project a firm structure. Websites, dictionaries and articles have also been referred.


7

ARBITRATION: MEANING
Arbitration can be either voluntary or mandatory (although mandatory arbitration can only
come from a statute or from a contract that is voluntarily entered into, where the parties agree
to hold all existing or future disputes to arbitration, without necessarily knowing, specifically,
what disputes will ever occur) and can be either binding or non-binding. Non-binding
arbitration is similar to mediation in that a decision cannot be imposed on the parties.
However, the principal distinction is that whereas a mediator will try to help the parties find a
middle ground on which to compromise, the (non-binding) arbitrator remains totally removed
from the settlement process and will only give a determination of liability and, if appropriate,
an indication of the quantum of damages payable. By one definition arbitration is binding and
so non-binding arbitration is technically not arbitration.
Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose
decision the parties to the dispute have agreed, or legislation has decreed, will be final and
binding. There are limited rights of review and appeal of arbitration awards.
ARBITRATION AGREEMENT
In theory, arbitration is a consensual process; a party cannot be forced to arbitrate a dispute
unless he agrees to do so. In practice, however, many fine-print arbitration agreements are
inserted in situations in which consumers and employees have no bargaining power.
Moreover, arbitration clauses are frequently placed within sealed users' manuals within
products, within lengthy click-through agreements on websites, and in other contexts in
which meaningful consent is not realistic. Such agreements are generally divided into two
types:
Agreements which provide that, if a dispute should arise, it will be resolved by
arbitration. These will generally be normal contracts, but they contain an arbitration
clause
Agreements which are signed after a dispute has arisen, agreeing that the dispute
should be resolved by arbitration (sometimes called a "submission agreement")
The former is the far more prevalent type of arbitration agreement. Sometimes, legal
significance attaches to the type of arbitration agreement. For example, in
certain Commonwealth countries, it is possible to provide that each party should bear their
own costs in a conventional arbitration clause, but not in a submission agreement.
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In keeping with the informality of the arbitration process, the law is generally keen to uphold
the validity of arbitration clauses even when they lack the normal formal language associated
with legal contracts. Clauses which have been upheld include:
"arbitration in London - English law to apply"
1

"suitable arbitration clause"
2

"arbitration, if any, by ICC Rules in London"
3

The courts have also upheld clauses which specify resolution of disputes other than in
accordance with a specific legal system. These include provision indicating:
That the arbitrators "must not necessarily judge according to the strict law but as a
general rule ought chiefly to consider the principles of practical business"
4

"internationally accepted principles of law governing contractual relations"
5

Agreements to refer disputes to arbitration generally have a special status in the eyes of the
law. For example, in disputes on a contract, a common defence is to plead the contract
is void and thus any claim based upon it fails. It follows that if a party successfully claims
that a contract is void, then each clause contained within the contract, including the
arbitration clause, would be void. However, in most countries, the courts have accepted that:
1. A contract can only be declared void by a court or other tribunal; and
2. If the contract (valid or otherwise) contains an arbitration clause, then the proper
forum to determine whether the contract is void or not, is the arbitration tribunal.
6

Arguably, both the positions are potentially unfair; if a person is made to sign a contract
under duress, and the contract contains an arbitration clause highly favourable to the other
party, the dispute may still referred to that arbitration tribunal. Conversely a court may be
persuaded that the arbitration agreement itself is void having been signed under duress.
However, most courts will be reluctant to interfere with the general rule which does allow for
commercial expediency; any other solution (where one first had to go to court to decide
whether one had to go to arbitration) would be self-defeating.

1
Swiss Bank Corporation v Novrissiysk Shipping [1995] 1 Lloyd's Rep 202
2
Hobbs Padgett & Co v J C Kirkland (1969) 113 SJ 832
3
Mangistaumunaigaz Oil Production v United Kingdom World Trade [1995] 1 Lloyd's Rep 617
4
Norske Atlas Insurance Co v London General Insurance Co (1927) 28 Lloyds List Rep 104
5
Deutsche Schachtbau v R'As al-Khaimah National Oil Co [1990] 1 AC 295
6
Heyman v Darwins Ltd. [1942] AC 356
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ADVANTAGES OF INTERNATIONAL ARBITRATION
Neutrality
Very often parties to commercial transactions who come from different countries show
distrust against the judiciary of the country of the other party, be it justified or not.
Arbitration allows the parties to choose a neutral forum. Although the parties could, in
theory, also choose the jurisdiction of a third country, this does not happen very often. The
reason is that by doing this the parties would subject themselves to unknown procedural
rules, to the language of the country and possibly to other inconveniences compared to an
international arbitration.
International Recognition and Enforcement
International arbitral awards may be enforced more easily than state court judgements.
Several international treaties provide for the enforcement of foreign arbitral awards. The most
prominent instrument used to enforce awards around the world is the 1958 New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York
Convention"), to which 149 nations have adhered.
The New York Convention requires the courts of signatory countries to:
enforce arbitration agreements; and
recognize and enforce foreign arbitral awards.
Under the New York Convention, recognition or enforcement of a foreign arbitral award may
only be refused under specific circumstances.
The New York Convention sets minimum standards. Other multinational treaties or national
laws may be even more favourable to the recognition and enforcement of arbitration
agreements and arbitral awards. One example of a complementary international convention is
the 1961 European Convention on International Commercial Arbitration ("European
Convention").
Speed
The arbitration process is intended to be flexible and fairly quick. In general, arbitration
proceedings are a faster and more economical alternative to litigation, even in the largest,
most complex disputes. This mostly results from the flexibility of the arbitration procedure
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itself and the fact that there is no court of appeal or further judicial instances in arbitration
proceedings.
For example, while a (first) hearing can be held shortly after the nomination of the arbitrators,
in litigation cases are often pending for months, even years, before the case is heard.
Furthermore, arbitral tribunals often take less time than national courts to reach a final
decision. Some arbitral institutions, such as the ICC International Court of Arbitration,
monitor deadlines from the initiation of the arbitration to the rendering of the award.
Costs
It is supposed that arbitration is less costly than litigation. Costs relating to arbitration consist
of four elements:
fees and expenses relating to the arbitral tribunal;
administrative fees of the institution;
legal costs; and
other costs, fees of experts or travel expenses for example.
When talking about costs the comparator would be litigation in the state courts. Depending
on the national systems the court fees range from substantial to non-existent. An additional
element which impacts costs is that usually arbitration is concluded in one instance whereas
court systems usually allow for at least one instance of appeal, which adds to the total costs of
the proceedings.
Useful guides for the reduction of costs in arbitration proceedings can be found in the ICC
Commission on Arbitration's Report 'Techniques for Controlling Time and Costs in
Arbitration'.

Confidentiality
In contrast to many litigation proceedings, arbitration proceedings are not open to the public.
Usually, arbitration laws or arbitration rules provide that the arbitrators and the arbitral
institution have to maintain confidentiality. As regards the parties' duty to maintain
confidentiality, usually there are no legal provisions in that respect. However, it is possible
that the parties provide for such a confidentiality obligation contractually.

Experience and Background of Arbitrators
Whether nominated by the parties or designated by an appointing authority, arbitrators may
be required to have a certain experience and background for the resolution of the specific
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dispute at hand. Such requirements may include professional qualifications in a certain field,
technical expertise, legal proficiency, language skills or nationality.
As opposed to state court judges in many jurisdictions, arbitrators usually come from a
different background. Many of them are or were attorneys in private practice, others are
academics; still others have technical, financial or other qualifications and experience.
Therefore, arbitrators may have a much better understanding of the factual or legal issues to
be resolved. It does happen more and more that in a dispute concerning mainly technical
issues, technicians and lawyers are members of the panel. This greatly increases the
efficiency of the process.
Qualification requirements may already be included into an arbitration agreement, allowing
the parties to influence the choice of the arbitrators to a certain extent. Providing for such
requirements in an arbitration agreement requires great care as it may actually create
obstacles in the appointment process. The parties may argue whether the agreed requirements
are fulfilled or not.

Influence on the Constitution of the Arbitral Tribunal
In contrast to court proceedings where the parties have no influence over the selection of the
judge or panel of judges assigned to their case, in arbitration proceedings the parties have
much greater freedom to choose one or more arbitrators whose backgrounds and experience
are most fitting to their dispute.
In case of three member tribunals, each party has the possibility to appoint one member of
this panel. With respect to a choice of a sole arbitrator or the chairperson of an arbitral
tribunal it is not rare that the parties manage to agree on a nomination.

Procedural Flexibility
In litigation the parties hardly have any influence over the procedure or rules of the court
system. Arbitration offers a much greater flexibility. Already in advance of any dispute, the
parties may decide on certain procedural rules. Practical examples for procedural flexibility
are the use of several languages, the use of written witness or expert statements; expert
processes tailor-made to the topics at issue or optimized procedures to question witnesses
such as witness or expert conferences.
Another example of flexibility is the "documents-only arbitration", where the parties agree
that a hearing is not necessary and that the entire pleadings and proof shall be made directly
by submission of documents.
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Legal Basis
Arbitration is a private process. It could be held without any basis in domestic or international
law.
However, arbitration is partial waiver of the right to a trial before state courts, found for
example in Art.6 of EHRC. For this and other reasons states regulate the entry gate to
arbitration, the arbitration agreement.
At the other end of the process is the award. If it is fulfilled voluntarily, again, this is a private
matter without involvement of the state. However, if this is not the case, the successful party
may have to deploy physical or legal force to obtain what it is entitled to or to obtain
recognition of the award as part of the sphere of a legal system. For this, the assistance of the
state is required. The state on the other hand puts in place certain conditions for lending its
hand, such as rules on the challenge or recognition and enforcement of the award.
Although in arbitration international treaties play a much more important role than in many
other legal domains, many aspects of arbitration are still governed by domestic law.

Arbitration Agreement Drafting and Assessment
When drafting an arbitration agreement providing for institutional or ad hoc arbitration
several sets of legal rules must be considered:
the arbitration rules (if any);
the arbitration law of the seat of arbitration;
the arbitration law chosen by the parties (if any); and
the law applicable to the main agreement.
Several other legal systems may play a role, such as:
the legal systems relevant to determine whether a certain person validly concluded an
arbitration agreement;
the law applicable to the corporate representation of a company when concluding an
arbitration agreement;
the law applicable to a proxy given to conclude an arbitration agreement; and
the law of a country where enforcement of an award will be sought.
The following topics shall be considered when drafting an arbitration agreement:
institutional or ad hoc arbitration;
choice of arbitral institution;
seat of arbitration;
law governing the arbitration agreement;
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form requirements;
content requirements;
objective arbitrability;
subjective arbitrability;
number of arbitrators and appointment procedure;
language of arbitration;
waiver of remedies;
multiparty situations;
representation;
special regimes;
law governing the merits of the dispute; and
pre-arbitral procedure.

Rendering Awards
At the end of the arbitration proceedings the arbitral tribunal will render its award. The award
may either deal with all issues in dispute, and then it is a final award, or it may deal with just
some of the issues and would then be called either partial award or interim award. A partial
award fully decides one or several of the claims whereas an interim award just decides part of
one or several claims, for example jurisdiction or liability. However, there is no international
consensus on the meaning of "partial" and "interim" award.
Generally, an award must be made in writing, be signed by the arbitrators and contain the
date and place of issuance. Usually, the award must be reasoned. Many jurisdictions allow
the parties to waive this requirement.
A number of arbitration laws and arbitration rules allow the parties either to request a
correction of the award in case of typographical or similar clerical errors, to demand an
interpretation of the award or to ask for a supplementary award in case the final award does
not deal with all issues in question.
A request for the correction of an award cannot be used as a means to appeal the decision of
the arbitral tribunal.

Interim Relief
A party entering into an arbitration agreement should consider whether it may need interim
relief from the arbitral tribunal or a local court prior to or during the arbitration. Such relief
generally ensures that the purposes of the arbitration are not frustrated during the proceedings
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or regulates the conduct of the parties during the arbitration. Examples of interim relief
include:
the pre-judgment attachment of the opposing party's assets;
orders to continue the performance of a contract during arbitral proceedings;
prohibitions on moving assets from a jurisdiction pending the arbitration;
orders for depositing the amount in dispute in an escrow account; and
injunctive relief and orders to safeguard goods, bonds, and a temporary receivership.
Interim measures can be indispensable if the award to be ultimately rendered by the arbitral
tribunal is to be meaningful or if one of the parties would be harmed unless the status quo is
maintained pending the issuance of a final award. The arbitration agreement should expressly
state that the parties may seek interim relief from a court or from the arbitral tribunal and that
doing so is not inconsistent with the obligation to arbitrate.
Many modern arbitration laws and institutional rules contain regulations authorizing
arbitrators to grant interim relief and determine the circumstances in which they may do so.
In addition, it is usually possible for a court to grant, before or during arbitral proceedings, an
interim measure of protection relating to the subject-matter of the arbitration upon request of
a party.

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ADVANTAGES OF USING AN ARBITRAL INSTITUTION TO ADMINISTER
ARBITRATION PROCEEDINGS
An arbitral institution organizes and provides services in connection with arbitration
proceedings.
Certain leading institutions have also assumed a role as industry regulators, setting standards
and practices and offering training and conferences. Arbitral institutions, in particular ICC,
have contributed significantly to the growth and success of international arbitration.
The level of service offered by an arbitral institution depends entirely on the institution and
can range from simple appointment of a default arbitrator to full supervision and monitoring
from the beginning to the end of the proceedings. The ICC system of arbitration offers full
supervision and a range of important services including, notably, the scrutiny of draft arbitral
awards.
The cost of the services provided and the manner in which they are calculated are important
points of difference among arbitral institutions. Another important difference is the method
used to calculate arbitrators fees. While there is significant variation among institutions, the
cost must be assessed against the extent and quality of service offered. An essential
consideration is whether the institution offers value for money by reference to the services
offered.
Whether parties wish to use an arbitral institution, and which one, are entirely a matter of
party choice and discretion. It is, however, not possible to engage the services of an arbitral
institution unless all relevant parties have agreed.
Ad hoc arbitration is when there is no institution involved. The arbitrators and the parties
administer the proceedings themselves. This can work fine if all parties (and their lawyers)
are cooperative and really know what they are doing (or are advised by lawyers who really
know what they are doing). However, by the time a dispute has reached the stage of
arbitration it often happens that at least one party no longer wants to cooperate. There are
numerous examples of dilatory tactics which can cause serious delays and unnecessary costs.
Well-established arbitral institutions can deal quickly and efficiently with many such tactics
and/or assist the arbitral tribunal to do so. Moreover, ICC can efficiently deal with many
procedural issues that might otherwise have to be resolved by a domestic court if ICC was not
involved. A good institution can also remove any arbitrator who lacks independence or is
otherwise not performing his or her functions properly.
For all of these reasons, it is not surprising in a 2008 study by Queen Mary University Law
School on the views of in-house counsel at leading multinational corporations found that:
16

86% of awards that were rendered over the last 10 years were under the rules of an
arbitration institution, while 14% were under ad hoc arbitrations. This confirms anecdotal
evidence from arbitration practitioners and users that institutional arbitration is preferred over
ad hoc arbitration. The 2010 version of the same study showed that on a global level ICC is
the preferred arbitral institution, with 50% of participating corporations preferring ICC. The
second most preferred institution was chosen by 14% of participants. One very important
point must be kept in mind in relation to arbitral institutions: like many aspects of the
arbitration procedure, an institution can only be utilized if the parties have specifically chosen
to use it. It is not possible for an institution to administer arbitration unless the parties have
agreed. Since it is usually difficult for parties to agree after a dispute has arisen, institutions
are normally chosen in advance, for example in an arbitration clause contained in a contract.

The United Nations Commission for International Trade Law (UNCITRAL) has drafted its
own arbitration rules, which were approved by the United Nations General Assembly in
1976. UNCITRAL will not administer an arbitration conducted under its rules, but the rules
may be applied in either an ad hoc arbitration (where the arbitration tribunal conducts the
arbitration itself), or in an arbitration conducted in one of the institutional forums discussed
above. Ad hoc arbitration awards are enforceable under the New York Convention. The rules
contain provisions on: appointment of arbitrators; number of arbitrators; place of arbitration;
language to be used; notice; contents of the pleadings; challenges to the jurisdiction of the
tribunal; evidence; interim measures; contents, form, and effect of the award; costs; and other
issues.

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CONCLUSION
There has been a paradigm shift in the field of dispute settlement from the ordinary course
available through the courts to other alternative dispute resolution mechanisms. Arbitration is
one the most preferred and efficient means of dispute settlement. It is a binding procedure
wherein the parties, subject to an arbitration agreement between them, choose to bring the
dispute to an arbitrator rather than going to the Courts. Arbitration is less time consuming and
cost effective and usually the parties to the arbitration agreement reach an amicable solution.
International Arbitration plays a very important role in the same field as there are no specific
forums that regulate and enforce the laws of country worldwide, thus arbitration, being a
pioneer of party autonomy, is the preferred mechanism.
The advantages of Arbitration are numerous and they provide for an efficient resolution of
disputes.

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REFERENCES
The Arbitration and Conciliation Act, 1996
Saraf, B.P., Jhunjhunwala, S.M., Law of Arbitration and Conciliation, 2
nd
edition,
(Snow White Publications, 2000), p.38
Bansal, A.K., Law of International Commercial Arbitration, (Universal Law
Publishing Co. Pvt. Ltd.)
Bachawat, R.S., Law of Arbitration and Conciliation, 3
rd
edition, (Wadhwa and Co.,
1999) p. 677 874
Markanda, P.C., Law relating to Arbitration and Conciliation, 7
th
edition, (Lexis
Nexis Butterworths Wadhwa, Nagpur)
Singh, Avatar, Law of Arbitration and Conciliation, 8
th
edition, (Eastern Book
Company, Lucknow)