What is Arbitration Process under Alternative Dispute Resolution

Arbitration can be considered as a form of dispute resolution. If one party is desired to solve the dispute with the help of arbitration law but the other party does not want to go with the process of arbitration, it cannot be done. The mutual and free consent of both parties is a must for the arbitration.

There are many arbitral tribunals that help people to resolve disputes. They have their arbitrators which are well educated and experienced in specific fields. That means, the parties can hire the arbitrator who is the master to solve the problems related to their disputes. We are going to discuss the arbitrator, working, and legality of arbitral awards.

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What is arbitration?

According to the arbitration definition, arbitration is a technique given under the statute for the resolution of disputes out of the court where the parties choose their one or more arbitrator with free consent and bind themselves with the decision of the arbitration tribunal. There will be an arbitration agreement to do the process of arbitration.

Arbitration is a remedy to a dispute where the parties of the dispute settle their dispute outside the court through an independent person (the arbitrator) appointed with their free consent.

Arbitration is a part of ADR (Alternative Dispute Resolution) in which a dispute is resolved outside the court by appointing a third person. In this, the third person appointed to decide is called an arbitrator. Arbitration is mostly used to resolve commercial disputes. In this article, we will discuss about arbitration and its process for better understanding.

Definition of Arbitration

Arbitration is a process in which a dispute is resolved outside the court. There is no need for a judge to decide this. In place of the judge, a third person is appointed with the consent of both the parties who listens to the arguments and disputes of both the parties and finally gives a decision. Both the parties have to accept this decision. The biggest advantage of this process is that it saves a lot of time. And also no more legal procedures have to be followed as used in Civil Suits. Arbitration is a very flexible and personal process to resolve disputes.

There are various characteristics of the arbitration, such as:

Arbitration is Consensual

In the arbitration process, when the parties come into any types of contracts, they make the arbitration agreement with their free consent. This agreement is made to settle any types of disputes arising from the business with the help of an arbitrator. The name or the qualification of the arbitrator can also be added to the arbitration agreement. The party that agreed to the arbitration cannot withdraw the consent.

Right to choose the arbitrator

The parties have the full right to choose the arbitrator or arbitrators for the dispute arising from their business or contract. The parties can add the name or qualifications at the time of making the arbitration agreement or when the dispute arises. If the parties fail to appoint the arbitrator, they can ask the court to appoint the arbitrator.

Independent arbitrator

An arbitrator is an independent person. Each party has the full right to choose the person as an arbitrator who will be neutral in the case. It means, the person should not be favouring one party. He should not be in the relation of the party. But if the parties agree that there is no problem with such relations, then it will not disallow him to be the arbitrator in the dispute.

Arbitrators are experts

The parties are free to choose the arbitrator. It means they can choose an arbitrator who is more experienced and expert in his field. The dispute can be solved in an easy way if the arbitrator has knowledge of the issue arising in the dispute. There are various law firms providing arbitrators who are well-educated and experts in their fields. Also, if the parties fail to appoint the arbitrator for the dispute, they can take the help of the court for the appointment of the arbitrator.

Arbitration is confidential

The law provides the confidentiality of the arbitration proceedings. The arbitrator is not allowed to discuss the case problem with any other person who is not involved in the case. It is the best remedy for businessmen who do not want to share their company ideas with any other person. In the court proceedings, it is much possible to make the secrecy of the proceedings.

The choice of procedure and venue

The parties of the dispute are free to choose the procedure and the arbitral tribunal venue as they want. The parties can also choose the language of the court. This process helps the parties to express their views more conveniently to the arbitrator of the case.

The decision is final and easy to enforce

The decision or the arbitral award is binding for both parties. In the arbitral agreement, the parties already bind themselves that the decision given by the arbitrator shall be binding for us without any delay. It is a fast remedy and the decision is easy to enforce. There are very limited circumstances that can set aside the arbitral award.

Advantages of Arbitration

There are many advantages of signing an Arbitration Agreement, so let us discuss each of them:

It is more flexible than simple court proceedings. The arbitration laws are not as complicated as litigations. The parties can choose the procedure for the arbitral proceedings.
Arbitration is a fast remedy whereas the court took more time to give the judgement in the case as the courts are already overburdened due to lots of cases.
These are less expensive and time-saving.
An arbitrator is an expert in the field of that specific case. He can deal with the case with more experience as compared to the normal judge. The arbitrators are professionals in their fields and it builds the confidence of the parties to the case.
There is no need to go for further appeal after the arbitral award as this is binding for both parties.
The decision of the arbitrator is unbiased.
It provides the confidentiality of the case and related oral and documentary evidence of the case.

What is the arbitration agreement?

The arbitration agreement is the agreement between the parties where they add the clause of arbitration. Now, with this agreement, all future disputes shall be resolved with the process of arbitration. The parties are allowed to add the basic conditions in the agreement related to the arbitrator or arbitration proceedings such as:

Parties are allowed to add the name or qualification of the arbitrator
They can fix the number of arbitrators in the case
Parties can add the language of the court
Right to choose procedure and venue of for arbitration proceedings

The arbitration agreement binds the parties in the contract and the arbitral award shall be binding for both parties.

Who is an arbitrator?

The arbitrator is assigned to the arbitration proceedings by the parties to solve their dispute. There is no qualifications are given for the arbitrator in the act, any person who is sound of mind can be the arbitrator. The reason behind this is that the parties who are facing the issue are appointing the arbitrator with their free consent.

The arbitrators must be in odd numbers. People usually choose one or three arbitrators for the resolution of disputes. The reason for this is to make the decision more powerful and correct. Suppose there are two arbitrators and both are giving different decisions, the dispute can never be resolved. But in the case, if there are 3 arbitrators, where the decision of 2 arbitrators is the same that decision will consider as the final decision of the arbitral tribunal.

The parties are free to add the name and qualifications of the arbitrator for the disputes. But if the parties fail to appoint the same arbitrator at the time of the conflicts, due to any reasons, the parties can ask the court for the appointment of an arbitrator for the case. The court will provide the arbitrator who will be well educated and experienced in the specific field of the case. For instance, if the case is related to money, the court may appoint a person who is an expert in the financial area.

Arbitration Process

Preliminary Agreement

For the arbitration process, it is crucial to have an agreement between both parties. For this, a contract or agreement should be made in which there should be a clause of arbitration, only then you can solve your dispute outside the court. Today, all financial companies use arbitration. Because it saves both their money and time.

Selection of arbitrator

The arbitrator is a third person who listens to the arguments and disputes of both parties and gives a decision. This arbitrator is selected by both the parties. He can be any mutually trusted person of both parties. Nowadays, big financial companies keep retired judges as their arbitrators.

Hearing and evidence

Whenever there is a dispute between the two parties, their hearing is done outside the court by the arbitrator in which the arbitrator listens to both the parties. In this, both the parties are also given a chance to present their evidence.

Decision and award

After looking at the arguments and evidence of both parties, the arbitrator makes the decision. Both the parties have to accept this decision. This decision is in written form and this decision is called an award.

Types of arbitration

Institutional arbitration

It is run by an institution. In this, an institution handles and makes all the rules and procedures according to itself.

Ad hoc arbitration

This arbitration is created and run by both parties, in this everything like rules and procedures is made by both parties.

Arbitration in India is governed by the Act 1966. Act 1966 has been amended in 2019. Arbitration in India started with Panchayats. Panchayats are also a type of arbitration in which decisions are made outside the court.

Where is arbitration mostly used?

Commercial disputes

Arbitration is mostly used in commercial disputes.

Construction disputes

Nowadays arbitration is also used in construction disputes. Most of the disputes in construction are due to the Quality of materials and timely payment. Arbitration is very good for resolving these disputes because time and money are very important for construction work. If the construction case goes to court, it takes a lot of time due to which the construction work also stops in the middle.

Limitations of Arbitration

Many cases such as criminal cases are not resolved through arbitration. There is an arbitrator in it who is chosen by both the parties, sometimes he gives a decision in favour of one of them, due to which arbitration can sometimes lack impartiality.

What is an Arbitral award?

An Arbitration award is the final decision of the arbitrator in the case solved with the help of arbitration. This decision is binding on both the parties, and it is given by the arbitrator after hearing both the parties. There is no need to go to the court for the Arbitration award because the arbitrator helps to solve the case outside the court.

Characteristics of Arbitration Award

Final decision

This award shows the final decision given by the arbitrator by listing both parties and checking all the oral and documentary evidence. This decision cannot be altered once the case has been decided.

Binding nature

This award shall be binding for both the parties in the disputes. It means, that both parties must accept this decision. This can only be challenged in the court on some terms. If one party does not follow this decision or award, then the other party can ask the court to punish the defaulted party.

Written and signed

The award provided by the arbitrator is written and signed by the arbitrator. If there is more than one arbitrator, then most of the arbitrators can sign this award. The parties shall also sign this award by giving their consent that they will take the actions according to the award provided by the arbitrators.

Reasoned award

The award must have written the reason upon which the award is given. The reason written in the award shows the transparency in the decision-making process. This reason or award can be used as evidence in the court in future if either party tries to break the conditions and decision mentioned in this award.

Content

The award shall contain the names and addresses of the parties and full details of the arbitrators. It also covers the issue between the parties with the decision given by the arbitrator. The parties decide the process of arbitration according to their choice so there is no need to write down the process. If the parties are ready to choose any procedure, then the arbitrator will mention that in the document.

Grounds to challenge the Arbitration award

Although the Arbitration award is binding for both parties still there are some Grounds on which an Arbitration award can be challenged. The parties who are not happy with the decision of the arbitrator can challenge the award on these grounds.

Public policy violation

As per the laws, the award given by the arbitrator should not be contrary to the public policies which are existing at present. Though the arbitrator takes care of this but still if there is any conflict between the award and policies, then this award can be challenged in the court.

Issues related to jurisdiction

The law has provided some restrictions on the award which can be provided by the arbitrator.

The capacity of the party is one of the major challenges which says that at the time of the decision, both the parties must be capable of doing the agreement.
The arbitration agreement made by the parties must be aalid, it should not contain cillegal conditions
The scope of the arbitration process is bind to civil cases only. The arbitrator has no jurisdiction to give a decision in the cases which are not civil disputes.

Procedural Irregularities

Improper notice of appointment of the arbitrator and proceedings.
If the arbitrator has not given the right to present the case to one party and has not followed the principle of natural justice.
If the parties have chosen the procedure for the process of arbitration but the arbitrator did not follow that procedure.

Arbitrator Misconduct

The arbitrator was biased in nature or doing partiality with either party.
The arbitrator has failed to maintain the confidentiality in the dispute.

Award given fraudulently

If the arbitrator is found guilty of giving the award fraudulently.
The decision of the arbitrator was given undue influence or the corruption activity was found.

Legal errors

If there are legal errors in the award given by the arbitrator.
If the arbitrator did not follow the present laws or give the decision without going into details of the case.

Incapacity of party

If either of the parties to the dispute is not capable of any reason, the arbitration award will be set aside. For example, in the case of a minor or a person who is not a sound mind.

The arbitration agreement is not valid

If the arbitration agreement is not valid, either party can challenge the arbitral award.

Notice to the parties

If either of the Party not given proper notice of arbitral proceedings, the party which has not given the notice can ask for the set aside the arbitral award.

Nature of dispute

During the time, of the arbitration agreement, the parties may specify the cases in which they will take the help of arbitration. But, If the nature of the dispute is not falling within the terms of arbitration the award will be set aside. For example, the murder case cannot be solved in the arbitration tribunal.

Arbitral procedure

If the arbitral procedure was not according to the procedure mentioned by the parties in the agreement or at the time of the appointment of the arbitrator, the award can also be set aside on the basis that the procedure was not in accordance with the agreement.

Conflict with the public policy

If the award given by the arbitrator is conflicting with the public policies, the award can be set aside.

These are some important points on which the arbitral award can be set aside.

FAQ related to the arbitration law

What is Arbitral tribunal?

The arbitral tribunal or the arbitration tribunal is penalised of one or more arbitrators who are used to settle the dispute by the arbitration. There must be an odd number of arbitrators in the tribunal. The members selected for the arbitration tribunals are chosen by the parties to the dispute.

What is the work of the arbitrator?

The arbitration has to solve the dispute by hearing both the parties and their witnesses and finally pass the arbitral award which is suitable for the dispute. An arbitrator is an independent person appointed by the parties to the dispute who has similar powers as the judge in his case. He can ask for the pieces of evidence and collect the pieces of evidence and can also serve the summons for witnesses.

What is the procedure for arbitration?

The process of arbitration tribunal begins as other tribunals or as provided by the parties. In the process, the penal take the evidence and hear the parties and their witnesses and also cross-examine the parties and witness with documents presented as evidence. The arbitration process is faster than simple courts. Generally, the arbitrator passes the award within one year or depends upon the case to case.

Is a decision passed by the arbitrator legally enforceable?

The decision passed by the arbitrator is known as arbitral award and it is binding for both the parties of the dispute as it is passed by the judge of the court. No party can challenge the arbitral award unless on the grounds given under section 34 of the Arbitration and Conciliation Act.

Conclusion

The arbitration law provides the remedies for the parties to solve their disputes besides the court of law. The arbitral courts are semi-courts that are used to solve civil case between parties. The arbitration agreement binds the parties to solve their dispute with the help of arbitration.

The arbitrator is assigned to the arbitration proceedings by the parties which help the parties to solve their dispute, He has the power of the service of summons to the parties and asks them to produce oral and documentary evidence which are necessary for the case. His decision is considered as the arbitral award which shall be binding for both parties.

There are many advantages of the arbitration proceeding which help the parties to save their money and time. The arbitration proceedings are faster than courts and the arbitrator is more capable of giving the decision in the court as he is a specialist in the particular field.