Businesses that expand into international markets are susceptible to legal disputes brought on by differences in laws, rules, and corporate procedures as well as errors of thought, language, and cultural hurdles. Companies that deal with cross-border disputes may require the assistance of legal specialists to address such challenges.
Arbitration has become a widely accepted form of dispute settlement on a global scale in the last several decades. It is becoming the main technique for resolving business conflicts. The combination of global economic expansion and technological advancements has made arbitration a successful dispute resolution process.
This article examines at the notion of international business arbitration, how it functions, and how it sets itself apart from other means of settling disputes.
OVERVIEW:
The process of resolving disputes between parties in various countries by an arbitrator or panel of arbitrators is known as international commercial arbitration. It entails bringing the disagreement before arbitration rather than a court of law. A ruling on the dispute will be binding and made by the arbitrator or panel of arbitrators.
To further break it down, it is comparable to a worldwide courtroom where corporations battle it out is international commercial arbitration. We have arbitrators who decide conflicts in secret rather than gavels and powdered wigs. You don’t have to reveal your cards to everyone, much like in a refined game of poker
The swift advancement of international commercial arbitration has compelled national legal systems to accommodate it and establish supportive legislative frameworks that enable it to thrive. It has been correctly stated that there was a competitive phase between the legislature and judiciary in the 1980s and 1990s as they all attempted to draw in more international arbitration. The two primary outcomes of this competition were the modernization and liberalisation of arbitration systems and the transfer of international arbitration’s advantageous status to domestic courts.
HISTORICAL DEVELOPMENT:
The Jay Treaty (1794) between Great Britain and the United States, which established three arbitral commissions to settle disputes and questions coming out of the American Revolution, is credited with helping to shape modern international arbitration.
Ad hoc arbitration courts were created in the 19th century as a result of several arbitral agreements that were reached, allowing them to handle a large volume of claims or particular instances. The most important was the arbitration of Alabama claims under the terms of the Treaty of Washington (1871), wherein the United States and Great Britain agreed to resolve disputes resulting from Great Britain’s failure to uphold its neutrality during the American Civil War.
Established in The Hague in 1899, the Permanent Court of Arbitration is made up of a panel of jurists nominated by the member nations, from which the claimant governments choose the arbitrators.
PROCESS FOR INTERNATIONAL COMMERCIAL ARBITRATION:
International Commercial Arbitration is like a global courtroom where businesses duke it out. Instead of powdered wigs and gavels, we’ve got arbitrators who settle disputes privately. Here’s how it works-
- AGREEMENT: An arbitration agreement is normally signed by the parties to the dispute at the start of the international commercial arbitration process. The rules of procedure, the selection of the arbitrator or arbitrators, and the arbitration location are all outlined in this agreement, detailing the terms and conditions of the arbitration process.
- ARBITRATORS: The arbitration procedure might start after the agreement is signed. Once the arbitrator or panel of arbitrators has heard all of the arguments and supporting documentation, they will decide how to resolve the disagreement. The only situations in which this decision can be contested are those in which there was a significant irregularity in the arbitration procedure or in which the conclusion is against public policy. Otherwise, this decision is final and binding.
- GOVERNANCE: The United Nations Committee on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration is one of the international conventions and national legislation that govern international commercial arbitration. A thorough framework for the management of international business arbitration procedures is provided by this model law.
- HEARING, DECISION AND AWARDS: During the arbitration hearing, both parties submit their witnesses, evidence, and arguments. Final Decision: Based on the facts submitted, the arbitrator or panel renders a legally binding judgement. Award: An arbitral award, which serves as documentation for the ruling, is enforceable in national courts.
GENERAL PRINCIPLES:
- MUTUAL CONSENT: Mutual consent is necessary for the mutual process of arbitration. Only when the parties have decided to start arbitration can it begin. If applicable, the parties may use a submission agreement to add any arbitration clause they see fit. Additionally, the parties cannot end the arbitration agreement on their own.
- CONFIDENTIAL PROCESS: The confidentiality of the matter is particularly protected under the arbitration rule. The arbitration procedure protects confidentiality and prevents pointless disputes about the parties and case. Any information disclosed during the process could lead to judgements and prizes. Trade secrets and other sensitive material submitted to the arbitration tribunal may, under certain conditions, be subject to access restrictions set by the parties.
- CHOICE OF ARBITRATOR: The arbitrator that each party selects should be someone they believe is qualified to hear their case. Every party designates one arbitrator if a three-person arbitration panel has been selected by the parties. Next, the two arbitrators who were chosen will have to agree on the presiding arbitrator. In addition, the centre has the authority to directly select members of the arbitration tribunal or recommend a suitable arbitrator with the necessary experience.
ADVANTAGES:
- Compared to typical litigation, arbitration is frequently quicker and more effective. This is due to the fact that arbitration procedures are typically more flexible and less formal than court proceedings, which may be expensive and time-consuming.
- By using arbitration, the disputing parties can select the arbitrator or panel of arbitrators of their choice. This entails that the parties may choose an arbitrator or arbitrators with subject-matter experience related to the issue, resulting in a better informed and equitable conclusion.
- Compared to typical litigation, arbitration is frequently more discreet. Since court procedures are typically open to the public, confidential information pertaining to the parties to the dispute may be disclosed. On the other hand, arbitration procedures are typically private, allowing the parties to maintain the confidentiality of the specifics of the disagreement.
CASE LAWS:
Enercon (India) Ltd. and Others v. Enercon GmbH and Another [1]:
The Enercon case clarified the Indian courts’ authority to grant such a ruling, addressing the issue of impartiality in international commercial arbitrations. The judiciary issued directives regarding the situations in which it can intervene and emphasised the need for a balance between protecting the independence of arbitration proceedings and guaranteeing effective representation.
This choice prompted parties to choose arbitration over other channels for resolving international disputes and helped to create a more arbitration-friendly environment. It is considered to be a landmark case in the ambit of international commercial arbitration.
Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. (BALCO case) [2]
Judge intervention and party sovereignty must be delicately balanced, as highlighted by the BALCO case, a watershed moment in Indian arbitration. The principle of minimal intervention by the judiciary in arbitration proceedings was upheld by the Supreme Court in its decision. The court emphasised that arbitral decisions should be respected unless they are manifestly illegal or against public policy, and it clarified that the scope of judicial review under Section 34 of the Arbitration and Conciliation Act, 1996 is limited.
Shri Lal Mahal Ltd. v. Progеtto Grano Spa [3]:
The subject matter of this case is international commercial arbitration’s internal measures. The Supreme Court expounded upon the authority of Indian courts to provide interlocutory appeals in favour of foreign-sat arbitrations.
Amееt Lalchand Shah v. Rishabh Enterprise [4]:
The question of whether the parties might define the “seat” of arbitration through the arbitration agreement was addressed by the Bombay High Court in this particular case. The court determined the applicable criminal legislation by defining the significance of a seat carrier.
CONCLUSION:
Rapidly expanding economies need a reliable, stable dispute resolution process in order to draw in international investment. Economic actors in India and overseas have developed a strong preference for arbitration as a means of resolving disputes because of the enormous backlog of cases that are waiting in Indian courts.
India has not always adhered to worldwide best practices in arbitration, even though it was one of the founding members of the New York Convention. But there has been a significant change in mindset during the past five years. Courts and lawmakers in India have updated the arbitration laws to reflect global best practices. The pro-arbitration stance of the courts and the enactment of the 2015, 2019, and 2021 Amendment Acts provide grounds for optimism that Indian arbitration law would soon adopt these global best practices.
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Written by Riddhi S Bhora
[1] Enercon (India) Ltd. and Others v. Enercon GmbH and Another (AIR 2014 SUPREME COURT 3152)
[2] Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. (BALCO case) (CIVIL APPEAL NO.7019 OF 2005)
[3] Shri Lal Mahal Ltd. v. Progеtto Grano Spa ((2013) 115 CORLA 193)
[4] Amееt Lalchand Shah v. Rishabh Enterprise (CIVIL APPEAL NO. 4690 OF 2018)
