Law of Arbitration: Various Modes of Dispute Resolution
In the realm of PPP and Infrastructure Development, understanding the Law of Arbitration is vital. Explore the nuances of arbitration agreements, appointment of arbitrators, challenging appointments, arbitral tribunal proceedings, awards, and more. Discover different dispute resolution methods like ADR, commercial court, mediation, conciliation, negotiation, and collaborative law. Delve into the essentials of legal actions in courts concerning cause of actions, limitation periods, court jurisdictions, and applicable laws.
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PPP & Infrastructure Development Topic: Law of Arbitration & Project Financing Date:14-10-2022 venue:IIM Shillong P P SINGH LLB, FCA,ACA,B.sc(Hons) 9354605808,9711521060 cappsingh@gmail.com/info@ppsingh.org
Disclaimer Contents and oral discussion are Just a discussion for understanding and could not be considered as opinion for any decision making. Before taking any decision the proper legal expert and other Consultants should be approached. content writer could not be held responsible in any way for any action taken on the basis of explained here
Various modes of dispute resolution Choice - ADR vs Commercial Court arbitration agreement No of arbitrators Appointment of arbitrators . Important point- drafting arbitration agreement Grounds for Challenging the appointment of an arbitrator Proceeding of arbitral tribunal Arbitration award Rectification of award Application for set aside award Appeal Contents
Dispute resolution- arbitration
Court Arbitration- written agreement-section 7 Mediation- mediator just facilitate the negotiation- dispute resolved by party themselves Conciliation-even w/o prior written dispute resolution agreement/clause, it start if one party propose and other party accept for conciliation. Negotiation-no third party intervention required Collaborative law-no third party intervention required Various modes of dispute resolution
Most important for legal action in a court Cause of action Limitation period Jurisdiction of court Applicable laws- lex fori/ substantive law/private international law.
sl.no court Arbitration 1 Judges- no discretion of parties Arbitrator at the discretion of party 2 Language of court As agreed by the parties 3 Place /venue - as per court As agreed by the parties 4 Timing - as per court discretion As agreed by the parties 5 Procedure of proceedings- court discretion and CPC etc As agreed by the parties CPC, indian evidence act not apply. 6 Fee- court fee very high amount As agreed by the parties- schedule 4 if not agreed otherwise for domestic arbitration 7 Long duration Short duration - pleading 6 months+ award 1 year
Arbitration agreement Section-7 of the ACA 1996
Essentials of arbitration agreement Section -7 Agreement by parties to submit disputes( all or certain) may arise in future or already arisen between parties Dispute in respect of defined legal relation - may be contractual or otherwise May be my way of a clause of arbitration in a contract or separate arbitration agreement Agreement in writing
The parties are free to determine the number provided that such number shall not be an even number. Section 10(1) Failing the determination referred to in sub-section (1), the arbitral Tribunal shall consist of a sole arbitrator. Section 10(2) No of arbitrators Section 10 of arbitrators,
person of any nationality may be an arbitrator unless otherwise agreed by parties 11(1) Procedure for appointment- parties are free to agree upon adopting appointment of arbitrator as they like 11(2) If no specified procedure agreement- each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. 11(3) any procedure for in arbitration Appointment of arbitrators . section-11
(a)a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other party; or Appointment of arbitrators- court intervention . Parties Agreed for a procedure for appointment of 3 arbitrators but failure to comply section-11(4) (b) agree on the third arbitrator within 30 days from the date of their appointment, the two appointed arbitrators fail to Appointment on application of a party 1. by arbitral institution designated by SC ,if international commercial institution 2. By HC in other cases
Section procedure 11(5)- no agreed Section 11(6)- agreed procedure Appointment of arbitrators- court intervention . Agreed appointment u/s11(2) but upon procedure for Party agreed for sole arbitrator- no specific agreed u/s11(2)- request made but by one party for appointment but failure by the other party 30 days of receipt of request- appointment according to section 11(4) procedure. procedure 1. A Party failed to act according to procedure for appointment 2. Parties failed to as per agreed procedure arbitrators failed to appoint third arbitrator 3. person, including an institution, fails to perform any function entrusted to him or it 4. appointment institution designated by SC ,if international commercial institution 5. By HC in other cases to appoint within or appointed section-11(5) &(6) Not a delegation of judicial power by court.-s-11(6) Appointment on application of a party by arbitral 1. by designated international institution By HC in other cases arbitral institution SC commercial by ,if 2.
Before appointment of arbitrator- ensure Requisite qualification of arbitrator as per agreement Disclosure in writing about relationship of proposed person 1. Arbitrator's relationship with the parties or counsel- schedule -5 2. Relationship of the arbitrator to the dispute 3. Arbitrator's direct or indirect interest in the dispute 4. Previous services for one of the parties or other involvement in the case 5. Relationship between an arbitrator and another arbitrator or counsel. 6. Relationship between arbitrator and party and others involved in the arbitration 7. Other circumstances Independent and impartial arbitrator/arbitral tribunal Parties have trust and confidence in arbitrator whether appointment by parties or court Application is not pending with other arbitral institution note:Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to different arbitral institutions, the arbitral institution to which the request has been first made under the relevant sub-section shall be competent to appoint.
An application made under this section for Time limit for disposal application for appointment of arbitrator Section 11(13) of appointment of an arbitrator or arbitrators shall be disposed of by the arbitral institution within a period of 30 days from the date of service of notice on the opposite party.
Fee of arbitral tribunal Section 11(14) The arbitral institution shall determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule. Provisions of section 11(14) not applicable o international commercial arbitration or other arbitration where parties agreed for fee as per rule of arbitral institution
Rate of fee in 4 th schedule as under: Sum in dispute Model fee Up to Rs. 5,00,000 Up to Rs. 5,00,000 Rs. 45,000 plus 3.5 per cent of the claim amount over and above Rs. 5,00,000 Above Rs. 5,00,000 and up to Rs. 20,00,000 Rs. 97,500 plus 3 per cent of the claim amount over and above Rs. 20,00,000 Above 1,00,00,000 Rs. 20,00,000 and up to Rs. Rs. 3,37,500 plus 1 per cent of the claim amount over and above Rs. 1,00,00,000 Above 10,00,00,000 Rs. 1,00,00,000 and up to Rs. Rs. 12,37,500 plus 0.75 per cent of the claim amount over and above Rs. 1,00,00,000 Above 20,00,00,000 Rs. 10,00,00,000 and up to Rs. Rs. 19,87,500 plus 0.5 per cent of the claim amount over and above Rs. 20,00,00,000 with a ceiling of Rs. 30,00,000 Above Rs. 20,00,00,000
Important point- drafting arbitration agreement
whether to adopt the rules of an established arbitral institution, such as the ICC or LCIA, to govern the arbitration procedure. - benefit - well-established and predictable procedure. Language-submissions and evidence -save interpretation costs. appointment of arbitrators & tribunal ( value of dispute amount)- odd- appointment procedure General arbitrator or qualifying criteria for arbitrator - consent of arbitrator after appointment Consolidation and joinder- to avoid conflicting arbitration award on similar facts translation and Number of arbitrators/arbitral
Multi-tiered clauses- step wise process in dispute situation- starting from from negotiation to mediation or conciliation and finally to arbitration. Don t overcomplicate the arbitration clause- simpler to cover any dispute and best suited to the parties Choice of the seat or legal place of the arbitration-only the venue is mentioned- venue shall be considered as the seat for arbitration Governing law and Jurisdiction-seat of an arbitration proceeding determines the governing law Award to be final and binding - it should be effective ,
unilateral arbitration clause in agreement
Meaning of unilateral arbitration clause Dispute Resolution Clause that confers a dedicated right to elect a specific Dispute Resolution Mechanism, ADR or court but option is conferred upon only one party Asymmetric ( One Sided ) Dispute Resolution Clauses Whether valid and enforceable in india?
TRF Ltd. v Energo Engineering Projects Ltd [(2017) (SC) 8 SCC 377] -not valid DK Gupta vs. Renu Manjulal( Delhi HC)-2017 SCC OnLine Del 12385] Party waived section 12(5)- valid- Delhi HC held that section 11(2) of the Arbitration and Conciliation Act, 1996, empowers the parties to agree on a procedure for appointment of an arbitrator. Same view confirmed in Bhayana Builders Pvt. Ltd. v. Oriental Structural Engineers Pvt. Ltd. [(2018) 249 DLT 619] Whether unilateral arbitration clauses are enforceable in a court of law? Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. [(2017) 4 SCC 665]- YES - if selection from broad panel of arbitrators,The Court upheld the right of one party to appoint a panel of arbitrators. Haryana Space Application Centre (HARSAC) and Anr. vs. Pan India Consultants Pvt. Ltd. & Anr.
Whether unilateral arbitration clauses are enforceable in a court of law? Perkins Eastman Architecture DPC vs. HSCC (India) ltd.[2019 (9) SCC OnLine SC 1517]- sequitur unilateral appointment of an arbitrator by one party was invalid in law. Lite Bite Foods Pvt. Ltd. v. Airports Authority of India (Bom HC).[2019 SCC OnLine Bom 5163] - invalid Central Organisation For Railways Electrification v. M/s ECI-SPIC-SMO-MCML (JV) 2019 SCC OnLine SC 1635]- valid even panel cosnsisting of employee and past employee.
Avoid -litigation Provision for appointment of arbitrators from broad panel Both parties have to appoint at latest one arbitrator and third arbitrator by already appointed arbitrators. Seventh schedule - truly independent arbitrator
A person who is ineligible to be appointed as an arbitrator, does not stand an opportunity to appoint an arbitrator. Perkins Eastman Architecture DPC vs. HSCC (India) ltd.[2019 (9) SCC OnLine SC 1517] Applicant respondent (HSCC) entered into a contract which mentioned arbitration as the preferred mode of dispute redressal. It mentioned respondent s Chief Managing Director (CMD) will appoint a sole arbitrator in case a dispute arises between the contracting parties. (Perkins) and the that the
The Court held that a panel of five arbitrators appointed by the Ministry of Railways, comprising their current and past employees, was valid and enforceable. Since the other party could choose an arbitrator from the panel, the power to appoint an arbitrator by one party was counterbalanced by an equal power in favour of the other party. Central Railways Electrification v. M/s ECI-SPIC-SMO-MCML 2019 SCC OnLine SC 1635] Organisation For (JV)
How to challenge the appointment of arbitrator ?
justifiable doubt as to independence or impartiality of such person 12(3)] Does not possess qualification as agreement. [S-12(3)] Person having parties, counsel or subject matters of dispute falls under any categories specified in schedule -7 of the ACA [S-12(5)] [S- Grounds for Challenging the appointment of an arbitrator- section 12(3) the requisite arbitration per relationship with
Procedure for Challenging appointment of arbitrator-section 13 Procedure to be adopted as agreed by the parties -section 13(1) if no agreed procedure-by way of written statement along with reasons within 15 days of becoming aware of constitution of arbitral Tribunal What's the appointment challenged- firstly the validity of appointments will be decided by the arbitrator if the challenge of appointment of arbitrator failed, proceedings shall continue and arbitrator shall pronounce Arbitration award Remedy available- against the arbitration award aggrieved party may move to court under section 34 for set aside of the arbitration Appeal under section 37 if court set aside the arbitration award under section 34, the court will decide wheather arbitrator is entitled for free or not? Section 13(6) -generally no refund of fee already received by arbitrator.
Termination of mandate and substitution of arbitrator- section 14 & 15 mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, 1. he becomes de jure or de facto unable to perform his functions 2. for other reasons fails to act without undue delay; 3. he withdraws from his office for any reason 4. parties mutually agreed to the termination of his mandate. If still arbitrator continue in his office remedy for aggrieved party is to apply to the Court to decide on the termination of the mandate. mandate of an arbitrator terminates, a substituted arbitrator shall be appointed according to the rules applicable to the appointment of the arbitrator where an arbitrator is replaced,any hearings previously held may be repeated at the discretion of the arbitral tribunal. an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal unless otherwise agreed by the party.
claimant shall file Statement of claim, issue, statement of facts, supporting evidence documentary or otherwise- section 23 Respondents shall Submit defence statement, counterclaim, set off of claim, supporting evidence is documentary or otherwise section 23 Proceedings of arbitration tribunals-1 Time period for completion of pleadings claim, defence statement etc- 6 months from the appointment of arbitrator -section 23(4) Date of commencement of proceeding - date on which request for referring the matter for arbitration received by the other party section 21 Language- any language agreed by the party section 22 Provisions of CPC 1908, Indian Evidence Act shall not apply - section 19
Proceedings of arbitration tribunals-2 Amendment or supplementary claim or defence allowed during the course of arbitral proceedings unless parties agreed otherwise or tribunal consider its inappropriate to allow the amendments or supplement the claim/ defence Section 23 (3) equal opportunity to the party- section 18 procedure for proceedings- as agreed by the parties - section 19(2)/(3) place of arbitration/ seat - it section 20 meeting for hearing, examination of witness or expert, inspection of documents or goods or other property- at any place section 20(3)
Proceedings of arbitration tribunals-3 [section 24] Oral hearing Except where parties agreed for no oral hearing All documents information supplied to, or applications made to, the arbitral tribunal by one party communicated other party, statements, or Oral hearing for the presentation evidence adjournments unless cause is made out, and may costs exemplary costs on the party adjournment without sufficient cause.] sufficient time notice of hearing - and of any meeting of the tribunal purposes inspection documents, or other property. advance other of sufficient while issuing impose including arbitral shall hearings, appropriate stage of the proceedings, on a request by a party tribunal oral at shall be the oral allowed argument, arbitral for to hold the of of an seeking Also evidentiary on which the arbitral tribunal may making its shall be communicated to the parties. expert report or document any goods rely decision in
claimant fails to communicate his statement of claim - arbitral tribunal shall terminate the proceedings ( similar provision in CPC) respondent fails to communicate his statement of defence-arbitral tribunal shall continue the proceedings without treating the failure allegations-effect may be ex parte award Consequence of default of a party without showing sufficient cause as admission of the Tribunal shall have the discretion to treat the right of the respondent to file such statement of defence as having been forfeited- effect may be ex parte award Section 25 A party( may be claimant or respondent) fails to appear at an oral hearing or fail to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.
Appointment of one or more expert to report to it on specific issues to be determined by the arbitral tribunal, Direction to a party to furnish expert any relevant information or to produce, or to provide access to, any relevant documents, property for his inspection. if a party so requests or if the arbitral tribunal considers expert shall,participate in an oral hearing A Party is entitled to to put questions to him and to present expert witnesses in order to testify on the points at issue. Cost of expert to be born by the parties by way of deposit of amount u/s 38. to the Appointment of Expert by arbitral tribunal to report and assist the arbitrator goods or other it necessary, the Section 26
Court arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the Court for assistance in taking evidence application shall specify 1. names and addresses of the parties and the arbitrators, 2. nature of the claim and the relief sought, 3. evidence to be obtained; 4. name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required; 5. description of any document to be produced or property to be inspected 6. The Court may order that the evidence be provided directly to the arbitral tribunal. 7. Court may issue processes to witnesses assistance in taking evidence Section 27 Processes" includes summonses and commissions for the examination of witnesses and produce documents summonses to Non compliances shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation tribunal of the arbitral
International commercial arbitration- applicable rules of law shall be: Place of arbitration is situate in India accordance with designated by the parties as applicable to the substance of the dispute; B. substantive law of the designated and not to its conflict of laws/rules; C. If rules of law not designated by the parties, tribunal considers to be appropriate in the circumstances surrounding the dispute. 1. A. in Rules applicable to substance of dispute . section 28 the rules of law country 2. Place of arbitration is situate in India- not covered by indian ACA
Rules applicable to substance of dispute- Domestic arbitration section 28 Domestic arbitration- applicable rules of law shall be: A. place of arbitration is situated in India: arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India; Note: arbitral tribunal shall decide ex aequoet bono or as amiable compositeur only if the parties have expressly authorised it to do so. While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.
Time limit for award Section 29A other commercial arbitration shall be made by tribunal within a period of 12 months from the completion of under section 23(4). than international international arbitration expeditiously as possible and endeavour may be made to dispose of the matter within a period of 12 months from the date of completion pleadings commercial as the arbitral date pleadings of For pleading 6 months from from the date the arbitrator or all the arbitrators, as the case may notice, in writing, of their appointment. of be, received
Decision making by the arbitral tribunal arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members unless otherwise agreed if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.
parties may, agree in writing to resolve dispute by fast track procedure Parties may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties. Dispute decided on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing; arbitral tribunal shall have power to call for any further information or clarification oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal considers it necessary Fast track arbitration Section 29B Tribunal adopt such procedure as deemed appropriate for expeditious disposal of the case. Time period for award- 6 months from the date the arbitral tribunal enters upon the reference. Extra fee as decided by parties and tribunal Failure of award -within 6 months- normal procedure apply
CONTENTS OF ARBITRATION AWARD signatures of the majority of all the members Reasoned award date and the place of arbitration as determined in accordance with section 20 signed copy shall be delivered to each party. interim arbitral award on any matter with respect to which tribunal may make a final arbitral award. interest, at such rate as it deems reasonable, on the whole or any part of the money, sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest @2% higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment. costs of an arbitration as per section 31A Award in writing SECTION 31
Within 30 days from the receipt of the arbitral award a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award; What to do if any mistake in award or interpretation of particular portion of award required ? Section 33 A party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. arbitral tribunal considers the request justified, it shall make the correction or give the interpretation within 30 days from the receipt of the request and the interpretation shall form part of the arbitral award.
It Settlement Section 30 is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute agreement of the parties, the arbitral tribunal may use mediation, procedures at any time during the arbitral proceedings to encourage settlement. if requested by the parties arbitral tribunal may record the settlement in the form of an arbitral award on agreed terms. arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute. and, with the conciliation or other
final arbitral award or by an order of termination according section 32(2) claimant withdraws his claim, parties agree on the termination of the proceedings arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible. Termination of proceedings Section 32
IF NOT SATISFIED WITH AWARD? APPLICATION FOR SET ASIDE U/S 34 PREFER APPEAL U/S 37
party making the application establishes on the basis of the record of the arbitral tribunal that party was under some incapacity arbitration agreement is not valid under the law not given proper notice of the appointment of an arbitrator unable to present his case during proceeding arbitral award beyond the scope /or on matter not referred to arbitrator - if different matters part of award may be set aside composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, subject-matter of the dispute is not capable of settlement by arbitration arbitral award is in conflict with the public policy of India award is vitiated by patent illegality appearing on the face of the award: APPLICATION FOR SET ASIDE AWARD SECTION 34 award shall not be set aside merely on the ground of an erroneous application of the reappreciation of evidence. law or by TIME PERIOD FOR APPLICATION - 3 MONTHS( 6MONTHS J&K ,Ladakh) + 30DAYS EXT ALLOWED
award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; In contravention with the fundamental policy of Indian law in conflict with the most basic notions of morality or justice. Award is in conflict with the public policy of India SECTION 34
Application within 3 months( 6 months J&K , ladakh UT )+30 days ext. time application under this section shall be filed by a party only after issuing a prior notice to the other party application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. Of prior notice to other party application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice is served upon the other party. PROCEDURE &TIME LIMIT FOR DISPOSAL OF SET ASIDE APPLICATION SECTION -34
