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Understanding Arbitration

Info: 30288 words (121 pages) Dissertation
Published: 27th Oct 2021

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Tagged: LawInternational Law

Introduction - Arbitration


Since the get-go, there have existed question in the public arena. It is a piece of human identity to deviate, and this causes differences. Contingent on their level, question can be unraveled in a neighborly way without the intercession of a nonpartisan outsider, or there might be the need of an outer gathering to help settle the issue. As human relations wound up noticeably mind boggling, so did the debate that emerged in the general public.

Arbitration is most likely the best known other option to court case. Arbitration is a form of alternative dispute resolution  (ADR)  method in which a question is submitted, by assention of the gatherings, to at least one authorities who settle on a coupling choice on the question. It is the private, legal assurance of a debate, by a free outsider. Discretion is a private instrument, however does not happen in a legitimate vacuum. In picking Arbitration, the gatherings choose a private debate determination methodology as opposed to going to court.

India has in place a modern and an efficient Arbitration Act (2015), but, is plagued with many shortcomings and the quality of arbitration has not adequately developed as a quick and low cost mechanism for resolution of commercial disputes. In the light of developments in the arbitration system of India, one can expect the same to grow and become stronger in addition to being qualitative. Arbitration is a speedy and economical way to determine disputes alternatively, not only in India but, all across the world.


For the purpose of this dissertation, the hypothesis formulated is as follows:

“Laws relating to arbitration are slowly becoming the centre of attention, not only in India but, all around the world. Though, arbitration is a foreign concept, it has become a widely-known mechanism for amicable settlement of disputes in India. The legal framework pertaining to arbitration in India is evolving and is still plagued with certain shortcoming as compared to its status internationally. Yet, it is a quick and cost-effective mechanism for resolution of commercial disputes.


For the purpose of submission of this dissertation, the objectives for this study are enumerated as follows:

  • To understand the meaning of the term ‘arbitration’ along with the evolution of arbitration laws in India and elsewhere.
  • To examine the concepts of international, technical and commercial arbitration.
  • To empirically ascertain the advantages and disadvantages of arbitration.
  • To conduct a detailed perusal of all the International Arbitration Treaties and Conventions.
  • To chart the progress and developments pertaining to laws relating to arbitration in India along with conducting a detailed perusal of the Arbitration and Conciliation Act, 1961 and the Indian Council of Arbitration.


In order to understand, examine and broaden the perspective on the title disciplines, it is essential that detailed research be made by using various sources. Chiefly, the primary sources are utilised to understand the basic concepts and also to make use of the same to further the boundary of exploration. Primary sources include books, bare acts and other publications such as articles, newspapers, etc.

Followed by the primary sources, secondary sources must be considered for further insight and grasp. Secondary sources shall include internet websites. These websites widen the net for search of specific topics, case laws, illustrations, definitions, etc. which are essential for supporting the material that has to be used in this dissertation. Also, many publications that form a part of primary sources can be found on the internet in the form of e-books, blogs, newspaper articles, etc.

For this dissertation, both primary and secondary sources were closely examined. Each topic was separately figured out and then, the matter for that particular topic was formulated. Every topic includes case laws and illustrations which have been duly footnoted and put together from reliable sources. Also, relevant citations for all case laws have been provided for further research, if any is required.


International Commercial Arbitration – G. Born

This book is refered to as the standard content in the field of worldwide arbitration. It gives an exhaustive treatment of the subject of universal business discretion and proposes creative hypotheses in regards to the worldwide legitimate administration for global arbitration and the sacred status of the 1958 New York Convention (United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards). The book extensively looks at the sacred system of contemporary global business discretion, altogether explaining every significant tradition, statutes, and institutional standards and their associations in many wards around the world. The work is separated into three fundamental parts, covering universal intervention understandings, worldwide arbitral procedures and global arbitral honors.


The dissertation is divided in the form of Chapters. Each chapter shall have further divisions in accordance with the topic of that particular chapter. A brief insight of the dissertation is given below.

Introduction (Meaning, Characteristics and Types of Arbitration)

This chapter is a detailed overview of the concept of arbitration. The chapter is divided into four parts which are, further, sub-divided. The chapter discusses the meaning of arbitration and arbitrators along with enumerating the essential characteristics of arbitration. Then, the history and evolution of arbitration has been given. The concept of international arbitration has been given in detail. Moreover, the various international treaties and conventions pertaining to arbitration have also been explored.

Arbitration in India

This chapter solely deals with status and functioning of arbitration in India. The history and evolution of arbitration in India has been explored. The chapter also scrutinizes the essential provisions of the Arbitration and Conciliation Act, 1961 that governs all aspects of arbitration India. Furthermore, the features and functions of the Indian Council of Arbitration have been enumerated in detail.

Technical Arbitration

This chapter of this dissertation reflects upon technical arbitration. The chapter explains the concept in detail and also gives a comparison of its Indian and International practices.

Commercial Arbitration

This chapter explains the modern-day scenario relating to international commercial arbitration and also, explains the various theories of commercial arbitration.

Case Studies

This chapter of this dissertation gives brief overview and important points of relevant case laws pertaining to the matter discussed in the dissertation.

Suggestions and Conclusion

The last chapter of this dissertation enumerates various suggestions pertaining to the practice of Arbitration in India. It also summarises the entire study by spelling out a conclusion.

Meaning, characteristics, & types of arbitration


Definition of Arbitration

Arbitration might be considered as a standout amongst the most conventional ideas of private dispute determination. It is one of the best known contrasting option to typical (court) suit. Arbitration, a type of alternative dispute resolution (ADR), is a method in which a question is submitted, by understanding of the parties, to at least one judge who settles on a binding decision on the question. It is the private, legal assurance of a determination, by an arbitor. Arbitration is a private system, however does not happen in a legal vacuum. In picking arbitration, the parties settle on a private dispute resolution method as opposed to going to court.[1]

“The term, arbitration has not been formally defined. However, various authors have given definitions which explain parts of the procedure of arbitration. René David (1985) defines arbitration as a dispute resolution method in which a person not related to the dispute decides it – “Arbitration is a device whereby the settlement of a question, which is of interest for two or more persons, is entrusted to one or more other persons – the arbitrator or arbitrators –who derive their powers from a private agreement, not from the authorities of a State, and who are to proceed and decide the case on the basis of such an agreement.”[2]

It is important to note that the arbitrator’s powers do not come from the State authority but from the agreement of the parties intrested in the dispute.  It is also important  that the arbitor who is deciding the dispute must be neutral. This is what Edward Brunet et al (2006), emphasise in their longer definition of arbitration. They affirm that there must be an agreement between the persons involved in order to submit their dispute to a neutral third party – “…there is an agreement between two or more persons to submit an existing or future dispute to the persons (arbitrators) who are chosen by the parties. The power of the arbitrators to act depends upon the scope of the agreement.”[3]

According to the  authors, the arbitrators will then conduct the procedure and make an arbital award in the end of the arbitration, which is binding – “…the arbitrator’s award on the merits is normally confidential and is intended by the parties to be final between them. The matter is decided and there are no appeals on the merits.”

“The fact that the award is binding and there are no appeals is an essential characteristic for the success of arbitration, because this way the dispute is settled much faster. The arbitration procedure will occur only if all the parties involved agree in using this method to settle their issue. “Richard Garnett et al (2000) emphasize that arbitration is based on consent – A fundamental aspect of arbitration is that it is based on consent.”[4]

One of the important aspects of arbitration is that the final decision usually cannot be appealed. However, arbitral awards can be appealed to courts. Steven Bennett (2002) highlights the possibility of having an appeal of the award to a court – “An arbitrator or panel of arbitrators conducts an information-gathering process, which may include document exchange, briefing and testimony of witnesses. The arbitrator’s decision is generally binding on the parties, subject to limited review by a court on motion to confirm or vacate the arbitration award.”[5]

Albert Fiadjoe (2004) focuses on the facts that arbitration is consensual, there is procedural freedom, and the award is binding – “The arbitral process is consensual, based on an agreement between the parties. The parties have procedural freedom. This means that the parties may organize their proceedings as they like and may choose an adversarial or inquisitorial procedure as they like, or a mixture of the two….An arbitral award is binding upon the parties.”[6]

Being one of the most distinguished processes of alternate dispute resolution (ADR), arbitration is a more formal process as compared to any other procedure of ADR, such as conciliation, mediation, etc. “Arbitration is often used for the resolution of commercial disputes, particularly in the context of international and  commercial transactions. The use of arbitration is also employed many times in consumer and employment matters, where arbitration may be authorised by the terms of employment or commercial contracts”.[7]

Thus, it can be said that arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision has been agreed to by the disputing parties or the legislation has decreed the decision. Moreover, such a decision will be final and binding.

Characteristics of Arbitration

Since arbitration has no official definition, it is essential to comprehend its characteristics in order to understand the concept of arbitration. The elements or features of arbitration are discussed below:

Arbitration as a mechanism for settlement of disputes:

Since the start of history, there have dependably been disputes in the society. It is a piece of human instinct to dissent, and this causes disputes. Contingent on the level of conflicts, they can be illuminated in a well disposed way without the intercession of an unbiased third party, or they may require another person to help decide the issue. As human relations turned out to be more mind boggling, so did the disputes that emerged in the public arena. Through arbitration, a nonpartisan party leads a method to settle an issue among the desputing parties.[8]

In the simplest sense, if no dispute exists there can be no arbitration. The arbitration procedures are open to any person or entity, regardless of nationality or domicile, and may be held anywhere in the world, in any language and under any law chosen by the parties.[9] As an essential characteristic of arbitration, a dispute must exist so that an arbitration proceeding can commence in furtherance of an intent of amicable settlement of that dispute.

Arbitration is a procedure of solving of disputes by a neutral third party. Once such a procedure commences, the dispute in question is considered by the arbitrator or an arbitration tribunal. Similar to the case of litigation during an arbitration the parties may choose to settle the dispute. In such a scenario, the arbitral tribunal shall not have any dispute to consider and eventually, the arbitral proceeding itself shall terminate.

The same has been provided in “Article 30” of the UNCITRAL Model Law,

“(1) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms.

(2) An award on agreed terms shall be made in accordance with the provisions of Article 31 and shall state that it is an award. Such an award has the same status and effect as any other award on the merits of the case.”[10]

Arbitration is consensual

Arbitration can only take place if both parties are in agreement for it. Arbitration is conducted in furtherance of an arbitration agreement or a general agreement (or relevant contract) that contains an arbitration clause for the settlement of any dispute that may arise in the future. Also, an existing dispute can be referred to arbitration by means of a submission agreement between the parties. Thus, it is established that arbitration is founded on the agreement of parties. If one of the parties objects to it, then the procedure for arbitration cannot be successfully convened. Moreover, a party cannot unilaterally withdraw from arbitration.

Since, arbitration is a product of the consent and submission of the disputing parties, it is essential that the arbitrator or the authority of the arbitral tribunal render an award that relates and is limited only to the dispute that was submitted. An arbitral award must not pronounce a decision on any issues or other disputes that may have arisen between the parties.

In most cases arbitration is only semi-consensual. Most arbitration agreements are in the form of an arbitral clause in the main contract. The arbitral clause will provide for the settlement of disputes that may arise in the near future. If a dispute does arise, the parties may no longer be in agreement that the dispute should be submitted to arbitration. Two consequences follow:

The claimant in the dispute may wish to go to the courts. However, it can be precluded by the respóndent from doing so and forced to proceed in arbitration. As stated in Article II of the New York Convention:

The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Conversely, the claimant may commence the arbitration in accord with the arbitration agreement, but the respondent may refuse to participate.

Nevertheless, the arbitral tribunal may continue the proceedings and make the award on the evidence before it.[11]

Arbitration is a confidential and private procedure

Arbitration is a procedure for settlement that is based on the consent or agreement of parties. Though, the procedure is distinct from the system of Court litigation, arbitration fulfils the same purpose as adjudication of disputes in the Court system. Moreover, the arbitral award is enforceable in the same manner as that of a decision given by a Court. Though, arbitration and Court litigation have quite a few similarities, there are also major differences in both the systems. While, Court litigation is a more public system, arbitration is confidential procedure that is exposed only to the disputing parties and the adjudicating arbitrator.

The parties to the dispute can keep the proceedings and any results confidential. This allows the focus to be kept on the merits of the dispute, and may be of special importance where commercial reputations and trade secrets are at stake.[12]

Since, worldwide business intervention was customarily between two business organizations that could have settled their debate by arrangement or other private and secret means, it progressed toward becoming something of an article of confidence that the private way of arbitration additionally prompted classification. It was comprehended that neither the parties, judges, witnesses, specialists nor any supporting work force would uncover anything about the arbitration, including its legality. There was an undeniable exemption on the off chance that one of the parties needed to conjure the guide of a court with respect to the assertion or to set aside or uphold an arbitral honor. A case of this comprehension is found in Article 30 of the LCIA Arbitration Rules.

“Unless the parties explicitly concur in keeping in touch with the opposite, the parties attempt as a general standard to keep classified all honors in their arbitration, together with all materials in the procedures made with the end goal of the assertion and every single other archive delivered by another party in the procedures not generally people in general area – spare and to the degree that divulgence might be required of a gathering by lawful obligation, to ensure or seek after a lawful right or to implement or test a honor in genuine legitimate procedures under the watchful eye of a state court or other legal expert.”[13]

Presently, the disputing parties and the arbitral tribunal are granted full autonomy for conducting the arbitral proceedings. Even then, the courts are able to assure that the proper procedure has been followed in the arbitration by their power to set aside an award or to refuse to recognize or enforce it, as mentioned above.[14]

Award of the arbitrator is final and binding

One of the most important features of arbitration is that its award is binding over the disputing parties. Also, unlike court judgments , which can generally be contested through one or more rounds of litigation, arbitral awards are not usually subject to appeal.[15] There exist numerous rules which state the same. Such as the ICC Arbitration Rule 28(6), specifically provides that:

“Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay….”[16]

Though, it is not necessary for all rules governing arbitration to state so. Yet, it must be considered that any procedure which does not lead to a final and binding determination of the rights and obligations of the parties is not arbitration.

Most importantly, Article III of the New York Convention requires all of its contracting States to “recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon…” It is upon this foundation stone that the entire edifice of international commercial arbitration is built.[17]

As far as enforcement and recognition of arbitral awards is concerned, the New York Convention provides for recognition of awards on a par with domestic court judgments without review on the merits. This greatly facilitates the enforcement of awards across borders.[18]


It is pertinent to understand who an arbitrator is. An arbitrator is a person who conducts arbitration, and serves as a judge who conducts a “mini-trial,” somewhat less formally than a court trial. In most cases the arbitrator is an attorney, either alone or as part of a panel. Most court jurisdictions now have lists of attorneys who serve as arbitrators.[19] In the most basic sense, an arbitrator is a third party who is brought in to settle a dispute. Such a person is an independent and impartial adjudicator to the concerned dispute. The arbitrator has the authority to make a decision as well.

The arbitrator, who is a neutral third party, is responsible to take the case on a track that leads both the parties to an equitable understanding. In order for the same, he or she shall consider the facts and circumstances of both sides and make a decision that is based on those facts and not on emotion. The arbitrator’s decision is known as an award.

Arbitrators act as judges in a less formal setting than normal trial courts. The process for becoming an arbitrator differs based on the type of arbitration position sought.[20] It is essential the every arbitrator on the top of his or her field and have ample experience for the same. In certain cases, parties may appoint their own arbitrators. The parties are not bound to choose a person with legal qualifications or with legal training. Parties sometimes may even choose an engineer or other technical person as an arbitrator whose expertise relates to the case. In present day, technical arbitrators have been most constructive and nifty with regard to arbitrations. A technical arbitrator is a person who holds the technical qualification concerning a field for which he has ample expertise. They may include persons who have particular proficiency like engineers, financiers, businessmen, etc.

There is no hard and fast rule which limits the number of arbitrators who may settle a dispute. A dispute, which is to be arbitrated, can be commenced and duly given effect to by a panel of arbitrators. Usually, it is required that the panel consist of an odd number of arbitrators so that there is no problem in reaching a unanimous decision.

Supporting the same, in the year 2008 two renowned writers, McLean and Wilson, stated – “Typically each party to the arbitration agrees to appoint one arbitrator, the party appointed arbitrator, and the two party-appointed  arbitrators then select a third arbitrator, most often referred to as the umpire, or sometimes the chair or the neutral. In the event, the two party-appointed arbitrators cannot agree on a third arbitrator, a dispute resolution provider or a court will be called upon to appoint the neutral.”[21]

Generally,By and large, there are four occurrences when an arbitrator should be supplanted – the passing of the arbitrator, the first arbitrator pulls back after a challenge , a maintained challenge , or the acknowledged abdication of an arbitrator . In any of the above cases, a substitute arbitrator will be designated following a similar strategy that was utilized to choose the first arbitrator, unless the parties commonly consent to follow an alternate procedure.[22]

History and Evolution of Arbitration

It is common to think that arbitration is a relatively new practice for dispute resolution in view of the fact that, these days it is mostly used by multinational large corporations. The concept of arbitration dates back to ancient history. The origin of the word ‘arbitration’ comes from various terms – the Latin term arbiter; the Middle English term arbitour; the Anglo-French term arbiter – all of which mean, ‘to arbitrate’.[23]

Arbitration was a change contrasted with self determination of dispute. Through this technique, the parties had a methodology and a ultimate decision would be enforced upon them. Along these lines, there was a superior opportunity to have a reasonable unprejudiced decision, rather than hosting the most grounded get-together force his/her will. Just quite a while after intervention was being utilized as a question determination, was the general population equity framework created and ready to comprehend the contentions that occurred in the public arena.[24]

Most social orders created at an early date frameworks of “arbitration” for the settlement of dispute. Question between private parties that are settled by arbitration may be of a family nature, concern work relations or be between two business endeavors. In the past such dispute were solely household and the frameworks of intervention that created mirrored the way of the specific culture. It is nothing unexpected, along these lines, to discover inconceivable contrasts between residential discretion in Continental Europe, Latin America, Islamic nations, the United States and China. In a few nations, especially in Latin America and in England, arbitration was generally observed as an augmentation of the State arrangement of prosecution. In such an environment the system followed in discretion was fundamentally firmly demonstrated on the methodology followed in suit in the courts. Indeed, even where discretion was not seen as an augmentation of the State arrangement of prosecution, and the law did not require the nearby court methodology to be followed in intervention, the propensities created by legal advisors in the courts were continued into arbitration.[25]

Although, the evolution of the system of arbitration is uncertain, there are evidences to show that the system has been a part of society since ancient times. In the Holy Bible there is a passage that relates to arbitration. A conflict between Jacob and Laban is described in the book of Genesis. Two of them suggest arbitration as a way to solve their dispute. Bible, Chapter XXXI, lines 36 and 37 read – “Now that you have ransacked all my things, have you found a single object taken from your belongings? If so, produce it here before your kinsmen and mine, and let them decide between us two.”[26]In this manner, Jacob and Laban suggested that a third party should decide their conflict, which is clearly based on the idea of arbitration.

The starting points of international arbitration are now and again followed, assuming uncertainly, to antiquated mythology as well. Early occurrences of dispute resolution among the Greek gods, in matters in any event ostensibly global by then prevailing measures, included dispute amongst Poseidon and Helios over the responsibility for (which was purportedly part between them by Briareus, a monster), Athena and Poseidon over ownership of Aegina (which was granted to them in like manner by Zeus), and Hera and Poseidon over responsibility for (which was granted altogether to Hera by Inachus, a legendary ruler of Argos). Egyptian mythology offers comparative records of divine arbitration , including a dispute amongst Seth and Osiris, settled by Thoth(“he who decides without being partial”)[27].

In spite of not being fully developed before all else, arbitration has been utilized as a methods for fathoming disputes for a great many years. There is proof that the Greeks utilized this strategy to illuminate clashes in old history. This sort of ADR would be utilized to comprehend dispute with regards to trade. Before States appeared and lawful frameworks were made as an alternative to settle clashes, people would endeavor to disentangle their dispute among themselves. All things considered, this would impel a great deal of discussion and the more grounded parties would have the capacity to force his or her desire. This antiquated technique prompted the advancement of other dispute determination methods which were all the more reasonable and productive.

The technique for arbitration was additionally used to settle conflicts between State-like elements during the Roman age. In spite of the fact that pundits watch that the utilization of arbitration declined from Hellenic practice, yet it was in no way, shape or form, relinquished. Regional units of Rome and in addition vassal states and partners spoke to the Roman Senate, the Roman proconsuls, or to the next Roman foundations for arbitral choices or for the arrangement of authorities to determine their regional and different question. When all is said in done, be that as it may, the authentic record demonstrates that Rome favored political and military arrangements inside the Empire when contrasted with interstate litigation or arbitration.

As the Roman State got more grounded and developed, Court Houses turned into a worldview of settling disputes in Rome. In the long run, arbitration  lost its esteem. Afterwards, similar events occurred in different States as well. As Governments happened to be more sorted out, they built up Court Houses which turned into the most widely recognized quirk of resolving dispute. Though state purview turned into the most widely recognized approach to settle disputes, arbitrationkept on being utilized however not on a vast measurement.

Amid the medieval times, arbitration turned out to be at the end of the day a more adequate approach to settle dispute. States were no longer as powerful as they were before; the administrative power created few authoritative records and there developed clashes among the Church and landowners, which contributed more to a perfect situation for arbitration. The Pope of the Catholic Church would go about as and choose clashes as an authority. Right now, there was not a considerable measure of unprejudiced nature from the Church, which more often than not would announce the landowners the winner. The Popes, amid that period, additionally frequently named religious administrators to be arbitrators.

As the medieval times moved toward their end, States began picking up significance once more. This prompted an upsurge in the current number of laws and controls. The judiciaries’ power proceeded to be utilized, all the more continually, as a dependable approach to settle dispute. Be that as it may, as the Courts turned out to be more sorted out and complex, the procedure of dispute resolution likewise wound up plainly inconvenient and lumbering.

Amid the twelfth century, the quantity of arbitration cases expanded exponentially, particularly among businessmen. The quantity of business relations inside Europe expanded and, alongside it, the utilization of arbitration. Around the sixteenth century, when the European nations began colonizing new regions around the globe, the quantity of universal business relations developed quickly. European shippers sold their items to the new provinces and this was an imperative actuality which increased the quantity of arbitration cases.

At the point when Napoleon ruled in Europe, the use of arbitration diminished. The tenets forced by the French ruler encouraged an expansion in the utilization of Courts and a decrease in the use of arbitration. It was significantly on the grounds that Napoleon was keen on extending his power as much as he could and he trusted that disputes must be unraveled either by him or his guides. Having third party comprehend issues was not attractive for an effective general since it would give other individuals an open opportunity to exercise control.

In the nineteenth century, arbitration was once again well accepted as a dispute resolution alternative. Regarding that, Machado Neto (2005) asserted – “Since the end of the XIX century, arbitration became a part of the legal system of several countries[28].”

International Arbitration

International arbitrations come to pass within a complex and imperative international legal framework. Contemporary international conventions, national arbitration legislations and institutional arbitration rules provide a specialized and highly supportive enforcement regime for most international commercial arbitrations and international investment arbitrations. A radically less detailed legal framework exists for interstate arbitrations even though international law instruments provide a workable enforcement regime.

The international legal establishments for international commercial and investment arbitrations have been instituted with the express goal of facilitating international trade and investment by providing a stable, predictable and effective legal framework in which commercial activities may be conducted – “Enforcement of international arbitral agreements promotes the smooth flow of international transactions by removing the threats and uncertainty of time-consuming and expensive litigation.”[29]

There are two basic methods of defining an international arbitration. One is to consider the transaction; does it involve a transaction that is either in a State other than the place of arbitration or that takes place in two or more States. The other method is to consider the parties; do they come from different States.[30]

It is usually the case that two natural persons who are citizens of differentStates will be considered to be from different States. However, a long-term resident of a State might be considered to be from that State for the purposes of determining whether an arbitration is international even though he is a citizen of a different State. Similarly, a juridical person would often be considered to be from the State under the law of which it was organized. However, if the juridical person in question is a wholly or substantially owned subsidiary of a foreign natural or juridical person, the subsidiary might be considered to have the nationality of its parent.

In the UNCITRAL Model Law, an arbitration is international if any one of four different situations is present:

  1. The parties to the arbitration agreement have, at the time of the conclusion of the agreement, their places of business in different States.
  2. The place of arbitration, if determined in or pursuant to, the arbitration agreement, is situated outside the State in which the parties have their places of business.
  3. 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 is situated outside the State in which the parties have their places of business.
  4. The parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.[31]

It pertinent to note, that the Model Law is very broad in its definition as to what makes arbitration, international. However, one cannot refrain from considering it important. It is relevant only if a State adopts the Model Law with a scope of application restricted to international commercial arbitration.

Types of International Arbitration

International arbitrations may be either institutional or ad hoc. Recognising such a distinction is fundamental. There are significant differences between these two forms of international arbitration. Institutional arbitrations are conducted pursuant to institutional arbitration rules, almost always overseen by an appointing authority with responsibility for various issues relating to constituting the arbitral tribunal, fixing the arbitrators’ compensation, and similar matters. In contrast, ad hoc arbitrations are conducted without the benefit of an appointing and administrative authority or pre-existing arbitration rules, subject only to the parties’ arbitration agreement and applicable national arbitration legislation.

Institutional Arbitration

All modern arbitration laws allow the parties to decide the procedure to be followed in the arbitration. In most cases the parties exercise that right by choosing an arbitration institution in which the arbitration will take place. Any arbitration that takes place in the context of an institution will be conducted in accordance with the rules of that organization.[32]Institutional arbitration is one in which a specialised institution with a permanent character intervenes and assumes the functions of aiding and administering the arbitral process as provided by the rules of that institution.[33]

A number of organizations, located in different countries, provide institutional arbitration services, often tailored to particular commercial or other needs. The best known international commercial arbitration institutions are the International Chamber of Commerce (ICC), the American Arbitration Association (AAA) and its International Centre for Dispute Resolution (ICDR), and the London Court of International Arbitration (LCIA).

Also active in the field are the Stockholm Chamber of Commerce Arbitration Institute (SCC), the Singapore International Arbitration Centre (SIAC), the Japan Commercial Arbitration Association (JCAA), the Hong Kong International Arbitration Centre (HKIAC), the World Intellectual Property Organization (WIPO), the Swiss Chambers of Commerce, the German Institution of Arbitration (DIS), the International Arbitral Centre of the Austrian Economic Chamber (VIAC or Vienna International Arbitral Centre), the Chinese International Economic and Trade Arbitral Centre (CIETAC), the Cairo Regional Centre for International Commercial Arbitration (CRCICA), the Australian Centre for International Commercial Arbitration (ACICA), the Kuala Lumpur Regional Centre for Arbitration (KLRCA), and the Indian Council of Arbitration (ICI). There are also a number of less widely known regional or national arbitral institutions, often dealing with industry-specific matters such as those of insurance or commodities arbitrations.[34]

The above mentioned arbitral institutions have promulgated sets of procedural rules that apply where parties have agreed to arbitration in the light of such rules. Among other things, institutional rules set out the basic procedural framework and timetable for the arbitral proceedings. Institutional rules authorise the arbitral institution to select arbitrators in particular disputes to resolve challenges to arbitrators, designate the place of arbitration, fix or influence the fees payable to the arbitrators and review the arbitrator’s awards in order to reduce the risk of unenforceability on formal grounds. Each arbitral institution has a staff and a decision-making body.

It must be noted that arbitral institutions do not themselves arbitrate the merits of the dispute. This is the responsibility of the particular individuals who have been selected as arbitrators. Arbitrators are, virtually, never employees of the arbitral institution. Instead, they are private persons selected by the parties. If parties cannot agree upon an arbitrator, most institutional rules provide that the host institution will act as an ‘appointing authority’ which chooses the arbitrators in the absence of the parties’ agreement.

Ad Hoc Arbitration

An ad hoc arbitration is one which is not administered by an institution.[35] This implies that the parties to such a form of arbitration shall settle on all aspects of the arbitration to be held such as the number of arbitrators to be involved, their appointment, the language and procedure for arbitration, etc.

There are many reasons why two parties may decide to have an ad hoc arbitration rather than one in the context of an arbitration institution. One of the more prominent is that arbitration involving a limited amount of money and two parties in agreement that they wish to arbitrate their dispute may be less expensive and cumbersome as an ad-hoc arbitration than one in an institution. The parties may also choose ad hoc arbitration because they were not able to agree on an institution.[36]

Where ad hoc arbitration is chosen, parties usually designate an appointing authority that selects the arbitrator if the parties cannot agree and considers any subsequent challenges to members of the tribunal. If the parties fail to select an appointing authority, then the national arbitration statutes of many States permit National Courts to appoint arbitrators.

The major disadvantage of ad hoc arbitration is that, while at the time of concluding the contract the parties may expect any dispute they might have to be settled in a friendly manner; at the time the dispute ripens they may be less inclined to cooperate. In particular, since any particular procedural rule may favour one or the other party in the dispute that now exists, they are unlikely to be able to settle upon the rules of procedure for their arbitration. Without the rules of an arbitration institution as well as the impetus that a permanent structure can give, they may well find it difficult even to commence the arbitration.

The difficulties inherent in an ad hoc arbitration have been largely overcome by the preparation of two sets of rules for ad hoc arbitrations, the ECE Arbitration Rules and the UNCITRAL Arbitration Rules. The parties can provide in the arbitration clause in their contract that any dispute they may have will be settled by arbitration in accordance with the Rules. If a dispute does arise that must be settled by arbitration, the rules of procedure have already been agreed upon and the arbitration can commence. While the ECE Arbitration Rules have been widely used on the continent of Europe, they have been eclipsed by far by the UNCITRAL Arbitration Rules.[37]

International Arbitration Treaties and Conventions

The foundations for the present-day legal regime pertaining to international arbitration were laid at the end of the nineteenth and beginning of the twentieth centuries. The basic legal framework for international commercial arbitration was established in the first decades of the twentieth century, with the 1923 Geneva Protocol and 1927 Geneva Convention, along with the enactment of national arbitration legislation that paralleled these instruments, and in conjunction with the development of effective institutional arbitration rules. Building on these foundations, the current legal regime for international commercial arbitration was developed in significant part during the second half of the twentieth century, in the midst of countries from all parts of the globe entering into international arbitration conventions and enacting national arbitration statutes designed specifically to facilitate the arbitral process. At the same time, national courts in most states gave robust effect to these legislative instruments. This avowedly pro-arbitration regime ensures the enforceability of both international arbitration agreements and arbitral awards, gives effect to the parties’ procedural autonomy and the arbitral tribunal’s procedural discretion and also seeks to insulate the arbitral process from interference by national courts or other governmental authorities.

During the past several decades, the current legal regime for international investment arbitration was developed, which included, particularly the adoption of the ICSID Convention and an extensive network of Bilateral Investment Treaties (BITs). Similarly, the 1899 Hague Peace Conference adopted the Convention for the Pacific Settlement of International Disputes, followed by the 1929 General Act on the Pacific Settlement of International Disputes. These instruments reflected to a pro-arbitration approach to the use of international arbitration to resolve interstate disputes peacefully at the same time as setting forth a basic legal framework in which international arbitrations could be conducted.

1899 & 1907 Conventions for Pacific Settlement of International Disputes

By the beginning of the twentieth century, proposals for more universal state-to-state arbitration mechanisms became credible. In 1899, the Hague Peace Conference produced the Hague Convention of 1899 on the Pacific Settlement of Disputes, which included chapters on international arbitration and established a ‘Permanent Court of Arbitration’ to administer state-to-state arbitration under the Convention. These provided the foundation for more formal interstate adjudication in the Permanent Court of International Justice and later in the International Court of Justice. This also facilitated the naissance of the Permanent Court of Arbitration. During that period, arbitration remained a preferred method of resolving interstate disputes, often selected by states during the twentieth century in preference to standing international judicial bodies. Thus, Article XVI of the Convention recorded the contracting states’ recognition that – “In questions of a legal nature and especially in the interpretation or application of International Conventions,” international arbitration was the “most effective and at the same time the most equitable, means of settling disputes which diplomacy has failed to settle.”[38]

Articles XV to IXX of the Convention prescribed a set of rules regarding the constitution of interstate arbitral tribunals and the conduct of interstate arbitrations. The 1899 Convention established the Permanent Court of Arbitration (seated in Hague) for administering interstate arbitrations.

The 1899 Convention “was revised in 1907 with the new Convention for the Pacific Settlement of International Disputes including the addition of a number of provisions regarding international arbitral proceedings. In 1929, General Act on Pacific Settlement of International Disputes was negotiated. Over and above the 1899 and 1907 Conventions, the Act sets forth a basic legal framework for international arbitrations between state parties[39].

Geneva Protocol and Geneva Convention

During the first decades of the twentieth century, businesses and lawyers in developed states called for legislation to facilitate the use of arbitration in resolving domestic and international commercial disputes. These appeals emphasized the importance of reliable, effective, and fair mechanisms for resolving international disputes to the expansion of international trade and investment.

In 1923, initially under the auspices of the newly founded International Chamber of Commerce, major trading nations negotiated the Geneva Protocol on Arbitration Clauses in Commercial Matters. The Protocol was ultimately ratified by the United Kingdom, Germany, France, Japan, India, Brazil and about two dozen other nations.

The Geneva Protocol played a critical role in the development of the legal framework for international commercial arbitration. Among other things, Article I of the Geneva Protocol declared that – “Each of the Contracting States recognizes the validity of an agreement whether relating to existing or future differences between parties subject respectively to the jurisdiction of different contracting states by which the parties to a contract agree to submit to arbitration all or any differences that may arise in connection with such contract relating to commercial matters or to any other matter capable of settlement by arbitration, whether or not the arbitration is to take place in a country to whose jurisdiction none of the parties is subject.”[40]

This provision was complemented by Article IV, which provided that – “The tribunals of the Contracting Parties, on being seized of a dispute regarding a contract made between persons to whom Article 1 applies and including an arbitration agreement whether referring to present or future differences which is valid by virtue of the said article and capable of being carried into effect, shall refer the parties on the application of either of them to the decision of the arbitrators.”[41]

In these two provisions, the Geneva Protocol planted the seeds for a number of principles of enormous future importance to the international arbitral process together with the presumptive validity of agreements to arbitrate future disputes, the obligation of national courts to refer parties to arbitration, the concept of arbitrating commercial disputes and disputes capable of settlement by arbitration, and the obligation to recognize international arbitration agreements on an equal footing with domestic arbitration agreements.

All of these basic themes reappeared repeatedly in international conventions and national legislation over the next 80 years and remain the foundation of the contemporary legal framework for international commercial arbitration.

Additionally, Article III of the Geneva Protocol attempted to provide for the recognition of international arbitral awards. It declared that – “Each Contracting State undertakes to ensure the execution by its authorities and in accordance with the provisions of its national laws of arbitral awards made in its own territory.”[42]This provision was extremely limited, providing only for Contracting States to enforce awards made on their own territory.

The Geneva Protocol was augmented by the Geneva Convention for the Execution of Foreign Arbitral Awards of 1927. Recognizing the Protocol’s deficiencies in dealing with this issue, the Geneva Convention expanded the enforceability of arbitral awards rendered pursuant to arbitration agreements subject to the Geneva Protocol. Regrettably, the Convention placed the burden of proof in recognition proceedings on the award-creditor, requiring the award-creditor to demonstrate both the existence of a valid arbitration agreement.  The Convention also required the award-creditor to show that the arbitral award had become final in the place of arbitration and was not in contradiction to the public policy of the recognizing state. This proved a major source of uncertainty regarding the finality of international arbitral awards[43].

Despite their shortcomings, the Geneva Protocol and Geneva Convention were major steps towards today’s legal framework for international commercial arbitration.The Geneva Protocol and Convention both inspired and paralleled national legislation and business initiatives to augment the legal regime governing international commercial arbitration agreements.

New York Convention

The Geneva Protocol and the Geneva Convention were succeeded by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Generally referred to as the ‘New York Convention’, the treaty is by far the most significant contemporary legislative instrument relating to international commercial arbitration. It provides a universal constitutional charter for the international arbitral process, whose sweeping terms have enabled both national courts and arbitral tribunals to develop durable, effective means for enforcing international arbitration agreements and arbitral awards.

The Convention was adopted specifically to address the needs of the international business community and to improve the legal regime provided by the Geneva Protocol and Geneva Convention for the international arbitral process. The first draft of what became the Convention was prepared by the International Chamber of Commerce (ICC) in 1953. Preliminary drafts of a revised convention were prepared by the ICC and the United Nations’ Economic and Social Council (ECOSOC), which then provided the basis for a three-week conference in New York (the United Nations Conference on Commercial Arbitration) and attended by 45 states in the spring of 1958. The New York Conference resulted in the New York Convention that was in many respects a radically innovative instrument, which created for the first time a comprehensive legal regime for the international arbitral process.[44]

It was only late in the Conference that the delegates recognised the limitations of this approach and considered a proposal from the Dutch delegation to extend the treaty from the recognition of awards to international arbitration agreements. That approach and the resulting provisions regarding the recognition and enforcement of international arbitration agreements form one of the central elements of the Convention. The text of the Convention was approved on June 10, 1958, by a unanimous vote of the Conference with only the United States and three other countries abstaining.

Yet, it is often said that the Convention did not provide a detailed legislative regime for all aspects of international arbitrations. Rather, the Convention’s provisions focused on the recognition and enforcement of arbitration agreements and arbitral awards, without specifically regulating the conduct of the arbitral proceedings or other aspects of the arbitral process.

As one national court has observed, the Convention was designed to – “Encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate areobserved and arbitral awards are enforced in the signatory nations.”[45]

In particular, the Convention’s provisions prescribe uniform international rules that:

  1. require national courts to recognize and enforce foreign arbitral awards (Articles III and IV) subject to a limited number of specified exceptions (Article V)
  2. require national courts to recognize the validity of arbitration agreements subject to specified exceptions (Article II)
  3. require national courts to refer parties to arbitration when they have entered into a valid agreement to arbitrate that is subject to the Convention (Article II(3)).[46]

The New York Convention made a number of significant improvements in the regime of the Geneva Protocol and Geneva Convention for the enforcement of international arbitration agreements and arbitral awards.In general, the provisions of the Convention were intended to promote the use of arbitration as a means of resolving international commercial disputes, in order to facilitate international trade and investment.

Despite its present importance, the New York Convention initially attracted relatively few signatories or ratifications. Over time, however, states from all regions of the globe reconsidered their position, and today, some 144 nations have ratified the Convention. The Convention’s parties include virtually all major trading states and many Latin American, African, Asian, Middle Eastern, and former socialist states.

The practical effect of the Convention is dependent on both the content of such national legislation and the interpretations given by national courts to the Convention and national implementing legislation. In general, national courts have risen to the challenge of adopting uniform interpretations of the Convention’s provisions.

European Convention

The 1961 European Convention on International Commercial Arbitration is one of the world’s most important regional commercial arbitration treaties. Drafting of the European Convention began in 1954, aimed at producing a treaty that would improve upon the then-existing legal framework for international arbitration involving parties from European states and particularly East-West trade. The drafting process was protracted and delayed by the intervening New York Convention, but ultimately concluded with signing of the Convention in Geneva on April 21, 1961. The European Convention entered into force in 1964, and 31 states are currently party to it. Most European states (but not the United Kingdom, the Netherlands, or Finland) are party to the Convention, while some ten non-EU states are parties, including Russia, Cuba, and Burkina Faso.[47]

The Convention addressed the three principal phases of the international arbitral process, namely, the arbitration agreements, the arbitral procedure and the arbitral awards. With regard to arbitration agreements, the Convention does not expressly provide for their presumptive validity, instead it provides for a specified limited number of bases for the invalidity of such agreements in proceedings concerning recognition of awards. With regard to the arbitral procedure, the Convention limits the role of national courts and confirms the autonomy of the parties and the arbitrators or arbitral institutions to conduct the arbitration proceedings. With regard to arbitral awards, the Convention is designed to supplement the New York Convention, essentially dealing only with the effects of a judicial decision annulling an award in the arbitral seat in other jurisdictions.

ICSID Convention

The International Centre for the Settlement of Investment Disputes (ICSID) is a specialized arbitration institution, established pursuant to the so-called ICSID Convention or Washington Convention of 1965. ICSID was established at the initiative of the International Bank for Reconstruction and Development (IBRD or World Bank) and is based at the World Bank’s Washington headquarters.

The ICSID Convention is designed to facilitate the settlement of investment disputes that the parties have agreed to submit to ICSID. Investment disputes are defined as controversies that arise out of an investment and are between a Contracting State or designated state entity and a national of another signatory state. With regard to such disputes, the Convention provides both conciliation and arbitration procedures.

Nearly 150 countries, from all geographical regions of the world, have ratified the ICSID Convention. ICSID currently is administering more than 100 cases, with total amounts in dispute exceeding $30 billion, and ICSID tribunals have issued more than 100 awards.[48]

Bilateral Investment Treaties or Investment Protection Agreements

Bilateral investment treaties (BITs) or Investment Protection Agreements (IPAs) became common during the 1980s and 1990s as a means of encouraging capital investment in developing markets. Capital-exporting states (including the United States, most Western European states, and Japan) were the earliest and most vigorous proponents of the negotiation of BITs, principally with countries in developing regions. More recently, states from all regions of the world and in all stages of development have entered into BITs.[49]

Most BITs provide significant substantive protections for investments made by foreign investors, including guarantees against expropriation and denials of fair and equitable treatment. BITs also frequently contain provisions that permit foreign investors to require international arbitration (typically referred to as investor-State arbitration) of specified categories of investment disputes with the host state. In addition, many BITs contain provisions dealing with the finality and enforceability of international arbitration awards issued pursuant to the treaty.[50]



Rapid globalization of the Indian economy and the resulting increase in competition, gradually, led to an increase in the number of commercial disputes in India. Nevertheless, modernization, growth of industries and development of the social and economic circumstances outpaced the scale of the improvement of dispute resolution mechanisms. Such development in India has overburdened Courts, which is the main reason for slow adjudication of commercial disputes. In the light of such circumstances arbitration and other ADR mechanisms have become popular and a necessity for businesses operating in India as well as those doing businesses with Indian firms.

Arbitration has a long history in India. In ancient times, people often voluntarily submitted their disputes to a group of wise men of a community—called the panchayat—for a binding resolution.[51]The arbitration law, present in India, was initially created by the Bengal Regulations during the British rule in the year 1772. The Regulations provided for reference by a Court to arbitration, with the consent of the parties, in lawsuits for accounts, partnership deeds, and breach of contract, etc.

Until 1996, the law governing arbitration in India consisted mainly of three statutes:

  1. the 1937 Arbitration (Protocol and Convention) Act,
  2. the 1940 Indian Arbitration Act,
  3. the 1961 Foreign Awards (Recognition and Enforcement) Act.

The 1940 Act was a general law governing arbitration in India along the lines of the English Arbitration Act of 1934. The Arbitration Act, 1940, dealt with only domestic arbitration. Under the 1940 Act, intervention of the court was required in all the three stages of arbitration, i.e. prior to the reference of the dispute to the arbitral tribunal, in the duration of the proceedings before the arbitral tribunal, and after the award was passed by the arbitral tribunal. Before an arbitral tribunal took cognizance of a dispute, court intervention was required to set the arbitration proceedings in motion. The existence of an agreement and of a dispute was required to be proved. During the course of the proceedings, the intervention of the court was necessary for the extension of time for making an award. Finally, before the award could be enforced, it was required to be made the rule of the court.[52] While the 1940 Act was perceived to be a good piece of legislation in its actual operation and implementation by all concerned – the parties, arbitrators, lawyers and the courts, it prove to be ineffective and was widely felt to have become outdated.[53]Both the 1937 and the 1961 Acts were designed to enforce foreign arbitral awards.

The Arbitration Act of 1940 was repealed by the Arbitration and Conciliation Act, 1996. The Act of 1996 marked the beginning of a significant era in the history of legal and judicial reforms in India. It is a comprehensive piece of legislation modeled on the lines of the UNCITRAL Model Law and covers both aspects of domestic as well as international commercial arbitration. The 1996 Act goes beyond the UNICITRAL Model Law in the area of minimizing judicial intervention.[54]

There is no marked difference in the arbitration practice from one industry to another in India. Yet, the exceptions to this rule are the construction industry and the IT industry. Construction/infrastructure is one of the fastest growing sectors of the Indian economy, and millions of dollars are spent in construction related disputes. According to a survey conducted in 2001 by the Construction Industry Development Council, the amount of capital blocked in construction sector disputes was over INR 540,000 million.[55] A general observation shows that ad hoc arbitration continues to be popular in the construction industry. One of the unique features of arbitration in the construction industry exists in the standard forms adopted by the government departments. It is that although an arbitration clause may include all the possible disputes relating to the transaction, there subsist exemption or exclusion clauses that make the decision of an authority named in the agreement which is final and binding on the parties. Such ‘excepted matters’ or ‘exclusion clauses’ make the decision of a particular authority final and binding on both the parties, and not subject to arbitration.

The growth in the IT industry in India has been a recent development and it is, expressly, a result of the globalization of the Indian economy. An important secondary effect of this development is that arbitration has also streamlined a sector-specific approach to cater to the technicalities and specific requirements of this specific sector. IT disputes typically centre on contractual or intellectual property (IP) law issues. There are seminars being conducted on Alternate Dispute Redressal methods for the IT sector in major cyber cities of India like Bangalore and Hyderabad for the main purpose of creating an expert pool of arbitrators specialized in cyber laws.

One of the most recent and major arbitration cases is the Hiranandani dispute. The London Court of International Arbitration’s (LCIA) Indian subsidiary resolved real estate giant Hiranandani Group’s family business dispute with an award in favour of Priya Hiranandani Vandrevala, after over two-and-a-half years of arbitration, in 2013. This was LCIA India’s first ever reported arbitration, out of fewer than 10 disputes handled by the Indian subsidiary since its inception in May 2010.[56]

Arbitration in India is still evolving. India has in place a modern and an efficient Arbitration Act, but, is still plagued with many shortcomings and the quality of arbitration has not adequately developed as a quick and cost-effective mechanism for resolution of commercial disputes. It is established that in the light of developments in the arbitration system of India, one can expect the same to grow and become stronger in addition to being qualitative.

Arbitration and Conciliation Act, 1996


The 1996 Act is categorised into two significant parts, namely, Part I and Part II. Part I is comprehensive in nature and contains extensive provisions based on the UNICITRAL Model Law. It provides for arbitration of disputes, non-intervention by Courts, composition and jurisdiction of the arbitral tribunal, conduct of the arbitration proceedings, recourse against arbitral awards and its enforcement. Thus, any arbitration conducted in India or enforcement of an award there under (whether domestic or international) is governed by Part I. Part II, on the other hand, is largely restricted to enforcement of foreign awards governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the Convention on the Execution of Foreign Arbitral Awards. Thus, enforcement of any foreign award to which the New York Convention or the Geneva Convention applies, is governed by Part II. Part II of the 1996 Act is, by its very nature, not a complete code.

Overview of the Act [57]

The Indian law of arbitration is contained in the Arbitration and Conciliation Act, 1996. The Act is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976. The Statement of Objects and Reasons of the Act recognises that India’s economic reforms will become effective only if the nation’s dispute resolution provisions are in tune with international regime. The Statement of Objects and Reasons set forth the main objectives of the Act as follows:

“i) to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation;

ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration;

iii) to provide that the arbitral tribunal gives reasons for its arbitral award;

iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;

v) to minimise the supervisory role of courts in the arbitral process;

vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes;

vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court;

viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and

ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two International Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award.”

Subject matter of arbitration

Any commercial matter including an action in tort if it arises out of or relates to a contract can be referred to arbitration. However, public policy would not permit matrimonial matters, criminal proceedings, insolvency matters anti-competition matters or commercial court matters to be referred to arbitration. Employment contracts also cannot be referred to arbitration but director company disputes are arbitrable (as there is no master servant relationship here). Generally, matters covered by statutory reliefs through statutory tribunals would be non-arbitrable.

Role of the court

One of the fundamental features of the Act is that the role of the court has been minimised. Accordingly, it is provided that any matter before a judicial authority containing an arbitration agreement shall be referred to arbitration (Section 8 provided the non -applicant objects no later than submitting its statement of defence on merits). Further, no judicial authority shall interfere, except as provided for under the Act (Section 5).

In relation to arbitration proceedings, parties can approach the Court only for two purposes: (a) for any interim measure of protection or injunction or for any appointment of receiver etc.6; or (b) for the appointment of an arbitrator in the event a party fails to appoint an arbitrator or if two appointed arbitrators fail to agree upon the third arbitrator. In such an event, in the case of domestic arbitration, the Chief Justice of a High Court may appoint an arbitrator, and in the case of international commercial arbitration, the Chief Justice of the Supreme Court of India may carry out the appointment. A court of law can also be approached if there is any controversy as to whether an arbitrator has been unable to perform his functions or has failed to act without undue delay or there is a dispute on the same. In such an event, the court may decide to terminate the mandate of the arbitrator and appoint a substitute arbitrator.

Jurisdiction of the arbitrator

The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. The arbitration agreement shall be deemed to be independent of the contract containing the arbitration clause, and invalidity of the contract shall not render the arbitration agreement void. Hence, the arbitrators shall have jurisdiction even if the contract in which the arbitration agreement is contained is vitiated by fraud and/or any other legal infirmity. Further, any objection as to jurisdiction of the arbitrators should be raised by as party at the first instance, i.e., either prior to or along with the filing of the statement of defence. If the plea of jurisdiction is rejected, the arbitrators can proceed with the arbitration and make the arbitral award. Any party aggrieved by such an award may apply for having it set aside under Section 34 of the Act. Hence, the scheme is that, in the first instance, the objections are to be taken up by the arbitral tribunal and in the event of an adverse order, it is open to the aggrieved party to challenge the award.

Challenge to arbitrator

An arbitrator may be challenged only in two situations. First, if circumstances exists that give rise to justifiable grounds as to his independence or impartiality; second, if he does not possess the qualifications agreed to by the parties. A challenge is required to be made within 15 days of the petitioner becoming aware of the constitution of the arbitral tribunal or of the circumstances furnishing grounds for challenge. Further, subject to the parties’ agreement, it is the arbitral tribunal (and not the court – unlike under the old Act of 1940) which shall decide on the challenge. If the challenge is not successful the tribunal shall continue with the arbitral proceedings and render the award, which can be challenged by an aggrieved party at that stage. This is another significant departure from the Model Law, which envisages recourse to a court of law in the event the arbitral tribunal rejects the challenge.

Conduct of arbitration proceedings

The arbitrators are masters of their own procedure and subject to parties agreement, may conduct the proceedings “in the manner they consider appropriate.” This power includes- “the power to determine the admissibility, relevance, materiality and weight of any evidence”. The only restrain on them is that they shall treat the parties with equality and each party shall be given a full opportunity to present his case, which includes sufficient advance notice of any hearing or meeting. Neither the Code of Civil Procedure nor the Indian Evidence Act applies to arbitrations. Unless the parties agree otherwise, the tribunal shall decide whether to hold oral hearings for the presentation of evidence or for arguments or whether the proceedings shall be conducted on the basis of documents or other material alone. However the arbitral tribunal shall hold oral hearings if a party so requests (unless the parties have agreed that no oral hearing shall be held).

Arbitrators have power to proceed ex-parte where the respondent, without sufficient cause, fails to communicate his statement of defence or appear for an oral hearing or produce evidence. However, in such situation the tribunal shall not treat the failure as an admission of the allegations by the respondent and shall decide the matter on the evidence, if any, before it. If the claimant fails to communicate his statement of the claim, the arbitral tribunal shall be entitled to terminate the proceedings.

Taking of evidence in arbitral proceedings

The Indian Oath’s Act 1969 extends to persons who may be authorized by consent of parties to receive evidence. This Act thus, encompasses arbitral proceedings as well.  Section 8 of the said Act states that every person giving evidence before any person authorized to administer oath “shall be bound to state the truth on such subject.” Thus, witnesses appearing before an arbitral tribunal can be duly sworn by the tribunal and be required to state the truth on oath and upon failure to do so, commit offences punishable under the Indian Penal Code. However, the arbitrators cannot force unwilling witnesses to appear before them and for this court’s assistance is provided for vide Section 27 of the Act. Under this provision the arbitral tribunal or a party with the approval of the tribunal may apply to the court seeking its assistance in taking evidence (this is also provided for in the Model Law). However, Section 27 of the Indian Act goes beyond the Model Law as it states that any person failing to attend in accordance with any order of the court or making any other default or refusing to give evidence or guilty of any contempt of the arbitral tribunal, shall be subject to like penalties and punishment as he may incur for like offences in suits tried before the court. Further, the court may either appoint a commissioner for taking evidence or order that the evidence be provided directly to the arbitral tribunal. These provisions extend to any documents to be produced or property to be inspected. Section 26 provides for appointment of experts by the arbitral tribunal for any specific issue. In such situation a party may be required to give the expert any relevant information or produce any relevant document, goods or property for inspection as may be required. It will be open to a party (or to the arbitral tribunal) to require the expert after delivery of his report, to participate in an oral hearing where the parties would have an opportunity to put questions to him.

Form and content of awards

The arbitrators are required to set out the reasons on which their award is based, unless the parties agree that no reasons are to be given or if it arises out of agreed terms of settlement. The tribunal may make an interim award on matters on which it can also make a final award. Indian law provides for a very healthy 18% interest rate on sums due under an award. Thus, unless the arbitral tribunal directs otherwise, the award will carry interest at 18% per annum from the date of the award till the date of payment. The tribunal is free to award costs, including the cost of any institution supervising the arbitration or any other expense incurred in connection with the arbitration proceedings.

Setting aside of awards

The grounds for setting aside an award rendered in India (in a domestic or international arbitration) are provided for under Section 34 of the Act. These are materially the same as in Article 34 of the Model Law for challenging an enforcement application. An award can be set aside if:

a) a party was under some incapacity; or

b) the arbitration agreement was not valid under the governing law; or

c) a party was not given proper notice of the appointment of the arbitrator or on the arbitral proceedings; or

d) the award deals with a dispute not contemplated by or not falling within the terms of submissions to arbitration or it contains decisions beyond the scope of the submissions; or

e) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties; or

f) the subject matter of the dispute is not capable of settlement by arbitration; or

g) the arbitral award is in conflict with the public policy of India.

A challenge to an award is to be made within three months from the date of receipt of the same. The courts may, however, condone a delay of maximum 30 days on evidence of sufficient cause. Subject to any challenge to an award, the same is final and binding on the parties and enforceable as a decree of the Court. Considerable controversy has been generated as to whether an award is liable to be challenged under Section 34 on merits.

The position of a foreign award has also undergone some recent controversy. A foreign award is enforceable under Part II of the Act if it is rendered in a country that is a signatory to the New York Convention or Geneva Convention and that territory is notified by the Central Government of India. Once an award is held to be enforceable it is deemed to be a decree of the court and can be executed as such. Under the Act there is no procedure for setting aside a foreign award. A foreign award can only be enforced or refused to be enforced but it cannot be set aside.

Enforcement of foreign Awards

The conditions to be satisfied in order to obtain recognition or enforcement of a foreign arbitral award under the Geneva Convention are the following:

(a) The arbitration agreement is valid;

(b) Subject-matter of dispute is capable of settlement by arbitration;

(c) The award is made by a validly constituted Arbitral Tribunal;

(d) The award has become final in the country in which it has been made;

(e) Recognition and enforcement of award is not contrary to the public policy or the law of India.

Even if these conditions are fulfilled, the recognition and enforcement of the award could be refused if the court is satisfied that (a) the award is annulled, (b) sufficient notice of the arbitration proceedings is not given to the party; and (c) the award does not deal with contemplated differences.

The party against whom the award under New York Convention is sought to be enforced can object to recognition and enforcement of the foreign award on the following grounds:

(a) Incapacity of the parties or invalidity of the agreement

(b) Lack of proper notice of appointment of arbitrator or arbitral proceedings

(c) The award deals with differences not contemplated within the submission to arbitration

(d) The composition of the arbitral authority or procedure does not accord with the agreement

(e) The award has not as yet become binding

(f) The subject-matter is not capable of settlement by arbitration

(g) Recognition and enforcement of the award is contrary to public policy of India.

Indian Council of Arbitration

The Indian Council of Arbitration (ICA), which is now considered to be an apex arbitral institution in the India, is situated at New Delhi and was created in the year 1965. The ICA frames its rules of arbitration comparable to international standards for conduct of arbitration proceedings. The Arbitration and Conciliation Act, 1996 provides statutory recognition to conciliation as a distinct mode of dispute settlement and contains detailed procedure governing arbitration and conciliation proceedings.[58]

The ICA defines rules for arbitration which are to be strictly adhered to by all persons indulging in areas of arbitration in India. Furthermore, the ICA also has provided for guidelines which are to be followed by both, arbitrators as well as parties to ensure economic and expeditious disposal of arbitration cases.

The ICA also has a Code of Conduct which has been formulated in the wake of a fundamental principle that only an arbitration institution can guarantee the enforcement of such ethical norms which is required at various stages of arbitration right from the appointment of an arbitrator to the rendering of an arbitral award. The Code is updated time and again so as to keep it at pace with the International Standards. The Code is set out into 4 parts, namely,

  1. Code of Conduct or the Arbitration Committee.
  2. Code of Conduct for the Arbitrators.
  3. Code of Conduct for the parties.
  4. Code of Conduct for the Counsel.[59]


Technical Person

A person who holds the technical qualification for a field on which he has expertise on. They may include persons who have their expertise like engineers, financiers, business men.  The technical experts who are related to the certain subject-matters of the arbitration always help to better understand the basis and the roots of the case. They have a complete knowledge about the case. A technical person can understand the evidence better than any other person in that particular field.

In 1983 article in law news, Sheppard J referred in one of the section of his paper to a time fast approaching when the need for judges to understand the facts and the evidence better to understand complex scientific & technological evidence, will make it essential for them to have readily technical advice.  He then refers to assessors & the difficulties involved with such appointments he had then put forward a solution.

“Another way the problem may overcome is by greater resort to arbitration. Until comparatively recently the standard of commercial arbitration in this country was not high. Arbitrations lasted an inordinate time and were very expensive. In recent times, there have been signs of improvement. I think this will continue.”[60]

International Practice

There are many issues worldwide which arise on technical terms which cannot be just resolved by any arbitrators. These issues are referred for technical expertise as they are the ones who can

  1. Understand all the basic facts clearly.
  2. Understand the root of the problem with this expert knowledge.
  3. Understand the evidence and study them clearly
  4. Give an unbiased and a reasonable decision/award.

Without technical assistance, they decision given cannot be said to be reasonable. As no ordinary arbitrator can provide his advice or set an award in the matter of technical disputes.

United States Department of Commerce for International Arbitration

A Party may choose an arbitrator from the technical background who will understand the specific issues in the case. In the United States, arbitration is most commonly used in labour-management, commercial, and consumer conflicts. There are several advantages of arbitration.  First, it is more flexible than adjudication. The disputants can usually choose their own arbitrator, who can be an expert in the topic in dispute, which a judge seldom is. This makes arbitration especially useful in complex, technical commercial disputes. Second, arbitration is usually much quicker than litigation, especially since the result is binding and not opens to appeal as litigation is.  Third, arbitration is private. This avoids the disclosure of trade secrets and potentially embarrassing information.

Code of Federal Security Under title 6- Domestic Security, Chapter 1, Part 9

Technical advice provided by an engineer on the performance or operational capability of a piece of equipment rendered directly in the negotiation of a contract is allowable. However, communications with the intent to influence made by a professional (such as a licensed lawyer) or a technical person (such as a licensed accountant) are not allowable under this section unless they provide advice and analysis directly applying their professional or technical expertise and unless the advice or analysis is rendered directly and solely in the preparation, submission or negotiation of a covered Federal action. communications with the intent to influence made by an engineer providing an engineering analysis prior to the preparation or submission of a bid or proposal are not allowable under this section since the engineer is providing technical services but not directly in the preparation, submission or negotiation of a covered Federal action.[61]

Beijing Arbitration Commission

The commission have been clear powers to interfere if the award given by any arbitral tribunal has any kind of technical or major substantive error.

The Office of the BAC and its Secretariat has to manage the cases and other day-to-day affairs. The Secretariat oversees arbitral tribunals in the case of technical or typographical errors, miscalculations, failures to include matters decided during the arbitration in the award, or decisions inconsistent with how the same dispute was decided in a previous case. Case managers use a comprehensive, computerized case-management system that monitors the entire arbitration procedure, contains a searchable arbitrator database, and allows parties to submit post-arbitration feedback. Parties may use the inquiry system to search arbitration rules and other laws or pull up information regarding a specific arbitrator’s background, case data, or feedback.

The Panel of arbitrators for BAC (Beijing Arbitration Commission) consists of 270 arbitrators from China and around the world, all highly regarded in their respective legal or trade fields of expertise.

Arbitrators selected by the Commission for inclusion on the Panel must meet the qualifications set out in Article 13 of the Arbitration Law. Those hoping to join the BAC as an arbitrator must have some knowledge or practical experience in the legal field as a lawyer or engaged in legal education or research.[62]

Rules for Arbitration of the Kuala Lumpur Regional Centre for Arbitration

Kuala Lumpur Regional Centre for arbitration: Business need cost effective and timely solutions in resolving contractual disputes, especially when it involves payment issues such as money owed, goods sold or services rendered. This is where arbitration plays its role. Parties can choose a technical person as arbitrator if the dispute is of technical nature so that the evidence will be more readily understood.[63]

Stockholm Chamber of Commerce

Article 1: Appointment of Sole or Presiding Arbitrator – When requested to appoint a sole or presiding arbitrator under the UNCITRAL Arbitration Rules (the Rules), the Arbitration Institute of the Stockholm Chamber of Commerce (the SCC Institute) will follow the list procedure set forth in Article 6:3 of the Rules unless all parties agree that the list procedure is not appropriate for the case.

In selecting arbitrators, the SCC Institute will carefully consider the nature of the case, as described in the Notice of the Arbitration, in order to include in the list persons who are not only experienced in international arbitration but also familiar with the technical and commercial aspects of the matter.

When appointing a sole or presiding arbitrator under the Rules, the SCC Institute will, in so far as possible, designate a person of a nationality other than the nationalities of the parties, unless otherwise agreed by the parties.[64]

Indian Practice

There is Indian Institution of Technical Arbitrators (IITArb) established for providing technical persons as arbitrators. The Indian Institution of Technical Arbitrators (IITArb) is a non-profit, professional body of Engineers and Architects devoted to the popularization of Arbitration as a speedy and cost effective method for resolution of commercial and contractual disputes. The Institution’s major objectives include honing the skills of practicing and aspiring Arbitrators with technical background by arranging technical lectures, short term courses, seminars, workshops, in-house programs etc., build up a reference library for Arbitrators, carryout research in Arbitration and provide infrastructural facilities at affordable cost, for conducting Arbitration proceedings.

The Institution was established in the year 2003, with its Head Quarters at Chennai. Registered under Societies Registration Act, 1975, the Institution has grown into one of the premier Arbitration Institutions in the country with State Centres at Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Kochi, Kolkata and a Local Centre at Madurai. Presently The Institution has 500 members, who have held or are holding senior positions in Central and State Governments, Public and Private Sector organizations.[65]

Construction Industry Arbitration Council (CIAC) and Bombay Stock Exchange (BSE) have developed specific arbitration cells, which provide relevant technical expertise. However, the survey revealed that only 31% of respondents were aware of institutions such as the CIAC.

The Indian trend is to appoint retired judges of the Supreme Court or High Court as arbitrators. This often leads to difficulty in understanding the technical matters, which arbitrators may not possess. There are different aspects to be considered while selecting an arbitrator such as position of the claimants, subject matter and interpretation of technical parameters in contract, which warrants the selection of relevant technical experts as arbitrators. Most institutions have a panel of professionals and experts who can be appointed as arbitrators.


The notion of International Commercial Arbitration is a product of the 20th century, thereby, a relatively recent phenomena. But, it must be noted that this conception has deep roots in history and had undergone recurrent challenges in time. Today, commercial arbitration may be considered as the most prominent procedure for resolving commercial disputes in international commerce.

International Commercial Arbitration may be defined as a commercial dispute subject to arbitration and in which significant international elements exist such as, for example, the head offices of the disputants are different countries or the performance of the underlying contract is in a foreign state.[66] It is, in the most basic sense, the resolving of disputes between two or more parties outside of a formal court system, i.e., by a third party; and such disputes shall be relating to commercial transactions or shall be business disputes. Commercial arbitration is usually categorized as either institutional or ad hoc.

In the international context, commercial arbitration is often used to resolve disputes arising from international treaties, agreements, and conventions. A key benefit of using commercial arbitration is that it allows a way for companies that are not a part of the same court system to effectively solve business disputes. International arbitration can also be quicker, simpler, and less expensive than traditional court cases. In addition, it eliminates the possibility of a foreign court decision being rendered unenforceable.[67]

The resolution of disputes under international commercial contracts is widely conducted under the auspices of several major international institutions and rule making bodies. The most significant are the International Chamber of Commerce (ICC), JAMS International, the International Centre for Dispute Resolution (ICDR), the international branch of the American Arbitration Association (AAA), the London Court of International Arbitration (LCIA), the Hong Kong International Arbitration Centre, and the Singapore International Arbitration Centre (SIAC). A number of arbitral institutions have adopted the UNCITRAL Rules for use in international cases.[68]

Commercial arbitration, in present day, is considered as an effectual ADR technique in the business community in comparison with the conventional mechanisms of court litigation. Familiarity and exposure to effective arbitral practices can turn out to be very effective tools in reparation of disputes that generally arise between various stakeholders in business firms. For scores of commercial or business disputes, such a form of arbitration offers an excellent alternative to litigation.  It tenders a private, cost effective and not as much of a formal approach for the binding conclusion of disputes.  International Commercial Arbitration provides the parties with a greater control of the process as compared to that of a court hearing. Generally, arbitrations are frequently conducted without the stringent utilisation of the rules of evidence.

Commercial arbitration is conducted pursuant to an arbitration agreement between the parties in dispute.  An arbitration agreement is an agreement in writing to refer disputes of a commercial nature that arise under a contract for resolution by arbitration. Such an agreement will usually comprise a few clauses within a larger agreement entered into when the parties originally set out the terms of their commercial and contractual relationship.[69]Contract arbitration clauses may vary accordingly. Most commonly, commercial arbitration clauses require that the arbitrator’s final award be binding on the parties. This would mean that the parties to the arbitration shall have to adhere to that decision, in the same manner as if it were handed down by a court.

There are various reasons which may exhibit as to why parties choose international commercial arbitration to solve their disputes. By and large, arbitration gives the parties permission to choose any persons with specialized knowledge pertaining to the subject matter of their dispute to judge the arbitration. Judges in State courts are less likely to acquire the same degree of expertise in the technical aspects of the transactions that come before them. Such advantages are prevalent over a variety of fields. In an arbitration relating to construction, there may be engineers or architects as well as lawyers serving as arbitrators. Also, in many trades where arbitrations are conducted by a trade association, it is a requirement that the arbitrators have a minimum period of experience in the trade concerned. Nonetheless, it is pertinent to note that such freedom to choose arbitrators is not available in States that have restrictive arbitration laws.

In addition to the above-mentioned reasons, an arbitration tribunal consists of a sole arbitrator or a panel of three arbitrators and such a tribunal stays with the arbitration from the commencement to the conclusion of the dispute. This is because arbitrators are chosen for a specific dispute. The arbitrators, in time, become thoroughly familiar with the facts and matters in dispute. By way of contrast, in many legal systems one dispute may be handled by more than one judge who may never be accustomed with the entire dispute.

The procedure of arbitration is flexible and can be adapted to the needs of the particular dispute. Furthermore, arbitration is not subject to appeal on the merits. Speedy decisions and lower costs when weighted against Court litigation, has been one of the traditional arguments in favor of arbitration. It is to be considered that, every now and then there are doubts raised with regard to whether arbitration is really faster or less expensive that litigation. There exists no empirical evidence that can prove either, essentially because there are too many variables to be considered.

The most beneficial situation for a party to a dispute in an international commercial transaction is to litigate in one’s own courts. Even if the courts stand to be scrupulously unbiased, the party litigating at home uses its regular lawyers, follows a familiar procedure and its own language. Whilst, that is good for one party to the dispute, it is unfavourable to the other party who faces all the difficulties of litigating in an unfamiliar procedure, in a language that may be foreign and not being able to use its lawyers who are familiar with the company.

Arbitration of such disputes is a means to reduce the inequalities. While it is possible for the arbitration to take place in an arbitration organization located in the home country of one or the other party, it is also possible for the arbitration to be administered by an arbitration organization located in a third country. Furthermore, many arbitration organizations will administer arbitrations throughout the world. There is active competition among leading arbitration organizations to offer their services worldwide. An interesting example is provided by the American Arbitration Association (AAA). It has a long and distinguished history as a provider of domestic arbitration services. In order to reduce any image of partiality that might be conveyed by its name, it offers its services as a provider of arbitration services for international disputes through its International Center for Dispute Resolution, which has a European office in Dublin, Ireland.[70]

Conclusively, international commercial arbitration still continues to be one of the most popular of the dispute settlement techniques when it comes to commercial or business disputes.

CASE studies

Indus Waters Kishenganga Arbitration (Pakistan v. India)

On December 20, 2013, the court of Arbitration, constituted in the matter of Indus Waters Kishenganga Arbitration (Pakistan V. India), rendered its Final Award in the dispute between Pakistan and India regarding the Kishenganga Hydro-Electric Project (KHEP) located on the Kishenganga/Neelum River. Pakistan instituted arbitral proceedings against India in 2010, challenging, in particular, the permissibility of the planned diversion by the KHEP of the waters of the Kishenganga/Neelum and the effect that this diversion would have on Pakistan’s own Hydro-electric project under construction downstream of the KHEP. The final award decided the issues of ‘minimum flow’ that was left unsolved in the Court of Arbitration’s February 2013 Partial Award. According to the press release, with the final award, “the Court of Arbitration unanimously decided that India shall release a minimum flow of 9 cumecs into the Kishenganga/Neelum River below the KHEP at all times.” Although the Final award is binding on the parties without appeal, “the Court also decided that either India or Pakistan may seek reconsideration of this decision through the Permanent Indus Commission and the mechanisms of the Indus Waters Treaty after a period of seven years from the first diversion of water from the Kishenganga/Neelum River.”[71]

R.M. Investments Trading Co. Pvt. Ltd. v. Boeing Co. [ 1994 AIR 1136]

In 1986, RMI (an Indian company) entered into an agreement with Boeing (a U.S. company) to provide consultancy services for promoting the sale of Boeing aircrafts in India, and agreed to arbitrate any disputes under AAA rules. A dispute arose, and RMI brought suit in the Calcutta High Court. Boeing moved for stay of the suit on the ground that its subject matter was covered by the arbitration clause in the contract. The High Court dismissed Boeing’s application to stay the suit in April 1993, holding that the agreement in question was not a “commercial” agreement under India’s 1961 Foreign Awards (Recognition and Enforcement) Act (“1961 Act”), which implemented the NYC, and that therefore the 1961 Act did not apply. The Division Bench of the High Court, however, dismissed this decision in October 1993. RMI appealed to the Supreme Court of India, arguing that the consultancy agreement was not a commercial agreement under Section 2 the 1961 Act.

The Supreme Court held that the agreement fell within the definition of “commercial” under Section 2 of the 1961 Act (which incorporated Articles I(1) and II(1) NYC but expressly required a “commercial” relationship), and therefore that the stay could be granted under the Act. The Court emphasized that the purpose of the 1961 Act was to facilitate international trade by providing for dispute settlement through arbitration. It accordingly read the term “commercial” broadly, finding that it encompassed the promotion of commercial activity, in order to further the goals of the 1961 Act. RMI played an active role in promoting the sale of Boeing’s aircraft and provided managerial assistance in the process; therefore, the transaction was commercial in nature.[72]

Bharat Aluminium Co. v Kaiser Aluminium Technical Service, Inc. [AIR 2005 Chh 21]

Bharat Aluminium Co. (“Bharat”) entered into a contract with Kaiser Aluminium Technical Service, Inc. (“Kaiser”) for the supply and installation of a computer based system, which provided for arbitration in London and was governed by Indian law. A dispute arose and Kaiser initiated an arbitration proceeding, culminating in two awards in Kaiser’s favour. Bharat filed applications with the District Court of Bilaspur in India in order to have the two awards set aside. According to Bharat, Part I of the Arbitration and Conciliation Act 1996 (the “1996 Act”) also applied to awards made in arbitrations which have their seat outside India, therefore allowing Bharat to apply to have the awards set aside. Bharat also argued that the wording “has been set aside or suspended by a competent authority of the country … under the law of which, the award was made” in Section 48(1)(e) of the 1996 Act (mirroring Article V(1)(e) NYC) entitled an Indian court to set aside the awards made in London. This was because, according to Bharat, “the law [under] which” the awards were made was Indian law, as it was the law applicable to the contract. The District Judge refused Bharat’s application and Bharat appealed to the High Court of Judicature at Cattisgarh, Bilaspur. The High Court rejected its appeal and Bharat appealed to the Supreme Court.

The Supreme Court rejected Bharat’s appeal, holding that “under the law of which the award was made” in Section 48(1)(e) of the 1996 Act referred to the law governing the arbitral process, and not the law governing the contract or the law governing the arbitration agreement. The Supreme Court expressly stated that Article V was “bodily lifted and incorporated” in Section 48 of the 1996 Act, noting that it is the party which seeks to resist the enforcement of the award which has to prove one or more of the grounds set out in Sections 48(1) and 48(2) of the 1996 Act. The Supreme Court found that the NYC established a “territorial link” between the place of arbitration and the law governing that arbitration, as made evident by both Article V(1)(d) NYC which referred to “the law of the country where the arbitration took place” and Article V(1)(e) NYC which referred to “the law of the country where the award is made”. Consequently, the Supreme Court considered that Part I of the 1996 Act only applied to domestic arbitrations, that is – according to the Supreme Court – proceedings with their seat in India. Additionally, the Court reasoned that Part II of the 1996 Act only deals with enforcement proceedings in India and not with the challenge of the validity of arbitral awards rendered outside India. The Court expressly referred to Article V(1)(e) NYC in interpreting Section 48(1)(e) of the 1996 Act, rejecting Bharat’s argument that it was open to the legislature of state-parties to the NYC to enact situations where an award could be annulled in places other than the two situs provided for in Article V(1)(e) NYC. According to the Court, even the two situs where an award may be annulled pursuant to Article V(1)(e) NYC are alternative and not concurrent jurisdictions: it is only if the court of the seat has no power to annul the award under that court’s national law (what the Supreme Court labelled the “first alternative”) that the court of the place of the law under which the award was made would have the power to annul the award (the “second alternative”). Any other interpretation, the Court feared, would lead to “chaos […] created by two court systems, in two different countries, exercising concurrent jurisdiction over the same dispute”, which would undermine the policy of the NYC. The Supreme Court remarked that annulment of an award by the courts of the place of the law under which the award was made is a “highly unusual “once-in-a-blue-moon” occurrence”. Finally, the Supreme Court noted that the 1996 Act did not deal with awards made outside India but in states not parties to the NYC. In such cases the Court confirmed that neither Part I nor Part II of the 1996 Act applied, as Section 44 of the 1996 Act (implementing Articles I and II NYC) limits the application of Part II to awards made in pursuance of an agreement to which the NYC applies, including the reservation of reciprocity. The remedy of this lacuna, in the view of the Supreme Court, would be the enactment of appropriate legislation by Parliament.[73]

Bhatia International (Ind) v Bulk Trading S.A. & Anr [AIR (2002) SC 1432]

Bhatia International entered into an agreement with Bulk Trading and agreed to arbitrate any disputes in Paris, under ICC rules. Following a dispute, Bulk Trading filed a petition for interim relief, including an injunction, under Section 9 of India’s 1996 Arbitration and Conciliation Act (“Act”). Bhatia objected, arguing that Section 9 did not apply to arbitrations occurring outside of India and that only Part II of the Act (which applies to foreign awards and implements the NYC) applied. Because no section of Part II contains a provision for interim relief, Bhatia maintained that none could be granted by the court here.

The Supreme Court held that Part I of the Act applied to foreign awards unless the parties affirmatively excluded this Part in their arbitration agreement. It reasoned that this must be the case because if Part I did not apply to foreign awards then there would be no Indian law governing awards rendered in non-NYC countries. Because the plain language of the Act did not conclusively establish otherwise, the Court found that Part I of the Act presumptively applies to both domestic and foreign awards, and the burden is on the parties to modify this by express or implied agreement.[74]

Fuerst Day Lawson Ltd v Jindal Exports Ltd [1999 IIAD Delhi 265]

Fuerst Day Lawson Ltd (“FDL”) entered into a contract with Jindal Exports Ltd (“Jindal”) for the sale of goods, which provided for arbitration. A dispute arose between the parties and FDL initiated an arbitration proceeding, which culminated to an award in FDL’s favour. FDL filed an application for the execution of the award in India. Jindal resisted the application for execution on the basis that it was premature, arguing that it was necessary for the executing court to first satisfy itself that the award was enforceable.

The High Court of Delhi found for Jindal, holding that the application for execution was premature and that the court, before ordering the enforcement of an award, had to satisfy itself that the award was enforceable. The High Court held that even though under the Arbitration and Conciliation Act 1996 (the “1996 Act”) it was not necessary to make an award into a decree of an Indian court in order to enforce it, it was still necessary for an enforcing court to decide whether the award should be enforced at all. In arriving at this conclusion, the High Court scrutinised Section 48(2) of the 1996 Act (mirroring Article V(2) NYC), under which a court may raise grounds against an award’s enforcement on its own motion. This, the High Court noted, indicated that an enforcing court is responsible for scrutinising an award before it executes it.[75]

Venture Global Engineering v. Satyam Computer Svcs. Ltd. & Anr. [(2008) 4 SCC 190]

In October 1999, Venture Global Engineering (“VGE”) (a U.S. company) entered into a Joint Venture agreement with Satyam Computer Services (an Indian Company) and agreed to arbitrate any disputes at the London Court of International Arbitration. A subsequent dispute led to an April 2006 award in favour of Satyam. Satyam obtained leave to enforce the award in Michigan in September 2006, and the Sixth Circuit affirmed this decision in May 2007. Prior to this, however, VGE had commenced proceedings in India seeking an injunction on payment and annulment of the award, and had received a permanent injunction in June, 2006. Satyam appealed, and the High Court granted an interim suspension of the injunction. In February 2007, the High Court also dismissed VGE’s appeal from a decision denying annulment, holding that Part II of India’s 1996 Arbitration and Conciliation Act (“Act”) (implementing the NYC) did not permit Indian courts to set aside a foreign award. The court found that Part I of the Act, which allows Indian courts to set aside awards on grounds of public policy, did not apply to foreign awards.

The Supreme Court reversed the judgment of the High Court, holding that unless the parties provide otherwise, foreign awards can be challenged in India under the Act. The Court affirmed its previous holding in the 2002 case Bhatia International, that the general arbitration provisions set forth in Part I of the Act apply to arbitration proceedings that occur abroad, unless this Part is expressly excluded by the parties. It remanded the case to the lower court to determine whether the award violated Indian law, and therefore Indian public policy provisions. It further held that the U.S. proceedings had no effect because the injunction in India was issued prior to the decision of the Michigan District Court.[76]

Oil & Natural Gas Commission (ONGC) v. Western Company of North America [1987 AIR 674]

The Indian Oil and Natural Gas Commission (“ONGC”) entered into a drilling agreement with Western Company of North America (a U.S. company) and agreed to arbitrate any disputes in London in accordance with the provisions of India’s domestic arbitration statute. A subsequent dispute led to an October 1985 award in favor of Western, which then filed suit in a U.S. district court to confirm the award and obtain a judgment against ONGC. ONGC, in turn, petitioned the High Court of Bombay to set aside the award and issue an order enjoining Western from proceeding with its suit in the U.S. court. The High Court held that Western was entitled to bring suit in the U.S. court to enforce the award as a foreign award, that the pending application in the High Court to set aside the award did not affect this right, and that, therefore, an injunction was inappropriate. ONGC then appealed to the Supreme Court of India.

The Supreme Court reversed the judgment of the High Court, holding that under India’s domestic arbitration law the award did not bind the parties until it was confirmed by an Indian court and that, therefore, under Article (V)(1)(e) NYC the award was unenforceable in the U.S. as it did not yet bind the parties. Consequently, an injunction was appropriate in this case. [77]

Indian Organic Chemicals Ltd v Chemtex Fibres Inc and Ors. [AIR 1978 Bom 106]

Chemtex Fibres Inc (“Chemtex”), together with its two subsidiaries – the second and third defendant – entered into a contract with Indian Organic Chemicals Ltd (“Indian Chemicals”), guaranteeing the performance of two other contracts which the second and third defendant had entered into with Indian Chemicals. The guarantee provided for arbitration under the auspices of the International Chamber of Commerce (“ICC”) in London. The contract entered into by the second defendant and Indian Chemicals was for the supply of machinery, equipment and technical information for the installations for a polyester plant and provided for arbitration under the ICC in London as well. The contract entered into by the third defendant and Indian Chemicals was for the supply of machinery, equipment and technical information required for the implementation of the project and provided for arbitration in India. A dispute arose and Indian Chemicals sued Chemtex and the second and third defendant before the High Court of Bombay. The three defendants sought to have the proceeding stayed in favour or arbitration pursuant to Section 3 of the Foreign Awards (Recognition and Enforcement) Act 1961 (the “1961 Act”) (mirroring Article II(3) NYC).

The High Court of Bombay rejected the defendants’ application, refusing to order a stay of the legal proceeding before it. The High Court remarked that the 1961 Act had been implemented to give effect to the NYC and had as its purpose the speedy settlement of disputes through arbitration. The Court referred to Section 2 of the 1961 Act (incorporating, in modified language, Articles I and II NYC), which it read in tandem with Articles I and II NYC. According to the Court, Section 2 of the 1961 Act applies when four conditions are satisfied: (i) the difference is out of a relationship considered as “commercial under the law in force in India”; (ii) the “foreign award” was made on or after 11 October 1960; (iii) the award is made in pursuance of an agreement in writing to which the NYC applies; and, (iv) the award is made in a territory that the Central Government of India has notified as also applying the NYC. Turning to Section 3 of the 1961 Act, the High Court considered that it applies when (i) there is an agreement to which Article II NYC applies; (ii) a person party to such an agreement, or a person claiming through him, commences a legal proceeding before a court against the other party to the agreement; (iii) the dispute falls within the scope of the legal proceeding; and, (iv) the other party has not “filed any written statement or has not taken any other step in the proceeding” before making the application to stay. Once these conditions are satisfied, the Court noted, a court has no discretion but to stay the legal proceeding before it, unless the agreement is null and void, inoperative or incapable of being performed. Applying the facts of the case, the High Court considered the three contracts to be “inextricably linked” and “commercial” in nature. In making the latter point, the Court stipulated that the term “commercial” must be given a liberal construction. Nonetheless, the Court stressed, characterising a contract as “commercial” was not suffice for Section 2 of the 1961 Act to apply: according to the Court, the relationship must be considered commercial “under the law in force in India”. This language, the Court reasoned, requires that it be “established that [the relationship] is commercial by virtue of a provision of law or an operative legal principle in force in India”. Further to that, the High Court held that Section 3 could not apply as it only made reference to a person commencing legal action when that person is a party to “an agreement”. This, the Court reasoned, indicated that Section 3 of the 1961 Act has no application in a situation where there is a “plurality of agreements [which] converge on disputes and differences which arise out of a single transaction or series of transactions”. Commenting, obiter, on the other conditions of Section 3, the Court found that the arbitration agreements were capable of being performed and that the dispute brought before it fell within the scope of the arbitration agreement in the guarantee.[78]

National Thermal Power Corp v Singer Company and ors [1993 AIR 998]

National Thermal Power Corporation (“National”) entered in two contracts with the respondent Singer Company (“Singer”) for the supply of equipment and commissioning of certain works in India, the General Terms and Conditions of which provided for arbitration under the auspices of the International Chamber of Commerce (“ICC”). The General Terms and Conditions expressly stated that the contract was governed by Indian law. A dispute arose which was referred to arbitration under the ICC Rules. As the parties had not agreed to a seat for the arbitral tribunal, the ICC Court decided that the arbitration would have its seat in London. An interim award was rendered which National sought to set aside in India, relying on Sections 14, 30 and 33 of the Indian Arbitration Act 1940 (the “1940 Act”), a statute which applied to domestic awards.

The Supreme Court allowed the appeal, holding that the award was a domestic award and therefore Indian courts had jurisdiction to set it aside. The Court found that Section 9 of the Foreign Awards (Recognition and Enforcement) Act 1961 (the “1961 Act”) clearly indicated that an award rendered in the territory of a foreign State could be enforced as a domestic award if the law of the enforcing state governed the arbitration agreement. Here, the parties intended for Indian law to govern the agreement and mere fact that the award was handed down in London was not enough to supersede the overriding jurisdiction and control of Indian courts. In reaching this conclusion, the Court remarked that the 1961 Act implemented the NYC. In particular, the Court noted that Section 7 of the 1961 Act is “in consonance” with Article V NYC, an Article specifying the conditions under which a foreign award will be recognised and enforced.[79]

Masumi SA Investment LLC v Keystone Realtors and ors [Company Appeal (L) No. 47 of 2012]

Masumi SA Investment LLC (“Masumi”) entered into a shareholder agreement with Keystone Realtors (“Keystone”), which provided for arbitration in Mumbai. Masumi filed a claim before the Company Law Board (“CLB”) alleging that Keystone and the other respondents had mismanaged the affairs of some of the respondent companies. The second respondent filed an application to the CLB under Section 8 of the Arbitration and Conciliation Act 1996 (the “1996 Act”) to have the proceeding referred to arbitration. The CLB found for the second respondent and stayed the proceedings before it, referring the matter to arbitration. Masumi applied to the High Court of Bombay, seeking to appeal the decision of the CLB by relying on Section 10F of the Companies Act 1956, which, as the Court remarked, allowed “any person aggrieved by a decision or order of the Company Law Board to file an appeal to the High Court”.

The High Court of Bombay rejected Masumi’s application and ordered that the matter be referred to arbitration. In reaching this conclusion, the High Court relied on Section 37 of the 1996 Act, a section which the High Court considered as setting out the situations in which a court order may be appealed when concerning arbitration. Importantly, the High Court referred to Section 50 of the 1996 Act, which – the High Court remarked – “applies to international arbitration covered by New York Convention [sic]”. The High Court noted that, under Section 50 of the 1996 Act, an appeal against an order is possible only if the order refuses to refer the matter to arbitration; when the order is for the matter to be referred to arbitration, Section 50 does not allow for an appeal. The High Court used the provision in Section 50 by analogy, to illuminate the effect of Section 37. In conclusion, the High Court considered that the 1996 Act is “a self contained, complete and exhaustive code in all respects”. In the Court’s view, since Section 37 did not mention the right to appeal against an order referring parties to arbitration, no such remedy lied in the present case.[80]

European Grain and Shipping Ltd v Bombay Extractions Ltd. [AIR 1983 Bom 36]

Bombay Extractions Ltd (“Bombay Extractions”) entered into a contract with European Grain and Shipping Ltd (“European Grain”), which provided for arbitration in London, pursuant to the Rules of the Grain and Feed Trade Association. A dispute arose and European Grain initiated an arbitration proceeding against Bombay Extractions. The latter neither appointed its arbitrator nor participated in the arbitration proceedings in any other fashion. After an award was rendered in favour of European Grain, it sought to enforce it in India pursuant to the Foreign Awards (Recognition and Enforcement) Act 1961 (the “1961 Act”). The Single Judge of the High Court of Bombay refused to enforce the award on the basis that the 1961 Act was inapplicable. The Single Judge held that the legal relationship between Bombay Extractions and European Grain was not “commercial” because it had not been designated as such by a provision of law or operative legal principle in India. European Grain appealed against the decision of the Single Judge to the High Court of Bombay.

The High Court of Bombay allowed the appeal, ordering the enforcement of the award and holding that a legal relationship would be “commercial” if it concerns a trading activity. In the Court’s view, the 1961 Act was implemented to give effect to the NYC. Turning to Article I(3) NYC, the Court reasoned that the term “commercial” included “a trading activity, like buying and selling, which is involved in the instant case”. According to the Court, Indian law would treat the contract in this case as a commercial agreement. Finally, the Court noted that the United Kingdom was a party to the NYC and had been notified as such by the Central Government of India (therefore there was no issue as to the reciprocal application of the NYC).[81]

Ramasamy Athapan and Nandakumar Athappan v. Secretariat of Court, International Chamber of Commerce [O.A. No. 277 of 2008]

Plaintiffs (India) entered into a Joint Venture agreement with several companies located in various countries and agreed to arbitrate any disputes at the ICC in Paris under Indian law. Following a dispute, and after the initiation of criminal and civil proceedings against the plaintiffs and some of the defendants, two of the defendants (6 & 10) sought arbitration in Paris. The plaintiffs and some of the defendants resisted arbitration arguing, among other things, that the arbitration agreement was void, inoperative, and incapable of being performed under Section 45 of India’s 1996 Arbitration and Conciliation Act (“Act”) (which directly incorporates Article II(3) NYC).

The Court enjoined defendants 6 and 10 from submitting the matter to arbitration, on the grounds that their decision to bring numerous civil and criminal suits before Indian courts rendered the arbitration agreement inoperative under Section 45 of the Act. Although the agreement was neither void nor incapable of performance under Indian contract law, the Court found that the defendants were thwarting the purpose of the arbitration clause by filing several suits before submitting the matter to arbitration, and that these actions negated their ability to invoke the clause here. The Court further noted that the plaintiffs had not submitted to the jurisdiction of the arbitral tribunal by requesting a stay of the arbitration, and therefore an injunction was appropriate in this case.[82]

M/S Centrotrade Minerals & Metal. Inc. v Hindustan Copper Ltd. [Appeal (civil) 2562 of 2006]

M/S Centrotrade Minerals & Metal. Inc. (“Centrotrade”) entered into a contract with Hindustan Copper Ltd (“HCL”) for the sale goods which provided for arbitration before the Indian Council of Arbitration (“ICA”) and, if either party was in disagreement with the award rendered by the ICA, to appeal the award in a second arbitration under the rules of the International Chamber of Commerce (“ICC”) in London. A dispute arose between the parties and was referred to the ICA for arbitration leading to an award in favour of HCL. Centrotrade then initiated arbitral proceedings in London, before the ICC, appealing the ICA’s award. HCL maintained that the part of the dispute resolution clause providing for the appeal of an award by the ICA’s to the ICC was contrary to public policy. Initially HCL refrained from submitting argument before the arbitrator appointed by the ICC but eventually did so. The ICC arbitrator rendered an award in favour of Centrotrade, which, inter alia, provided that (i) the dispute resolution clause was neither unlawful nor invalid; and, (ii) the ICA award had been wrongly decided. Centrotrade sought to enforce the award in India and applied to the Court of the District Judge in Alipore. HCL resisted the enforcement application on the basis of Section 48 of the Arbitration and Conciliation Act 1996 (the “1996 Act”). The District Judge found for Centrotrade, a decision which HCL appealed to the High Court. The High Court held that although successive arbitrations were not permissible in India, the two awards cancelled each other out. Both Centrotrade and HCL appealed the High Court’s decision.

The Supreme Court allowed HCL’s appeal, granting an order to stay the enforcement of the award, as it held that the part of the dispute resolution clause concerning the appeal of the ICA’s award was void ab initio and did not have effect. The Supreme Court held that serious procedural defects in the arbitral proceedings would be contrary to public policy, as the concept is understood in Indian law, and could therefore constitute a ground for refusing an award’s enforcement. Turning to the clause at hand, the Supreme Court stressed that Indian law did not allow the parties to agree on whether an award could be appealed. Such a contractual arrangement, the Court held, would be void as contrary to public policy. The Supreme Court considered that if a court has the power, under Section 45 of the 1996 Act (which mirrors Article II(3) NYC) to determine whether an agreement to arbitrate is valid for the purpose of referring the parties to arbitration, a court should also have the power to arrive at a finding with respect to the validity of an arbitration agreement in the context of enforcement of an award.[83]

Smita Conductors Ltd. v. Euro Alloys Ltd. [2001 AIR SCW 3517]

In August 1990, Euro Alloys proposed a contract for the sale of aluminum rods to Smita Conductors. Despite several requests and reminders, Smita neither signed nor returned the contract, which contained an arbitration clause. Smita did, however, open several irrevocable letters of credit, and shipments were made in performance of the contract. A subsequent dispute led to a July 1992 arbitral award in favour of Euro Alloys. Euro Alloys then obtained an order from the Bombay High Court for enforcement of the award, with interest, under the 1961 Foreign Awards (Recognition & Enforcement Act) (“1961 Act”), which implemented the NYC. Smita appealed, arguing that (1) enforcement violated Section 2(a) of the 1961 act and Article II(1)-(2) of the NYC because the agreement containing the arbitration clause was not signed by both parties, and none of the parties’ other written exchanges contained an agreement to arbitrate, and (2) it would be contrary to the public policy of India to enforce the award, in violation of Section 7(1)(b)(ii) of the 1961 Act (which directly incorporates Article V(2)(b)NYC).

The Supreme Court dismissed the appeal and affirmed the decision of the High Court. It held that Smita’s conduct, particularly the acts of opening the letters of credit in reliance on the contract and invoking the contract’s force majeure clause, demonstrated its acknowledgement and acceptance of the terms of the written contract. Therefore, it would be illogical to let Smita escape its obligations under the contract simply because it failed to sign. The Court also found that because the arbitrator’s conclusions were plausible, enforcing the award would not be contrary to the public policy of India.[84]

Marriott International Inc et al v Ansal Hotels Ltd et al [ AIR 2000 Delhi 337]

Marriott International Inc. (“Marriott”) entered into a contract with Ansal Hotels Ltd (“Ansal”) for the management of a hotel as part of the Marriott chain of hotels, which provided for arbitration in Kuala Lumpur, Malaysia. Ansal terminated the contract, leading Marriott to initiate arbitral proceedings against Ansal in Kuala Lumpur, while also seeking an interim directions from the Single Judge in Delhi, India, pursuant to Section 9 of the Arbitration and Conciliation Act 1996 (the “1996 Act”). Ansal resisted the interim directions sought by Marriott on the ground that Section 9 of the 1996 Act, and all of Part I of the Act does not apply to arbitrations with their seat outside India. The Single Judge decided the issue in favour of Ansal, a decision which Marriott appealed to the High Court of Delhi.

The High Court of Delhi dismissed the appeal, holding that Part I of the Act does not apply when the seat of the arbitration is outside India. In reaching this conclusion, the High Court also remarked that Part II of the Act concerns the enforcement of foreign awards made under the NYC or the Geneva Convention. The Court observed that “foreign award” means an arbitral award on a difference considered commercial under Indian law, made in pursuance of an agreement in writing to which the Geneva Convention or the NYC applies and rendered in the territory of a state other than the state where recognition and enforcement is sought. In concluding that the award was a “foreign award”, the Court also considered as indicative the fact that one of the parties to the arbitration agreement was not a national of India.[85]

Faircot SA v Tata SSI Ltd. [2000 (2) BomCR 429]

Faircot SA (“Faircot”) entered into a contract with Tata SSI Ltd (“Tata”), which provided for arbitration of disputes under the auspices of the Liverpool Cotton Association (“LCA”). A dispute arose between the parties and Faircot initiated an arbitral proceeding. Tata did not participate in the proceeding save by sending a letter to the arbitral tribunal to inform it that it had not signed the contract and, consequently, that there was no agreement between the parties. The tribunal rendered an award in favour of Faircot, which the latter sought to enforce in India, before the High Court of Bombay. Tata resisted the award’s enforcement on the basis that the arbitrators had no jurisdiction to render the award as Tata had challenged the validity or existence of the contract.

The High Court of Bombay agreed with Tata’s argument, rejecting Faircot’s application to enforce the award. The High Court considered that the Foreign Awards (Recognition and Enforcement) Act 1961 (the “1961 Act”) applied to the award. The Court relied on Section 7 of the 1961 Act (mirroring Article V NYC), pointing out the language “deals with the conditions for enforcement of a foreign award”. Specifically, the Court noted that one of the grounds on which the Court can decline to enforce a foreign award is that the award deals with questions not referred or contained decisions on matters beyond the scope of the agreement. Relying on the decision of the Supreme Court of India in Renusagar Power Co Ltd v General Electric Company and Anr., the High Court distinguished between instances where the scope of the arbitration agreement is in dispute and instances where the validity of the contract containing the agreement is in dispute. With respect to the former case (i.e. whether a dispute fell within the scope of the agreement to arbitrate), the High Court held that an arbitral tribunal has jurisdiction to make a tentative determination, which is subject to a challenge before a court pursuant to Section 7 of the 1961 Act. In contrast, the Court held, an arbitral tribunal does not have jurisdiction over the issue of the existence or validity of the contract which contains the arbitration agreement. The High Court found that in the present case the arbitral tribunal had lacked jurisdiction to make the award as the validity or existence of the contract containing the agreement to arbitrate had been challenged. Finally, the Court rejected Faircot’s argument that English law (the law of the seat of the arbitration) would be applicable in deciding whether a matter was beyond the arbitral tribunal’s jurisdiction, holding that the question would be resolved by applying Indian law.[86]

Transocean Shipping Agency (P) Ltd. V. Black Sea Shipping & Anr. [AIR 1998 SC 707]

Transocean Shipping Agency (“Transocean”) entered into a contract with the Black Sea Shipping (“Black Sea”; a company incorporated in Ukraine) under which Transocean would operate as Black Sea’s Shipping agent. The contract provided for arbitration “where [Black Sea] are registered”. A dispute arose and Black Sea referred the matter to arbitration in Odessa, Ukraine. The second respondent, who was an official of Black Sea and appointed as arbitrator by an order of the government of Ukraine, made an award in favour of Black Sea. Black Sea sought to enforce the award in India, a motion which Transocean resisted on three grounds: (i) that the award made in Ukraine was not a foreign award as defined in Section 2 of the Foreign Awards (Recognition and Enforcement) Act 1961 (the “1961 Act”) (implementing Articles I and II NYC), because Ukraine had not been notified to be a party to the NYC after the dissolution of the Union of Soviet Socialist Republics (“USSR”); (ii) that the arbitration had not been conducted in accordance with the law of Ukraine as envisaged by Section 7(1)(a)(iv) of the 1961 Act (mirroring Article V(1)(d) NYC); and, finally, (iii) that enforcement of the award would be contrary to public policy, as envisaged by Section 7(1)(b)(ii) of the 1961 Act (mirroring Article V(2)(b) NYC), because the arbitrator was an official of Black Sea. The High Court rejected the arguments advanced by Transocean and ordered the enforcement of the award. Transocean appealed the High Court’s decision to the Supreme Court.

The Supreme Court dismissed the appeal, ordering the enforcement of the award and rejecting Transcocean’s arguments. The Supreme Court held that the award was a “foreign award” for purposes of Section 2 of the 1961 Act, holding further that the 1961 Act was enacted in order to give effect to the NYC. In the view of the Supreme Court, it was not necessary that the Indian authorities send a notification to the effect that the states emerging from the dissolution of the USSR continued to be parties to the NYC, therefore satisfying the requirement of reciprocity. With respect to Transocean’s argument that the arbitration was invalid according to the law of Ukraine, the Supreme Court noted that Transocean had not presented any evidence as to why this was the case. According to the Supreme Court, Transocean bore the burden of proving why the award should not be enforced; a burden which it had been unable to satisfy. In making this point, the Supreme Court remarked that Section 7 of the 1961 Act “is in conformity with” Article V NYC. Finally, the Supreme Court rejected the contention that the enforcement would be contrary to public policy due to the arbitrator being an official of Black Sea, stressing that the award rendered was valid under the law of Ukraine and, consequently, there was no violation of public policy in enforcing the award in India.[87]

Renusagar Power Co Ltd v General Electric Company and Anr. [1987 SCR (3) 858]

Renusagar Power Co Ltd (“Renusagar”) entered into a contract General Electric Company (“General Electric”), which provided for arbitration under the auspices of the International Chamber of Commerce (“ICC”) in Paris. A dispute arose and General Electric referred the matter to arbitration. Renusagar applied to the High Court of Bombay, arguing that the dispute fell outside the scope of its arbitration agreement with General Electric. The High Court of Bombay found for General Electric, a decision upheld by the Supreme Court. Meanwhile, in August 1982, General Electric had filed a suit in the High Court of Calcutta seeking to enforce a bank guarantee issued in favour of Renusagar. Renusagar, in turn initiated court proceedings before the Court of Civil Judge at Mirzapur in November 1982 requesting a declaration that the bank guarantee was unenforceable. General Electric objected on the grounds that, among other things, the Supreme Court’s decision established that the matter should be stayed pending arbitration of the disputes. General Electric also filed an application with the High Court of Allahabad to quash the legal action before the Court at Mirzapur. Both the Mirzapur Court and the High Court of Allahabad found that General Electric had abandoned these objections when it answered the complaint and took other actions that demonstrated intent to proceed with the suit. General Electric appealed to the Supreme Court of India.

The Supreme Court allowed the appeal, reversing the lower courts’ judgments and staying the proceedings pending arbitration. Under the Section 3 of the 1961 Act (mirroring Article II(3) NYC), if a party requests that a dispute arising under an arbitration agreement be referred to an arbitral tribunal, the court must do so unless the requesting party disentitled itself from making the request, either by filing a written statement or by taking a further step in the proceedings. The Court found that an act will not deprive a party of the right to request arbitration unless it expressly or implicitly manifests an unequivocal intention to abandon the right under the arbitration agreement and litigate the merits in court. Here, the substance of General Electric’s actions indicated it requested a stay before filing a written statement or taking further steps in the proceedings which would obviate its request; therefore, it had not abandoned its right to have the suit stayed.[88]

European Grain and Shipping Ltd v Bombay Extractions Ltd. [AIR 1983 Bom 36]

Bombay Extractions Ltd (“Bombay Extractions”) entered into a contract with European Grain and Shipping Ltd (“European Grain”), which provided for arbitration in London, pursuant to the Rules of the Grain and Feed Trade Association. A dispute arose and European Grain initiated an arbitration proceeding against Bombay Extractions. The latter neither appointed its arbitrator nor participated in the arbitration proceedings in any other fashion. After an award was rendered in favour of European Grain, it sought to enforce it in India pursuant to the Foreign Awards (Recognition and Enforcement) Act 1961 (the “1961 Act”). The Single Judge of the High Court of Bombay refused to enforce the award on the basis that the 1961 Act was inapplicable. The Single Judge held that the legal relationship between Bombay Extractions and European Grain was not “commercial” because it had not been designated as such by a provision of law or operative legal principle in India. European Grain appealed against the decision of the Single Judge to the High Court of Bombay.

The High Court of Bombay allowed the appeal, ordering the enforcement of the award and holding that a legal relationship would be “commercial” if it concerns a trading activity. In the Court’s view, the 1961 Act was implemented to give effect to the NYC. Turning to Article I(3) NYC, the Court reasoned that the term “commercial” included “a trading activity, like buying and selling, which is involved in the instant case”. According to the Court, Indian law would treat the contract in this case as a commercial agreement. Finally, the Court noted that the United Kingdom was a party to the NYC and had been notified as such by the Central Government of India (therefore there was no issue as to the reciprocal application of the NYC).[89]

Swiss Singapore Overseas Enterprises Pvt Ltd v M/V African Trader [Civil Application No. 23 of 2005]

Swiss Singapore Overseas Enterprises (“Swiss Singapore”, the charterer) entered into a charterparty with M/V African Trader (“African Trader”, the owner), which African Trader alleged provided for arbitration in Durban, South Africa. After a dispute arose, Swiss Singapore launched a legal action before the High Court of Gujarat, Ahmedabad. African Trader applied to the High Court to stay the action commenced by Swiss Singapore, pursuant to Section 45 of the Arbitration and Conciliation Act, 1996 (the “1996 Act”) (mirroring Article II(3) NYC). In its argument, Swiss Singapore relied on Articles I and II(3) NYC.

The High Court of Gujarat rejected African Trader’s application, finding that Section 45 of the 1996 Act was inapplicable as the Indian Central Government had not issued a notification that South Africa was a reciprocating state party to the NYC. Consequently, the High Court held, that the award could not be a “foreign award” as the term was defined in Section 44 of the 1996 Act (implementing Articles I and II NYC) and, as a result, Section 45 was inapplicable. According to the High Court, notification by the Central Government is one of the four conditions set out in Section 44 of the 1996 Act: (i) the award is on a difference arising out of legal relationships considered as commercial under the law of India; (ii) the award was made on or after 11 October 1960; (iii) the award was made in pursuance of an agreement in writing for arbitration to which the NYC applied; and, (iv) the award was made in one of the reciprocating contracting States notified by the Central Government. The High Court found the award met the first three conditions but, due to the lack of notification, failed to meet the fourth. In addition, the Court considered that the alleged arbitration agreement was “absolutely vague, ambiguous and self-contradictory”. In the Court’s view, such an agreement was not capable of being performed and therefore fell within an exception of Section 45. Finally, the Court noted that in reaching its decision it also placed weight to the fact that African Trader had moved the application to stay only after Swiss Singapore had commenced legal action, something which – according to the Court – showed that African Trader did not intend to refer the dispute to arbitration.[90]

Penn Racquet Sports v. Mayor International Ltd. [2011 (1) ARBLR 244 (Delhi)]

Penn Racquet Sports (“Penn”, a company incorporated in the USA) entered into a contract with Mayor International Ltd (“Mayor”, a company incorporated in India) whereby Penn licensed Mayor to use its trademark, which provided for arbitration under the auspices of the International Chamber of Commerce (“ICC”) in Paris. The contract was expressed to be governed by Austrian law. A dispute arose and Penn initiated an arbitration proceeding which culminated in an award in its favour. When Penn sought to enforce the award in India, Mayor resisted enforcement arguing that the award’s enforcement would be contrary to public policy, pursuant to Section 48(2)(b) of the Arbitration Act 1996 (the “1996 Act”) (mirroring Article V(2)(b) NYC), because the arbitrator’s award was based on an interpretation of the contract which contradicted the contract’s express terms. Mayor further argued that it had been unable to present its case.

The High Court of Delhi ordered the enforcement of the award, rejecting Mayor’s arguments and holding that when a foreign award is enforceable under Part II of the Arbitration Act, it is deemed a decree of the court. In the Court’s view, the term “public policy of India”, found in Section 48(2)(b) of the 1996 Act, had a narrow meaning compared to the same term when used in the enforcement of domestic awards. The High Court considered that the interpretation of the contract was a matter entirely for the arbitral tribunal, with the consequence that a court called to enforce an arbitral award should not interfere with the award on the ground that the arbitral tribunal had adopted a particular interpretation of a contract, unless it could be shown that the contractual interpretation complained of was contrary to the contractual terms as interpreted under the applicable law. The Court held that the applicable law was that of Austria, therefore Mayor’s submissions, which focussed on India law, were irrelevant. Finally, the judge considered that “public policy” meant the “fundamental policy of Indian law”. The judge concluded by stressing that a monetary award against an Indian entity on account of its commercial dealings would not make the award contrary to the interests of India, or contrary to justice or morality.[91]

Rashtriya Ispat Nigam Ltd and Anr. v MS Verma Transport Company [Appeal (civil) 3420 of 2006]

Rashtriya Ispat Nigam Ltd (“Rashtriya”) entered into a contract with MS Verma Transport Company (“Verma”) which provided for arbitration. Rashtriya alleged that a partner of Verma had been involved in bribery, including in obtaining agency contracts from Rashtriya. Rashtriya sought to terminate its contract with Verma, something which Verma resisted by filing an application to obtain an injunction restraining Rashtriya from terminating the contract. Rashtriya argued that the subject-matter of the dispute fell within the scope of the parties’ arbitration agreement and, therefore, Verma could not apply for an injunction to the courts. The Single Judge of the High Court of Punjab and Haryana rejected Rashtriya’s application on the ground that Rashtriya had not provided the original arbitration agreement or a duly certified copy of it, as required by Section 8 of the Indian Arbitration and Conciliation Act 1996 (the “1996 Act”). The High Court of Punjab and Haryana rejected Rashtriya’s application of review of the Single Judge’s decision, leading Rashtriya to challenge the Single Judge’s decision before the Supreme Court.

The Supreme Court upheld Rashtriya’s challenge, holding that the matter should be referred to arbitration as the existence of an arbitration agreement was admitted and the matters in the legal action filed by Verma fell within the scope of the arbitration agreement. In reaching this conclusion, the Court compared Sections 8 and 16 with Sections 45 (mirroring Article II(3) NYC) and 54 of the 1996 Act. The Court expressly refrained from dealing with the question of whether the arbitrator is entitled to determine his own jurisdiction under Part II of the 1996 Act (which incorporates the NYC), a question which the Court characterised as obiter.[92]

Ashok Ohri v. Delhi Development Authority [64 (1996) DLT 700]

In this case, the dispute that had risen between the plaintiff and the respondent was referred for the decision of respondent No. 2 in terms of the Arbitration Clause. The arbitrator appointed admittedly was atechnicalperson. The arbitrator entered into the references on 3.7.1991 when he issued notices to the parties to file their claims. After hearing the parties and considering the evidence on record, the arbitrator made his award on 12.7.1993 and published the same. After publication of the aforesaid award, the petitioner filed a petition in this Court under Section 14 of the Arbitration Act. In this petition, the petitioner has prayed for filing of the arbitration agreement together with the proceedings and also the award.

Konkan Railway Corporation v. Mehul Construction Co. [(2000) 7 SCC 201]

The Supreme Court ruled that the default power of the Chief Justice of India or “any other person or institution’ designated by him under Section 11 of the Arbitration and Conciliation Act, 1996 is not adjudicatory. On review of its earlier dicta the Court said that the only function of the Chief Justice or his designate under Section 11 is to fill the gap and appoint an arbitrator, so that the arbitral tribunal is expeditiously constituted and arbitration proceedings are commenced. This function, according to the Court, has been left to the Chief Justice or his designate with a view to ensure that the appointment of the arbitrator is made by a person occupying a high judicial office to instill confidence in the appointment process. This would ensure that due care is taken to see that a competent, independent and impartial arbitrator is appointed. Further, since the Chief Justice or his designate exercising the default power to appoint arbitrators is not a tribunal, therefore, such a decision cannot be the subject of a petition for special leave to appeal under Article 136 of the Constitution of India.[93]

Food Corporation ofIndia v. Sreekanth Transport [(1999) 4 SCC 491]

The Supreme Court held that ‘excepted matters’ do not require any further adjudication, since the agreement itself provides a named adjudicator, and concurrence by the parties to the decision of the named adjudicator is obviously presumed by reason of unequivocal acceptance of the terms of the contract of the parties. The Dispute Review Board is also one relating to the construction industry. The proceedings of the DRB can be brought as evidence before an arbitral tribunal or other judicial forum. The board members could also be presented as witnesses.

Bhushan Steel Ltd v. Singapore International Arbitration Centre & Anr. [IA No 11355/2009 in CS (OS) No1392/2009]

In this case, the arbitration clause contained in a series of contracts for the supply of coated steel coils, made reference to disputes being referred to arbitration in Singapore, as per international law. Upon a dispute arising, the second defendant, a Danish company, initiated arbitration proceedings at the Singapore International Arbitration Centre (SIAC). The plaintiff, Bushan Steel, then filed a suit in the Delhi High Court seeking, inter alia, a declaration that the arbitration clause in the contract was vague and indeterminate, and hence void and incapable of being enforced; and asked that the court issue a permanent injunction restraining SIAC from continuing the arbitration proceedings. The Danish company, in response, filed an application for the rejection of the application on grounds that the court had no jurisdiction.[94]

Sumitomo Heavy Industries v Oil & Natural Gas Commission of India [2010(3) Arb. LR 151(SC)]

The Supreme Court held out that if the conclusion of the arbitrator is based on a possible view of the matter, the court should not be expected to interfere with the award. It held that an arbitrator ‘is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the arbitrator has to be accepted as final and binding’. It further went on to rule that a court, while considering a challenge to an arbitral award, ‘does not sit in appeal over the findings and decision of the arbitrator’.[95]

Dozco India (P) Ltd v Doosan Infracore Co Ltd. [MANU/SC/0812/2010]

The Supreme Court refused to intervene in a dispute where the arbitration clause made a specific reference to arbitration under Korean law, with a seat of arbitration in Seoul. It held that the designation of a foreign seat and an express choice of a foreign governing law, amounted to a clear agreement to exclude the operation of part 1 of the Indian Arbitration Act.[96]

Oil & Natural Gas Corpn. Ltd v Saw Pipes [(2003) 5 SCC 705]

The Supreme Court had held that if an award is contrary to the substantive provisions of the law, or the provisions of the Act, or against the terms of the contract, it would be patently illegal and liable to be set aside under section 34 of the Act. Addressing these points, it is proposed that the Act be amended to include a provision where an arbitral tribunal is obliged to (the word used is ‘shall’) take into account the terms of the contract and trade usages applicable to the transaction.[97]


Recommendation for Arbitration in India

Arbitration in India is gradually marking its place. In a recent judgment made by the Supreme Court, it was decided that only the Indian courts have the final say in arbitration proceedings, which means that even if the arbitration takes place abroad only the Indian courts would have the right to decide over the dispute. This fails the whole mechanism of Arbitration. Under Section 89 of the Civil Procedure Code, 1908, the court may refer the parties to other means of solving the dispute, where it may feel fit; one of them being, arbitration.

Mr. Debajyoti Sengupta, Additional Director of the Indian Council of Arbitration (ICA) has said “Arbitration in India is plagued with loopholes and problems”[98], further stating that “there are problems with the Arbitration and Conciliation Act, 1996, and there are problems with the arbitration culture in India.”

Mr. Hiroo Advani, Managing partner of Advani & Co, said “While the awards are supposed to be legally binding, the law allows the losing party to appeal to the courts to challenge it. First, that’s a long process. Second, until the courts adjudicate on the dispute, the award cannot be dispensed, which ties things up further.”[99]

Setbacks of Arbitration in India may be stated as follows:

  • Heavy cost; which is cannot be met by everyone
  • Appeals against final arbitral awards
  • Loopholes in legislation – Arbitration and Conciliation Act, 1996
  • No prescribed court fees
  • Unavailability of trained arbitrators in a particular field
  • No strong domestic arbitration institutions or centres
  • No power provided to the arbitrator to issue summons, examine witnesses, taking evidence
  • The awards passed have to get enforced by the Court

Settlement of disputes through arbitration is a statutory right and it is not prohibited by any other law in force in India. In pursuance of the same, arbitration as a dispute settlement mechanism must be available for use to all citizens of India. Limiting the procedure to those who can afford it is absurd. This, in a way, restricts the scope the arbitration in India by hindering it.

Moreover, the Arbitration and Conciliation Act, 1996 consists of ambiguities which it difficult to interpret the law. On account of validity of the arbitration agreement, the courts cannot intervene into matters of arbitration as they have been prohibited under section 5 of the Act.  Yet, the enforcement of arbitral awards is done by Courts only. Furthermore, there is a provision in the Act that allows appeal for the recourse against an arbitral award to be made to Courts. Modifying the legislation would make a huge difference and would aid the use of arbitration in India for the purpose it actually exists, i.e., to minimise the burden of Courts.

The Act is eighteen years old and what is the Indian experience is obvious by the fact that the court’s interference is not minimal but the courts are hyper active.Our legal system continues to fall in the trap of looking backwards by continuing to follow the underlined unwritten principle in the 1940 Act that judicial interference is desirable and necessary which has been totally given a go by under the new Act and in particular in international commercial arbitration awards. The continuous following of the old jurisprudence will certainly not give a boost to the Indian international trade and business which is the underlying principle and reasoning of the new Act.[100]


There are infinite disputes in the society that need to be resolved. But, there is not enough time or resources that will facilitate the determination of these disputes. In such a scenario ADR mechanisms emerge as perfect solutions, especially arbitration. To summarise, arbitration is a cost efficient and speedy method of deciding disputes and it is given effect to in a manner that the parties are satisfied with.

Thus, it can be asserted that the concept of arbitration proves to be an excellent dispute resolution mechanism which shall never reach the brink of being outdated. Whether any dispute is concluded by ways and means of institutional arbitration or ad hoc arbitration, the Courts get enough time to address other cases and are not burdened under caseloads. The importance of the New York Convention and the Geneva Convention are now recognised by more States.

The Indian legal system too recognises the importance of arbitration. Though the Indian Arbitration and Conciliation Act, 1996 suffers from a few setbacks, which has been corrected in the 2015 Act, it has come across as an efficient set of provisions in not only domestic but also in international disputes. With globalisation leading to advancement in Indian business and international relations, the need of legal provisions with respect to ADR has been long – awaited, considering that the Act of 1940 had become outdated.

Arbitration continues to be a speedy, economical, flexible, private and cheaper way of determining disputes as compared to Court hearings, litigations and trials. An amicable mode for settling disputes on the terms set out by parties to that dispute provides ample flexibility in reaching the decision and also ensures that both the parties are duly contented with it. Arbitration is a technique, that is rapidly gaining popularity world-wide, which allows the resolution of an argument to be determined legally without the intervention of courts.


Primary Sources

International Commercial Arbitration, G. Born: Chapter 1 (2009)

Arbitration and Conciliation Act, 1996

North Carolina Law Review, Vol. 71, pp. 81-120, 1992

Alternative Dispute Resolution in Construction Industry’, International Council of Consultants (ICC) papers

S K Dholakia, ‘Analytical Appraisal of the Arbitration and Conciliation (Amendment) Bill, 2003’, ICA’s Arbitration Quarterly

Sheppard J, New Roles for commercial Judges, Australia Law News, October 1983

Secondary Sources (Internet Websites)





























http://cddrl.stanford.edu._ Development_and_Practice_of_Arbitration_in_India.pdf;




















[3]North Carolina Law Review, Vol. 71, pp. 81-120, 1992











[14] ibid







[21]http://epublications.marquette.edu/theses_open/20; accessed on 22.01.2014

[22] ibid

[23]http://dictionary.reference.com/browse/arbiter; accessed on 27.01.2014

[24]http://epublications.marquette.edu/theses_open/20; accessed on 27.01.2014



[27]International Commercial Arbitration, G. Born: Chapter 1 (2009)





[32] ibid


[34]International Commercial Arbitration, G. Born: 1294-1310 (2009)



[37] ibid










[47]nasamer.ku.edu.tr/sites/nasamer.ku…/conventions/geneva%20conv.pdf‎; accessed on 11.02.2014

[48]http://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment_Disputes; accessed on 11.02.2014

[49]www.law.cornell.edu/wex/bilateral_investment_treaty‎;accessed on 12.02.2014

[50]en.wikipedia.org/wiki/Bilateral_investment_treaty; accessed on 12.02.2014

[51] ‘Alternative Dispute Resolution in Construction Industry’, International Council of Consultants (ICC) papers

[52] http://cddrl.stanford.edu._ Development_and_Practice_of_Arbitration_in_India.pdf;

[53] Arbitration and Conciliation Act, 1996

[54] S K Dholakia, ‘Analytical Appraisal of the Arbitration and Conciliation (Amendment) Bill, 2003’, ICA’s Arbitration Quarterly



[57] This section is mainly based on the lines of Arbitration In India: An Overview By Sumeet Kachwaha and Dharmendra Rautray, Kachwaha & Partners



[60]Sheppard J, New Roles for commercial Judges, Australia Law News, October 1983







[67]http://www.wisegeek.com/what-is-commercial-arbitration.htm; accessed on


























[93]http://www.manupatra.co.in/newsline/articles/Upload/30693C83-676B-4CD5-9D46-73C1810E46BC.pdf; accessed on 04.03.2014

[94]file:///C:/Users/sid/Downloads/Asia%20Pacific%20Arbitration%20Review%202011.pdf; accessed on 04.03.2014




[98] http://www.telegraphindia.com/1131016/jsp/opinion/story_17458353.jsp;


[100] works.bepress.com/context/dev_chopra/article/1000/type/;

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Content relating to: "International Law"

International law is a set of rules, norms and standards that define the legal responsibilities that apply to how nations interact with other nations and the citizens and businesses of other nations. International law is enshrined in conventions, treaties, and standards.

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