Commercial Arbitration in India
The Applicable Arbitration Law
The Indian Arbitration and Conciliation Act, 1996 the governing arbitration
statute in India. It is based on the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985.
Previous statutory provisions on arbitration were contained in three different enactments, namely,
the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961.
The Arbitration and Conciliation Act, 1996 has repealed the Arbitration Act, 1940 and also the Acts of 1937 and
Conventions on Arbitration
India is a party to the following conventions:
the Geneva Protocol on Arbitration Clauses of 1923
the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927; and
the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
It became a party to the 1958 Convention on 10th June, 1958 and ratified it on 13th July, 1961.
There are no bilateral Conventions between India and any other country concerning arbitration.
The Types of Arbitrations
The Indian Arbitration and Conciliation Act, 1996 applies to both
domestic arbitration in India and to international arbitration. Section 2(1)(f) of the
Act defines "International Commercial Arbitration" as arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India where at least one of the parties is:
an individual who is a national of, or habitually resident in any country other than India; or
a body corporate which is incorporated in any country other than India; or
a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or
the Government of a foreign country.
Requirements of an Arbitration
Section 7(3) of the Act requires that the arbitration agreement must be in writing.
Section 7(2) provides that it may be in the form of an arbitration clause in a contract or it may be in the form of a separate agreement.
Under Section 7(4), an arbitration agreement is in writing, if it is contained in : (a) a document signed by the parties, (b) an exchange of letters, telex, telegrams or other means of telecommunication, providing a record of agreement, (c) or an exchange of claims and
defense in which the existence of the agreement is alleged by one party and not denied by the other.
In section 7(5), it is provided that a document containing an arbitration clause may be adopted by "reference", by a contract in writing.
Validity of an Arbitration
Section 16 of the Act empowers the arbitral tribunal to rule on its jurisdiction:
Under the Act, the arbitration tribunal can rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for this purpose:
an arbitration clause which forms part of a contract will be treated as an agreement independent of the other terms of the contract; and
a decision by the arbitral tribunal that the contract is null and void will not entail, ipso jure, the invalidity of the arbitration clause.
A plea that the arbitral tribunal does not have jurisdiction will, however, have to be raised not later than the submission of the statement of
defense. However, a party shall not be precluded from raising such a plea merely because he has appointed, or participated in the appointment of an arbitrator.
A plea that the arbitral tribunal is exceeding the scope of its authority has to be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
The arbitral tribunal may, in either of the cases referred to above, admit later a plea if it considers the delay justified.
The arbitral tribunal has to decide on a plea about lack of jurisdiction or about the tribunal exceeding the scope of its authority and where the arbitral tribunal takes a decision rejecting the plea, it shall continue with the arbitral proceedings and make the arbitral award.
A party aggrieved by such an arbitral award is free to make an application for setting aside the award under section 34 of the
Act. Section 34(2)(a) inter alia permits a challenge to an award on the above grounds.
The Indian Arbitration and Conciliation Act, 1996 (No.26
of 1996): Preamble
[16th August, 1996]
An Act to consolidate and amend the law relating to domestic arbitration,
international commercial arbitration and enforcement of foreign arbitral
awards as also to define the law relating to conciliation and for matters
connected therewith or incidental thereto.
WHEREAS the United Nations Commission on International Trade Law (UNCITRAL)
has adopted the UNCITRAL Model Law on International Commercial Arbitration
AND WHEREAS the General Assembly of the United Nations has recommended that
all countries give due consideration to the said Model Law, in view of the
desirability of uniformity of the law of arbitral procedures and the specific
needs of international commercial arbitration practice;
AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980;
AND WHEREAS the General Assembly of the United Nations has recommended the
use of the said Rules in cases where a dispute arises in the context of
international commercial relations and the parties seek an amicable settlement
of that dispute by recourse to conciliation;
AND WHEREAS the said Model Law and Rules make significant contribution to
the establishment of a unified legal framework for the fair and efficient
settlement of disputes arising in international commercial relations;
AND WHEREAS it is expedient to make law respecting arbitration and conciliation,
taking into account the aforesaid Model Law and Rules;
Be it enacted by Parliament in the forty seventh year of the Republic as
Short title, extent and commencement.(1) This Act may be called the
Arbitration and Conciliation Act, 1996.
It extends to the whole of India:
Provided that Parts I, III and IV shall extend to the State of Jammu and
Kashmir only in so far as they relate to international commercial arbitration
or, as the case may be, international commercial conciliation.
Explanation In this sub-section, the expression international
commercial conciliation shall have the same meaning as the expression
international commercial arbitration in clause (f) of sub-section
(1) of section 2, subject to the modification that for the word
arbitration occurring therein, the word conciliation
shall be substituted.
It shall be deemed to have come into force on the 25th day of January, 1996.
Chapter 1 : General Provisions
In this Part, unless the context otherwise requires,
arbitration means any arbitration whether or not administered
by permanent arbitral institution;
arbitration agreement means an agreement referred to in section
arbitral award includes an interim award;
arbitral tribunal means a sole arbitrator or a panel of arbitrators;
Court means the principal Civil Court of original jurisdiction
in a district, and includes the High Court in exercise of its ordinary original
civil jurisdiction, having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the subject-matter
of a suit, but does not include any civil court of a grade inferior to such
principal Civil Court, or any Court of Small Causes;
international commercial arbitration means an arbitration relating
to disputes arising out of legal relationships, whether contractual or not,
considered as commercial under the law in force in India and where at least
one of the parties is
an individual who is a national of, or habitually resident in, any country
other than India; or
a body corporate which is incorporated in any country other than India; or
a company or an association or a body of individuals whose central management
and control is exercised in any country other than India; or
the Government of a foreign country;
legal representative means a person who in law represents the
estate of a deceased person, and includes any person who intermeddles with
the estate of the deceased, and, where a party acts in a representative
character, the person on whom the estate devolves on the death of the party
party means a party to an arbitration agreement.
This Part shall apply where the place of arbitration is in India.
This Part shall not affect any other law for the time being in force by virtue
of which certain disputes may not be submitted to arbitration.
This Part except sub-section (1) of section 40, sections 41 and 43 shall
apply to every arbitration under any other enactment for the time being in
force, as if the arbitration were pursuant to an arbitration agreement and
as if that other enactment were an arbitration agreement, except in so far
as the provisions of this Part are inconsistent with that other enactment
or with any rules made thereunder.
Subject to the provisions of sub-section (4), and save in so far as is otherwise
provided by any law for the time being in force or in any agreement in force
between India and any other country or countries, this Part shall apply to
all arbitrations and to all proceedings relating thereto.
Construction and References
Where this Part, except section 28, leaves the parties free to determine
a certain issue, that freedom shall include the right of the parties to authorise
any person including an institution, to determine that issue.
An arbitral award made under this Part shall be considered as a domestic
Where this Part
refers to the fact that the parties have agreed or that they may agree, or
in any other way refers to an agreement of the parties,
that agreement shall include any arbitration rules referred to in that agreement.
Where this Part, other than clause (a) of section 25 or clause (a) of sub-section
(2) of section 32, refers to a claim, it shall also apply to a counter-claim,
and where it refers to a defence, it shall also apply to a defence to that
Receipt of written communications
Unless otherwise agreed by the parties,
any written communication is deemed to have been received if it is delivered
to the addressee personally or at his place of business, habitual residence
or mailing address, and
if none of the places referred to in clause (a) can be found after making
a reasonable inquiry, a written communication is deemed to have been received
if it is sent to the addressees last known place of business, habitual
residence or mailing address by registered letter or by any other means which
provides a record of the attempt to deliver it.
The communication is deemed to have been received on the day it is so delivered.
This section does not apply to written communications in respect of proceedings
of any judicial authority.
Waiver of right to objectA party who knows that
any provision of this Part from which the parties may derogate, or
any requirement under the arbitration agreement,
has not been complied with and yet proceeds with the arbitration without
stating his objection to such non-compliance without undue delay or, if a
time limit is provided for stating that objection, within that period of
time, shall be deemed to have waived his right to so object. Extent of judicial
Notwithstanding anything contained in any other law for the time being in
force, in matters governed by this Part, no judicial authority shall intervene
except where so provided in this Part.
In order to facilitate the conduct of the arbitral proceedings, the parties,
or the arbitral tribunal with the consent of the parties, may arrange for
administrative assistance by a suitable institution or person.
How to Draft an Arbitration Agreement?
A good arbitration
agreement is one which minimizes complications when a dispute
arise. However, many a times people neglect to pay attention
while drafting an arbitration agreement.
finalizing an arbitration agreement, the terms
should be thoroughly discussed and negotiated to
avoid any misunderstanding at a later stage. Arbitration lawyers from all applicable jurisdictions must be
consulted before finalizing any arbitration agreement..
Arbitration Agreement could result in double jeopardy: arbitration as well as
litigation arising out of arbitration. Therefore, care should be taken to
draft an enforceable arbitration agreement. Lawyers from all applicable
jurisdictions should review the arbitration agreement before its executed
signing an Arbitration Agreement
the following must be properly addressed:
law to arbitration
Be aware of local peculiarities
Survival after Termination
of the main agreement.
The arbitration agreement should be
modified as applicable under different circumstances. One brush
should not paint all the painting.
Model Arbitration Agreement
"All and any disputes arising out of or in connection with the
present agreement shall be finally settled under the UNCITRAL
Model Rules of Arbitration (or another arbitration rules of your
choice) by sole (or three) arbitrator (s) appointed by _________
(an arbitration institute of your choice) in accordance with the
said Rules. The place of arbitration shall be _____. The
arbitration shall be conducted in ______ language. The
arbitration award shall be final and binding. The arbitration
shall be governed under the laws of ______. "
Our arbitration lawyers and arbitrators include those who have
undertaken arbitration in the USA, Europe, and Asia. They understand the multi-cultural and the multi-jurisdictional
aspects of international business in this age of globalization.
They those educated at Harvard Law School,
Harvard University in the USA.
They believe in high moral and legal ethics.
We assist our clients with resolution of
disputes in all areas of general and special practices, including
commerce, finance and industry. Our highly trained & experienced attorneys
endeavor to prevent disputes by ensuring proper documentation and by
tactfully handling the matter. However, in cases where disputes cannot be
prevented, we take utmost care in preparation of our client's case and
ensure that the client gets the best advice and support in resolving their
disputes. Our attorneys are highly experience and has dealt with hundreds
of arbitrations & conciliation in India and overseas, including:
- Preparing and presenting the case
- Domestic and International Arbitration
- International Chamber of Commerce,
Paris Arbitration (ICC)
- American Arbitration Association (AAA)
- Enforcement of Awards