ARBITRATION AGREEMENT

[Mr. M. GOVINDARAJAN]

ARBITRATION:

                        Arbitration is an alternative to the litigation in civil courts, which are time consuming process.   There is a maxim 'Justice delayed in Justice denied'.   Justice could not be attained in time at present due to the prolonged procedures prevailing in Civil Courts.    The Arbitration and Conciliation Act, 1996 was enacted based on the UNCITRAL model law, on International Commercial Arbitration, adopted by the United Nations Commissions on International Trade Law. 

                        The term 'Arbitration' is defined in Halsbury's Laws of England (4^th Edition)  Vol.II as 'An Arbitration is the procedure of referring the dispute or difference between not less than two parties for determining after hearing both sides in judicial manner by a person or persons other than a Court of competent jurisdiction.   The Arbitration, thus, is a private process.   The dispute is not settled through the intervention of a third person but without recourse to a court of law.  Such person is called as Arbitrator.   The parties repose confidence in the judgment of the arbitrator and show their willingness to abide by his decision. 

                        Encyclopedia of American Law and Procedural says, "The object of arbitration is the final disposition in a speedy and inexpensive way of the matter involved, so that they must not become the subject of future litigation between the parties."  The concept of parties settling their disputes by reference to a person or persons of their choice or private tribunal was well known to ancient India.  There were Nyaya Panchayats at gross root levels before the advent of the British System of Justice.   Even now in rural areas we are witnessing the Panchayat systems.                         

ARBITRATION AGREEMENT:

                        The pre-requisite for initiating arbitration is agreement between the parties to the dispute to refer the dispute to arbitration.   The parties to arbitration are to comply with the provisions contained in Arbitration and Conciliation Act, 1996.

It means an agreement by the parties to submit all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not, to arbitration;

It may be in the form of arbitration clause in a contract or in the form of a separate agreement;

It shall be in writing;

An arbitration agreement is said to be in writing if it is contained in-

Ø      A document signed by the parties;

Ø      An exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

Ø      An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and denied by the other party;

The reference in a contract to document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make the arbitration clause part of the contract.

REQUIREMENTS OF AN ARBITRATION AGREEMENT:

The arbitration clause should be simple to understand;

It should provide for the division of costs incurred in arbitration;

The arbitration agreement shall indicate the appointment of arbitrators.   The number of arbitrators to be appointed (it shall not be even number), their minimum qualifications, nationality, methods of selection etc., are to be stated;

It should provide for the time limit for the conduct of arbitration;

It should provide the procedure of arbitration to be conducted.   Some points are discussed as follows:

Ø      To agree on a procedure for challenging the appointment of an arbitrator;

Ø      Where an arbitration is replaced to agree whether any hearings held previously may be repeated and the ruling of the erstwhile arbitrator be valid or not;

Ø      To agree the interim measures to be ordered by the tribunal;

Ø      To agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings;

Ø      To agree the place of arbitration;

Ø      To agree when the arbitral proceedings are commenced;

Ø      To agree upon the language or languages to be used in the arbitral proceedings;

Ø      To decide the period of time to submit the claim and defence;

Ø      To decide whether either party may amend or supplement his claim or defence during the course of arbitral proceedings;

Ø      To decide hearings and written proceedings;

Ø      To decide how the arbitrator act in case of default of either party in various occasions;

Ø      To agree on the appointment of experts, getting report of experts, examination of all documents, goods or other property in the possession of experts, giving evidence by experts, cross examination of experts;

Ø      Decision making by panel or arbitrators;

Ø      To decide whether arbitrator has to give reasons in his award to arrive at his decision;

Ø      If the dispute is on the payment of money to decide the rate of interest for the sum to the whole or in part of the period.