Introduction

In today’s fast-paced economy time and money have a greater value and one cannot afford to waste them. As such solving your disputes in a court of law will sometimes prove more tedious of a task. It is more often a complex and long-drawn procedure and in order to simplify and make it easier at the parties, there are other options available. These are what we call alternative dispute resolution (also commonly abbreviated as ADR). You can read more information about this on Discover Everything About Alternate Dispute Resolution (ADR) (laymanlitigation.com) In this article, we will be discussing in depth all about arbitration. This would include – what is arbitration, what is arbitration tribunal and proceedings? What is an award? What constitutes an arbitration agreement? In addition to this, we will be discussing general terms and composition. What are the international laws and instruments and a few arbitration case laws and examples? How arbitration evolved and many more concepts further in this article.

The origins of arbitration[1]

The modern history of international arbitration is generally recognized as dating from the so-called Jay Treaty of 1794 between the United States of America and Great Britain. This Treaty of Amity, Commerce and Navigation provided for the creation of three mixed commissions, composed of equal numbers of American and British nationals, whose task it would be to settle a number of outstanding questions between the two countries which it had not been possible to resolve by negotiation. While it is true that these mixed commissions were not strictly speaking organs of third-party adjudication, they were intended to function to some extent as tribunals. They reawakened interest in the process of arbitration. Throughout the nineteenth century, the United States and the United Kingdom had recourse to them, as did other States in Europe and the Americas.

The Alabama Claims arbitration in 1872 between the United Kingdom and the United States marked the start of a second, even more decisive, phase. Under the Treaty of Washington of 1871, the United States and the United Kingdom agreed to submit to arbitration claims by the former for alleged breaches of neutrality by the latter during the American Civil War. The two countries set forth certain rules governing the duties of neutral governments that were to be applied by the tribunal, which they agreed should consist of five members, to be appointed by the Heads of State of the United States, the United Kingdom, Brazil, Italy and Switzerland, the last three States not being parties to the case. The arbitral tribunal’s award ordered the United Kingdom to pay compensation, which it duly did. The proceedings served to demonstrate the effectiveness of arbitration in settling of a major dispute, and led during the latter years of the nineteenth century to a range of developments, namely:

• a sharp growth in the practice of inserting in treaties clauses providing for recourse to arbitration in the event of a dispute between the parties,

• the conclusion of general treaties of arbitration for the settlement of specified classes of inter-State disputes,

• efforts to construct a general law of arbitration, so that countries wishing to have recourse to this means of settling disputes would not be obliged to agree each time on the procedure to be adopted, the composition of the tribunal, the rules to be followed and the factors to be taken into consideration in making the award;

• proposals for the creation of a permanent international arbitral tribunal to avoid the need to set up a special ad hoc tribunal to decide each individual dispute.

Disputes in itself are a long process for courts to solve, as such international disputes would be an even greater task and would be time consuming as well. This encouraged the international community to come up with a mechanism to solve this issue. Chapter VI of the United Nations Charter, Articles 33 to 38 talks about Pacific Settlements of Disputes. Article 33 states that, “The parties to any dispute, the continuance of which is likely to endanger the maintenance of international peace and security, shall, first of all, seek a solution by negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other peaceful means of their own choice.”[2]

We can see the traces of arbitration in our history, it is not only found in medieval society and in our modern civilization. While arbitration is also a formal method of solving disputes it is an alternate method wherein two parties will appoint a neutral third party, who will not be biased and will make a decision on behalf of the party in order to reach a conclusion (solve the dispute). The third party is what we call an “arbitrator” and these proceedings take place in an arbitration tribunal instead of your traditional courts. These decisions are what we call an “award”. These are legally binding decisions or judgments. An arbitration decision or award is legally binding on both sides and enforceable in the courts unless all parties stipulate that the arbitration process and decision are non-binding.[3]

ADVANTAGES & DISADVANTAGES OF ARBITRATION

1. Parties can decide in an agreement what law will be applicable during a dispute,
2. Parties can also decide the jurisdiction and penalties,
3. In contrast to litigation, where one cannot “choose the judge”[4] in an arbitration, parties can decide on a neutral third party of their choice (for example, quantity surveying expertise, in the case of a construction dispute, or expertise in commercial property law, in the case of a real estate dispute)[5]. Such parties are not biased, and an arbitrator also ensures that the parties maintain cordial relationships and ensure a conclusion is reached in complex disputes.
4. Arbitration is less time consuming than litigation process,
5. Arbitration is also very cost-efficient,
6. Because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court verdicts.[6]
7. In most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability.[7]
8. Once an award is announced that a judgement is made in an arbitration proceeding, if one party is not happy with the outcome of the proceeding, he or she will not have the option to appeal again,
9. Therefore, when a judgement is pronounced by an arbitrator, one also waive their rights to opt for litigation when they choose to solve their disputes through the arbitration process,
10. There is sometimes a disconnect between the presumption of confidentiality and the realities of disclosure and publicity imposed by the arbitrators, and even with the parties themselves.[8]
11. As stated earlier, an arbitration award is final and hence holds the same legal value as equal to judicial pronouncement.

Certain subject matter cannot be chosen to be carried out in arbitration proceedings. For example: until the 1980s, antitrust matters were not arbitrable in the United States.[9] German law excludes disputes over the rental of living space from any form of arbitration,[10] while arbitration agreements with consumers are only considered valid if they are signed by either party,[11] and if the signed document does not bear any other content than the arbitration agreement.[12]

TYPES OF ARBITRATION

The type of arbitration you will opt for will greatly depend upon the subject matter of the case and as well as the jurisdiction of the court to try that subject matter.

1. International arbitration: “As the name suggests, international arbitration occurs outside the domestic territory because of either a clause inserted in the agreement between the parties or the cause of action that arises from a foreign element relating to the dispute or to the parties. According to the circumstances that led to a case being filed foreign or Indian law would be applicable.”[13]
2. Emergency Arbitration: “Emergency arbitration is a form of arbitration where interim relief is given by the arbitral tribunal to a party who wants to protect their assets and/or evidence from being otherwise lost or altered. It can be roughly compared to the concept of interim injunctions granted by civil courts.”[14]
3. Institutional Arbitration: “In institutional arbitration, the parties are free to choose a particular arbitral institution in the arbitration agreement itself. The institution’s governing body or the parties can appoint one or more arbitrators from a panel of arbitrators that had previously been agreed upon. The institution selects one or more arbitrators who possess the skills and experience stipulated applicable in a given case when the parties do not appoint an arbitrator themselves. On the other hand, if the parties choose to appoint one themselves they can choose from the list provided by the institution. It is mainly used by business organisations worldwide owing to a specific procedure being deployed as well as an efficient dispute resolution procedure provided by the institutions. A few prominent arbitration centres are the Chartered Institute of Arbitrators UK, the London Court of International Arbitration, the National Arbitration Forum USA, Singapore International Arbitration Centre, and the International Court of Paris.”[15]

[1] The below information is retrieved from: History | INTERNATIONAL COURT OF JUSTICE (icj-cij.org)

[2] Chapter VI: Pacific Settlement of Disputes (Articles 33-38) | United Nations

[3] O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 324. ISBN 978-0-13-063085-8.

[4] "The Supreme Court's retired, but hardly retiring, Ian Binnie". The Globe and Mail. Toronto. 15 June 2012.

[5] See for example the arbitration service offered by Falcon Chambers, the specialist property barristers chambers – www.falcon-chambersarbitration.com.

[6] Born, Gary (2021). International arbitration: law and practice (Third ed.). Alphen aan den Rijn, The Netherlands: Kluwer Law International. pp. 38, 39, 86, 94. ISBN 978-94-035-3253-0.

[7] Born, Gary (2021). International arbitration: law and practice (Third ed.). Alphen aan den Rijn, The Netherlands: Kluwer Law International. pp. 38, 39, 86, 94. ISBN 978-94-035-3253-0.

[8] Brown, Alexis (1 January 2001). "Presumption Meets Reality: An Exploration of the Confidentiality Obligation in International Commercial Arbitration". American University International Law Review. 16 (4).

[9] Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985)

[10] Berger, Klaus Peter. "Zivilprozessordnung - German Code of Civil Procedure". www.trans-lex.org.

[11] To be correct: certain form, as defined by statute, of an electronic signature using a chip card and a PIN code is also sufficient

[12] Section 1031 subesction 5 of the Zivilprozessordnung. The restriction does not apply to notarized agreements, as it is presumed that the notary public will have well informed the consumer about the content and its implications.

[13] Types of arbitration (ipleaders.in)

[14] What is arbitration - iPleaders

[15] Types of arbitration (ipleaders.in)