Adr Clinical Course 1.pdf

JAMIA MILLIA ISLAMIA ALTERNATE DISPUTE RESOLUTION DISSERTATION

SUBMITTED BY

SUBMITTED TO

FARHEEN HAIDER SEM.VII SEC.B ROLL NO.12

DR. MADHU SAINI FOL.JMI.NEW DELHI 1|Page

ACKNOWLEDGMENT I have taken efforts in this project. However, it would not have been possible without the kind support and help of many individuals and organisation. I would like to extend my sincere thanks to all of them. I am highly indebted to Mam madhu saini for their guidance and constant supervision as well as for providing necessary information

regarding the project and also their support in

completing the project. I would like to express my gratitude towards my parents and members of jamia millia islamia for their kind cooperation and encouragement which help in the completion of the project. My thanks and appreciations also go to my colleague in developing the project and people who have willingly helped me out their abilities.

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TABLE OF CONTENTS Acknowledgment Index of Authorities. CHAPTER…1 1. Introduction……………………………………………………………9…14 1.1 Traditional ADR methods. 1.2 Arbitration. 1.3 Arbitration and Conciliation Act, 1996: A new era. 1.4 The Arbitration and Conciliation Act, 1996: Major policy issues involved. CHAPTER….2……………………………………………………………….15...23 2 Arbitrators and its Role 2.1 Appointments and qualification of arbitrators. 2.2. Judicial interpretation. 2.3. Summary of the judgment in S.B.P. & Co. v. Patel Engineering Ltd. 2.4.Implications of the decision in S.B.P. & Co. v. Patel Engineering Ltd. 2.5 Accountability of arbitrators 2.6. Issues identified and recommendations with respect to appointments and qualification of Arbitrators.

CHAPTER….3 3.Arbitral Awards…………………………………………………………….24…41 3.1 Procedural justice to parties and legality of arbitral awards.  Venue and language of arbitration. 3.2 Validity of an arbitral award.  Choice of law in Arbitration.  Issues identified and recommendations with respect to legality of arbitral awards. 3.3. Finality and the Enforcement of Arbitral award.  Conditions for enforcement of arbitral awards. 3.4 Grounds for non-enforcement of arbitral awards.  Incapacity of parties and invalidity of arbitration agreement.  Improper composition of arbitral tribunal or violation of the principles of natural justice by the arbitrator. 3.5 Award not becoming final.  Award in conflict with public policy  Issues identified and recommendations with respect to finality and enforcement of arbitral Award.

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CHAPTER….4 4 Dispute settlement through methods of ADR………………………………42..54 4.1 The incentive structure for various stakeholders in arbitration 4.2 Scope and nature of dispute settlement through different methods of ADR.  Conciliation.  Matrimonial disputes.  Intellectual property rights disputes. 4.3 Section 89 of Civil Procedure Code, 1908.  Mediation.  . Incentive structure for various stakeholders in mediation 4.5 Lok Adalat  . Incentive structure for various stakeholders in Lok Adalat. 4.6 Tribunal system in India  Consumer Disputes Redressal Agencies  Ombudsman  Fast track arbitration CHAPTER…..5 5.CONCILIATION………………………………………………………56…81 5.1 Salient Features of Part iii of The Arbitration and conciliation Act 1996. 5.2. Differences between the process of Conciliation and Mediation. 5.3. Conciliation under amended the civil procedure code 1999. 5.4. Conciliator.  Role of Conciliator 5.5. Conduct of Conciliation Proceedings.  Termination of Conciliation Proceedings.  Conciliation under the Industrial Dispute Act. 5.6.Ambiguties found under the Arbitration and Conciliation Act 1996. 5.7. Arbitration and Conciliation (amendment) Bill 2003. CHAPTER…..6 6. Mediation………………………………………………….82...97 6.1 Salem Bar Association case and Mediation Rule 2003. 6.2. Definition and scope of Mediation.  Differences between Mediation and other form of Alternate Dispute Resolution.  Role of Mediator  Mediation Process.  Disputes types suitable for the mediation.

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CHAPTER……..7 7.1 Negotiation…………………………………………….97..114  Meaning.  Procedure.  Advantages.  Disadvantages. 7.2.Internationnal Commercial Arbitration. 7.3. Relationship between National court and International Commercial Arbitration. CHAPTER……….8 Seminar and Arbitral Proceeding Report………………………………….115..125 8.1 The Delhi International Arbitration Centre: A Seminar On Ethics In Arbitration. 8.2 Arbitration Proceedings Before SH. S.M. AGGARWAL, Hon‖ble Sole Arbitrator. CONCLUSION BIBLIOGRAPHY

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INDEX OF AUTHORITIES

1.

Agarwal Engineering Co vs. Technoimpex Hungarian

1977 (4)SCC 367.

Machine Industries Foreign Trade Co. 2.

Ali Shipping Corp vs. Shipyard Trogir

1998(2) AII ER 136 147.

3.

Ali Shipping Corp vs. Shipyard Trogir

1998 (2) AII ER 136.

4.

Atlantic Shipping and Trading Company vs. Dreyfus and (1992) 2 AC 250. Company

5.

Bhatia International v. Bulk Trading S. A.

6.

Bonytbon v. Common wealth

[1951] AC 210 at 219.

7.

Coppee Levalin NV v Ken-Ren Fertilisers and

[1994] 2 Lloyd‘s Rep 109 at 116 (HL).

Chemicals 8.

Food Corporation of India v. Indian Council of

(2002) 4 SCC 105.

(2003) 6 SCC 56

Arbitration 9.

Gurunanak Foundation v. Rattan Singh and Son

(1981) 4 SCC 634.

10.

Haresh Dayaram Thakur vs State of Maharashtra

2000(6) SCC 179.

11.

Hassneh Insurance Co of Israel vs. Steuart J Mew Revue

1986

de l‘ Arbitrage 12.

Hoshhangabad Vs. RS Sharma

13.

In Grid Corporation of Orissa Ltd. v. AES Corp

14.

International Tank & Pipe S.A.K. v. Kuwait Aviation

353 1986 (Lab) .IC 667 (670) SC. (2002) 7 SCC 736. [1955] Q.B.224.

Fueling Co.K.S.G. 15.

K.K. Modi v. K.N. Modi

(1998) 3 SCC 573.

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16.

Konkan Railway Corporation v. Rani Construction Pvt. Ltd.

17.

Konkan Railway Corporation Ltd. v. Mehul

(2002)2 SCC 388. (2000) 7 SCC 201.

Construction Ltd. 18.

Konkan Railway Corporation Ltd. v. Rani Construction

[2000] 8 SCC 159

P.Ltd 19.

Lesotho Highlands Development Authority v Impregilo

[2005] UKHL

Spa and others 20.

London and Leeds Estates Ltd Vs. Paribas Ltd

21.

MacDermott International INC v. Burn Standard CO Ltd.

1995 (1) EG 134.

(2006) 11 SCC 181.

22.

Maula Bux v. State of West Bengal

AIR 1990 Cal. 318.

23.

Mysore Cements Ltd vs. Svedal Barmac Ltd

2003 (10) SCC 375.

24.

National Thermal Power Corpn. v. Singer Co

(1992) 3 SCC 551.

25.

National Thermal Power Corporation v. Singer Co

AIR 1993 SC 998.

26.

ONGC v. Saw Pipes Ltd.

(2003) 5 SCC 705.

27.

Oxford Shipping Co Ltd Vs. Nippon Yusen Kaishs

28.

Philipps v. Philipps

29.

R v. Agricultural Land Tribunal Ex. P. Bracy

(1960) I All ER 518.

30.

Renu Sagar Power Co. Ltd. v. General Electric Co. Ltd.

AIR 1985 SC 1156.

31.

S B P & Co.v.Patel Engineering & Anr

(2005) 8 SCC 618.

1984 (3) ALL ER 835842 (1978) 4 QB 127.

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32.

Salem Bar Association v. Union of India

33.

Shell Egypt West Manzala GmbH & Anor v Dana Gas

(2005) 6 SCC 344. [2009] EWHC 2097.

Egypt Ltd 34.

Sudarshan Trading Co. v. Government of Kerala

35.

Sudarshan Trading Co. v. State of Kerala

36.

Svenka Handles Banker v. Indian Charge Chrome Ltd

(1994)2 S.C.C. 155.

37.

Tans Ocean Shipping Co. Ltd. v. Black Sea Shipping

(1999) 96 Com. Cas. 367 (SC).

Co. Ltd.

(1989) 2 SCC 38 AIR 1989 SC 890.

38.

Thawandas Pherumal v. Union of India

A.I.R. 1955 S.C. 468

39.

Thermal Power Corporation v. Siemens

(2007) 4 SCC 451

Aktiengesellschaft 40.

Venture global Engineering v. Satyam computers

2008(1) SCALE 214.

Services 41.

Wellington Associates v. Kirti Mehta

AIR 2000 SC 1379.

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CHAPTER 1: INTRODUCTION Alternative methods of dispute resolution, popularly known as ADR are necessary. As an alternative to existing methods of dispute resolution such as litigation, conflict, violence and physical fights or rough handling of situations. It is a movement with a drive from evolving positive approach and attitude towards resolving a dispute. Since disputes are inevitable, there is an urgent need to find a quick and easy method of resolution. Dispute blocks development, disturbs the peaceful conduct of human life and hence dispute sustained

without resolution develops into

a conflict beyond control under normal

circumstances. All government, indeed every human benefit and enjoyment, every virtue and every prudent act, is founded on compromise and barter, said Edmond Burke in a speech in the House of Commons, on conciliation with the American Colonies as far back as1775. Dr Dasarathi Rangacharya, a famous poet who translated Divine Vedas into colloquial telugu language says, life is nothing but adjustment or ‗Adjustment itself is life .ADR is not an answer only for the international commercial transactions, state, private or foreign corporation business firms, inter-corporation conflict or inter-country dispute, but also for solving problems of middle class society and conflicts among the poor or conflicts of rich with the poor. ADR should be the solution for social peace. The role of arbitration as one of the ADR methods is now more complex with complicated laws, court interpretations, former judge impositions and interventions of the judiciary at every possible stage of the process despite the reforms in arbitration law. The arbitration part of Arbitration and Conciliation Act 1996 was in use more; conciliation part of it is yet to take off. However most of these times, ADR means only arbitration, which is akin to litigation, almost fraught with similar problems and adversities, on the line of continuum of ADR; arbitration is nearer to traditional and adversarial litigation process than a friendly resolution process. Negotiation /by the parties themselves is the primary method a dispute has to be addressed with, and if any alternative to it is required it must be ‗conciliation‘ or ‗mediation‘. Patties who are unable to solve their problems may seek assistance of an expert or subject specialist or an elderly personality, who with honest, neutral, and impartial facilitating service help achieve the resolution. Negotiation and conciliation are the best, inexpensive, informal 9|Page

and autonomous methods of resolution. One may find some variables of these mechanisms but they are basically built on these two foundations. Even during arbitration, the parties can move on to choose conciliation, if they settle it there is no need to come back to arbitration except for a few formalities. These two reflect self-determination of the parties in tackling their own problems instead of handing over the power to impose a decision on either a private or state authority. Finding fault and guilt may be unnecessary in 90 per cent of disputes, which tend to complicate the issue and block sources of solution. Thus, disputants may opt for resolution by their own consensual processes. Only methods, where the consent of parties has a significant role, are negotiation and conciliation. Chief Justice of India (CJI), Mehta J, referred to arbitration and its difficulties and preferred the other systems such as negotiation and conciliation, either annexed to court or by individual, options. The CJI justified the need to practice alternatives to litigation. He made out an example of a water container with an entry provision where water is received and there is an outlet for the same. Entry point is filing of cases and the exit Point is disposal of cases. The CJI compared the present situation with building pressure inside the water container because of pendency of litigation; He further examined the following questions, with detailed analysis. 1.1 Traditional ADR methods As a matter of fact, ADR has a long tradition in many countries and India too has an age-old tradition of settlement of disputes through mediation and conciliation1 . In ancient India, Panchayats continued as forum of settlement of disputes in rural India. In villages, disputes were not to be taken to law courts; instead they were referred to ‗Panchayats’ consisting of village elders who commanded very high respect. The Village Panchayats were so called because it consisted of five elders who used to decide civil, criminal and also family disputes and they were called ‗Panch Parameswar’. This system worked successfully in the villages, and was independent of the state authority and control. The concept of parties settling their disputes in a binding manner by reference to a person or persons of their choice or private

1

In ancient India there were three categories of arbitration viz., (i) Puga: Board of different sects of tribes (ii) Sreni: Assembly of traders and artisans of different classes (iii) Kula: Meeting point of family ties. This was followed by the Panchayat system.

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tribunals was well known to ancient and medieval India. Appeals were also often provided against the decisions of such persons or tribunals to the court of judges appointed by the king and ultimately to the king himself. However, the law of arbitration, as it is known to modern India owes its elaboration to the British rule in India. With the advent of East India Company rule in India, the British legal system was introduced in our country. They institutionalized the

justice

delivery

system through

the

establishment

of

courts

and

tribunals.

Subsequently inadequacy and inefficiency of the formal court system led to the development of ADR mechanisms getting recognition in India also. The present study does the analysis of the various available modes of dispute resolution mechanisms coming under the purview of ADR. Adjudication of disputes through courts, while unavoidable, does not in every case provide a satisfactory or amicable solution2 .

Arbitration, mediation and conciliation are a few among

the other accepted modes of alternative dispute resolution mechanisms. Even so, a common person, particularly in the rural area, may hardly be benefited by these mechanisms, unless persons who understand his mind-set interact with him in a suitable and congenial environment, to solve disputes with the minimum of costs. Certain kinds of disputes such as matrimonial disputes, family disputes, disputes with neighbors, particularly in rural areas, and several other categories of petty civil and criminal cases, which form a substantial percentage of pending litigation, can be better and more satisfactorily resolved by the processes of mediation or conciliation through intervention of public spirited, respected and senior citizens. 1.2Arbitration Arbitration is adjudication over disputes between parties by a neutral person who has been agreed upon by the parties to be the arbiter and decide upon the matter. The parties are permitted to agree upon the procedure to be followed for such arbitration. In India, the law

2

As has been stated in the previous chapter, despite the working of ADR techniques supplementing the functions of ordinary courts, the data collected indicate huge number of pending cases resulting in

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governing arbitration is the Arbitration and Conciliation Act, 1996 based upon the UNCITRAL Model Law on Arbitration of the year 1985.

In the past, statutory provisions on arbitration were contained in three different enactments, viz., the Arbitration Act, 1940, the Arbitration (Protocol and Convention)Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. The Arbitration Act, 1940 laid down the framework within which domestic arbitration was conducted in India, while the other two Acts dealt with foreign awards. The Arbitration and Conciliation Act 1996 has repealed the Arbitration Act, 1940 and also the Acts of 1937 and 1961, consolidated and amended the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards and also defined the law relating to conciliation. The Arbitration Act of 1996 contains mainly three parts. Part I deals with domestic arbitrations, Part II deals with international commercial arbitrations and Part III deals with provisions as to conciliation. The Act does not define arbitration as such. It merely says that arbitration means any arbitration whether or not administered by a permanent arbitral institution3 . This means that arbitration may be ad hoc 4 or institutional. Institutional arbitration is arbitration conducted under the rules laid down by an established arbitration organization5. Such rules are meant to supplement provisions of Arbitration Act in matters of procedure and other details the Act permit. They may provide for domestic arbitration or international arbitration or for both, and the disputes dealt with may be general or specific in character. In order to facilitate the conduct of the arbitral proceedings, it is provided that the parties or the arbitral tribunal, with the consent of the parties may arrange for administrative assistance by a suitable institution and expressly facilitates the adoption of

3

Section 2(a) of the Arbitration and Conciliation Act, 1996. An ad hoc arbitration is arbitration agreed to and arranged by the parties themselves without recourse to any institution. The proceedings are conducted and the procedures are adopted by the arbitrators as per the agreement or, with the concurrence of the parties . It can be a domestic, international or foreign arbitration. In case of disagreement on the appointment of an arbitrator under ad hoc arbitration cases, Section 11 0f the Arbitration and Conciliation Act‘1996 empowers the Chief Justice of High Court or Chief Justice of India, as the case may be, to appoint the arbitrators. The Chief Justice is also empowered to designate any person or institution to take the necessary steps for the appointment of arbitrators. A scheme made by the Chief justice may designate a person by name or ex-officio or an institution, which is specializing in the field of arbitration. The new provision has really given recognition to the role of arbitral institutions in India 5 International Centre for Alternate Dispute Resolution (ICADR), New Delhi. 4

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institutional rules. Other kinds of arbitration are specialized arbitration statutory arbitration, Compulsory arbitration by Government and permanent Machinery of arbitrators.

1.3 Arbitration and Conciliation Act, 1996: A new era The highly technical and formal procedures of courts have in fact stimulated the need for the less formal and speedy dispute resolution mechanisms. The Arbitration Act, 1940, that had been enacted for the effective and speedy resolution of disputes had become outdated. Its ineffectiveness was emphasized by the Supreme Court of India in Gurunanak Foundation v. Rattan Singh and Sons6 . In the context of liberalization of the economy and globalisation of world markets, the Government of India realized that for the effective implementation of economic reforms in India, it was necessary to 2introduce reforms in the business laws. As part of such an effort, changes were also made in the arbitration law in India. The Arbitration and Conciliation Act, 1996, has been enacted in close similarity with the UNCITRAL Model Law on Arbitration with the objective that, disputes arising in international commercial relations shall be settled in a fair, efficient and expeditious manner 7 . This could be regarded as one reason why the settlement of international disputes through arbitration has got a tremendous impact in these recent years. There is also an opposite view stating that the unification in the arbitration laws has brought about certain practical difficulties in arbitration due to the changing dimensions of global trade8 . Here is an attempt made to analyze these issues with the help of doctrinal study. As has been stated earlier, the 1996 Act tried to reduce the judicial intervention in the arbitration process. Speedy settlement of disputes itself means the absence of long and delaying technicalities of ordinary courts. In the present constitutional set up judiciary plays a vital role in the enforcement of individual rights. The right to go for judicial review is an accepted fundamental right and each party to the dispute has got the freedom to exercise it. The scope and extent of that freedom is

an

important issue in the context of alternate dispute

6

(1981) 4 SCC 634 Konkan Railway Corporation Ltd. v. Mehul Construction Ltd., (2000) 7 SCC 201. 8 Janak Dwarkadas, ―A Call for institutionalised arbitration in India: A step towards certainty, efficiency and accountability‖, (2006) 3 SCC (jour) 1. 7

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resolution mechanisms. Although there is a role for the judiciary in arbitration proceedings9 , it is an accepted fact that over-interference on the part of the judiciary would definitely result in the delay of arbitration process, causing much worry to the disputants. Our experience with arbitration in the context of judicial process had once made the Law Commission of India to propose certain amendments to the arbitration law in India. 1.4 The Arbitration and Conciliation Act, 1996: Major policy issues involved The Indian Arbitration and Conciliation Act, 1996 has consolidated the provisions relating to domestic as well as international arbitration in to one single document10 . The Act contemplates both ad hoc and institutional arbitration that may be accomplished by an agreement between the parties or in accordance with the provisions of the Act. But in practice, it has been proved that since the applicable fields have not been properly demarcated under the provisions of the Act, there are a few grey areas in the Act, which would have definitely invited the attention of the policy makers. While examining the various factors affecting smooth functioning of the Act11 , it can be seen that the jurisdiction of the arbitral tribunal is an important element determining the validity of an arbitral award passed there under12 . Generally speaking, the irregular mode of appointment of arbitrators, their lack of jurisdiction and the element of bias or misconduct on their part can become solid grounds for challenging awards13 . Likewise, the principles of natural justice are the cardinal principles on which the entire arbitration process rests. For this reason, procedural irregularities in the conduct of arbitration and their effect on the validity of final award are also equally important. An arbitral award should be made fulfilling the requirement of fairness. Similarly issues of legality and fairness are also important elements in testing the validity of an award may it be domestic or international. 14

9

See ss. 9 and 11 of the Arbitration and Conciliation Act, 1996 dealing with interim orders by the court and appointment of arbitrators respectively. 10 Part I of the Act deals with domestic arbitrations whereas Part II deals with international arbitrations. 11 The Arbitration and Conciliation Act, 1996. Herein after referred to as the Act. 12 Section 16 of the Act deals with the jurisdiction of the Act to rule on its own jurisdiction. 13 Sections 10, 11 and 12 of the Arbitration and Conciliation Act, 1996. 14 Dhyan Chinnappa, ―Enforcement of Arbitral Awards‖, (2002) 8 SCC (Jour) 39.

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Arbitral awards not falling within the parameters set forth by the Act are easily vulnerable to challenge under the provisions of the Arbitration and Conciliation Act, 1996 15 . In order to have a holistic approach towards these main issues, a detailed analysis of each one of them is imperative.

CHAPTER 2: ARBITRATORS AND ITS ROLE 2.1. Appointments and qualification of arbitrators The appointment of arbitrators is a major step in the arbitration proceedings. So

great

caution is required to be exercised by the parties during the selection of arbitrators. The parties are given the freedom to select the arbitrators of their own choice 16 . If the parties fail to do so, the judiciary is given the freedom to choose arbitrators. The Chief Justice or any person or institution designated by him shall make the appointment upon request of a part17 Again if the parties fail to comply with the agreement under s. 11(2) as to the appointment of a sole arbitrator, within 30 days from the request by the other party, the Chief Justice or a person or institution designated by him can appoint a sole arbitrator upon the request by that party18 . In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than that of the parties 19 . There was a legislative move to replace the words, ‗Chief Justice of India‘ and the words, ‗Chief Justice‘ by the words, ‗Supreme Court‘ and ‗High Court‘ respectively. This would have had the effect of converting the process of appointment of arbitrators from being an administrative act to a judicial one. There is also an argument that it would have further made the arbitration law in India in absolute conformity with the UNCITRAL Model Law as the 15

Id., ss. 34 and 45 Id., s. 11(1) 17 Id., s. 11(4) 18 Id., s. 11(5) 19 Supra n. 34 16

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latter empowers the court to make appointment of arbitrators 20 . Critics‘ felt that such duplication is unwarranted and variations from the international rules should be maintained wherever required21 .

2.2 Judicial interpretation The law provides that the parties are free to determine the number of arbitrators, provided that such number shall not be even number22 . If there are two arbitrators appointed by each of the parties, then the appointed arbitrators are free to appoint a third arbitrator, who shall act as the presiding arbitrator23 . The parties can agree as to the nationality of an arbitrator in their agreement, a person of any nationality can be appointed as an arbitrator.

In Grid Corporation of Orissa Ltd. v. AES Corp24 the issue was regarding the nationality of the presiding arbitrator. Here, the Supreme Court held that, in international commercial arbitration, the presiding arbitrator might be of a nationality other than of the parties. Again the court explained the principal factors behind the appointment of the presiding arbitrator. It was held that the requirement of law is satisfied, (1) if it is actually made, (2) if it is made in consultation between the two original arbitrators and (3) if the Information as to appointment is communicated by both or either of the parties. When an application is made for the appointment of an arbitrator, the court may decide whether the particular clause is an arbitration agreement or not.

The Supreme Court in

Wellington Associates v. Kirti Mehta25 , said that, See. 16 of the Act did not exclude the jurisdiction of the nominee of the Chief Justice of India to decide the question as to the

20 21 22 23 24

Art. 7(2)(b) &11 of UNCITRAL Model Law on Arbitration (1985) Jaya V S. ―Competency and Jurisdiction of Arbitral Tribunals: Some Issues‖, XXVI DLR (2004). Section 10(1) of the Arbitration and Conciliation Act, 1996. Id., at s. 11(3). (2002) 7 SCC 736.

25

AIR 2000 SC 1379.

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existence of a valid arbitration agreement26 . Thus, under Sec. 11 of the Act, it is permissible to decide a question as to the existence or otherwise of the arbitration agreement. This trend was not uniformly found in the subsequent cases as there were cases holding a contrary view also. In Konkan Railway Corporation v. Rani Construction Pvt. Ltd.27 , the Apex Court categorically stated that the power exercised by the Chief Justice in the appointment of arbitrators is an administrative power and not a judicial power. The Court further clarified that the major role of the court at the stage of appointment must be to facilitate the arbitration by helping the parties to select arbitrators and not to decide on the merits of the case or the validity of the arbitration agreement. Food Corporation of India v. Indian Council of Arbitration,28

This view was reiterated in wherein the court held

that legislative intent underlying the Act is to minimize the supervisory role of the courts in the arbitral process and quick nomination or appointment of arbitrator, leaving all contentious issues to be decided by him. Coming to the present position, the Supreme Court apparently acceded to its earlier view taken in the case of Wellington Associates29 by the recent decision in S.B.P. & Co. v. Patel Engineering Ltd.,30 by holding that the nature of power exercised by the Chief Justice in the appointment of arbitrators is of judicial in character and not of administrative nature while overruling the earlier decision in the Konkan Railway case. The present decision has invoked many far-reaching consequences as it has increased the scope of judicial interference with the arbitral proceedings. The current position is unfortunately going against the very objective of minimum judicial interference in the arbitration law as it has opened up a new route for the disputants to the courts by way of an appeal31 . The law laid down in the Konkan Railway case is perhaps preferable to the latest decision in S.B.P. &Co 32 . 26

The Arbitration and Conciliation act, 1996, s. 16 reads,‖ the arbitral tribunal may rule on its own jurisdiction, including ruling on any objection with respect to the existence or validity of an arbitration agreement. 27 (2002)2 SCC 388 28 (2003) 6 SCC 564 29 Supra n 30. 30 (2005) 8 SCC 618. 31 Once the process of appointment of arbitrators by the Chief justice is said to be of judicial nature and not of administrative character, it is amenable to judicial review under Article 136 of the Constitution of India. 32 Indeed the Supreme Court went a step further holding that the Chief Justice would have jurisdiction to determine whether there is in existence a valid arbitration agreement. The court held: ―It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage…He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes

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2.3 Summary of the judgment in S.B.P. & Co. v. Patel Engineering Ltd.

In this case, a constitutional bench of the Supreme Court consisting of seven judges considered the legal issue as to the nature of power exercised by the Chief Justice of India or Chief Justices of the high courts under sections 11(9) and 11 (6) respectively. The findings of the Court were as follows: i. The power exercised by the Chief Justice of the High Court or the Chief Justice of India under section 11(6) of the Act is not an administrative power. It is a judicial power.

ii. The power under section 11(6) of the Act, in its entirety, could be delegated, by the Chief justice of the High Court only to another judge of that court and by the Chief Justice of India to another judge of the Supreme Court. iii. In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated judge would be that of the Chief Justice as conferred by the statute. iv. The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice of the judge designated would within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the arbitral tribunal on taking evidence, along with the merits of the claims involved in the arbitration.‖ The decision makes a significant inroad into Section 16 of the Act which provides that all cont entious issues, relating to the jurisdiction of the tribunal, including with respect to the existence or validity of the arbitration agreement shall be decided by the arbitral tribunal (corresponding to Article 16 of the Model Law)

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be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the Judge Designate.

v. Designation of a district judge as the authority under section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act. vi. Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of section 37 of the Act or in terms of section 34 of the Act.

vii. Since an order passed by the Chief Justice of the High Court or by the Designated Judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court.

viii. There can be no appeal against an order of the Chief Justice of India or a Judge of the Supreme Court designated by him while entertaining an application under section 11(6) of the Act. ix. In a case where the parties have constituted an arbitral tribunal without having recourse to section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by section 16 of the Act.

x. Since all were guided by the decision of this court in Konkan Railway corporation Ltd. v. Rani Construction P. Ltd. [2000] 8 SCC 159 and orders under section 11(6) of the Act have been made based on the position adopted in that decision, it was clarified that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided under section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under section 11(6) of the Act. xi. Where District Judges had been designated by the Chief Justice of the High Court under section 11(6) of the Act, the appointment orders thus so far made by them will be treated as 19 | P a g e

valid; but applications, if any, pending before them as on the date of judgment will stand transferred, to be dealt with by the Chief of the concerned High Court or a judge of that court designated by the Chief Justice. xii. The decision in Konkan Railway Corporation Ltd. v. Rani Construction P.Ltd.33 is overruled.

2.4 Implications of the decision in S.B.P. & Co. v. Patel Engineering Ltd. The decision entails the following consequences like, i. If the order of appointment of arbitrators is made judicial order, it is possible to challenge that order by way of an appeal under Article 136. This will definitely prolong the proceedings at the initial stage of appointment itself.

ii Going in appeal against the order of the Chief Justice of the High Court may not sound realistic. The lawyers and parties might fear that the judge may be prejudiced against them in subsequent cases on account of such a challenge.

iii. The decision has enhanced the scope of judicial intervention in the arbitral process by holding that the court while entertaining an application under section 8 or 11 of the Act can go into the contentious issues apart from deciding the preliminary issues 34 . iv. Consequently, the power of an arbitral tribunal to rule on its own jurisdiction under section 16 of the Act by deciding issues such as, validity of the arbitration agreement, arbitrability of the disputes, competency of the parties etc. has been considerably reduced. As a result of the decision, the referring court has also got the power to decide such issues.

33

[2000] 8 SCC 159

34

Section 8 of the Act talks about the power of the court to refer the parties to arbitration on an application made by the parties in the light of an existing arbitration agreement between them.

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v. The judgment categorically states that the order of appointment under section 11 could only be that of the Chief Justice or any other judge nominated by him, but they may seek opinion of an institution regarding matters of appointment. Here exists confusion regarding the role of an institution or person as mentioned in the Act. As per section 11(7) of the Arbitration and Conciliation Act, 1996, a decision on matter entrusted by sub-sections (4), (5) and (6) to the Chief Justice or the person or institution designated by him is final. In the light of the impugned judgment, it is not very clear that whether the order passed by such a person or an institution would also assume the character of a judicial order whereas the person or an institution need not necessarily be a judicial authority.

vi. As a whole, the decision has the effect of undermining the best objectives of the Act such as speedy and efficacious resolution of disputes, minimal judicial intervention, ensuring party autonomy etc.

vii. Designation of a district judge as the authority under section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act. This may cause difficulties for those parties who live in remote areas or far away from the place where the High Court is situated since they may not have easy an access to the High Court always.

2.5 Accountability of arbitrators The validity of an arbitration agreement determines the jurisdiction of an arbitral tribunal. What the law requires is that there should be an arbitration agreement between the parties to refer the differences or disputes to arbitration35 . When there exists an agreement between the parties to refer the disputes to arbitration and afterwards a dispute arises, the very next step is the appointment of arbitrators as discussed earlier. Now the issue is whether the appointed arbitrators suffer from any kind of disqualification such as bias or lack of qualifications. A person to be appointed as an arbitrator or who has been so appointed is obliged to disclose in writing any circumstances that are likely to give rise to justifiable doubts as to his 35

Section 7 of the Arbitration and Conciliation Act, 1996 reads thus, ―An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not.‖

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independence and impartiality36 . An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or if he does not possess qualifications agreed to by the parties. This means that a party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only by reason of which he becomes aware after the appointment has been made. Thus it becomes clear that an arbitrator must possess integrity and the requisite qualification. He should not act with a mind leading to predisposition towards an issue. He is likely to suffer from bias when his competence, qualification, impartiality or independence is challenged. 2.6 Issues identified and recommendations with respect to appointments and qualification of arbitrators Appointment of arbitrators has become a vital issue in the arbitration process. To ensure minimum judicial intervention at the initial stage of appointment of arbitrators, changes in law and policy are required. To avoid inconsistencies in the appointment procedure of arbitrators, it is suggested that suitable arbitral institutions may be empowered to take the lead in this respect37 . The Court may direct only these accredited institutions to help the parties with the selection of arbitrators of their choice from the panel. This would in a way regulate the unsupervised and unaccountable arbitrations taking place in the country. This calls for an amendment in the existing position of law. When there is a clear proof of bias or misconduct on the part of the arbitrators the courts are given the power to set aside an arbitral award 38 . In such a case, the parties have to wait till the entire arbitration proceedings are over. This would generally result in waste of both money and time39 . This difficulty can be avoided by appointing persons who are known for their integrity and impartiality as arbitrators. Keeping in mind the interest of the business community and the public policy, it is desirable that a proper institutionalized mechanism is set up to ensure accountability of arbitrators and transparency in the arbitration process. In 36

Section 12 of the Arbitration and Conciliation Act, 1996. These institutions may get themselves registered with the Government. 38 Infra n. 65. 39 To have a detailed explanation the meaning of the term, jurisdiction under the Act, the decision in National Thermal Power Corporation v. Siemens Aktiengesellschaft, (2007) 4 SCC 451 may be referred to. 37

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the case of institutional arbitration, after the appointment is made, the institution would keep monitoring the proceedings to ascertain the performance of arbitrators. Generally Rules of these institutions provide for a fee structure that is not based on the number of sittings these arbitrators hold, but fixed for each arbitration. This would definitely resolve the existing problem of arbitrators unnecessarily holding additional sittings and claming their fee on the basis of such number of sittings they hold.

Any kind of misconduct or malafide acts from the arbitrators will definitely vitiate the arbitral award. It is therefore, necessary that there should be an internationally accepted code of conduct for the arbitrators to be observed in resolving the disputes. It is often mentioned that there is overburdening of retired, eminent persons with several arbitration cases at a time. Here, the remedy is that no person should be appointed as an arbitrator, until he has finished the case in his hand. There should also be a reasonable time limit for the completion of arbitration cases. One way of addressing this issue would be to have full-time arbitrators. One may even go as far as to recommend that those arbitrators cannot practise or engage in any other profession simultaneously. This will provide a check on prolonged arbitral process.

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CHAPTER 3: ARBITRAL AWARDS

3. ARBITRAL AWARDS

The decision of the Arbitral Tribunal is termed as 'Arbitral Award'. Arbitrator can decide the dispute ex aequo et bono (in justice and in good faith) if both the parties expressly authorize him to do so. Section 28 of the Arbitration and Conciliation Act,1996 grants autonomy to the parties to choose the substantive law to be applied to ‗Arbitration other than an international commercial arbitration‘ as well as to an ‗international commercial arbitration‘, where the place of arbitration is in India. The Supreme Court of India in Sumitomo Heavy Industries v. Oil and Natural Gas Co Ltd held that, where the parties had made an express choice of Indian law as proper law of the contract, then it would follow that the proper law of the arbitration agreement is also Indian Law. It was held as the arbitration agreement is part of the substance of the underlying contract and terms of arbitration clause are held to be clear in that respect. The provisions has made a vital improvement in making international commercial arbitration considerably more user-friendly and flexible.

In the arbitral proceedings with more than one arbitrator, the

decision of Arbitral Tribunal will be by majority. In Shin-Etsu Chemical Co Ltd.v. Aksh Optifibre Ltd and another , it was held that, in an application for reference rejected on the ground of invalidity of agreement under Section 45 of the Act, the judicial authority is required to pass reasoned order after hearing parties. Impugned order is liable to appeal under Section 50(1) (a) of the Act. 24 | P a g e

3.1 Procedural justice to parties and legality of arbitral awards Aspect of procedural justice is often used as justification for judicial interference40 . According to the Supreme Court, like judges in an ordinary court, the arbitrators are also bound by these rules41 . An arbitral award can be challenged successfully, if it is proved that, there is violation of the principles of natural justice by not giving a notice, or not allowing the other party to present his version of the dispute42 . The term ‗natural justice‘ is a vague term. Its meaning differs from case to case. The different contours of the concept are determined by the judiciary itself43 . Rules of procedure The Arbitration and Conciliation Act, 1996 provides for the determination of rules of procedure for conduct of arbitral proceedings44 . The Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872, does not bind the arbitral tribunal. 45 The parties are given the freedom to agree on the procedure to be followed by the arbitral tribunal. 46 Failing agreement by the parties, the arbitral tribunal may conduct the arbitration in such a manner, as it 40

In Food Corporation of India v. Indian Council of Arbitration, (2003) 6 SCC 564, the court held that legislative intent underlying the Act is to minimize the supervisory role of the courts in the arbitral process and quick nomination or appointment of arbitrator, leaving all contentious issues to be decided by him. The institution opted by the parties shall nominate the arbitrator as sought for by them giving due importance to the procedural rights of the parties. 41 Ibid. 42 Jaya V S, ―Procedural Justice for Parties to Arbitration: Reflections and Perspectives on Indian Arbitration Law‖, XXIX DLR (2007) 43 Maula Bux v. State of West Bengal, AIR 1990 Cal. 318, at p. 334 44 Section 19 of the Arbitration and Conciliation Act, 1996 45 Id.at s.19 (1). 46 Id. s.19 (2).

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considers appropriate.47 The power thus conferred at by the tribunal, should be disclosed to the parties interested.Later these elements were incorporated in the Arbitration and Conciliation Act, 1996 by way of Ss.18, 12 and 24 Arbitration and Conciliation Act, 1996. The tribunal includes

the power to determine the admissibility, relevance, materiality and

weight of any evidence.48 This power may subsequently give rise to judicial review also. Across different countries, the courts have different approaches to procedural justice to parties to arbitration49 . This may cause difficulties for the foreign parties coming to India to settle their disputes.

In Sudarshan Trading Co. v. State of Kerala,50 the Supreme Court has opined that arbitral tribunal will have the power to adopt its own rules for evaluating evidence. It is the sole judge of quality and quantity of evidence. The court has no jurisdiction to substitute its own evaluation of the conclusion of law or fact. Courts in other countries have taken another view in this regard. To give reasons that are inadequate, to act on no evidence or on evidence that ought to have been rejected, and not taking into consideration evidence which ought to have been considered, are viewed as an error of law.

Party autonomy The autonomy of parties to determine the rule of procedure is given special importance by the law. It allows the parties to select the rules, according to their specific wishes and needs. It provides flexibility for solving any procedural question, not regulated by the agreement or the Act. It enables resolution of any procedural difficulty, if any

experienced during

the

course of the proceedings. In National Thermal Power Corpn. v. Singer Co.,51 the court upheld the principle of party autonomy in international business as the guiding principle of the self-regulating mechanism envisaged by arbitration rules of major institutions like ICC.

Venue and language of arbitration 47

Id. s. 19 (3). Id. s. 19 (4). 49 R v. Agricultural Land Tribunal Ex. P. Bracy, (1960) I All ER 518. 50 AIR 1989 SC 890. 51 (1992) 3 SCC 551. 48

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The parties may agree or the arbitral tribunal will decide the place of arbitration and the period of time within which the claims and defences to be filed by the parties. 52 This has brought about inconsistent practices among arbitrators and parties performing under the same set of Rules of arbitration. The arbitral proceedings including hearing and meetings are expected to be held at the place determined by the parties. 53 Failing agreement, the arbitral tribunal is empowered to decide the matter. For consultation amongst its members, for hearing witnesses, experts or parties, or for inspection of documents, goods or other property, the arbitral tribunal may meet at any place it considers appropriate, unless otherwise agreed by the parties.54 In determining the place, the tribunal should take into consideration the circumstances of the case including the convenience of the parties. 55 However, the arbitral tribunal has the discretion to meet at any place it consider appropriate to enable arbitral proceedings being carried out in a manner most efficient and economical. The legal relevance of the place of arbitration is that it determines the international character of arbitration. 56 It is also a connecting factor for the ‗territorial‘ applicability of the law and becomes the place of origin of the award. Apart from this, the place of arbitration has got some factual relevance too. The place should be convenient for the parties and the arbitrators. It should be selected taking into account the availability and the cost of support services needed and the location of the subject matter in dispute. If the arbitrator decides the place of arbitration, without looking into the relevant factors, the parties can approach the court for setting aside the award on the ground of substantial procedural irregularity. As against the usual court procedure, the arbitration does not contain the limitation as to selection of forum. 57 With regard to the language of the arbitral proceedings also the Act gives freedom to the parties to agree upon the language to be used 58 . If they fail, the arbitral tribunal determines the language. Translation of documentary evidence in that language may be ordered to accompany the evidence. Bearing in mind the needs of the proceedings and economy, the arbitral tribunal may consider which of them should be accompanied by a translation into the 52 53 54 55 56 57 58

Id. ss. 20 (1) and 22 (1). Id. S. 23 (1). Id. S. 20 (3). Id. S. 20 (2). Bhatia International v. Bulk Trading S. A., (2002) 4 SCC 105 Krishna Sarma. ―Trans-national Commercial Arbitration in India,‖ (2000) 4 COMP LJ 11 (Jour.). S. 22 of the Arbitration and Conciliation Act, 1996.

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language of the proceedings and may order accordingly. The arbitral tribunal can also determine the possible need for the interpretation of the oral presentations.

The arbitral tribunal must allow the parties to submit their claim and counter claim at the earliest opportunity.59 If there exists circumstances, which requires the parties to give an oral hearing, then the arbitral tribunal must provide it. Non-compliance with such procedures will vitiate the award. Issues identified and recommendations with respect to procedural justice to parties The Arbitration and Conciliation Act, 1996, as it is modeled on the UNCITRAL Model Law has become a statute of international business standards in dealing with arbitration cases. In the era of fast growing industrialization and international commercial trade, there is an imminent need for settlement of disputes at an early date. Over- judicialisation of such disputes in traditional court divides the parties into two enemy camps. Redressal of disputes does not require confrontation, but it requires collaboration, co-operation and mutual trust that are available in arbitration proceeding than in the ordinary courts. The arbitrator, while acting as an impartial judge, has to adhere to certain basic principles such as Audi alteram partem and independence and impartiality. Any deviance from the normally expected standards may vitiate the entire arbitration process.

The setting aside of an arbitral award on the ground of minor procedural irregularities may destroy the objective behind ADR mechanisms. Hence, to satisfy the minimum requirement of procedural fairness it is imperative that the Indian arbitration law is amended to include specific provisions as to maximum time limit for hearing the parties, examination of the documents and passing the final award, with total period not exceeding six months. These 59

Philipps v. Philipps, (1978) 4 QB 127.

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suggestions, if implemented would certainly make India an important venue for international arbitration, as it would really help preventing arbitrators from unnecessarily delaying the process.

3.2 Validity of an arbitral award The validity of an arbitral award depends on many factors. The interpretation of law governing

arbitration,

especially international arbitration assumes great importance in

determining the validity of an arbitral award. Often the arbitrators find it very difficult to come up with an interpretation of law in accordance with the intention of the parties. A common standard cannot be adopted in all cases because that may go against the interest of parties. So the element of fairness depends on the facts and circumstances of each and every case60

The Act provides for limited grounds on which an application for setting

aside an arbitral award can be made61 . Legal validity of an arbitral award mainly depends on the propriety of the substantive law applied to the arbitration, venue chosen for conducting arbitration proceedings, interpretation of contract between parties etc.62 .

Choice of law in arbitration The Indian Arbitration and Conciliation Act, 1996, lays down the rules applicable to the substance of a dispute.63 The enforceability of the award in the national courts also depends on the proper application of the substantive law. As far as India is concerned, in domestic arbitrations, the substantive law shall be law in force in India. 64 In international arbitrations, the parties themselves can choose the applicable law to the substance of the dispute. 65

60 61 62 63 64 65

In K.K. Modi v. K.N. Modi, (1998) 3 SCC 573 Section 34 Thawandas Pherumal v. Union of India, A.I.R. 1955 S.C. 468. Section 28 of the Arbitration and Conciliation Act, 1996,. Id., at s.28 (1) (a) Id., at 28(1)(b)(ii)

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Usually the law here means the substantive law of the country specified by the parties. 66 If the parties fail to designate the applicable law the arbitral tribunal can choose the same.67 The Act also ensures justice and fairness in making the choice of law. The terms of the contract and usages of the trade applicable to the transaction are also given priority in all these cases to ensure that the applicable law is free from any infirmities.68 A study of these provision shows that, the party‘s freedom to choose a particular law for deciding the dispute is restricted in domestic arbitrations. But in international arbitrations, they have been given the freedom to choose the substantive reasons stated in the award, it is not possible to find out whether an award has been passed in accordance with law. The reasons stated should be paper and adequate. To give reasons which are inadequate is an error of law.( R. v. Agricultural Land tribunal exp. Bracy, [1960] 1 All ER 518). At the same time it is to be noted that the arbitral tribunal is not required to give a detailed judgment. (Indian Oil Corporation v. Indian Carbon Ltd., A.I.R. 1988 S.C.1340) law of any country for deciding their dispute. Thus, the scope for challenge against the validity of an award is more with respect to international arbitration as compared to domestic arbitration. Parties’ autonomy in choosing applicable law International Arbitration in the Indian context involves numerous difficulties, one of the most troublesome of which is the substantive law to be applied in a given dispute. The parties may specify the substantive law of the arbitration in their original agreement. ―In general, parties to an agreement containing an arbitration clause have virtually autonomy in selecting the substantive governing law.

Almost any choice of substantive law by the parties is

enforceable, so long as the arbitral award itself is enforceable.69 Once the parties agree as to the law that is to be applied in deciding the dispute, the arbitral tribunal is bound to adhere to it and to give a proper interpretation of that law. Here the issue is that the Indian Arbitrators may not necessarily be conversant with foreign law and practice. This will pose great difficulty in the smooth conducting of the arbitration. In arbitrations other than the international commercial arbitration, neither the arbitral tribunal nor the parties have a choice 66

Id., at s.28(1)(b)(iii). Id.,at s.28(2). 68 Id., at s. 29(3). 69 General Principles of Law in International Commercial 67

Arbitration‖. 101. Harv.L.Rev.1817(1988).

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to decide the substantive law applicable for resolving the dispute. 70 In all such cases, the dispute has to be resolved in accordance with the Indian law for the time being in force, as applicable to the subject matter of the dispute. In international commercial arbitration where the arbitration proceedings are conducted at any place situated in India, the arbitral tribunal shall first ascertain as to whether the parties have by agreement designated the rules of law of any particular country for being applied to the substance of the dispute. Where the parties have chosen to designate the law or legal system of a particular country to be applied by the arbitral tribunal, that law binds it. Generally it is seen that the parties do agree with a substantive law of a particular country as the law to be followed in resolving the dispute. Often a question may arise whether the express mentioning of a particular law made by the parties is in accordance with the general principles of trade. The question of choice of law has become a serious problem affecting the relevancy of international commercial arbitration71 and thereby reducing its importance in the field of international trade. Here it is important that the arbitrators have to be well equipped with the necessary mindset and skills to deal with such issues in an efficacious manner. Parties specifying or not specifying a national law Parties specifying or not specifying a national law may lead to disputes of different types. When the parties clearly designate the substantive law of a particular jurisdiction, there is little room for the application of the general principles of law. In such a situation, the arbitral tribunal also cannot move away from what is intended by the parties. In many of the standard form contracts, the parties expressly provide the law, which is to govern contractual rights and obligations. For example, in a case where an Indian public sector undertaking had entered into a contract with a foreign company and the parties to the contract had expressly stated that the laws applicable to the contract would be the laws in force in India and that the courts of Delhi would have exclusive jurisdiction in all matters arising under the contract; definitely the contract would in all respects be construed and governed according to Indian law.The Supreme Court also has taken the same view in National Thermal Power Corporation v. Singer Co.72 The parties may supplement their choice of a national law with 70

Section 28 of the Arbitration and Conciliation Act, 1996. Dr.K.I.Vibhute, ―International Commercial Arbitration: Some Reflections on its Problems and Perspectives‖, (1995) 1 S.C.C 7(Jour.). 72 AIR 1993 SC 998 71

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reference to some other rules such as general principles of law or law merchant or the law of international trade. Here also the arbitrators have to exercise their discretion to find out the applicable law, which would match with the intention of the parties. Sometimes the agreement may be silent as to the substantive law to be applied in the particular case. In many cases the parties simply are unable to agree on a particular national or non-national law. Arbitrators in such situations have more discretion than in any other case, as they may apply any substantive law that their arbitral rules and other procedural provisions allow. The parties usually agree on the terms of reference to arbitration and even the procedure to be followed by the arbitral tribunals in an international arbitration. But they may keep silence as to the law to be applied in settling the disputes. In the absence of choice of any substantive law by the parties, the arbitrator in some cases may apply the conflict of laws rules they view most appropriate to the particular case. The choice of law can become an important point of issue under four circumstances namely, (1) in the case of the interpretation of an arbitration agreement, (2) in an individual reference to arbitration and the mode of its application, (3) in the arbitral procedure and the law governing it and (4) selecting the law applicable for deciding the dispute. Sometimes, the validity of interpretation of an arbitration agreement itself may be an issue. The submission may take the form of a separate agreement entered into by parties after a dispute has arisen. It is now established that an arbitration agreement is a separate contract distinct from the substantive agreement in which it is usually imbedded. 73 If there is an express designation of the governing law in the arbitration agreement generally that will be determinative. In the absence of an express choice, the proper law will be inferred from the terms and nature of the agreement and the circumstances of the case. Generally the law applicable to the substantive contract will govern the arbitration agreement also. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards,74

provides

that the validity of an arbitration agreement is to be referred to, ―the law to which the parties have subjected it or, failing any indication there on the law of the country where the award is made.‖75

73 74 75

Section 16 (a) The New York Convention, 1958. Article VI (a).

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Issues identified and recommendations with respect to legality of arbitral awards In an international arbitration, many legal issues on the validity of its award may arise, as it contains laws of different countries. In an international arbitration where

the

place

of

arbitration is situated in India, the problems arising out of arbitration may call for the application of any one or more of the following laws.76 (1) Proper law of contract, (2) proper law of arbitral agreement

and (3) law

governing the conduct of arbitration. The arbitrator may also apply a fully non-national standard such as law merchant, standard usages or general principles of law.77 Here also the problem may come, as there are no clearly defined general principles of law or custom or usage in international trade. Here lies the need for developing a coherent set of principles based on published arbitral awards. For that it is necessary to examine the interference made by the courts in ascertaining the legality of such arbitral awards. A comprehensive code of principles enunciated by the courts regarding the principles determining the validity and fairness of an arbitral award may be useful in this regard. Once a dispute has arisen and a party gives notice of arbitration, thereby putting into effect the arbitration agreement, a new set of contractual relationship comes into being, requiring the parties to arbitrate that particular dispute. Under this situation, the arbitration agreement and the individual reference stand on different footing and the illegality of one will not affect the other. Hence the proper law of contract or the system of law with which the contract has a 76 77

J.H.C. Morris et.al., Dicey’s Conflict of Laws, Stevens and Sons Ltd., London (7th edn.-1958). Pp.797-802. Ibid.

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close connection may be taken into account in deciding the legality of the arbitration agreement or individual reference. The law governing the arbitral procedure will usually be the law of the place where the arbitration is held. Sometimes, it may be necessary to determine

the arbitral procedure law prior to the commencement of the arbitration

proceedings themselves. If the agreement does not specify the site of the arbitration, the problem can arise. In such cases, the court may come up with the proposition that the proper law of the agreement would apply. 78 In the absence of an express choice, the proper law is the legal system to which the contract is most closely connected. 79 Under the UNCITRAL Model Law, there are express provisions in this regard.80 Another important issue is regarding the interpretation given by the courts regarding the applicability of provisions under Part I of the Act to international arbitrations81 . The Supreme Court has interpreted the 1996 Act to the effect that even international arbitrations taking place in India, the same would be treated as a domestic arbitration and in such cases Part I of the Act would apply82 . This would invariably curtail certain benefits attached with a foreign award under the New York convention like awarding cost for successful party in case of any frivolous challenge against enforcement of the award. In the light of the recent judicial interpretations on the applicability of Part I to foreign awards83 , it is recommended that a legislative amendment providing for cost to the affected party may be introduced in the Arbitration and Conciliation Act, 1996. 3.3 Finality and enforcement of arbitral awards Under the present law, there is a presumption of finality of an award.

In domestic

arbitration, the awards are enforceable as decrees of the court due to this presumption of finality. But this is not the case with international or foreign awards. In an international arbitration issues relating to different national laws will come into play. As a result, during the enforcement process, it has to get through a number of hurdles 84 . The law specifically says about certain conditions under which, the court can intervene in the enforcement process 78

International Tank & Pipe S.A.K. v. Kuwait Aviation Fueling Co.K.S.G., [1955] Q.B.224. Bonytbon v. Common wealth, [1951] AC 210 at 219. 80 UNCITRAL Model Law, Art 28(1). 81 Bhatia International v. Bulk Trading S. A., (2002) 4 SCC 105. 82 Ibid. 83 Venture global Engineering v. Satyam computers Services, 2008(1) SCALE 214. 84 Garry B Born, “International Commercial Arbitration”, Transnational Publishers and Kluwer Law International (New York)(2nd Edition – 2001) 79

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of an arbitral award. Although there is uniformity in the conditions for enforcement at the international level, the interest of individual nations outweighs such uniformity.

Conditions for enforcement of arbitral awards

The UNCITRAL Model Law, which is adopted in India, makes the enforcement of foreign awards easier. It states, ―an arbitral award irrespective of the country in which it was made shall be recognized as binding upon an application in writing to the competent court and shall be enforced subject to the provisions of this articles and of article 36‖.85 Likewise the case of other arbitral Institutions also. The aim of the 1996 Act is to minimize the scope and extent of judicial intervention in arbitration matters86 . The court has adhered to this principle in interpreting the contract and the arbitration clause in it as seen in a number of cases. Yet in a number of other cases the court has taken a contrary view. For example, in Bhatia87 International v. Bulk Trading S. A125, the court refused to accept the contention that an award made in a non-convention country88 could not be enforced in India and observed that a party could not be left completely remediless in such situations. It was further held that the provisions of Part I of the Arbitration and Conciliation Act, 1996 would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I of the Act. Though the decision seems to be practically good, still there is no consistency among the various high courts as evident in a number of conflicting judgments. In a recent decision, a two-judge 85 86 87 88

The UNCITRAL Model Law, Arts. 35 and 36 Section 5 of the Arbitration and Conciliation Act 1996 Sudarshan Trading Co. v. Government of Kerala, (1989) 2 SCC 38 New York Convention of 1958.

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bench of the Supreme Court reiterating the decision in Bhatia International held that an award made in England through an arbitral process conducted by the London Court of International Arbitration, though a foreign award, Part I would be applicable to such an award. Hence the courts in India would have jurisdiction both under section 9 and section 34 of the Act and entertain a challenge to its validity89 .

3.4 Grounds for non-enforcement of arbitral awards It is generally presumed that arbitral awards are binding and become final on the persons between whom it is made.90 However, there are a few specific grounds on which the enforcement of the arbitral awards may be refused. They are the following.

Incapacity of parties and invalidity of arbitration agreement Incapacity of the parties is a valid ground for refusal of enforcement of arbitral awards. Generally the incapacity of the parties is to be determined in accordance with the law applicable to the parties or in the absence of any indication thereof, according to the law of the place of arbitration. Same is the case with the law to be applied for determination of the validity of the arbitration agreement. The Supreme Court in Svenka Handles Banker v. Indian Charge Chrome Ltd.91 held that the right to foreign arbitration is an indefeasible right of the parties in which the court does not have any discretion. For getting a reference for arbitration, the parties have to put their material before the court and the court has to record its finding as to the capacity of the parties thereon.92 If the agreement is such that it is not capable of being performed, the court

89 90 91 92

Venture Global Engineering v. Satyam Computers Services, 2008 (1) SCALE 214. S. 46 of the Arbitration and Conciliation Act 1996. (1994)2 S.C.C. 155. Renu Sagar Power Co. Ltd. v. General Electric Co. Ltd., AIR 1985 SC 1156.

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may not refer the parties to arbitration. Incapacity does not mean impossibility. It implies that performance is impracticable from a reasonable man‘s point of view.

Incapacity of the parties to perform an agreement may happen when the contract is frustrated. Frustration occurs whenever law recognizes that without default of either party a contractual obligation has become incapable of being performed, because the circumstances in which the performance is called for would render it a thing radically different from which was

undertaken by the contract. This doctrine does not apply to self-induced frustration. It is applicable when the impossibility is caused

by external circumstances beyond the

contemplation of the parties93 .

Improper composition of arbitral tribunal or violation of the principles of natural justice by the arbitrator

Enforcement of an arbitral tribunal can be opposed on the ground that the composition of the arbitral tribunal was not in accordance with the agreement or with the law of the county where the arbitration took place. Generally the law which would apply to the filling of award, its enforcement and its setting aside would be the law governing the agreement to arbitrate and the performance of the agreement. Similarly, an arbitrator is guilty of misconduct if he acts in apparent violation of the rules of natural justice to the detriment of either party. Lack of opportunity or notice may be a ground for refusal of enforcement. The person alleging must establish that he did not have ‗proper notice‘ which was adequate or of sufficient for preparing. 3.5 Award not becoming final

93

S.A. Tiewul, ―The Enforcement of Arbitration Agreements and Awards‖, Vol.2, The University of Ghana law Journal, 162 (1974).

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Enforcement of a foreign award may be refused, on the request of the party if he proves that the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which or under the law of which country, that award was made. The parties anticipate maximum expertise and expediency on the part of the arbitrators while deciding a dispute. If it is not reflected in the award, then the court can exercise its power of judicial scrutiny during the process of enforcement. If a party has made an appeal regarding the competence of the arbitrator or any defect in the arbitration procedure, before the prescribed authority of the country where the award is made, or the time for making such an objection or appeal has not expired, the award cannot be enforced. It would be binding if such objection has been rejected or such time has expired. 94 This matter was further discussed in Harendra H. Metha v. Mukesh H. Mehta. The Court identified the following ingredients, 1. The award should be made on an arbitration agreement governed by the New York Convention or the Geneva Convention and not by the Indian Law. 2. The agreement involved must be an agreement considered as commercial under the law in force in India. 3. The award must be made outside India. However in another case, the Supreme Court has observed that, an award on the arbitration agreement governed by law of India, although the dispute was with a foreigner and the arbitration was held and made in a foreign country was not a foreign award. 95 Award in conflict with public policy One of the major grounds for setting aside an award is issue relating to public policy which may not be the same in India and in other countries.‖ The Act does not define ―public policy‖ and therefore it has been ruled by the courts that what would constitute public policy is a matter dependent upon the nature of the transaction and the statute 96 . The interpretation given

94 95 96

Tans Ocean Shipping Co. Ltd. v. Black Sea Shipping Co. Ltd. (1999) 96 Com. Cas. 367 (SC). National Thermal Power Corporation v. Singer Co ., AIR 1993 SC 998. Ibid.

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by the courts to the term public policy has been generally criticized as leading to excessive judicial interference with arbitration process and awards 97 . It is true to certain extent that the Court‘s intervention has also not been able to do much in resolving the issue effectively. 98 There are instances wherein the court has appreciated the fact that the 1996 Act makes provision for the supervisory role of the courts and for the review of the arbitral awards only to ensure fairness. This has been further explained by the Supreme Court in MacDermott International INC v. Burn Standard CO LTD99 that the supervisory role is to be kept at a minimum level and interference is envisaged only in case of fraud, bias, violation of natural justice etc. Interference on ground of patent illegality is permissible only if the same goes to the root of the matter, and a public policy violation should be so unfair and unreasonable as to shock the conscience of the court. The issue as to public policy is still being treated as a controversial one. To resolve the problem, it is suggested that a better understanding of the law and practice relating to transnational public policy issues may be desirable for both the arbitrators and judges. Whereas in ONGC case, one more ground was introduced along with the above three, i.e., if the award is patently illegal it can be set aside on the ground of violation of public policy within the meaning of section 34(2)(b)(ii) of the Arbitration and Conciliation act, 1996. Critics view it as a bad decision on the ground that the same law would be applied in an international arbitration also. In the light of the fact that in ONGC case, both the parties were Indians and arbitrated the matter in India, it is felt that the fear is misplaced. See also, Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445.As per this decision, the award must be in accordance with the agreement of the parties and the agreement of the parties must lie within the parameters prescribed by the non-derogable provisions of Part I of the Act. This seems to be contrary to the earlier decision in Narayan Pasad Lohia v. Nikunju Kumar Lohia, (2002) 3 SCC 572, wherein it was held that if the award passed in accordance with the agreement of the parties, it may not be set aside by the court. Issues identified and recommendations with respect to finality and enforcement arbitral awards

97

ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705. Renusagar Power Co. Ltd v. General Electric Co., (1994) Supp. 1 SCC 644. 99 (2006) 11 SCC 181. 98

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Parties choose arbitration, though not very cost effective always, to avoid contentious litigation in courts100 . The scheme of the Act of 1996 clearly demonstrates that the Act is intended to provide for greater autonomy in the arbitral process and limits judicial intervention to a narrow circumference than the position obtained under the previous legal regime101 . India‘s experience with arbitration for last so many years has proved the fact that what the present system requires is a supportive role of the court rather than a supervisory role.102 Whether the courts have reminded themselves of this note of caution while dealing with the arbitral process and particularly, the arbitral awards is a question that probably cannot be satisfactorily answered in the affirmative 103 . The recent decisions of the Supreme Court also add to this point104 . The provisions dealing with domestic arbitration and international arbitration though intended to be operative in different fields, there exist certain practical difficulties due to the overlapping nature of certain provisions in the two parts. For example, section 9 of the Act dealing with the power of the court to pass interim orders during the pendency of the arbitration matter has invited the attention of jurists and lawyers after the controversial decisions in Bhatia international105 and Global Engineering106 cases. The view taken by the court in these cases is that even for international arbitrations held in India, Part I of the Act dealing with domestic arbitration would apply107 . This has in fact opened a floodgate for judicial intervention in the arbitral process. Hence, it is suggested that there may be a change in the present Act so that inconsistencies and overlapping provisions can be rectified. Ambiguities in legislation would invariably slow down the processes envisaged under it. Same is the case with the vague provisions under the Arbitration and Conciliation Act, 1996 also. If these defects go uncorrected, the common fear of arbitrators ruining the finances and commerce of the parties may also become a reality. 108 Therefore it is suggested that there is an urgent need to introduce a few changes in the Act as mentioned hereunder. The presence of an institution to keep vigilance over arbitration process assumes 100

Sanjay P Gogia, ―Need for a new International Court for Enforcement of International Commercial Arbitral Awards‖ Indian Journal of International Law, p. 78 101 D.K.Bebber, ―The Arbitration Law in India‖, Chartered Secretary, December (1996). 102 Ardy International (P) Ltd. v. Inspiration Clothes and U, (2006) 1 SCC 417. 103 A. K. Ganguli, ―Emerging trends in the enforcement of arbitration awards‖, 50 JILI (2008), p. 57 104 S B P & Co.v.Patel Engineering & Anr, (2005) 8 SCC 618. 105 Supra n. 114. 106 Supra n. 116. 107 section 34 108 Jaya V.S, ― Finality and Enforcement of Foreign Arbitral Awards: Reflections on Indian Law‖, Asia Law Review Vol. 2, (2007).

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importance here, as that would ensure a minimum level of accountability and fairness in arbitration in accordance with the legislative mandate. Thus, it is clear that when arbitration is conducted in accordance with the established principles of justice and in compliance with the well-drafted rules of an institution there are fewer chances of parties complaining about lack of fairness in the arbitral process. This can definitely help the parties in avoiding the delay by getting the problems connected with enforcement to be remedied at the earliest.

Under the present law, the parties even after getting the arbitral award passed without any delay have to wait for a long time, if the opposite parties raise a claim as to its nonenforcement. It is often seen that the unsuccessful party challenging the awards resulting in undue hardship for the winning party. To remedy this defect, it is possible that a provision may be made to the effect that the challenging party has to deposit certain amount of sum as a security against the stay proceedings. The court may also be empowered to pass appropriate orders against parties filing frivolous and vexatious complaints. A summary way of proceedings may be introduced in the Arbitration Act to enable the court to deal with such applications as in the case of special statutory tribunals.109

109

CESTAT constituted under the Central Excise Act, 1944 and Customs Act, 1962.

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CHAPTER 4: DISPUTE RESOLUTION THROUGH ADR

4.1 The incentive structure for various stakeholders in arbitration ―Arbitrate and don‘t litigate‖ shall be the principle in mind while going for an alternate dispute resolution mechanism to resolve disputes. On the one hand there are horror stories of arbitrations being delayed for years by the parties fighting through the courts in an attempt to delay an inevitable result. On the other hand it is quite natural that the parties may want minimum judicial interference on certain occasions to allow a smooth process. Lawyers and businessmen are frequently criticized for utilizing judicial interference in arbitration process. From the point of view of parties to arbitration it can be seen that most of the areas, where there is an unnecessary delay in the arbitration process, have a close connection with the conduct of arbitrators. Any kind of misconduct or malafide acts from the arbitrators will definitely vitiate the arbitral award. It is therefore, necessary that there should be an internationally accepted code of conduct for the arbitrators to be observed in resolving the disputes. On the basis of that, the court can decide the fairness in the award made. The arbitrators should adhere to those standards, which are expected out of them. The arbitrators should act as officers discharging the public function of dispensation of justice110 . It is the case with lawyers too. A feeling of responsibility should be there in the minds of lawyers. Unnecessary adjournments and enormous sittings of arbitration should be 110

Jaya V S., “Legality and Fairness of Arbitral Awards”, AALCO Quarterly Bulletin, No. 3, p. 278(2006)

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curtailed. Both the arbitrators and the lawyers are paid normally on the basis of number of sittings they hold and appearances they make. A provision may be made in the Act providing for a fixed fee for arbitrators. They should not be paid on the basis of number of sittings as it may provide an incentive for them to have additional sittings, which will further delay the process. So a fixed fee for arbitrators will certainly help improvement in the system.

From the arbitrators‘ point of view it is felt that lack of proper infrastructure and training offered to arbitrators are frequently cited as the reasons for weakening of the system. Lack of accountability on the part of ad hoc arbitrators also contributes to this cause. A separate Bar for full- time arbitrators who have been trained by the accredited national arbitral institution may be useful in this regard. Taking into consideration the socio-economic conditions peculiar to India, it is strongly felt that progress could be perhaps achieved in making the institutional arbitration more popular, effective and cheaper by setting up high quality arbitral

institutions

of international standard in India 111 . These arbitral institutions shall be

given the power to appoint arbitrators, as they are well versed in the matter of arbitration both domestic and international. This will definitely help the trading industries also. These institutions should improve upon their rules to make it in conformity with the international standards. These institutions may work

out

the

modalities

for developing a proper enforcement

mechanism, which is more in the nature of self-regulatory. This may also enhance the uniformity

in

arbitration

laws

at

the international level. This would definitely help the

business community in achieving the objectives of Indian arbitration law and the promotion of international trade.

4.2 Scope and nature of dispute settlement through different methods of ADR Under this head the various types of cases, which can be effectively handled through Conciliation, mediation and other forms of ADR are studied. The study aims at enhancing the scope and nature of known methods of ADR and also to explore the possibility of tailoring new ADR techniques to novel types of disputes. 111

Ibid. 43 | P a g e

Conciliation The proceedings relating to conciliation are dealt under sections 61 to 81 of Arbitration and Conciliation Act, 1996. This Act is aimed at permitting mediation conciliation or other procedures during the arbitral

proceedings to encourage settlement of disputes. This Act

also provides that a settlement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal. Conciliation shall apply to disputes arising out of legal relationship, whether contractual or not and to all proceedings relating thereto 112 . Unlike an arbitrator, a conciliator does not give a decision but his main function is to induce the parties themselves to come to settlement. An arbitrator is expected to give a hearing to the parties, but a conciliator does not engage in any formal hearing, though he may informally consult the parties separately or together. The arbitrator is vested with the power of final decision and in that sense it is his contribution that becomes binding. In contrast, a conciliator has to induce the parties to come to a settlement by agreement. A party initiating conciliation can send to the other party a written invitation to conciliation113 . Conciliation commences when the other party accepts in writing this invitation. If it does not accept it, then there will be no conciliation114 .

If the settlement is product of conciliation, with all the formalities of

reducing it into writing and authenticated by the conciliator, on a stamped paper, it will be an award and thus a decree, which could be executed immediately115 . Non- compliance would lead the party affected to file execution petition straight. Matrimonial disputes In any matrimonial suit, before proceeding to grant any relief, it shall be the duty of the court in the first instance, if it is possible to do so consistently with the nature and circumstances of the case, to make every endeavour to bring about reconciliation between the parties116 . However, the reconciliation cannot be applied in any proceedings wherein relief if sought on any of the grounds specified in Clause II to VII of sub-section (1) of Section 13 of the Hindu 112 113 114 115 116

Section 61 of the Arbitration and Conciliation Act, 1996. Id., at s. 62. Ibid. Id., at s. 73 and 74. Section.23 (2) of the Hindu Marriage Act, 1955

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Marriage Act, 1955. For the purpose of aiding the court in bringing about such reconciliation the court may, if the parties so desire or if the court thinks it just and proper so to do, adjourn the proceedings for a reasonable period of not exceeding 15 days and refer the matter to any person named by the parties in this behalf or to any person nominated by the court if the parties fail to name any person, with directions, to report to the court as to whether reconciliation can be and has been effected and the court shall in disposing of the proceedings have due regard to the report. The Preamble of the Family Courts Act, 1984 itself contains the obligations on the Family Court to endeavour to effect a reconciliation or settlement between the parties to the family disputes117 . Intellectual property rights disputes Disputes on intellectual property rights generally assume international character because of the involvement of different legal systems. As far as India is concerned, the arbitrability of domestic intellectual property claims is not very well settled. The specific legislation dealing with intellectual property rights do not contain any legislation

are

also

silent

as

to

provision

for

arbitration118 .

These

the enforceability of arbitral awards involving the

findings of validity of a claim over an intellectual property or the right against its infringement. There are no reported decisions of Indian courts regarding the arbitrability of intellectual property disputes. At the international level, many countries have already explored the possibility of introducing an alternate dispute resolution mechanism like arbitration in settling the IPR issues. The disputes relating to infringement, licensing as well as validity of an IPR claim can be arbitrated in US.119 Similarly it is possible in Germany and U.K. Looking at the complexity and technicality of the IPR disputes it is suggested that the arbitral institutions with their own panel of experts in IPR Laws would be a better option to take the 117

The proceedings of the court at the initial stage will be informal. Section 9 of the Act envisages the method to be adopted for a settlement. The role of family court's judge is very important here. He is expected to give an impression to the parties that he is their well wisher and his endeavour is to settle the dispute amicably. The Judge of a family court shall assist and persuade the parties to come to a settle ment rather than sit at their loggerheads. In this connection he may take the help of experts and counsellors. 118 Patent Act, 1970 or the Copyright Act, 1957 119 Rhone-Poulenc Specialties Chimiques v. SCM Corp., 769 F 2d. 1569 (Fed. Cir. 1985).

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lead.

Such institutions should

provide

congenial environment, infrastructure, special

assistance etc. for the smooth conduct of the arbitral proceedings. Generally, the know-how contracts dealing with the transfer of the right to exploit the intellectual or industrial secrets of inventions play a decisive role and sometimes even more important than the underlying patent. It is therefore natural that in disputes where there is a necessity of preserving secrecy, parties will always want to have a dispute resolved by arbitration and not by the court. The reason being that in the courts where a larger group of persons dealing with the secret, the risk of disclosing the secrets increases considerably and more importantly court proceedings are open to the public. Thus they are accessible to everybody, including the competitors. This can be avoided in arbitration or like ADR proceedings for the reason private

forums

chosen

by

parties

and

maintain

that

they

are

utmost confidentiality throughout the

proceedings120 . It would be more appropriate if separate provisions suggesting the use of ADR mechanisms in resolving the disputes were made within the legislation dealing with IPR. Furthermore, the courts must suggest the parties to opt for the various ADR mechanisms available for bringing their IP disputes for resolution. 121 4.3 Section 89 of Civil Procedure Code, 1908 The Civil Procedure Code 1908 was also amended in the year 2002 by reintroducing section 89. A recent judgment of the Supreme Court has added more meaning to it. 122 This Section provides for

judicial

settlement

of

disputes

through arbitration, conciliation or court-

annexed mediation123 . Though the legal community at large welcomed the reintroduction of section 89 in to the code of civil procedure, it is also not free from criticisms. At a national consultation meet of district and sessions judges from all across the country arranged in New Delhi to solicit their views regarding the merits and demerits of the section 89 of CPC,

120

H Stumpf,‖Arbitration and Contracts Concerned with Scientific. Technical and Research work including agreements on the use of inventions, know-how, etc.‖ A Report presented to the Fourth International Arbitration Congress at Moscow in October 1972. 121 Courts have the power to refer the disputes to ADR techniques under the provisions of S. 89 of Civil Procedure Code 1908. 122 Salem Bar Association v. Union of India, (2005) 6 SCC 344. 123 Section 89 of CPC reads thus: ― Where it appears to the court that there exists elements of a settlement which may be acceptable to the parties, the court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the court may reformulate the terms of a possible settlement and refer the same for-Arbitration, Conciliation, Judicial settlement including settlement through Lok Adalats Mediation.

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following factors were identified as the reasons for its failure. The consultation really helped in coming up with meaningful suggestions for improving the system.

Issues identified and recommendations with respect to section 89 of CPC

Lack of proper and effective training to be offered to judicial officers in ADR techniques and lack of necessary infrastructure for mediators and mediation centres are the major hurdles in the path of implementation of section 89 CPC. Training of judges has to be properly institutionalized in order to achieve desired results. At the same time, lack of interest and cooperation among lawyers towards settlement of disputes through ADR mechanisms is another difficulty in the enforcement of section 89 CPC. Over burdening of Judicial Officers with routine court work gives very little time for them to give proper attention to resolution of disputes using ADR techniques. Lack of awareness among public and lawyers towards various modes of ADR also leads to prolonging of proceedings by the parties. Non– Cooperation from insurance companies and other similar departments, both governmental as well as of public sector undertakings is also cited as one of the reasons for nonimplementation. Reluctance on the part of judges to refer the matter to ADR modes and nonappearance of one or both the parties also cause undue delay. On account of their personal reasons like fee/commission and other vested interests, quite often the lawyers tend to delay the proceedings. It is very difficult for the judge to convince a litigant without the support of lawyers. At present ADR techniques are useful in matrimonial and motor accident cases. Section 89 of the Code of Civil Procedure, 1908 may be

made applicable before the institution of suit

through a panel of lawyers. The provision may be made compulsory for all civil cases and in such cases party should be directed to take recourse to Section 89 CPC. Family disputes and small-scale commercial disputes are generally settled by ADR in a short period. More incentives for cases settled under Section 89 and disposal shall be credited to judges‘

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norms. Mediation may be made compulsory and specific rules for Section 89 CPC should be framed. Mediation centres shall be set up at district and High Court levels under the supervision and support of respective high courts. Mediation Rules shall be framed by the high courts ensuring

full

compliance 124

Association case

with

directions

of

the

Supreme

Court

in

Salem

Bar

. Trial court may be given more authority to compel the parties for a

possible settlement, as at present it is not a condition precedent to follow section 89 CPC. Parties should be made to give reasons in writing on affidavit if they do not agree with a proposed resolution formulated by the court.

There is no time frame for completion of ADR proceedings. It is desirable that the law may be changed to introduce a limited timeframe for the completion of the proceedings. The stage at which a matter can be referred to ADR techniques shall be specifically included under the section. The parties to the disputes shall be allowed to exercise their wisdom and discretion in choosing the appropriate mode of settlement. The changes may include the provision as to conducting arbitration, mediation or conciliation through recognized institutions accredited with the government125 . The court may refer the case to

these well-established institutions for an easy judicial settlement with help of trained

mediators or conciliators in their panel. This would definitely result in enhancing the scope of ADR proceedings under section 89 of CPC. 4.4 Mediation In general terms, mediation is the negotiation facilitated by a third party. It is a private, voluntary, informal non-binding and cost effective process, which provides an environment for constructive communication. The core value in mediation is that the process provides the parties with an opportunity to negotiate, converse and explore options aided by a neutral third

124

Salem Bar Association v. Union of India, (2005) 6 SCC 344. These accredited institutions that are registered with the government may only be directed by the court to take up matters coming under section 89. The parties may choose the procedure to be followed according to their convenience. Under the strict rules of the institution, the parties may resole their disputes in a more efficacious and speedy manner. 125

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party, the mediator, to exhaustively determine if a settlement is possible. As a whole in mediation, the disputes are getting dissolved rather than getting resolved. It was also opined in the consultation meet that ADR through mediation is moving very satisfactorily and successful. It not only resolves the particular dispute referred to mediation but also the present as well as future disputes. It focuses on past and future relations between the parties126 . Parties feel free to reveal facts to neutral mediators as the entire process maintains confidentiality. There is no rigid framework of rules for mediation. It is a very flexible process. A person who is acceptable to both the parties would serve as mediator. It is important to decide on the cost of the mediation at the beginning itself. The Mediator should indicate the possible cost and obtain the consent of parties to share the cost equally. If not, the cost of mediation would become an issue of conflict to be mediated between the mediator and the party.Though not much accredited, negotiation can also be termed as a kind of mediation for certain reasons127 . Incentive structure for various stakeholders in mediation Mediation has now become a frequently used method of ADR for the reason that it gives number of incentives to both the parties and mediators. From the point of view of parties to court-annexed mediation under section 89 CPC, it is always cost effective as compared to court litigation. It is generally offered free of cost to promote out of court settlements. In noncourt annexed mediation, although the parties have to pay certain sum as mediator‘s fee, it may be nominal as compared to their business and other personal interests salvaged through the process of mediation. Moreover, the common fact that in mediation, the disputes are getting dissolved and not resolved provides an incentive to parties to settle their disputes in a harmonious way as compared to contentious litigation in the courts. In mediation, since the mediator persuades the parties to settle their differences in an amicable and acceptable manner, there is no question of one party winning the case or the other party losing it. This 126

For more details, please refer to Chapter 3 based on an empirical study on mediation practice in the three cities of Delhi, Bombay and Bangalore. 127 Negotiation is a communication process. It is voluntary and non -binding. It has control over procedure and outcome since there is wide range of possible solutions. Aims at maximu m joint gains, which is quick, inexpensive, private and less complicated. Negotiation is possible where parties must cooperate to meet these goals. Parties can influence each other to act in ways that provide mutual benefit or avoidance of harm.

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would further help in maintaining a cordial relationship between the parties even after the dispute is settled. From the point of view of mediators, there are certain factors that encourage them to take up the task of mediation. An empirical analysis of the status of court- annexed mediation in Delhi and Bangalore has revealed the fact that generally, sitting or retired judicial officers and lawyers act as mediators. The success story of mediation establishes the fact that the mediators are skilled and competent in effecting a fruitful settlement of the disputes. This would definitely help building up their reputation as persons possessing high integrity and impartiality. Also, in court- annexed mediation, the mediators are paid a certain sum as fee apart from the regular income they have. In non-court annexed mediation or general mediation, the parties agree upon the fee to be paid to the mediators or if it is an institutional mediation, the monitoring institution will pay the mediators as per the fee fixed by the Rules of that particular institution. The institution must take active steps in promoting mediation and offering training to the mediators. These systematized efforts give the mediators an incentive to finish cases at the earliest without any delay. 4.5 Lok Adalats Lok Adalat (people‘s courts), established by the government settles dispute through conciliation and compromise. Matters pending or at pre-trial stage, provided a reference is made to it by a court or by the authority concerned or committee, when the dispute is at a pretrial stage and not before a Court of Law it can be referred to Lok Adalat128 . Parliament enacted the Legal Services Authorities Act 1987, and one of the aims for the enactment of this Act was to organize Lok Adalat to secure that the operation of legal system promotes justice on the basis of an equal opportunity. The Act gives statutory recognition to the resolution of disputes by compromise and settlement by the Lok Adalats 129 . The concept

128

Here comes the significance of Lok Adalat, which has showed its significance by settling huge number of Third Party claims referred by Motor Accident Claim Tribunal (MACT). Except matters relating to offences, which are not compoundable, a Lok Adalat has jurisdiction to deal with all matters. 129 For more details on the types of cases settled in Lok Adalats, please refer to Chapter 5 dealing with an empirical study of the working of Lok Adalats in the three cities of Delhi, Mumbai and Bangalore.

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has been gathered from system of Panchayat, which has roots in the history and culture of this Country. The provisions of the Act based on the notion of decentralization of justice are meant to supplement the Court system. They will go a long way in resolving the disputes at almost no cost to the litigants and with minimum delay. At the same time, the Act is not meant to replace and supplants the Court system. The Legal Services Authorities Act, 1987 (as amended vide Act No. 37 of 2002) provides for setting up of a ―Permanent Lok Adalat‖ which can be approached by any party to a dispute involving ―public utility services‖ which have been defined in the Act130 (as amended) to include transport services for the carriage of passengers or goods by air, road or water; postal, telegraph or telephone services; insurance service, as also services in hospital or dispensary, supply of power, light or water to the public, besides systems of public conservancy or sanitation131 . Incentive structure for various stakeholders in Lok Adalats The empirical data collected show that the success rate of Lok Adalats in the country is remarkably high.132 While examining the incentive structures for various stakeholders in Lok Adalats, it can be seen that the litigants are more aware about the advantages of such an ADR mechanism than any other form. Since the entire process is totally free of cost, it gives an incentive to the poor to settle their disputes in Lok Adalats. The rural inhabitants also get the benefit in view of the fact that these Adalats are regularly conducted in different parts of the states including rural areas under the supervision of Taluka, District and State Legal Service Authorities. In some states, the poor litigants coming to Lok Adalats are even provided with refreshments and other amenities. From the point of view of presiding officers of Lok Adalats, for the effective functioning of the system, 130

Section 22A of the Legal Services Authorities Act, 1987. Any civil dispute with a public utility service and where the value of the property in dispute does not exceed Rupees ten lakhs; or any criminal dispute which does not involve an offence not compoundable under any law, can be taken up in the ―Permanent Lok Adalat‖. An important feature of this amendment is that after an application is made to the Permanent Lok Adalat, no party to that application can invoke jurisdiction of any court in the same dispute. Such disputes involving public utility services shall be attempted to be settled by the Permanent Lok Adalat by way of conciliation and failing that, on merit, and in doing so the Permanent Lok Adalat shall be guided by the principles of natural justice, objectivity, fair play, equity and other principles of justice without being bound by the Code of Civil Procedure and the Indian Evidence Act. 132 Infra chapter 5. 131

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goodwill and co-operation among the lawyers, parties and the judges are very important. The co-ordination among the various stakeholders has been the main driving force behind the success of Lok Adalats. The prompt result gives the officers an incentive to conduct more and more Adalats of like nature. These officers are also paid certain sum as fee. In the light of the present day developments in the digital technology, it is recommended that a well equipped judiciary with necessary infrastructure facilities and adequate training offered to these officers are highly desirable. Plea bargaining A

new

chapter133

on

plea-bargaining

has

been

introduced

by

the

Criminal

Law(Amendment)Act, 2005 that makes it applicable to offences for which punishment is up to a period of seven years. Plea-bargaining can be defined as pre-trial negotiations between the accused and the prosecution during which the accused agrees to plead guilty in exchange for certain concessions by the prosecution. The object of plea- bargaining is to reduce the risk of undesirable orders for either side. One major reason for introducing plea-bargaining to our system is that most of the criminal courts are overburdened and unable to dispose off the cases on merits134 . Apart from regular courts, presently this technique is being practised in Lok Adalats also. 4.6 Tribunal system in India Two decades after the commencement of the Constitution of India, it was realized that the existing court system was insufficient to cater to the needs of the people and to deal with all types of disputes. The constitution was accordingly amended and Article 323-B was added to authorize the legislature to establish tribunal, commissions, district boards etc for the adjudication or trial of any disputes, complaints or offences with respect to any matters 135 . The survey of the existing legal framework of alternate dispute resolution mechanisms would not be

complete without

mentioning

the

offices

of Conciliation officer, Board of

133

Chapter XXIA of the code of Criminal Procedure, 1973. To reduce the delay in disposing criminal cases, the 154th Report of the Law Commission first recommended the introduction of plea- bargaining as an alternative method to deal with huge arrears of criminal cases. 135 42nd Amendment to the Constitution of India (1976) 134

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Conciliation,Voluntary arbitrator, Labour Court, Industrial Tribunal and National Tribunal for resolving labour disputes136 .

Consumer Disputes Redressal Agencies The Consumer Protection Act, 1986 provides for establishment of Central Consumer protection Councils and the State Consumer Protection Councils for the purpose of spreading consumer awareness. Central Council is headed by the Minister in Charge of the Consumer affairs in the central Government and in the State; it is the Minister in charge of the Consumer affairs in the state who heads the state council. There are consumer councils at the district level also. The main object of these Councils is to protect and promote the rights of consumers such as the right to safety, the right to information, to right to choose, the right to be heard, the right to seek refusal and the right to consumer education137 . In order to ensure the better protection of the interests of consumers and the speedy settlement of grievances the Act provides for the establishment of Consumer Disputes Redressal Commissions at the central as well as state levels and Consumer Disputes Redressal Forums at the district level also.138 Ombudsman The institution of ombudsman is slowly gaining momentum in India. Keeping in view the time constraints, the economy and the resources involved in regular courts some of the institutions have preferred to have an ombudsman for settlement of disputes arising against their institution. Grievance Redressal Committee and Lok Ayukta have been constituted

136 137 138

the provisions under the Industrial Disputes Act, 1947. Section 6 and 8 of the Consumer Protection Act, 1996. Id., at Sections 4, 7 and 8A.

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accordingly139 .

With

an objective of protecting the taxpayer's rights and reducing his

burden, the government has announced the setting up of a Tax Ombudsman and notified the 2006 Scheme140 . grievances

Similar schemes

under

banking,

are present

for

redressal

of

customers'

insurance,securities 141 and electricity laws.142 The success

story of ombudsmen in banking and insurance services has been the driving force for this development143 . The Reserve Bank of India announced the revised Banking Ombudsman Scheme with enlarged scope to include customer complaints on certain new areas, such as, credit card complaints, deficiencies in providing the promised services even by banks' sales agents, levying service charges without prior notice to the customer and non adherence to the fair practices code as adopted by individual banks. Fast track arbitration A novel experiment aimed at clearing the massive backlog in court cases has begun in the country with the setting up of fast track courts in various states. These courts are expected to serve as model courts for speedy disposal of cases pending for a long time. This includes both civil and criminal cases. The scheme envisages the appointment of ad-hoc judges from amongst the retired judges, additional sessions judges or judges promoted on ad-hoc basis and posted in these courts or from among members of the bar. The states that are lagging behind their targets are being persuaded by the Centre to speed up the work.

Similarly with India‘s economic growth on the fast track, the need for a fast track arbitration process has never been felt more144 . Under fast track arbitration, the arbitrators have to decide the

matter within

the

time frame on written submission without oral hearings. This will

inspire confidence in the foreign investors who want to dispose of the matter in a minimum

139

Lok Ayukta have been constituted in various states under state legislation passed by the resp ective State Governments. 140 The current tax system provides for appeals right up to the Supreme Court, while the offices of the Authority for Advance Ruling and the Settlement Commission are there to minimise litigation. 141 BIFR, DRT (Debts Recovery Tribunal), OTS (one-time settlement) and CDR (corporate debt restructuring) Schemes 142 Superintending Engineer Dharmapuri Electricity Distribution Circle v. Meenakshi Udyog India Pvt. Ltd and TamilNadu Electricity Ombudsman. 143 Banking Regulation Act, 1949 and Insurance Act, 1938 144 S. Venugopalan, ―Fast Track Arbitration‖(2004) 10 CLA-BL supp (Mag.) 37

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timeframe to reduce the number of hearings and ultimate reduction of substantial cost, which is the very objective of arbitration.

CHAPTER 5: CONCILIATION

5.1

SALIENT

FEATURES

OF

PART

III OF THE ARBITRATION

AND

CONCILIATION ACT, 1996 The Arbitration and Conciliation Act, 1996 Part III comprises of 21 sections dealing with various aspects of the process of Conciliation. No such provision existed in the Arbitration Act 1940. The Statement of Objects and Reasons of Arbitration and Conciliation Bill, 1995 was, ―Like arbitration, conciliation is also getting increasing worldwide recognition as an instrument for settlement of disputes. There is, however, no general law on the subject in India…Though the said UNCITRAL Model Law and Rules are intended to deal with international

commercial

arbitration

and

conciliation,

they

could,

with

appropriate

modifications, serve as a mode for legislation on domestic arbitration and conciliation‖. The Part III of the Arbitration and Conciliation Act, 1996 adopts, with minor contextual variation, the UNCITRAL Conciliation Rules 1980. One of the important innovations is the intent to avoid formal proceedings and provides that the Code of Civil Procedure 1908 or the Indian Evidence Act 1872 do not bind the conciliator145 . The provisions under Part III of Arbitration and Conciliation Act, 1996 confer same status and effect on the ‗settlement 145

The arbitration and conciliation act 1996 sec 66

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agreement as if it is as award on agreed terms on the substance of the disputes rendered by an arbitral tribunal under Section 30146 . There are three main exceptions to the application of this part147 . Firstly, in the cases where any law for the time being in force provides otherwise. Secondly in the cases where the parties agree not to be governed by the provisions of Part III and agree to the effect that not to settle their disputes by conciliation .Thirdly, where any law for the time being in force in India prohibits certain disputes to be submitted to conciliation. Subject to these three statutory exceptions, disputes arising out of contractual or tortious relationship may be resolved by conciliation

in accordance with the procedure prescribed

under Part III of the Arbitration and Conciliation Act, 1996. DIFFERENCES

BETWEEN

THE

PROCESS

OF

CONCILIATION

AND

MEDIATION Is there any difference between Conciliation and Mediation is a question that can trigger the mind of a common man when the meaning of the term Conciliation is read. Conciliation means the adjustment and settlement of a dispute in a friendly, un-antagonistic manner304. This meaning of the term Conciliation does not make it clear as to whether the two concepts of conciliation and mediation would have different connotation or they would refer to the same mode. In order to understand this concept the researcher has studies it in relation to the legislations Arbitration and Conciliation Act, 1996 and The Civil Procedure Code (Amendment) Act, 1999 where it is used. The Arbitration and Conciliation Act, 1996 under Part I, Section 30, of the Act, provides that an arbitral tribunal may try to have the dispute settled by use of ‗mediation‘ or ‗conciliation‘. Sub-Section (1) of Section30 permits the arbitral tribunal to ―use mediation, conciliation or other procedures‖, for the purpose of reaching settlement. 5.2 CONCILIATION UNDER AMENDED CIVIL PROCEDURE CODE 1999 The Civil Procedure Code (Amendment) Act, 1999 that introduced Section 89, speaks of ‗Conciliation‘ and ‗Mediation‘ as different concepts. Order 10 Rules 1A, 1B, 1C of the Code also go along with Section 89. Thus, the Parliament of India has made a clear distinction 146 147

The Arbitration and Conciliation Act,1996. Section 74. The Arbitration and Conciliation Act,1996. Section 61(1)&(2)

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between Conciliation and Mediation. In Part, III of the Arbitration and Conciliation Act, 1996 in Sections 61 to 81 deals with ‗Conciliation‘ but there is no definition of the term ‗Conciliation‘. Nor is there any definition of ‗Conciliation‘ or ‗Mediation‘ in Section 89 of the Code of Civil Procedure, 1908 and as amended in 1999. As the two have been used in the Acts as two different forms of dispute resolving techniques, it can thus be held that the process of Conciliation is different from that of Mediation. The concept of Conciliation has now been given a statutory recognition under the Arbitration and Conciliation Act, 1996. However, the expression conciliation is not defined in this Act. It only states that conciliation could take place not only in contractual and commercial disputes but also in all disputes arising out of legal relationship. The expression `conciliation‘ is defined by the International Labour Organisation (ILO) in the year 1983, and the said definition is also adopted by the Advisory, Conciliation and Arbitration Service. The process of conciliation has been defined as, ―The practice by which the services of a neutral third party are used in a dispute as a means of helping the disputing parties to reduce the extent of their difference and to arrive at an amicable settlement or agreed solution. It is a process of orderly or rational discussion under the guidance of the conciliator.‖148 Article 1(3) of UNCITRAL Model Law on International Commercial Conciliation 2002 defines conciliation to mean ―a process, whether referred to by the expression conciliation, mediation or an expression of similar import, whereby parties request a third person or persons called the conciliator to assist them in their attempt to reach an amicable settlement of their dispute arising out of or relating to a contractual or other legal relationship. The conciliator does not have the authority to impose upon the parties a solution to the dispute‖.Conciliation is also said, to be a procedure like mediation but the third party, the conciliator, takes a more interventionist role in bringing the two parties together and in suggesting possible solutions to help achieve a settlement. However, the term ‗conciliation‘ is gradually falling into disuse and a process, which is pro-active, is also being regarded as a form of mediation149 .

148

Brown and Marriott, Alternative Dispute Redressal methods Principles and Practice, 2nd edn,1999,p272,para 11-017. 149 lord Chancellor‘s Department on Alternative Dispute Resolution (http://www.lcd.gov.uk/Con sult/cirjust/adi/annexald/htm)

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The Advisory, conciliation and arbitration service makes a distinction between conciliation and mediation in the following words, ―Mediation may be regarded as a halfway house between conciliation and arbitration. The role of the conciliator is to assist the parties to reach their own negotiated settlement and he may make suggestions as appropriate.

The mediator

proceeds by way of conciliation but in addition is prepared and expected to make his own formal proposals or recommendations which may be accepted.‖150

Under Part III of the Arbitration and Conciliation Act,1996 the Conciliator‘s powers are larger than those of a ‗mediator‘ as he can suggest proposals for settlement. Hence, the above meaning of the role of ‗mediator‘ in India is quite clear and can be accepted, in relation to Section 89 of the Code of Civil Procedure also. The difference lies in the fact that the ‗conciliator‘ can make proposals for settlement, ‗formulate‘ or ‗reformulate‘ the terms of a possible settlement while a ‗mediator‘ would not do so but would merely facilitate a settlement between the parties. 5.3 CONCILIATOR A Conciliator is basically different from that of a Judge or an Arbitrator. The role of the Conciliator is to assist the parties to reach their own negotiated settlement and he may make suggestions as appropriate. Conciliator does not impose a decision on the parties but, on the contrary, his role is to assist the parties to resolve the dispute themselves. He may give opinion on issues in dispute but his primary function is to assist in achieving a negotiated solution151 . A conciliator can suggest terms upon which a settlement can be arrived at, but cannot impose a settlement conceived by him on the parties. His role is merely advisory and not creative or

150

The Role of ACAS in Arbitration, Conciliation And Mediation,1989,cited in Brown and Marriott, Alternative Dispute Redressal methods Principles and Practice, Second edn,1999,p272,para 11-018. 151 Carrol and Dixon, ‗ Alternative Dispute Resolution Developments in London‘ ,The International Construction Law Review,Pt 4,1990,pp 436-37, cited by Redfern and Hunter in Law and Practice of International Commercial Arbitration, 4th edn,2004,p36,para 1-71.

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decisive, like the role of an arbitrator or an adjudicator. In practice, conciliation covers different fields of activity, each with its own traditions, ethos and culture. The skill and technique adopted by the conciliator in enabling the parties to come to a voluntary settlement of dispute between them and thereby avoiding adjudication and in due course bringing about a negotiated settlement vary. A conciliator, dealing with a commercial dispute, may have to adopt altogether different procedure, technique and approaches, from that of a conciliator dealing with family disputes or labour disputes. Nevertheless, all the fundamental principles and procedure prescribed under the Arbitration and Conciliation Act, 1996 is the same. A conciliator is as an independent and impartial person and he must enjoy confidence of both the parties. The parties should be able to repose trust and confidence on him so as to enable them to share their secrets and their thinking process with the conciliator with the belief that the same should not be divulged to other party without specific instructions in that regard. Therefore, a conciliator is bound by rules of confidentiality and not by the strict rules of the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872152 . Though Section 66 is not governed by the provisions of Section 18, the provisions of Section 67, requires the conciliation to be aided by the principles of objectivity, fairness and justice are applicable to it. This ensures that the conciliator will conduct the proceedings in a fair and judicious manner, in order to do justice to each one of the parties. The number of conciliator generally appointed for a conciliation proceeding is one unless the parties agree and give mutual consent to have more conciliators than one153 . ROLE OF CONCILIATOR The role of the ‗Conciliator‘ is pro-active and interventionist. The conciliator records the evidence of the parties and hears their arguments on the question of fact and law, the conciliator forms his opinion and stops just short of making a decision because that does not fall in his territory .Conciliator then proceeds to persuade the parties to come to a settlement in the light of his opinion. Conciliator can suggest certain terms for the acceptance of the parties on which the

dispute can be resolved. Conciliator has to use his best endeavor to

conclude the conciliation. Section 67, of the Arbitration and Conciliation Act, 1996 requires 152 153

The Arbitration and Conciliation Act,1996. Section66. The Arbitration and Conciliation Act, 1996. Section 63

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the conciliator to play the following part in the process of conciliation: First, the conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute154 . Secondly, the conciliator shall be guided by principles of objectivity, fairness and justice, giving consideration to, among other things, the rights and obligations of the parties, the usages of the trade concerned and the circumstances surrounding the dispute, including any previous business practices between the parties155 . Thirdly, Section67(3), provides that, the conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking into account the circumstances of the case, the wishes the parties may express, including any request by a party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute. The conciliator may, at any stage of the conciliation proceedings can make proposals for a settlement of the dispute. Such proposals need not be in writing and need not be accompanied by a statement of the reasons therefore156 .Thus, the primary role of a conciliator is to act as a facilitator though he should not coerce the parties to accept his opinion. The above provisions in the 1996 Act make it clear that the ‗Conciliator‘ under the said Act, apart from assisting the parties to reach a settlement,

is also permitted to make ―proposals for a settlement‖ and

―formulate the terms of a possible settlement‖ or ―reformulate the terms‖.

5.4 CONDUCT OF CONCILIATION PROCEEDING A conciliation proceeding could be initiated in India when, one of the parties to the dispute arising out of legal relationship invites the other parties to get the dispute resolved through conciliation. The conciliation can start only if other party accepts in writing the invitation to conciliate. If, however, the other party rejects the invitation for settlement through conciliation, no such proceeding would be initiated. Even if no response were sent within thirty days to the invitation, it would be deemed that the said request is rejected. A statement of their respective cases is to be submitted by the parties to the conciliator in order to enable the conciliator to understand the case of the parties and to form an opinion.

154

The Arbitration and Conciliation Act,1996. Section 67(1) The Arbitration and Conciliation Act,1996. Section 67(2) 156 The Arbitration and Conciliation Act,1996. Section67(4) 155

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He can call for additional statement of facts and information in order to enable him to give his suggestion to the parties. The Conciliation proceeding could

be classified

into two types namely, facilitative

conciliation and evaluative conciliation. In facilitative conciliation, the conciliator avoids opinion and judgments and he merely assists the parties to clarify their communications, interest and priorities. On the other hand, in evaluative conciliation, the conciliator expresses his opinion on the merit of the issues so as to enable the parties to approach settlement. His opinion is a third party view on the merit but such opinion would not be conclusive and binding157 . The section 69 of Arbitration and Conciliation Act, 1996 contains the provision regarding communication between conciliator and parties whether orally or in writing and about place of meeting. The conciliator may meet or communicate with the parties together or with each of them separately. Unless the parties have agreed upon the place where meetings with the conciliator are to be held, such place shall be determined by the conciliator, after consultation with the parties, having regard to the circumstances of the conciliation proceedings. When the conciliator receives factual information concerning the dispute from a party, he shall disclose the substance of that information to the other party in order that the other party may have the opportunity to present any explanation, which he considers appropriate. In the proviso to the section 70, it is stated that when a party gives any information to the conciliator subject to a specific condition that it be kept confidential, the conciliator shall not disclose that information to the other party. The Supreme Court of India in Haresh Dayaram Thakur vs State of Maharashtra

158

case reinstated that under the provisions of section 72 each party

may, on his own initiative or at the invitation of the conciliator, submit to the conciliator suggestions for the settlement of the dispute. The success of a conciliation proceeding depends upon the genuine and honest desire of the parties to settle the dispute amongst themselves with the assistance of the conciliator. The parties shall in good faith cooperate with the conciliator and, in particular, shall endeavor to comply with requests by the conciliator

to submit written materials, provide evidence and

157

Mackie, Miles, Marsh and Allen, The Alternative Dispute Redressal methods Practice Guide; Commercial Dispute Resolution, 2nd edn, 2000,p 12,para1.3.3. 158 2000(6) SCC 179

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attend meetings159 . Thus, good faith of the parties in co-operation with the conciliator in the conciliation proceeding, is a sine qua non for arriving at an amicable settlement of the dispute and in the absence of good faith and bona fide co-operation by the parties, no conciliator can succeed in bringing about an amicable settlement. The parties are entitled to suggest terms of settlement, which would be discussed by the parties wherein suggestions could be given by the conciliator on such terms for their observations but the conciliator, cannot impose a settlement as conceived by him on the parties160 . Under Section 73 of Arbitration and Conciliation Act, 1996 it is provided that, after considering the reformulated terms of possible settlement, if the parties reach a settlement of the dispute, they may draw up and sine a written agreement. Otherwise, the parties may request the conciliator to draw up or to assist them in drawing up the settlement agreed upon by them. The parties shall sign the settlement agreed upon by them. Such settlement shall be final and binding on the parties and persons claiming under them respectively. The conciliator is then required to authenticate the settlement agreement and furnish a copy of it to each one of the parties. The Supreme Court of India in Haresh Dayaram Thakur VS.State of Maharashtra161 case held that, a successful proceeding comes to an end only when the settlement agreement signed by the parties comes into existence. It is such an agreement, which has the status and effect of legal sanctity of an arbitral award under Section 74 of Arbitration and Conciliation Act, 1996. In Mysore Cements Ltd vs. Svedal Barmac Ltd162 the Supreme Court noted that from the Memorandum of Conciliation Proceedings and Letter of Comfort, it did appear that parties had agreed to certain terms, but they could not straightaway be enforced by taking up the execution proceedings. It falls short the essential legal pre-requisites to be satisfied for being assigned the status of a legally enforceable agreement of settlement between the parties. In case the parties arrive at a settlement during the discussion and the proceeding, a settlement agreement is drawn up which would have the same effect and status as an arbitral award on agreed terms as envisaged under section 30 of the Act163 . The same thereafter could

159

The Arbitration and Conciliation Act,1996. Section 71 The Arbitration and Conciliation Act,1996. 161 AIR 2000 SC 2281. 162 2003 (10) SCC 375. 163 The Arbitration and Conciliation Act,1996. Section 74. 160

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be enforced as a decree of the Court under the Code of Civil Procedure 1908.A party desiring to avail the remedy could take resort to the said procedure during pre-litigation and even during the pendency of litigation. If the effort does not succeed, the parties can always come back to litigation.164 However, during the pendency of conciliation preceding a party is not entitled to pursue any arbitral or judicial proceedings in respect of a dispute that is the subject matter of the conciliation proceedings. This is subject to one exception that, a party may initiate arbitral or judicial proceedings where, in his opinion, such proceedings are necessary for the preserving his rights165 .

CONFIDENTIALITY The conciliator as well as the parties shall keep confidential all matters relating to the conciliation proceeding. Section 75 of Arbitration and Conciliation Act, 1996 has extended the confidentiality to the settlement agreement except where ‗its disclosure is necessary for the purpose of its implementation and enforcement‘ despite anything contained in any other law for the time being in force in India. This provision is expressly subjected to party autonomy to meet concerns expressed that it might be inappropriate to impose upon the parities a rule that would not be subject to party autonomy, and could be difficult to enforce. Evidently, this provision is inconsistent with the provisions of Section70 of Arbitration and Conciliation Act, 1996 that is not subject to party autonomy. Under Section 70 when a conciliator receives factual information concerning the dispute from one party, he shall disclose the substance of that information to the other party in order that the other party has the opportunity to present any explanation which he considers appropriate. Section 75 and 81 of Arbitration and Conciliation Act, 1996 are closely related. Section 80 prohibits the parties from relying on or introducing, the matters catalogued in it as evidence in any arbitral proceedings irrespective of the fact that such proceedings relate to the dispute that is the subject matter of the conciliation proceedings. In other words, the reliance on or 164 165

Conciliation and Mediation By Justice Dr.M.K.Sharma. Judge, High Court of Delhi,p1-4 The Arbitration and Conciliation Act, 1996. Section 77.

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introduction of these items will be inadmissible as evidence in any arbitral or judicial proceedings. Together they ensure that all information relating to and emanating from the conciliation remains confidential, and is not relied on or introduced as evidence in subsequent dispute resolution proceedings166 .The violation of these requirements will vitiate the award as being in conflict with the public policy of India, and render it liable to be set aside. In Hassneh Insurance Co of Israel vs. Steuart J Mew167 , it was held that the duty of confidence is qualified in relation to the award when disclosure is reasonably necessary to establish or protect a party‘s legal rights as against a third part. For instance, if the disclosure is necessary for a party to pursue a subsequent claim against his insurers in respect of the same loss, by founding a cause of action or a defence to a claim . In such situations disclosure of the award, including the reason stated therein will not constitute a breach of the duty of confidentiality. In Ali Shipping Corp Vs. Shipyard Trogir168 case it is held that, it also covers pleadings, written submissions, proof of witnesses, transcripts and notes of the evidence, provided of course disclosure is reasonably necessary to establish or protect a party‘s legal rights as against a third party. It is subject to an exception that in case where a party gives any information to the conciliator subject to a specific condition that it be kept confidential, the conciliator shall not disclose that information to the other party, or anyone else. The violation of the requirement of confidentiality will render the award liable to be set aside being ‗in conflict with the public policy of India169 , except where its disclosure is necessary for purpose of its implementation and enforcement.‘ In London and Leeds Estates Ltd Vs. Paribas Ltd (No 2)170 held that, in the interest of justice if any disclosure is required it is just and valid disclosure. In ensuring that it was held that the judicial decision in the particular case is to be based on accurate evidence rather than any public interest in the broader sense171 .

166

Peter Binder, International Commercial Arbitration And Conciliation in UNCITRAL Model Law Jurisdictions, 2nd edn 2005,p 328. 167 1986 Revue de l‘ Arbitrage 583. 168 1998(2) AII ER 136,147. 169 Section 34(2)(b)(ii) of Arbitration and Conciliation Act,1996 170 1995 (1) EG 134. 171 Ali Shipping Corp Vs Shipyard Trogir, 1998 (2) AII ER 136,148.Russell on Arbitration, 22nd edn,2003.

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In the agreement to arbitrate the parties may bring witnesses to the hearing to give evidence and legal or other representatives to present their case. Thus, a definition of the word ‗stranger‘ is, therefore, required. The term ‗stranger‘ has been defined as meaning ‗person whose presence is not necessary or expedient for the proper conduct of the proceeding‘172 . Thus, each of those individuals is considered to be subject to the duty of confidentiality on behalf of the party they are representing173 . In Oxford Shipping Co Ltd vs. Nippon Yusen Kaishs, (The Eastern Saga)174 case it was held that, the concept of privacy in arbitration ‗derives from the fact that the parties have agreed to submit to arbitration particular dispute arising between them and only between them. TERMINATION OF CONCILIATION PROCEEDING The provision of the Arbitration and Conciliation Act, 1996 set forth the situation and the point of time at which the conciliation proceedings terminate. Accordingly, the conciliation proceedings shall be terminated primarily by settlement. The conciliation proceeding are terminated on the date the parties sign the ‗settlement agreement‘. The proceeding shall be terminated by a written declaration of the conciliator, after consultation with the parties, to the effect that further efforts at conciliation are no longer justified, on the date of the declaration. The conciliation proceeding can be terminated by the parties on the date when they make a declaration in writing addressed to the conciliator to the effect that the conciliation proceeding are terminated. The conciliation proceeding can be terminated by a party on the date when it makes a declaration in writing to the other party and to the conciliator, if appointed to the effect that the conciliation proceedings are terminated. On the termination of the conciliation proceeding in any of the situation enlisted above under Section76; the conciliator shall fix the costs of the conciliation and give written notice thereof to the parties. Costs means reasonable costs incurred during the conciliation proceeding. The costs shall include the fee and expenses of the conciliator and witnesses requested by the conciliator with the consent of the parties, the expenses in relation to any expert advice

172

Esso Australia Resource Ltd Vs Plowman, Yearbook Commercial Arbitration, Vol XXI-1996,137. Collins , ‗Privacy and confidentiality in Arbitration Proceedings‘ , Arb Int 321,1995; Neill , Confidentiality in Arbitration‘ . Arb Int 287, 1996. Lew, Mis telis and Kroll, ComparativeInternational commercial Arbitration,2003,p 8. 174 1984 (3) ALL ER 835,842. 173

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requested by the conciliator with the consent of the parties, expenses incurred for the assistance of an institution or a person in connection with the appointment of a conciliator175 and the administrative assistance to facilitate the conduct of the conciliation proceedings

176

.

In addition to this, it also includes any other incidental expenses incurred in connection with the conciliation proceedings and the settlement agreement177 . The settlement agreement may provide the mode and the manner of apportionment of the costs to be fixed by the conciliator after the termination of the conciliation proceeding. In the absence of such provisions in the settlement agreement, the cost shall be borne equally by the parties. All the expenses incurred by a party shall be borne by that party.

Section 38 if the Arbitration and Conciliation Act, 1996 empowers an arbitral tribunal to call for deposits in an arbitral proceeding. The conciliator may direct each party to deposit an apportioned amount as an advance for the costs referred to under section 78(2) which he expects will be incurred during the conciliation proceeding178 . By Section 79 (2), the conciliator during the course of the conciliation proceedings, if he considers it expedient to call for further deposits, he may ‗direct supplementary deposits in equal amount from each party‘. If both the parties default in paying the amount called for by the conciliator within 30 days from the date of direction to deposit, the conciliator may suspend the proceedings. Alternatively, he may make a declaration to the parties in writing that the conciliation proceedings stands terminated179 .Under Section79 (4) it is provided that, after termination of the conciliation proceedings, the conciliator is required to render an accounting to the parties of the deposits received by him and the conciliator shall refund any unexpended balance to the parties. The Arbitration and Conciliation Act, 1996 under Section 80, prohibits the conciliator from acting as an arbitrator or as a representative or council of any party, in any arbitral or judicial proceedings in, respect of a dispute that is the subject matter of the

175

Section 64(2),The Arbitration and Conciliation Act,1996. Section 68,The Arbitration and Conciliation Act,1996 177 Section 78(2),The Arbitration and Conciliation Act,1996 178 Section 78 (3),The Arbitration and Conciliation Act,1996 179 Section 79 (3),The Arbitration and Conciliation Act,1996 176

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conciliation proceedings. The provision further prohibits the parties from presenting a conciliator as a witness in any arbitral or judicial proceeding.180 There is no conflict between litigation and a conciliation or mediation proceeding. Thus, they can be said to be complimentary to each other, like a bye pass. Choice is of the parties to choose one but one has a choice to come back to the main thoroughfare the litigation also, when so intended. Moreover, when a reference is made by the Court under section 89 Code of Civil Procedure, 1908 to a conciliator or a mediator, not only the Court retains the supervisory jurisdiction over the matter but the lawyers and the litigants continue to be participants therein.

It is with the active support of all the three participants along with an additional player, namely, the mediator or conciliator that a negotiated mutual settlement is arrived at. Therefore, the system of alternative dispute resolution through mediation and conciliation may not and should not be seen as competitive to litigation in Court181 . The mechanism of conciliation has also been introduced for settling industrial disputes under Industrial Disputes Act, 1947 and by the Arbitration and Conciliation Act, 1996. The City Disputes Panel, UK which offers a range of dispute resolution processes, facilitative, evaluative and adjudicative stated that conciliation ―is a process in which the Conciliator plays a proactive role to bring about a settlement‖ and mediator is ―a more passive process‖182 . 5.5

COMPARATIVE

ASSESSMENT

OF

THE

PROCESS

UNDER

THE

ARBITRATION AND CONCILIATION ACT, 1996

180

The Arbitration and Conciliation Act,1996. Section 80(a) and (b). Peter Binder, International Commercial Arbitration And Conciliation in UNCITRAL Model Law Jurisdictions, 2nd edn 2005,p 328. 182 Brown ,Handbook of the City Disputes Panel, UK.1997 ( p 127) 181

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The process of arbitration is more privatised than judicial settlement and conciliation is more privatised than arbitration. As judicial settlement and arbitration are species of adjudication, the judge and the arbitrator render their verdicts and impose them, with or without the consent or in spite of dissent, on the part of the parties. While the parties to arbitration are given considerable freedom to

regulate the modalities, barring some non-derogable

provisions, at various stages of the arbitral proceedings, they have no control over the decision making process except in the case of award on agreed terms. The Section 7(2) of the Arbitration and Conciliation Act, 1996 requires that ―an arbitration agreement shall be in writing‖, there is no such express provision in Part III regarding conciliation. However, that does not make any practical difference as the process of conciliation starts with the written offer and written acceptance to conciliate on the part of the parties. Conversely, in arbitration, even in the absence of a prior written agreement, if the parties appoint the arbitrator and proceed with the submission of written claim and defence and continue with the proceedings till they culminate in the award, the requirement of Section 7(2) under 4 ( c ) should be taken as complied with. It is possible to the parties to enter into an arbitration agreement, even before the dispute has arisen under Section 7 (1) (―all or certain disputes which have arisen or which may arise‖), it would appear from the language of Section 62 that, it would not be possible for the parties to enter into conciliation agreement even before the dispute has arisen. Section 62 provides that, the party initiating conciliation shall send to the other party a written invitation to conciliate under this part, briefly identifying the subject of the dispute. The Conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate. The above provision clearly requires that the conciliation agreement should be an ad hoc agreement entered into after the dispute has arisen and not before. A conciliation agreement entered into before the dispute has arisen may have the effect of ousting the jurisdiction of the Courts in relation to the subject matter of the dispute and such an agreement can be saved only by making an amendment to Section 28 of the Indian Contract Act as it was done in 1972 to save the arbitration agreement. After the enactment of the 1996 Act covering both arbitration and conciliation, there can be no objection, either theoretical or practical, for not permitting the parties to enter into a conciliation agreement regarding the settlement of 68 | P a g e

even future disputes ousting the jurisdiction of the Courts. This is particularly so in the light of the fact that the Act treats the conciliation settlement agreement authenticated by the conciliator on par with award on agreed terms, which in turn is treated on par with any arbitral award. Evident from Section 74 and 30 of Arbitration and Conciliation Act, 1996. While, Section 30 of the Arbitration and Conciliation Act, 1996 permits the parties to engage in conciliation process even while the arbitral proceedings are on. They may do so on their own and settle the dispute through conciliation or authorize the arbitrator himself to use mediation or conciliation and settle the dispute. The arbitrator would record the settlement in the form of an arbitral award. However, Section 77 of the Act bars the ―initiation‖ of any arbitral or judicial proceedings in respect of a dispute that is the subject matter of conciliation proceedings, except for the purpose of ―preserving‖ their rights. The term ―initiation‖ in Section 77 clearly supports the provision in Section 30. That is, when the arbitral or judicial proceedings are on, the parties are even encouraged to initiate conciliation proceedings but when the conciliation proceedings are on they are barred from initiating arbitral or judicial proceedings. The raisons de etre of the provision (16 of the Draft) were given in the ―Commentary on the Revised Draft UNCITRAL Conciliation Rules: Report of the Secretary General‖ as follows, the Article 16 deals with the delicate question whether a party may resort to Court litigation or arbitration whilst the conciliation proceedings are under way…. Article 16 emphasizes the value of serious conciliation effort by expressing the idea that, under normal circumstances, Court or arbitration proceedings should not be initiated as might adversely affect the prospects of an amicable settlement. However, the Article also takes into account that resort to Courts or to arbitration does not necessarily indicate unwillingness on the part of the initiating party to conciliate. In view of the fact that, under article 15(d), an unwilling party may terminate the conciliation proceedings at any time, it may well be that, if a party initiates Court or arbitral proceeding, he does so for different reasons. For example, a party may want to prevent the expiration of a prescription period or must meet the requirement, contained in some arbitration rules, of prompt submission of a dispute to arbitration. Instead of attempting to set out a list of possible grounds, Article 16 adopts a general and subjective formula: ―…except that a party may initiate arbitral or judicial proceedings where, in his opinion, such proceedings are necessary for preserving his rights.‖

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From the above study, it is evident that the real purpose of provisions in Sections 30 and 77 of the 1996 Act is, to encourage resort to non-formal conciliation in preference to the formal Court and arbitral proceedings. Secondly, resort to arbitral or judicial proceedings was permitted as an exception to meet the cases of requirements of the general law of limitation or of ―time-bar clauses‖ like the Atlantic Shipping Clause Atlantic Shipping and Trading Company vs. Dreyfus and Company183 or interim measures of protection. 5.6 CONCILIATION UNDER THE CIVIL PROCEDURE CODE AMENDMENT ACT 1999 The amendments made in 1999 to the Civil Procedure Code have introduced provisions to enable the Courts to refer pending cases to arbitration, conciliation and mediation to facilitate early and amicable resolution of disputes. The Arbitration and Conciliation Act, 1996 do not contain any provision for reference by Courts to arbitration or conciliation in the absence of the agreement between the parties to that effect.

Under that 1996, Act, the process of arbitration and conciliation are purely consensual and not compulsory. But under the newly added Section 89 of CPC, the Court can refer the case to arbitration, conciliation, mediation.., etc ―where it appears to the Court that there exist elements of settlement which may be acceptable to the parties.‖ The Court can formulate the terms of settlement and give them to the parties for their observation and after receiving the observations; the Court may reformulate the terms of a possible settlement and refer the same for arbitration, conciliation, mediation etc. At this juncture, the Court is not ascertaining the agreement of the parties but only their observations, because if there is agreement between the parties at the stage of formulation of possible terms of settlement, the Court can as well make it the basis of its judgment and there would be no need for further negotiations under the aegis of arbitration or conciliation. However, once the Court refers the case to arbitration or conciliation, that reference creates a legal fiction that it is deemed to be a reference under the provisions of the Arbitration and Conciliation Act, 1996 and the provisions of that Act would take over from the provisions of the CPC under which the reference was made. Thus, 183

(1992) 2 AC 250

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if the parties choose to do so, the parties or the conciliator under Section 76 of the 1996 Act can terminate the conciliation proceedings so commenced by Court‘s reference under Section 89 of CPC. CONCILIATION UNDER THE INDUSTRIAL DISPUTES ACT, 1947. In the year 1920, the first Trade Disputes Act was enacted constituting Courts of Inquiry and Conciliation Boards. The law did not make any provision for creating or establishing any machinery for the settlement of ―industrial disputes‖; its focus was the regulation of strikes that could potentially cripple the economy184 . This law was repealed and replaced by the Trade Disputes Act, 1929, which was the precursor to the present Industrial Disputes Act, 1947. Trade Dispute Act, 1929, facilitated State intervention in the settlement of industrial disputes by arming the government with powers that could be used whenever it considered fit to intervene in any industrial dispute. While it also addressed strikes in public utility services and general strikes affecting the community as a whole, its main purpose was to create a conciliation machinery to facilitate the peaceful resolution of industrial disputes. Initially, the law made provision for only ad hoc Conciliation Boards and Courts of Inquiry. However, in the year 1938, an amendment authorized the Central and Provincial Governments to appoint Conciliation Officers for mediating in or promoting the settlement of industrial disputes. The National Commission on Labour, 1969 noted,185 ―This Act, however, was not used extensively, as the government policy at that time continued to be one of laissez faire and selective intervention at the most. Where Government intervened, the procedure consisted of appointing an authority which would investigate into the dispute and make suggestions to the parties for settlement or allow the public to react on its merits on the basis of an independent assessment.‖ Thus the main defect is that while restraints have been imposed on the right of Strike and Lock-out in public utility services no provision has been made to render the proceedings institutable under the Act for the settlement of an industrial dispute, either by reference to a Board of Conciliation or to a Court of Inquiry, conclusive and binding on the parties to the dispute. This defect was overcome during the war by empowering under Rule 81 A of the Defence of India .The Second World War led to the promulgation of the Defence of India 184

GB, Pai, Labour Law in India (Vol 1), Butterworths, New Delhi, p. 496, 2001 OP,Malhotra, The Law of Industrial Disputes (Vol 1, 5th Edn), Universal Law Publishing Co. Pvt Ltd, New Delhi, p 2. 185

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Rules. Rule 81 (A) empowered the Central Governments to intervene in industrial disputes, adjudication and to enforce their award. In other words, this Rule was intended to provide speedy remedies for industrial disputes by referring disputes compulsorily to conciliation or adjudication. There by, making the awards legally binding on the parties, prohibiting strikes/lock-outs during conciliation or adjudication proceedings and placing a blanket ban on strikes not arising out of genuine trade disputes. Rule 81 A, which was to lapse on 1st October 1946, is being kept in force by Emergency Powers (Continuance) Ordinance,1946, for a further period of six months. As in checking the Industrial unrest Rule 81 A, proved useful and gained momentum due to the stress of post industrial re-adjustment, thus, the need of permanent legislation in replacement of this rule was evident. The Government of India passed The Industrial Disputes Bill .This Bill embodied the essential principles of Rule 81 A, which have proved generally acceptable to employer and the workmen, relating intact, for the most part, the provisions of the Trade Disputes Act 1929. The Industrial Disputes Bill was introduced in the Central Legislative Assembly on 8 October 1946. The Bill passed by the Legislature received its assent on 11 March 1947 and it came into force from 1 April 1947 as The Industrial Disputes Act 1947. The two institutions for the prevention and settlement of industrial disputes

provided

under

this

are

the

Works

Committees

consisting

of

representatives of employers and workmen, Industrial Tribunal consisting of one or more member possessing qualifications ordinarily required for appointment as Judge of a High Court. Power has been given to the appropriate Government to require Works Committees to be constituted in every industrial establishment employing 100 workmen, or more and their duties will be to remove causes of friction between the employer and the workmen in the day-to-day working of the establishment and to promote measure for securing amity and good relation between them186 . Industrial peace will be most enduring where it is found on voluntary settlement and the Works Committees rendered recourse to the remaining machinery provided under the Act, 1947 for the settlements of disputes infrequent. A reference to an Industrial tribunal can lie where both the parties to an Industrial Dispute apply for such reference and where the appropriate Government considers it expedient to do so187 . Conciliation will be compulsory in all disputes in public utility service and optional in the case of the other industrial establishment. With a view to expedite conciliation proceedings time limits have been prescribed for conclusion thereof 14 days in case of 186

Section3, Industrial Disputes Act 1947 Section 10,Industrial Disputes Act 1947.

187

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conciliation officer and two months in the case of Board of Conciliation from the date of notice of strike. A settlement arrived at in the course of conciliation proceeding will be binding for such period as may be agreed upon by the parties and where no period has been agreed upon, for a period of one year, and will continue to be binding until revoked by a 3 months‘ notice by either party to the dispute188 . The Act provided, for the first time, a compulsory adjudication of industrial disputes. The principal techniques of dispute statement provided

in the Industrial Disputes Act are Collective Bargaining,

Mediation and

Conciliation, Investigation, Arbitration, Adjudication. Section 11 of the Industrial Disputes Act provides that, industrial adjudicators and authorities constituted under the Industrial Disputes Act such as Conciliation Officers, Boards, Courts and Tribunal could follow such procedure as they thought fit. With reasonable notice, they can enter into any premises. They can exercise powers of a Civil Court in respect of enforcing attendance of witnesses, production of documents, etc. and they can appoint one or more persons having special knowledge of the matter under consideration as an assessor or assessors to advise them. Section 12 of the Industrial Disputes Act, addressing the duties of Conciliation Officers, clearly stated that a conciliation officer could do all such things as he thought fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute. In General Manager, Security Paper Mill, Hoshhangabad vs. RS Sharma189 case, Supreme Court summed up the role of a Conciliation Officer as, ―Even though a conciliation officer is incompetent to adjudicate upon the dispute between the management and its workmen, he is expected to assist them to arrive at a fair and just settlement. He is to play the role of an adviser and friend of both parties and should see that neither party takes undue advantage of the situation.‖ This indicates the wide sweep of powers conferred upon the conciliation authorities constitute under the Industrial Disputes Act 1947, who had full liberty and discretion to secure a peaceful settlement of industrial disputes.The process of conciliation as an alternative disputes redressed mechanism is advantageous to the parties in the sense that it is less costly and less time consuming. It is relatively simple and flexible, it obviates cumbersome

188 189

litigation procedure and

it eliminates the scope

for corruption and

Section10(2A) Industrial Disputes Act 1947. 353 1986 (Lab) .IC 667 (670) SC.

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malpractices and leave parties free to withdraw from Conciliation at any stage of the proceeding. 5.7 AMBIGUITIES FOUND IN THE ARBITRATION AND CONCILIATION ACT, 1996 There are few ambiguities in the Arbitration and Conciliation Act, 1996. This Act provides for procedural law on arbitration and conciliation mechanism for resolution of disputes in India. The Law Commission of India has recommended various amendments to the Arbitration and Conciliation Act, 1996 by its 176th Report. The proposed amendment seeks to make arbitration more effective and speedy. Ever since the commencement of the Arbitration and Conciliation Act, 1996, requests have been voiced for its amendment. The main problem with this Act is that the UNCITRAL Model, which was meant as a Model for international arbitration, was adopted also for domestic arbitration between parties in India. In several countries, the laws of arbitration for international and domestic arbitration are governed by different statutes. In addition, in many cases, the legislative provisions have lost the letter and the spirit, and in some cases, it has kept the letter, but lost the spirit of the UNCITRAL Model Law in the Arbitration and Conciliation Act, 1996. The areas where the Arbitration and Conciliation Act, 1996 is to be made more clear is highlighted herein. The Act, does not provide for any prescribed period within which a conciliation proceeding is to be concluded. For without a reasonable ultimatum in relation to the time limit, an inordinate delay in arriving at a settlement might result in the termination of the conciliation proceeding by an aggrieved party owing to frustration or in a settlement that is not in the best interest of a party owing to desperation. It is pertinent to note that, Section 13 of the Arbitration and Conciliation Act, 1996 which states that, the challenge procedure to remove an arbitrator from the tribunal, the arbitrator who is being challenged, remains in the arbitral tribunal and hence decides about his own competence as an arbitrator. Equity is regarded as a synonym for Natural Justice and fairness is an integral part of it. The principle of ―Nemo Judex in Causa Sua‖ that is no man shall be 74 | P a g e

the judge of his own cause remains as one of the bedrocks of natural Justice. Thus, it can be said that this section is completely against the principle of natural justice. Under Section 13(3) of the Act, the Arbitrator himself would adjudicate his own competence by being part of the tribunal, thereby creating doubts of biasness and unfair justice. The test of likelihood of bias is whether a reasonable person, in possession of relevant information would have thought that bias was likely and whether the person concerned was likely to be disposed to decide the matter only in a particular way. Therefore, it is to be carefully perceived that the challenge to the arbitrator adjudicating his own competence is in no manner a doubt or imputation to the character of the arbitrator; instead, it is the apprehension of biasness that forms the ground of appeal that has arisen from a situation. Hence, it has to be acknowledged that Section 13(2) is speculative and needs more clarity. Section 30 of the Arbitration and Conciliation Act, 1996 provides for encouragement of settlement of dispute before the arbitral tribunal and sub-section (4) thereof provides that an arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute. Section 35 of the 1996 Act gives finality to an arbitral award and states that it shall be final and binding on the parties and persons claiming under them respectively. Section 36 of the 1996 Act provides that, the arbitral award shall be enforced under the Code of Civil Procedure, 1908 (V of 1908) in the same manner as if it were a decree of the Court after the time for making an application to set aside the award under Section 34 has expired, or such application having been made, it has been refused. It thus appears that Section 36 is applicable to all arbitral awards, particularly those that are rendered by the arbitration tribunal on merits. In pursuant to the suggested amendments to Section 89 of the Code of Civil Procedure, 1908 it appears that arbitral awards on agreed terms between the parties to the dispute need not be exposed to any possibility of an application to set aside the arbitration award under Section 34. Hence, there needs a clarity in the provision providing for application for setting aside of the awards. There is no provision in the Arbitration and Conciliation Act, 1996 for expediting awards or the subsequent proceedings in Courts where applications are filed for setting aside awards. An aggrieved party has to start again from the District Court for challenging the award. No provision is available so as to enable the Indian parties to obtain interim measures from 75 | P a g e

Indian Courts before a foreign arbitration could commence outside India. Multinational companies can stipulate that foreign laws could apply even if the entire contract had to be implemented in India. This provision is inconsistent with the sovereignty of Indian Laws. 5.8 THE ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2003 The Arbitration and Conciliation (Amendment) Bill, 2003, which was introduced in the Rajya Sabha on the 22nd December, 2003 is greatly influenced by the Law Commission of India recommendation on various amendments to the Arbitration and Conciliation Act, 1996 by its 176th Report. The Bill seeks to amend various provisions of the Arbitration and Conciliation Act, 1996, to remove certain shortcomings in the existing Act and to speed up arbitrations under the Act. The Arbitration and Conciliation (Amendment) Bill, 2003 provided that, where the place of arbitration is in India, Indian Law would apply whether the arbitration is between the Indian Parties or an International arbitration in India. There is also proposal for Fast Track Arbitrations. It has also stressed that there is a need for empowerment to the arbitral tribunal to pass pre-emptory orders for implementation of interlocutory orders of the arbitral tribunal and if they are not implemented to empower Courts to, order costs or pass other orders in default. There is no provision under the Arbitration and Conciliation Act, 1996 that provides for the provision for the Arbitration Division in the High Courts and also for its jurisdiction and special procedure for enforcement of awards made under the Arbitration Act, 1940 including awards made outside India. The bill stressed the need for the provision for speeding up and completing all arbitrations under the existing 1996 Act, including those arbitrations under the repealed Arbitration Act, 1940 within a stipulated time. The Bill has also proposes for a single member fast track arbitral tribunal wherein filing of pleadings and evidence will be on fast track basis to pronounce award within six months and specification of procedures to be followed by such fast track arbitral tribunal. The Bill proposes to introduce a new Section 8A in 1996 Act to enable reference to arbitration at any stage of a civil suit pending in the City Civil Court or in the High Court or in the Supreme 76 | P a g e

Court if all the parties to the dispute enter into an arbitration agreement to resolve their dispute and pray to that effect. The new provision provides for absolute liberty to the litigants to refer to arbitration the civil disputes pending at various stages such as, at the institution, appeal, revision, including those instituted under Articles 226 and 227 of the Constitution and appeals there from to the Supreme Court. The Bill proposes very high degree of disclosures to be made by the arbitrator under Section 12 informing the party about his past, present, direct or indirect relationship with the parties to the arbitration in any of their financial, business, professional or social dealings apart from the subject matter of the dispute. Section 9 of the Arbitration and Conciliation Act, 1996 corresponds to Section 41 of the Second Schedule of the Arbitration Act, 1940 and Article 9 of the UNCITRAL Model Law. Section 9 of the 1996 Act provides for interim measures by Court whereby a party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court. According to Section 9 of the 1996 Act, A party or person is entitled to interim protection if action of the other party is either in breach of the terms of the agreement or militates against equity, fair play or natural justice, otherwise not . This is in contrast to the power given to the arbitrators who can exercise the power under Section 17 only during the tenure of the tribunal. Once the mandate of the arbitral tribunal terminates, Section 17 cannot be pressed into service. The party may misuse provisions in Section 9 of the Act, for a party may not take an initiative to have the arbitral tribunal constituted, after obtaining an interim measure and may unnecessarily delay the process. Thus, if the Amendment Bill is passed, it will be then mandatory on the part of the party who has obtained interim relief from a Court to constitute the arbitral tribunal expeditiously. If not, a party may run the risk of automatic vacation of the interim measure. The system of dual agency needs to be abolished or otherwise some enforcement mechanism must be provided for enforcement of the interim measures of protection ordered by the Arbitral Tribunal. The Amendment Bill 2003 was introduced as a measure to fill up the lacunae in the provisions of the Arbitration and Conciliation Act, 1996. Nevertheless, in conclusion the process of amending the Act must be in the direction of minimizing the intervention of the Courts to uphold the very spirit of the Arbitration and Conciliation Act, 1996.

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CRITICISMS The study shows that some of the provisions of the Arbitration and Conciliation (Amendment) Bill, 2003 are inconsistent with the spirit of the Law. Clause 8 of the Bill provides that any written communication by one party to another and accepted expressly or by implication by the other party will also be treated as an arbitration agreement. The clause deprives the parties of their basic right to go to the Court. Such an agreement should be only in some written form and it shall not be inferred by implication. A proposed amendment to section 8 by Clause 9 of the bill enables the judicial authority to decide on preliminary issues like the non- existence of any dispute, arbitration agreement. The clause is null and void as any arbitration agreement being incapable of performance will give rise to prolonged litigation in the Courts. In addition to it, this clause will also effectively introduce Court intervention at pre-arbitration stage and retard the arbitration process. This would defeat the main purpose of the 1996 Act, which is minimization of Court intervention. With respect to Clause 12 of the Bill, that confers the power of appointment of arbitrator, in default of the parties or the agreed procedure, on the Court, for determination of the issues arising in that connection on the judicial side is not an apt step. In the present scenario of huge pendency of cases in the Courts, it may take years to get the arbitrator appointed. If the parties are unable to appoint an arbitrator within the stipulated time, the power of appointment should not automatically devolve on the Courts. Nevertheless, if the parties apply for the appointment of an arbitrator, then the Court can do so. In addition to it, the thirty days time stipulated in the Arbitration, Conciliation Act, 1996 is more than sufficient for appointment of an arbitrator by the parties, and there is no need to extend the same. Clause 13 of the Bill, under which there has been an attempt to elucidate the 'circumstances' which is likely to provoke unnecessary time consuming challenge to the impartiality of the arbitrator on the ground that he had some relation of the type set out in the illustration with the parties or their lawyers. There is a high chance of abuse of such a provision by a party who wants to delay or derail the arbitration proceeding.

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Clause 17 of the Bill provides that if the parties to arbitration are Indian nationals or companies, then the arbitration venue have to be in India. This proposed amendment is directly against the common law principle that parties are free to contract as they deem fit provided no provision is against public policy or in violation of any applicable law or procures a breach of any applicable law. In addition, the clause that arbitration between domestic parties should be conducted only in India is entirely opposite to the rationale for adopting the New York Convention. If arbitration outside India was acceptable at the time of adoption of the New York Convention, then it should be all the more acceptable now, given that India has come so far in the international arena and has adopted the policy of Globalisation. Clause 18(1A) states that the arbitral tribunal shall endeavor to expedite the arbitral process subject to such rules as may be made by the High Court in this behalf, is against the principle of party autonomy which is the pillar on which consensual arbitration rests. Thus, this clause enables the Court intervention that has to be minimized as far as possible. Clause 29 A (1) provides for fixation of statutory time limit for completion of arbitral proceedings. This provision cannot work automatically and give quick disposal of the arbitration proceedings. This provision will yield results only if consequences of noncompliance of such a time limit are provided along with it. It must be accompanied with the principle of reasonableness or else it will prove harmful to the independence and fair arbitral proceedings. The review committee on the bill constituted by the Parliament of India reports that, The Arbitration and Conciliation (Amendment) Bill, 2003 would lead not only to greater interference by Courts in the process of arbitration but also end up having arbitration being conducted under the supervision of the Courts. The Bill would have the Courts sitting in judgment over the arbitrators before arbitration, during arbitration and after arbitration. There was a broad consensus that the provisions, if accepted, will make the arbitral tribunal an organ of the Court rather than a party-structured dispute resolution mechanism. In addition, many amending provisions are likely to create confusion and unnecessary litigation. Bringing back Court control and supervision in arbitration and the choice of the 79 | P a g e

arbitrator subject to High Court rules and supervision and control of the Court, is neither in the interest of growth of arbitration in India nor in tune with the best international practices. It was felt that they are contrary to the best international practices in the field of arbitration. Hence, the adoption of this Bill may hamper further development of international trade relations and diminish the confidence of the international community in the Indian system of arbitration.As far as domestic arbitration in India is concerned, there are a large variety of tribunals created by the State under different statutes as alternative to the traditional Court litigation, for settling various types of disputes such as labour disputes, service matters, antitrust matters, consumer protection, taxation, excise etc. In addition, there are Lok Adalats acting under the Legal Services Authorities Act, 1987, to deal with subjects like disputes arising out of the use of electricity, telecommunications, insurance etc. Therefore, the need of the hour is a system to deal with international arbitration and the institutionalised arbitration in India can ensure that parties to international arbitration opt for India as the venue for arbitration. The growing tendency to take undue advantage of Court procedure to gain time and delay arbitration or implementation of award is certainly undesirable. If the Court procedure is used in such a manner for the promotion of unfair objective, the remedy seems to be worse than the evil. The parties who entered into an arbitration agreement with a view to avoid the lengthy and expensive Court procedure find themselves fighting a battle on both the fronts-in arbitration proceedings and in the Court of law. This is indeed the fate of several arbitration proceedings in India today. Non-resident Indians and Foreign Institutional Investors are entering the Indian market in a big way. The Indian law relating to international commercial arbitration has to be made responsive to these changes in the Indian economic scene. There is a need to harmonize the Indian law with the concepts on arbitration and conciliation of the legal systems of the world. An arbitral institution with conscious office bearers can ensure that the proceedings are conducted in the interest of the parties. India has a number of small arbitration institutions all over the country, but there is an urgent need for an institution in India which would match international standards. The present Arbitration and Conciliation (Amendment) Bill, 2003 tends to allow greater intervention by the Courts than the Arbitration and Conciliation Act, 1996 and it may not be suffice in achieving the desired objectives. 80 | P a g e

CHAPTER 6: MEDIATION 6.1 SALEM BAR ASSOCIATION CASE AND THE DRAFT ADR AND MEDIATION RULES, 2003 The Hon'ble Supreme Court of India has in the landmark decision of Salem Advocate Bar Association, Tamil Nadu vs. Union of India190 case, directed that all Courts shall direct parties to

alternative dispute resolution methods like arbitration, conciliation, judicial

settlement or mediation. The draft "Civil Procedure Alternative Dispute Resolution and Mediation Rules 2003" was also considered by the Supreme Court, for enactment by respective High Courts. Direction was issued to all High Courts, Central Government and State Governments for expeditious follow-up action. The Courts can refer the case to mediation under Section 89, 1(d) and 2(d). When the Court decides to refer the case to mediation, ―the Court shall effect a compromise between the parties and shall follow such 190

2003 (1)SCC 49.

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procedure as may be prescribed‖. This provision is amenable to the interpretation that it is for the Court itself to ―effect a compromise‖ and follow the procedure prescribed for the purpose. If the Court for one reason or the other cannot itself effect a compromise, the only option it would have is to refer the parties to conciliation etc. In a historic judgment in Salem Bar Association case, the Supreme Court directed the constitution of a committee to frame draft rules for mediation under Section. 89(2) (d) of the CPC. Consequently, the Committee presided over by Justice M. Jagannadha Rao, Chairman of the Law Commission of India prepared a comprehensive code for the regulation of ADR process initiated under Section 89 of CPC. It consists of two parts, Part I: ADR Rules 2003 consisting of ―the procedure to be followed by the parties and the Court in the matter of choosing the particular method of ADR‖ and Part II: Mediation Rules, 2003 consisting of ―draft rules of mediation under section 89(2) (d) of the Code of Civil Procedure‖191 . It is to be noted that Rule 2(b), proviso clearly states that the Court in the exercise of its powers under Section.89(1)(a) to (d) read with Rule 1A of Order X ―shall not refer any dispute to arbitration etc without the written consent of all the parties to the suit" and Rule 4 calls this the exercise of the option by the parties. But, under Rule 5 (f) and (g), the Court is given the power to refer the parties under certain circumstances to alternative dispute redressal methods even if all the parties do not agree. This is in consonance with the letter and spirit of Section 89 of CPC. Rule 4 also requires the Court to do a sort of counselling in enabling the parties to choose the correct form of alternative dispute redressal method depending on the nature of the case and the relationship between the parties that needs to be preserved. Rule 4(iv) may be reformulated to say, ―Where parties are interested in reaching a compromise which might lead to the final settlement‖. Unlike the Arbitration and Conciliation Act, 1996, Rule 4 gives a workable definition of the terms arbitration, conciliation, mediation and judicial settlement. Under Rule 6(2), if the alternative dispute redressal method does not succeed and the case is referred back to the Court, the Court shall proceed with the case in accordance with law. A welcome feature of these Rules is that they provide for a detailed scheme for the conduct of training courses in alternative dispute redressal methods for lawyers and judicial officers 191

Civil Procedure Alternative Dispute Resolution And Mediation Rules, 2003 is affixed as ANNEXTURE-A

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under the auspices of the High Courts and the District Courts, and the preparation of a detailed manual of procedure for alternative dispute redressal methods. The manual will describe various methods of alternative dispute redressal mechanisms, the choice of a particular method, the suitability of a method for any particular type of dispute etc. The Manual shall particularly deal with the role of conciliators and mediators in disputes which are commercial or domestic in nature or which relate to matrimonial, maintenance and child custody cases. With a view to enhancing awareness of alternative dispute redressal procedures and for imparting training in them, the Rules provide for the conduct of seminars and workshops periodically (Rule 7). Thus, these provisions prepared a blueprint for the building up of a body of trained professionals who are sensitised to efficiently handle cases in future, as that task requires specialized training and expertise of a high order. Part II of the Rules contain a carefully prepared scheme for the appointment of mediators, empanelling of mediators, their qualifications and disqualifications and the proper selection of the mediator to suit a particular case etc. They also contain provisions regarding the actual conduct of mediation that, mutatis mutandi, apply some of the provisions of the 1996 Act relating to conciliation. A notable feature of these provisions is that Rule 19 imposes an obligation on the part of the parties to make an effort in good faith to arrive at a settlement, and this is intended to prevent the whole process from being reduced to a sham. The Rules also deal with cases where the parties succeed in arriving at a solution through the alternative dispute redressal processes only regarding some of the issues and not all. In such cases, the Court may incorporate the partial settlement in its judgment and decide the other issues according to law. Very importantly, the Rules also lay down a code of ethics to be followed by the mediator in the proper conduct of the proceedings so as to arrive at a fair and just settlement in an impartial and dignified manner so as to instill confidence in the parties in himself and the credibility of the process in general. OTHER MAJOR FORMS ALTERNATIVE DISPUTE REDRESSAL METHODS The study of the evolutionary history of the alternative dispute redressal methods in the earlier chapters proves the fact that, in many cultures including Indian, mediation has been a 83 | P a g e

standard mode of dispute redressal methods for generations, typically presided over by a town elder or a respected figure in the community, or through something akin to a Panchayat. On studying the different dispute redressal methods adopted by different countries it is seen that mediation is practiced worldwide and has emerging globally as one of the dispute redressal methods in addition to the existing formal litigation system192 . The Parliament of India has recommended recourse to alternative dispute redressal methods by the enactment of the Legal Services Authorities Act, 1987, The Arbitration and Conciliation Act, 1996, the Legal Services (Amendment) Act, 2002 and Section 89 of the Code of Civil Procedure and such other legislations. Existing systems of Arbitration, Conciliation and Lok Adalats are statutorily regulated but there is no independent mechanism for regulating mediation. The awareness of mediation as a dispute resolution mechanism among the stake holders is the need of the time to, assist in quick resolution of pending cases and in resolution of disputes at pre- litigation stages.

MEDIATION In order to emphasize the need of mediation in the process of resolving the disputes, it is significant to know the characteristic features of this method. At the simplest mediation is an informal, voluntary process in which an impartial person, trained in facilitation and negotiation techniques, helps the parties to reach at a mutually acceptable resolution193 . It can also be defined as a process of resolving dispute by which the ‗mediator‘ a neutral person, works with the parties to a dispute to bring them to an agreement that they can all accept194 . It is thus, impracticable to provide a final definition of the process of mediation. The former President of India Dr. A.P.J. Abdul Kalam has been supportive of amicable settlement of disputes and has advocated the need to encourage mediation as an alternative

192

Dennis J.D.Sandole ,theory and conflict resolution practice. Brown and Marriott, Alternative Dispute Redressal methods Principles and Practice, 2nd edn , 1999. 194 R. Charlton, Dispute Resolution Guide book,Law Book Company,Sydney,2000. 193

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dispute resolution mechanism in the following words195 , ―Mediation and Conciliation is definitely a faster method of dispute resolution compared to the conventional Court processes. Only thing is that we have to have trained mediators and conciliators, who can see the problem objectively without bias and facilitate affected parties to come to an agreed solution. In my opinion, this system of dispute resolution is definitely a cost effective system for the needy... Mediators must possess the qualities of being a role model in the society, impeccable integrity and ability to persuade and create conviction among the parties.‖ In some situations, mediation is a form of negotiation carried out with the assistance of a third party. The mediator, in contrast to the arbitrator or judge, has no power to impose an outcome on disputing parties. Despite the lack of ‗teeth‘ in the mediation process, the involvement of a mediator alters the dynamics of negotiations196 . Thus, the role of the ‗mediator‘ is restricted to that of a ‗facilitator‘ and the process of ‗mediation‘ is a way of settling disputes by a third party who helps both sides to come to an agreement, which each considers acceptable. Prof. Robert Baruch Bush and Prof. Joseph Folgen say that, ―In a transformative approach to mediation, mediating persons consciously try to avoid shaping issues, proposals or terms of settlement, or even pushing for the achievement of settlement at all. Instead, they encourage parties to define problems and find solutions for themselves and they endorse and support the parties‘ own efforts to do so.‖ On studying, the above definitions with respect to the characteristic features of mediation it can be evaluated that mediation, as one of the alternative dispute redressal methods is flexible and creative. The process varies from case to case depending largely on the parties' needs and the mediator's style. Usually, the parties meet to discuss the issues face-to- face. The mediator helps the discussions remain focused and productive. The mediator may hold private caucuses with each party separately, and carry the messages, clarifications, questions, proposals, offers, and counter offers back and forth between them. The mediator can use private group or the discussion groups and other techniques to facilitate the process of negotiation among the disputed parties.

195 196

Sunanda Bhandare, judiciary and its multi-dimensions, 2006. Stephen B. Goldberg, Negotiation, Mediation and other processes,1999.

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A mediator does not impose a solution but creates a conducive atmosphere in which the parties to the dispute can find a resolution to their problems. Mediation in India is still at its formative years, though it has existed and still exists in India from Vedic periods in some form or the other and with different names, which is evident from the study of the evolutionary history of dispute redressal methods in India197 . However, the fact is that, still there is no code or enactment existing in India, which specifically pertains to the process of mediation. Mediation in a dispute has to be adopted, as a basic method of resolving the conflict, mainly the government, and the public authorities who are the main litigants before the Courts of law should include these processes in the establishment of the legal order and encourage the quick settlement of disputes. 6.2 DEFINITION AND SCOPE OF MEDIATION Mediation is a fundamental procedure for resolving controversies. It is a process in which a neutral intervener called the mediator assists two or more negotiating parties, to identify matters of concern, develop a better understanding of their situation, and, based upon that improved understanding, develop mutually acceptable proposals to resolve those concerns198 . Thus, Mediation can be said to embraces the philosophy of democratic decision-making. The process of mediation can be ‗evaluative‘ as well as ‗facilitative‘. Henry J. Brown and Arthur L.Mariot say that ‗mediation‘ is a facilitative process in which ―disputing parties engage the assistance of an impartial third party, the mediator, who helps them to try to arrive at an agreed resolution of their dispute. The mediator has no authority to make any decisions that are binding on them, but uses certain procedures, techniques and skills to help them to negotiate an agreed resolution of their dispute without adjudication.199 In the Bhagavad Gita the holy book of Hindu‘s it is said, ―When meditation is mastered, the mind is unwavering like the flame of a lamp. Mediation

is

defined

in

various

ways;

for

example: Mediation is a process in which

an impartial third party acts as a catalyst to help others constructively address and perhaps resolve a dispute, plan a transaction, or defined the contours of a relationship. A mediator 197

Robert D. Benjamin, Mediation as a Subversive Activity: Remembrances of Times Past - A Brief History and the Origins of Mediation. 198 Sternlight,Mediaion theory and practice,Lexis Nexis,2006. 199 Henry,J.Brown ,ADR Principles and Practice,2nd Edition,1997.

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facilitates negotiation between the parties to enable better communication, encourage problem-solving, and develop an agreement or resolution by consensus among the parties. Lord Buddha who spread the message of peace and unity has also stated that ―Meditation brings wisdom; lack of Mediation leaves ignorance. Know well what leads you forward and what holds you back, and choose the path that leads to wisdom‖. Pantanjali one of the renowned yogis who taught the method of uniting the body, mind and sole with the practice of yogic living has also pointed out, that the progress in mediation comes swiftly for those who try their hardest. The process of mediation incurs minimal procedural and evidentiary requirements while providing unlimited opportunity for the parties to exercise flexibility in communicating their underlying concerns and priorities regarding the dispute.200 Thus, mediation can be practiced in various ways. For example, in the United States of America, the purest of its form is still considered to be facilitative. Undoubtedly, many practitioners and scholars differ on the ―role‖ of mediator in mediation. One view is that the process of resolving disputes shall be called mediation only if the mediator limits his or her role to that of a facilitator. Whereas in the evaluative method, the mediator assumes more control of the process and the parties may be ordered to participate in a particular way that may influence the outcome of the process. Moreover, from the standpoint of the Court's responsibilities, the use of mediation reduces the heavy caseload so common with litigation.201 The disputes referred to mediation can be settled in accordance with reason, equity, and the actual circumstances of the case. Both equity and mediation offer a form of "individualised justice" unavailable in the official legal system. However, through the mediation process a resolution or result to the dispute can be achieved without a right-wrong determination and without a factual finding.202 Thus, mediation when adopted as alternative dispute redressal method helps in dissolving bitterness and rivalry and creates the circumstance, which helps in the amicable development of the concept peace and unity through the win- win situation among the disputants.

200

John W. Cooley, Mediation Advocacy (National Institute for Trade Advocacy) ,1996. Kwang-Taeck Woo, A Comparison of Court-Connected Mediation in Florida and Korea, 22 Brook. 202 Kimberlee Kovach, Teaching a New Paradigm: Must Knights Shed their Swords and Armor to Enter Certain ADR Arenas. 3 (2000) 201

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DIFFERENCE BETWEEN THE MEDIATION AND OTHER DISPUTE REDRESSAL PROCESS The alternative dispute resolution procedures can be broadly classified into two groups, first those that are adjudicative and adversarial, and second those, which are consensual and nonadversarial. The latter group includes mediation. Sir Robert A. Baruch Bush and Joseph P. Folger, in, ―The promise of mediation‖ say that, in any conflict, the principal objective ought to be to find a way of being neither victims nor victimisers, but partners in an on-going human interaction that is always going to involve instability and conflict.203 There are several types of different dispute redressal methods that have evolved owing to the different needs and circumstances of the society. The study of the differences between them will help the disputant in choosing the best and the apt method of resolving their disputes according to their needs. The dominant form of dispute redressal method that is broadly adopted for the resolution of a dispute is, by filing of case before the Court of law. With the bird eye view, it can be said that, in the process of adjudication through Court of law, someone has to lose among the disputing party. The litigation route has now become slow, expensive, and uncertain in its outcome. The Courts and Tribunals do not 'resolve' a dispute, but they only ―decide‖ a dispute or ―adjudicate‖ on them. Whereas, in the case of mediation, the parties can try to agree with one another, were a mediator acts as a facilitator. Mediation has the advantage as it can lead to finality because, it allows for an informed and un-coerced decisions to be taken by everyone involved. Disputes are resolved in the process of mediation through consensual interaction between the disputants204 . The mediator in promoting or in other words, facilitating resolution of the dispute by the parties themselves does not purport to decide the issue between them. Mediation is more flexible, quick and less expensive than the process of adjudication through Court of Law. Thus, the study reveals that, litigation produces provides for fair and just results, but it is procedurally disadvantages as compared to mediation.

Mediation affords a far greater degree of flexibility, relative informality,

confidentiality and control over its resolution.

203 204

Robert A. Baruch Bush , The promise of mediation (1994) Tania Sourdin, Alternative Dispute Resolution,2002

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Comparative study of the process of ‗mediation‘ and ‗arbitration‘ shows that, mediation is a form of expedited negotiation. The parties control the outcome. Mediator has no power to decide. Settlement in the dispute is done only with party approval. Exchange of information is voluntary and is often limited. Parties exchange information that will assist in reaching a resolution. Mediator helps the parties define and understand the issues and each side's interests. Parties vent feelings, tell story, and engage in creative problem solving. Mediation process is informal and the parties are the active participants. Joint and private meetings between individual parties and their counsel are held in this process. Outcome based on needs of parties. Result is mutually satisfactory and finally a relationship may be maintained or created. Mediation when compared with arbitration is of low cost. It is private and confidential. Facilitated negotiation is an art. Mediator is not the decisionmaker. Mediator is a catalyst. He avoids or breaks an impasse, diffuse controversy, encourages to generate viable options. He has more control over the process. The process of mediation gives the parties many settlement options. Relationship of parties is not strained in the process of mediation. There is a high degree of commitment to settlement. Parties‘ participation is there in the decision making process. Thus, there is no winner and no loser in this process, only the problems are resolved. In this process the disputed parties maintains the confidentiality of proceedings205 . The Arbitration and Conciliation Act, 1996 has provided for the legislative framework of the processes of arbitration and conciliation in India. The process of ‗arbitration‘ is adjudicative in nature as the arbitrators control the outcome. Arbitrator is given power to decide. Arbitration award is final and is a binding decision. Often extensive discovery is required in this process. Arbitrator listens to facts and evidence and renders an award. The parties present the case, and testify under oath. The process of arbitration is formal. The attorneys can control the party participation. Evidentiary hearing is given in this process. No private communication with the arbitrator is possible. Decision is in the form of award based on the facts, evidence, and law. The process of arbitration is more expensive than mediation, but less expensive than traditional litigation. It is a private process between the arbitrator and the disputed parties but in some cases, decisions are publicly available. Thus, it is an informal 205

L,Boulle, Mediation: Principles, process,practice (Butterworths, Sydney,1996)

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procedure, which involves decision-maker impasse when it is submitted to an Arbitrator. The parties have less control in the proceedings and the final award, as the decision making process is with the arbitrator. The ‗Conciliator‘ under the Arbitration and Conciliation Act, 1996, apart from assisting the parties to reach a settlement, is also permitted to make ―proposals for a settlement‖ and ―formulate the terms of a possible settlement‖ or ―reformulate the terms‖. ‗Conciliation‘, is a procedure like mediation but the third party called the conciliator, takes a more interventionist role in bringing the two parties together and in suggesting possible solutions to help the disputed parties to reach a settlement. The difference between the process of mediation and conciliation lies in the fact that, the ‗conciliator‘ can make proposals for settlement, ‗formulate‘ or ‗reformulate‘ the terms of a possible settlement, while a ‗mediator‘ would not do so but would merely facilitate a settlement between the parties. Under Section 30 and Section 64(1) and Section 73(1) of the Arbitration and Conciliation Act, 1996, the conciliator has a greater or a pro-active role in making proposals for a settlement or formulating and reformulating the terms of a settlement206 . A mediator is a mere facilitator. The meaning of these words in India is the same in the UNCITRAL and Conciliation Rules and in UK and Japan. Conciliation and Mediation process is distinguishable from Arbitration as the parties‘ willingness to submit to mediation or conciliation does not bind them to accept the recommendation of the conciliation or mediator but an arbitrator‘s award, by contrast, is binding on the parties207 MEDIATOR ―Mediator‖ is a neutral third party who facilitates the disputing parties in arriving at a winwin settlement for both of them. The mediator assists and guides the parties toward their own solution by helping them to define the important issues and understand each other's interests. The mediator focuses each side on the crucial factors necessary for settlement and on the consequences of not settling. The mediator does not decide the outcome of the case and cannot compel the parties to settle.208 The mediator can defuse hostile attitudes and remedy miscommunications. The mediator is a mirror of reality, which can help soften or eliminate extreme negotiating positions. Through 206

Sarvesh Chandra,ADR : Is conciliation the best choice (1997). Robert Merkin , Arbitration Law,2004. 208 Tom Arnold, Mediation outline A practical guide for the Mediator and attorneys,(1988). 207

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the mediator, parties assess the weaknesses in their own case and recognise potential strengths of the other side. The parties can more clearly view matters previously distorted by anger and emotion. Mediator in general is a knowledgeable person with respect to the subject matter of the controversies. Within the privacy of the caucus, mediators can help each party analyses the strengths and weaknesses of their complete case. Most significantly, the mediator can explore creative and innovative solutions that the parties who are caught up in adversarial negotiations might never contemplate. The mediator does not impose a solution but rather works with the parties to create their own solution, this characteristic of mediation differentiates it from other forms of dispute resolution processes and principally, with that of the process of arbitration and litigation.

THE TASKS OF THE MEDIATOR The mediator has to play a very significant role in the process of Mediation. Mediator is not responsible for the content of any resolution or agreement, but only for the way it is arrived at. Mediator helps the parties to think through and state their own views of the problem and their own preferred solutions. Mediator ensures that all the parties have an equal chance to think through and state their own views of the problem. Mediator may challenge these initial explorations as appropriate. Mediator explores and tests possible agreement with the parties separately and together. Mediator can help if asked with the preliminary drafting of any agreement. Mediator helps if asked with the drafting of any feedback to the institution designed to assist it to avoid similar disputes in future. Mediations protect the 'safe place' by means of a pre-mediation agreement. One of its features is an agreement that whatever takes place or is said in the mediation will have to be confidential. It is subject to the recognition by everyone involved in the process that, if it emerges that there has been criminal activity confidentiality cannot be maintained. The pre-mediation agreement is separate from any

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agreement arrived at as a result of the mediation, and it is for the parties to decide whether all or part of what is agreed is to remain confidential209 . MEDIATION PROCESS There is no definite procedure to be adopted by the mediator for conducting mediation. Stephen B. Goldberg, Frank E.A. Sander and Nancy H. Rogers had highlighted this fact by saying that, depending on the terms of agreement, the mediator may attempt to encourage exchange of information, provide

new

information, and

help

the

parties

to

understand each other‘s views. Mediator can let the parties know that their concerns are understood and thereby promote a productive level of emotional expression. He has to deal with the differences in perceptions and interest between negotiations and constituents (including lawyer and client). This will help the negotiators realistically assess the alternatives to settlement and learn about those interests, which the parties are reluctant to disclose to each other. This is often possible in separate sessions with each party to the dispute. Thereby the mediator invents solutions that meet the fundamental interests of all parties to the dispute210 . The parties may agree on the procedure to be followed by the mediator in the conducting the meditation proceeding. If the parties do not agree on any particular procedure to be followed, the mediator follows the procedure, which shall be guided by the principles of fairness and justice, having regard to the rights and obligations of the parties, usages of trade, if any, and the circumstances of the dispute. The process of mediation generally starts with one of the disputing party suggesting for mediation or if there is a mediation clause in the agreement then the disputed parties go for mediation by selecting one mediator by consent or each party selecting a mediator and the two select a third mediator. The parties can also chose an institute for mediation, which will have a panel of mediators, and the parties can make the appointment or the institute itself from among the names on the panel selects a mediator. Where a Court directs the mediation, 209

Tweeddal & Tweeddale , Arbitration Of Commercial Disputes , International and English Law and Practice, 1st edn,2005. 210 Stephen B.Goldberg , Dispute Resolution (Negotiation, Mediation and other processes) ,1993.

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the Court will on its own, or the body handling Court referrals for mediation will appoint the mediator. The participation in the process of mediation is a voluntary process and requires the consent of the parties to come to the mediation table and in participate in the process mediation. If, at any time, a party feels that its interest are not served by the process or the party is in any way uncomfortable with the mediator, the party may terminate its participation at the mediation without any adverse consequences. The mediator and the parties select a mutually convenient date and location for the mediation. Subject to the availability of the participants, meetings can be conducted in person, by telephone, video conference, or any other method agreeable to the parties and the mediator. The parties will be responsible for charges incurred in dispute resolution process. The process of mediation can follow a general procedure that is, at first, the mediator receives from each party a brief summary of the case. At the first session, each party can make an opening statement giving its version. It can help in venting of their felling and enable each party to understand the point of the other. The process can starts with establishing the basic facts of the dispute, identifying the issues for resolution, getting parties to be realistic about their case. The issues needing resolution can thereby be clarified. Thereafter the mediator can start communicating with the parties. This could be in joint sessions with all the parties or in separate sessions with each party at a time. In these sessions mediator can focus parties on their long-term interests, as distinct from the position they have taken in the dispute. Long-term interests usually dictate that parties should adopt harmonious method of resolving dispute. These steps can make the parties to get more realistic about the strengths and the weaknesses of their case. This shows up the facts that are not in a party‘s favour, difficulties of proving matters asserted as facts, and those statutes and case law, which may not support their stand. At this stage, disputants can become more amenable to settlement after seeing the problem with their case211 .Thereby making the parties examine their alternatives in reaching at a mediated settlement. The mediator can then encourage the parties to come up with options for settlement, assuring them that they have full freedom to put out whatever suggestions they like, that this is like a brainstorming session. Putting an 211

Brown and Marriott,ADR Principles and Practice, Second edn,1999,p127.

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idea on the table will not mean a commitment has been given or the disputing parties make a binding statement. This liberty enables many different ideas for solution to emerge. The mediator then makes the parties focus on these lines of solutions, which have opened up by then. The energies are focused on these ideas for possible settlement. Now and again, it will be necessary for the mediator to remind the disputing parties of the reasons why it is beneficial for them to reach agreement at the mediation table. Giving the parties the freedom to create options for settlement, and refining their suggestion. Once consensus is reached, the mediator can then ensures that it is properly reflected in the written agreement, which loose ends are tied up, that a proper review mechanism is put in place, if necessary. On reaching for an agreement of settlement between the disputed parties and the mediator and the parties can sign it and the mediator can thereby declares the mediation closed. Once the settlement agreement is signed, it is final and binding on the parties212 . The process of mediation can also end if a party withdraws from the mediation or in case where all the parties agree that, the mediation is unsuccessful and in cases where the mediator terminates the mediation as unsuccessful. THE TYPES OF DISPUTES NOT SUITABLE FOR MEDIATION The attempt to arrive at an interests-based resolution through mediation may not be the best approach in each and every kind of dispute arising between the parties. The process of mediation is not a way for resolving a dispute if there is a matter of policy at stake, if there is an issue on which it is desirable to establish a precedent, if there are legal restrictions as statutes impose restrictions on its actions and on a point which is 'non-negotiable' for the complainant. Where order of the Court is necessary to enforce a right and where an interpretation of a law is called for, in cases of serious criminal offences, mediation is not a possible dispute resolution method. Where there is a statutory violation and in the cases where not all the parties are willing to make the 'voluntary' attempt towards resolving the issues mediation will be unsuccessful. If a party is acting in bad faith, for example, trying to give the appearance of 'having tried' to avoid the displeasure of a Court or to comply with a mandatory or contractual requirement to 212

Redfern and Hunter,Law and Practice of International Commercial Arbitration, 4th edn, 2004.

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attempt mediation, in such cases also the purpose will not be solved. If there are, going to be consequences that are detrimental to those not involve or in other words, will be unfair to them by comparison with that of other dispute redressal methods, in such cases the process of mediation will not serve the purpose and thus cannot emerge as a successful alternative to that of litigation in resolving disputes. Criminal matters (other than those under Section 498A Indian Penal Code, Section 125 Code of Criminal Procedure and Section 138 Negotiable Instruments Act) cannot be referred for mediation under any circumstances. THE TYPES OF DISPUTES SUITABLE FOR MEDIATION It is evident that, mediation belongs to the disputing parties called disputants. The disputing parties control the process, scheduling, costs, and outcome of the dispute. Mediation is less adversarial. The process of mediation is informal. It is less confrontational than arbitration or litigation. The process of mediation preserves options in a way where parties can enter into mediation without jeopardising their option to arbitrate or litigate. Mediation makes way for swift settlement. Most of the mediations are successfully concluded in a single day213 . Since mediation can be scheduled soon after a dispute arises, parties reach settlement much earlier than in arbitration or litigation. In many cases, mediations conclude before a formal arbitration claim is filed. It is of lower cost when compared to the other dispute redressal methods. Mediation usually entails lower legal and preparatory costs, there is minimal interruption of business or personal life, lost productivity is kept to a minimum, and the fees

and

expenses of mediation are modest. Mediation paves way for preservation of

business relationships. As a result of reaching an early resolution with minimal financial or other strain on either party, the chances for preserving business relationships are greatly enhanced. Sometimes parts of a dispute are resolved in mediation, leaving fewer or less extreme differences to be resolved in arbitration or litigation. Gaining agreement on collateral issues can translate into significant savings of time and money for everyone involved. This method protects privacy of the facts revealed during the mediation proceeding by the disputed parties. Mediation offers greater confidentiality than arbitration. This means that any party may not use what is revealed in the discussion in any future proceedings without the consent of those affected, and that the discussion is confidential. The confidentiality of any resulting agreement is for 213

www.spidr.org/ethic,htm- Society of professionals in dispute resolution.1986 (14th may 2001).

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the parties to decide together. The view, suggestions, admissions, proposals made during the mediation or conciliation proceedings cannot be used in any legal proceedings. It is to be noted that a document that is otherwise admissible and can be summoned does not cease to be so because it is introduced in mediation proceedings214 . Thus, the above study shows that, mediators help the parties craft creative solutions. Settlement potential is high in this process. The case proceeds promptly. The cost is modest and there are benefits even if a settlement is not reached. The disposal of cases through mediation has a direct advantage of not only reducing the number of pending cases in the Courts but also a collateral advantage of reducing the number of appeals and revisions made to the superior Courts. In other words, the advantage of a settlement through judicial mediation benefits not only the Trial Court but also the Appellate Court, which has then to deal with a lesser number of cases. The expected outcomes will not only directly benefit the Trial Courts but also collaterally benefit the Appellate Courts. Another collateral advantage is that one case being settled settles a large number of connected cases. Once parties reach an agreement and sign it, it becomes enforceable under the provisions of the Arbitration and Conciliation Act, 1996 and the Code of Civil Procedure. The Court will enforce the agreement by legal process of execution. Advantages that are unique to the process of mediation is that ,in this process, creative solutions are possible, including options that are not available to Courts or tribunals. Mediation can especially be helpful in the, resolution of family disputes, which includes the matrimonial disputes, maintenance disputes, partition cases, and such other matters that are possible to be resolve among the parties themselves without publicity. The process of mediation can also be advantageous where financial compensation may not be all that is sought. It is possible to rebuild trust and improve damaged working relationships. Misunderstandings can be cleared up during the process of mediation. 'Unfinished business' can be 'finished'. There is flexibility in the way the problem solving is approached, without a requirement to go through fixed stages as in the case of litigations in Court.

214

S.Duncombe, Leadre‖s model ―agreement to mediate,1995.

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CHAPTER7: NEGOTIATION & INTERNATIONAL ARBITRATION It is true that, nothing is more satisfying and more soothing than a cordially negotiated amicable settlement because, it protects and preserves personal and business secrets, relationships and reputations that might otherwise be impaired by the adversarial process. The process of negotiation does not fall either in the concept of ‗arbitration‘ or ‗conciliation‘. Strictly, negotiation by itself, is not an alternative dispute resolution procedure because it is a bipartite process and does not require a third party to facilitate and promote the settlement, whereas alternative dispute resolution methods essentially involves a third person for facilitating the resolution of the dispute by settlement. However, it is the most fundamental way of dispute resolution and is generally treated as one of the main components of alternative dispute resolution processes. It is only when the process of negotiation does not succeed, that it transforms into alternative dispute resolution method by intercession of a neutral and more structured process framework215 . 215

Brown and Marriott, ADR Principles and Practice , 2nd edn,1999.

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Justice Krishna Iyer J accentuated the need for settling disputes between parties particularly in commercial matters, by mutual negotiation in preference to Court litigation in the following languages, ‗Commercial causes…, should, as far as possible be adjusted by nonlitagitative mechanisms of dispute resolution since forensic process, dilatory and contentious , hamper the flow of trade and harm both sides, whoever wins or loses the lis. A legal adjudication may be flawless but heartless but a negotiated settlement will be satisfying, even if it departs from strict law216 . The parties should be encouraged, so far as possible, to settle their disputes without reference to litigation. The Arbitration and Conciliation Act,1996 gives legislative recognition to this concept under Section 30. Section 30 provides that, ‗ It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties; the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement‘. In India, the process of negotiation as a preferred dispute resolution method is yet to make an impact. Nevertheless, in many countries it has made a remarkable impact. In Sweden the disputed parties meet in a spirit of determination to agree, and they are said to consider the non arrival at an amicable settlement almost a disgrace to themselves217 MEANING Negotiation is the simplest and most purposeful method of settling commercial disputes between the parties. The disputants themselves are in the best position to know the strengths and weaknesses of their respective cases. If there is any need of advice felt by them on such points of difficulty or controversy, the disputed parties can seek the needed advice from the competent persons or from the experts of such field. The process of Negotiation thus enables the parties to iron out their differences and dispute by direct face-to-face interaction. It avoids unnecessary acrimony, anguish and expense. The process of negotiation can help in healing the wounds and thus remedies pains caused by inter – party frictions. Thus, Negotiation can take place in business, non-profit organisations, Government branches, legal proceedings, among nations and in personal situations such as marriage, divorce and parenting. PROCEDURE 216

Agarwal Engineering Co Vs Technoimpex Hungarian Machine Industries, Foreign Trade Co.1977 (4)SCC 367. 217 OP.Malhotra, The Law of Industrial Disputes Vol I, 6th edn,2004.

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Negotiation is a non-binding procedure in which discussions between the parties are initiated without the intervention of any third party with the object of arriving at a negotiated settlement of the dispute. It is not confined to the core points of the dispute alone. In order to facilitating overall settlement of the dispute, parties can introduce other issues as trade-offs. Negotiation is an interaction of influences. Such interactions, for example, include the process of resolving disputes, agreeing upon courses of action, bargaining for individual or collective advantage and of crafting outcomes to satisfy various interests. The process of negotiation gives the parties an option to go over a wide range of issues. In business disputes, the disputed parties try to reach a settlement by adopting a give and take process, understanding each other‘s point of view, as they best know the strength and weakness of their respective cases and the parties have their market reputation at stake. This gives

a

greater

chance

of

reaching

an

amicable

settlement

by

negotiations.

Negotiation involves three basic elements: process, behavior and substance. The ‗process‘ refers to how the parties negotiate, the context of the negotiations, the parties to the negotiations, the tactics used by the parties, and the sequence and stages in which all of these play out. ‗Behaviour‘ to the relationships among these parties, the communication between them and the styles they adopt. The ‗substance‘ refers to what the parties negotiate over the agenda

the

issues

in

their

respective

positions and more helpfully in interests of the parties, the options, and the agreements reached at the end by them218 . Skilled negotiators may use a variety of tactics ranging from a straightforward presentation of demands or setting of preconditions to more deceptive approaches such as intimidation and salami tactics may also play a part in arriving at the outcome of negotiations. The key to Negotiation is information. Emotions have the potential to play either a positive or a negative role in negotiation. During negotiations, the decision as to whether or not settle rests in part on emotional factors. Negative emotions can cause intense and even irrational behavior, and can cause conflicts to escalate and negotiations to break down, while positive emotions facilitate reaching an agreement and help to maximize joint gains. 218

http//en.wikipedia.org/Negotiation.

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Negative affect has detrimental effects on various stages in the negotiation process. Although various negative emotions affect negotiation outcomes. Angry negotiators plan to use more competitive strategies and to cooperate less, even before the negotiation starts. These competitive strategies are related to reduced joint outcomes. During negotiations, anger disrupts the process by reducing the level of trust, clouding parties' judgment, narrowing parties' focus of attention and changing their central goal from reaching agreement to retaliating against the other side. Angry negotiators can pay less attention to opponent‘s interests and can be less accurate in judging their interests, thus achieve lower joint gains. Moreover, because anger makes negotiators more self- centered in their preferences, it increases the likelihood that they will reject profitable offers. Anger does not help in achieving negotiation. goals either: it reduces joint gains and does not help to boost personal gains, as angry negotiators do not succeed in claiming more for themselves. Moreover, negative emotions leads to acceptance of settlements that are not in the positive utility function but rather have a negative utility. However, expression of negative emotions during negotiation can sometimes be beneficial: legitimately expressed anger can be an effective way to show one's commitment, sincerity, and needs. ADVANTAGES A negotiated settlement is conducive in preserving relations between the parties as also their market reputation, which justifies the preference of the process of negotiation over other alternative dispute resolution methods. The process of negotiation and the negotiated settlement is possible at any time, even after the other methods of dispute resolution have been initiated . The negotiated settlement is based on bipartite agreements, and as such, is superior to any procedure involving third party intervention in matters that essentially concern the parties. As against ‗arbitration‘ and ‗conciliation‘, the process of negotiation is most flexible and informal, and provides ample scope for the parties to direct the proceedings suited to the facts and circumstances of the case. For instance, parties are free to choose the location, timing, agenda, subject matter and the participants. It is quick, inexpensive, private and less cumbersome in comparison to other dispute resolution methods. It is a voluntary and non100 | P a g e

binding process, wherein the parties control the result and the procedure for coming to an amicable agreement. The main advantage of negotiation can be said to be that, a settlement by way of negotiation is always possible, even after other method of resolving the dispute have been set in motion or having been set in motion, have not resulted in an amicable settlement. DISADVANTAGES It is a common practice for the parties to an international contract to stipulate that before embarking upon arbitration, the parties will endeavour to settle any dispute by negotiation or some other form of alternative dispute resolution method. The essence of negotiation that it is basically a business deal involving reluctant exchange of commitments where both parties want to yield less and get more. It is akin to the practice of diplomacy. The evolution and adoption of the modern systems of Information, communication technologies and the concept of Cyber era has made the business and trade negotiations a highly sophisticated science, involving a complex interchange of ideas combining arguments, horse-trading and bluff. The businesspersons and traders use negotiation as a device for trying to persuade the other to give him what he needs or wants and gives up something in return. The process of negotiation can sometimes become highly complicated, particularly because the process of negotiation have emphasized a greater and extensive possibilities for joint gains and interest base outcome. The final outcome of negotiation would depend upon the art, skill and dexterity of displaying strength by one party to the other. Where the other de the process of negotiation can start with easy bargaining slowly adopting a pleading manner or in some cases the parties may hector, cajole or threaten the other party. The powerful party to the dispute has an option to use the tactic of avoiding the process of negotiation or withdrawing from the situation, which involve confronting others in resolving differences. There by the party may use the threat of withdrawal as a strategy in his favor and disadvantageous to that of the opposite party. Negotiations can culminate into an amicable settlement only if the parties have a genuine eagerness and will, followed by earnest honest

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efforts and cooperation, to settle the dispute. However, it is unlikely to succeed unless those involved are capable of a certain degree of detachment and objectivity. In long term agreements it is common to find a formula that the, in the event of a dispute arising, the parties will first endeavour to settle their differences by negotiations ‗in good faith‘. Lord Ackner in Walford vs. Miles has said that ‗an agreement to negotiate, like an agreement to agree, is unenforceable because it lacks the necessary certainty. A duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of the negotiating parties. Negotiation goals either: it reduces joint gains and does not help to boost personal gains, as angry negotiators do not succeed in claiming more for themselves. Moreover, negative emotions leads to acceptance of settlements that are not in the positive utility function but rather have a negative utility. However, expression of negative emotions during negotiation can sometimes be beneficial: legitimately expressed anger can be an effective way to show one's commitment, sincerity, and needs. 7.2 INTERNATIONAL COMMERCIAL ARBITRATION If we are to understand fully the present role of international commercial arbitration, and what shape it is likely to take in future, it is important to look at past developments that are the basis for our current system of arbitration. In short, to understand the future you need to understand the past. Arbitration is a system of justice, born of merchants. In one form or another, it has been in existence for thousands of years 219 . The origins of arbitration go back to dispute settlement usages in ancient times, in Europe, in Greece and Rome, including Roman law, and in Asia. The earliest law dedicated to arbitration in England was in 1697. In France, the French Revolution considered arbitration as a droid naturel and the Constitution of 1791 proclaimed the constitutional right of citizens to resort to arbitration. It was also included in the Code of Civil Procedure in 1806. The origins of the concept of arbitration in France go back to the 219

―Sources for the History of Arbitration‖ by Derek Roebuck (1998) 14 Arb Intl.; ―Cleopatra Compromised: Arbitration in Egypt in the First Century BC‖ (2008) 74 Arbitration 3 at 263.

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ancient courts of Pie Poudre (from the French pied poudreux, meaning vagabond), set up by boroughs to settle disputes between merchants on market days.Up until the 20th century, the national courts lagged behind in recognising the decisions of arbitrators. This may be because the courts saw arbitration as a rival, as well as being suspicious about the standards being applied in arbitrations at the time. Even in England, for long a centre for international commercial arbitration due to its pivotal position as the centre for shipping, insurance, commodity and financing businesses, arbitration was initially closely controlled by the English courts. In 1883 the Court of Common Council of the City of London set up a committee to consider the establishment of a tribunal for the arbitration of trans-national commercial disputes arising within the ambit of the City. The initiative came from the London business community, which was becoming increasingly dissatisfied with the slow and expensive process of litigating in the English courts. As The Law Quarterly Review was to report at the inauguration of the tribunal a few years later: ―This Chamber is to have all the virtues which the law lacks. It is to be expeditious where the law is slow, cheap where the law is costly, simple where the law is technical, a peacemaker instead of a stirrer-up of strife‖. In 1919 the world‘s business community established the International Chamber of Commerce (―the ICC‖). The ICC has been the voice of the international business community and has been a major driving force in the promotion of both arbitration as a mechanism for the resolution of international commercial disputes and the need for international regulations to uphold and support the arbitration process. As world trade expanded, the need to create a mechanism for international recognition and enforcement of both arbitration agreements and awards in relation to international commercial agreements was regarded as essential. In 1958 the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (―the NYC‖) was adopted. The NYC provides for international recognition and enforcement of arbitration agreements and awards by national courts. Since it was adopted, the NYC has been the cornerstone of international commercial arbitration and has represented a quantum leap forward for international arbitration. Lord Mustill described the NYC as a convention which: ―perhaps

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could lay claim to be the most effective instance of international legislation in the entire history of commercial law‖220 . The success of the NYC is illustrated by 3 factors: 

144 countries are signatories to the NYC4.



A body of international case law has developed in applying the NYC which has had a direct influence on international arbitration practice and law.



It is accepted that agreements to arbitrate and arbitration awards will be enforced by the courts of the countries that are party to the NYC.

As international arbitration increased and the influence and benefits of the NYC became apparent new arbitration institutions began to be created as a supplement to ad hoc arbitrations. Each institution has its own arbitration rules and procedures and offers arbitration

services

national environment.

that

were

initially

influenced

considerably

by

its

own

Whilst there are a large number of arbitral institutions, the major

institutions are: 

London Court of International Arbitration (―LCIA‖), based in London (established in 1892)



Stockholm Chamber

of

Commerce (―SCC‖), based in Stockholm (established in

1917) 

International Chamber of Commerce (―ICC‖), based in Paris (established in 1919)



American Arbitration Association (―AAA‖), based in New York (established in 1926)



China International Economic and Trade Arbitration Commission (―CIETAC‖), based in Beijing (established in 1956)



Hong Kong International Arbitration Centre (―HKIAC‖), based in Hong Kong (established in 1985).



Singapore International Arbitration Centre (―SIAC‖), based in Singapore (established

220

Mustill, ―Arbitration: History and Background‖ (1989) 6 J Intl Arb 43; see also Schwebel, ―A celebration of the United Nations‘ New York Convention‖ (1996) 12 Arb Intl 823.

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in 1991). In the early 1970s there was an increasing need for a neutral set of arbitration rules suitable for use in ad hoc arbitrations. Under the auspices of the United Nations, arbitration rules were prepared by the United Nations Commission on International Trade Law (―UNICTRAL‖). The UNCITRAL Rules cover all aspects of the arbitral process, providing a model arbitration clause, setting out procedural rules regarding the appointment of arbitrators and establishing rules in relation to the form, effect and interpretation of the award. The UNICTRAL Rules were intended to be acceptable in both capitalist and socialist countries, in developed and developing countries, and in common law as well as civil law jurisdictions. The UNICTRAL Rules have achieved international recognition and are now widely used. Since 2006, UNCITRAL has engaged its Working Group II in the revision of the Rules which is now in a late stage of completion. The revised Rules are expected to be adopted by UNCITRAL in the summer of 2010.A further historical landmark came in 1985 with the UNCITRAL Model Law on Arbitration, which is accepted by an increasing number of countries throughout the world; and many other countries (where they have not adopted it outright) have based their arbitration laws upon it. As the authors of Redfern and Hunter on International Arbitration (5th Edition) state at p. 76:―If the New York Convention propelled international arbitration onto the world stage, the Model Law made it a star, with appearances in States across the world.‖ Whilst accepting the significant advance brought by the Model Law, it soon fell behind the pace of the fast-moving world of international arbitration in at least two respects. Firstly, the requirement for an arbitration agreement to be in writing, if it is to be enforceable; and secondly, the provisions of Article 17 governing the power of an arbitral tribunal to order interim measures of relief. This resulted in the Revised Model Law, which was approved by the United Nations in December 2006. The Revised Model Law allows for the ―writing requirement‖ to be defined in very wide terms, and recommends that an arbitral tribunal should have the power to issue interim measures In the last 25 or so years there has been an increase in the number of institutions providing arbitration services. In particular, in 1985 the Hong Kong International Arbitration Centre (―HKIAC‖) was established; and in 1991 the Singapore International Arbitration Centre 105 | P a g e

(―SIAC‖) was established. More recently, in 2008 the ICC set up a branch of its Secretariat in Hong Kong and in Singapore. Also, in 2008, the LCIA established (together with the Dubai International Financial Centre) a centre in Dubai, known as DIFC-LCIA. And, in April 2009, the LCIA set up a satellite branch in India, known as LCIA India. This brief summary of the history of international commercial arbitration shows that, throughout history, international trade has led to the creation of arbitration machineries and legal frameworks. In looking to the future of arbitration, one similarly has to look at the current and future needs of international business practice to consider what future developments will occur in the field of international commercial arbitration.

Increasing diversity in the subject matter of international arbitration In terms of the subject matter of arbitration, as the past has shown us, changes in technology and in international contract practice will dictate what the future subject matter of international arbitration will be. For instance, new types of contracts in fields such as telecommunication, the transfer of technology, genetic engineering, electronic commerce, entertainment and sports will in the future probably take a greater share of arbitration cases. The growing significance of intellectual property will also mean that the World Intellectual Property Organisation (―WIPO‖) will need to expand. Increasing use of mediation and other forms of ADR There is presently a great variety throughout the world as to what role arbitrators may play in the promotion of amicable settlements between the parties. In countries such as China, Germany, and Japan, at least in domestic arbitrations, there is an expectation by the parties and their lawyers that the arbitrators, at some stage in the procedure, and in consultation with the parties, will try to promote an amicable settlement and suggest solutions for such settlement. In these countries, this is permitted by law and leads to a majority of domestic

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arbitration cases ending in such amicable settlement. In many other countries, such a role of the arbitrators is either not permitted by law or at least not performed in practice. Research has shown that companies would often like to have an option for mediation available, because an amicable settlement provides a better basis for future business relations between the parties. The traditions in countries such as China may have an impact on arbitration in other parts of the world in promoting arbitral procedures in which an amicable settlement is proactively sought with the consent of the parties. Recently, in December 2009, the Centre for Effective Dispute Resolution (―CEDR‖) published its own Rules for the Facilitation of Settlement in International Arbitration. If these Rules are adopted by parties, either on an ad hoc basis or as part of the underlying contract between them, the arbitral tribunal would then be able to invite the parties to participate in a first procedural meeting, at which it will ―ensure that [they] are aware of the different resolution processes such as mediation which, in the opinion of the tribunal, might assist the parties‖; will allow the tribunal to give a preliminary view on the merits and issues in the case; and the parties will agree to the inclusion of a mediation window in the arbitration proceedings to make it easier for them to come to an amicable settlement, with arbitration proceedings being adjourned so that the mediation can proceed. The CEDR Rules are akin to the pre-action protocols in English Court proceedings; and it is, perhaps not surprising, that it was Lord Woolf who introduced the new Rules in December 2009.

7.3

THE

RELATIONSHIP

BETWEEN

NATIONAL

COURTS

AND

INTERNATIONAL COMMERCIAL ARBITRATION It is important to reflect on the current relationship between national courts and international commercial arbitration as both must co-exist together. Because arbitration is essentially a consensual process, where there is a reluctant party it is sometimes necessary to use the court‘s coercive powers.

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The nature of this relationship has been compared to a relay race. As Lord Mustill put it221 ―Ideally, the handling of arbitral disputes should resemble a relay race. In the initial stages, before the arbitrators are seized of the dispute, the baton is in the grasp of the court; for at that stage there is no other organisation which could take steps to prevent the arbitration agreement from being ineffectual. When the arbitrators take charge they take over the baton and retain it until they have made an award. At this point, having no longer a function to fulfil, the arbitrators hand back the baton so that the court can, in case of need, lend its coercive powers to the enforcement of the award.‖ There is a tension that lies at the heart of the relationship of the courts and arbitration. On the one hand, the concept of arbitration as a consensual process, reinforced by the ideas of transnationalism, leans against the involvement of the mechanisms of state through the medium of a municipal court. On the other side, there is the plain fact, palatable or not, that it is only a court that possesses coercive powers which can rescue the arbitration if it is in danger of foundering222 . In the recent case of West Tankers the tension that lies between international commercial arbitration and the intervention of the courts in the arbitral process has come to the force. THE EUROPEAN COMMISSION’S GREEN PAPER ON THE JUDGMENTS REGULATION On 21 April 2009 the European Commission published its

report

223

on the

Judgments Regulation together with a Green Paper224 introducing a consultation on the relationship between the Judgments Regulation and arbitration. The Green Paper raises the question as to whether arbitration should be brought within the scope of the Judgments Regulation and suggests a deletion of the exclusion of arbitration from its scope.

221

Lord Mustill, ―Comments and Conclusions in Conservatory Provisional Measures in Interna tional Arbitration‖, 9th Joint Colloquium (ICC Publication, 1993) 222 Coppee Levalin NV v Ken-Ren Fertilisers and Chemicals [1994] 2 Lloyd‘s Rep 109 at 116 (HL). 223 224

Report on the application of Regulation 44/2001 COM (2009) 174. Green Paper on the review of Regulation 44/2001.

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Section 7 of the Green Paper addresses the issue of the integration of international arbitration in the scope of the Brussels 1 Regulation. The European Commission considers that its proposal would allow for more standard recognition and enforcement of arbitral awards as well as extending the reach of the provisional and conservatory measures that may be awarded by a court assisting the arbitral process. This Green Paper has been criticised by many practitioners as being incompatible with the NYC, and it now appears that the European Commission will not engage in a risky overhaul of a system of enforcement under the NYC that is already working well within Europe.

RECOGNITION AND

ENFORCEMENT OF INTERNATIONAL COMMERCIAL

ARBITRATION AWARDS In the recognition and enforcement of arbitral awards, the arbitral process is reliant upon national systems of law. This is the classic example of what Lord Mustill meant when he referred to the relationship between the national courts and arbitration being like a relay race. The arbitral tribunal, whilst having sufficient powers to make the award, has no coercive powers to force a reluctant party to comply with the award. This is where the national court system takes up the baton. In this regard, the NYC has been very successful as a system in obtaining the recognition and enforcement of international awards; and it continues to be the cornerstone of international commercial arbitration. Indeed, the NYC has been eulogised as ―the single most important

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pillar on which the edifice of international arbitration rests‖225 . The NYC has provided a considerable degree of uniformity in the recognition and enforcement of awards. It enshrines a strong pro-enforcement policy and there are, purposefully, very few grounds for objecting to recognition and enforcement under the NYC. Internationally, it is easier to obtain recognition and enforcement of an international arbitral award than it is of a foreign court judgment (which is dependent on a bilateral treaty of recognition, or within EU Member States under the Judgments Regulation). It is one of the main advantages of arbitration as opposed to litigation in resolving international commercial disputes. This is due to the fact that the provisions for the enforcement of foreign court judgments are less well developed with no recognition treaties that come anywhere near to the widespread adoption of the NYC, which has been adopted by 144 countries. The available statistics suggest that most arbitral awards are in fact carried out voluntarily. In a study carried out by Price Waterhouse Coopers LLP in 200821, it found that only in 11% of cases did participants need to proceed to enforce an award and, in those cases, in fewer than 20% did the enforcing parties encounter difficulties in enforcement. There are also often commercial pressures on a party to comply with an award. Before considering recognition and enforcement in detail, it is worth just mentioning the limited scope of the ability to challenge an award by way of appeal in the seat of arbitration. In considering whether or not it is possible to challenge an arbitral award, it is necessary to look at the applicable Rules of Arbitration226 , as well as the law of the seat of arbitration. Each state has its own concept of the level of control it wishes to exercise over the arbitral process, and this can vary (as well as distinguish between domestic and international arbitration). If the seat of the arbitration is London, the appeal is to the Commercial Court of the Queen‘s Bench Division of the High Court of Justice; if it is in France, it is to the Cour D‘Appel, Paris; and if in Switzerland, it is to the Swiss Federal Tribunal.

225

Wetter, ―The Present Status of the International Court of Arbitration of the ICC; An Appraisal‖ (1990). The Rules of art 32 of UNCITRAL, the LCIA, and the ICC each state that an arbitral award is final and binding 226

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Challenges to awards by way of an appeal are difficult to make; and, purposefully so, as the decisions of arbitrators are meant to be final and binding227 . Having said that, in the case of Shell Egypt West Manzala GmbH & Anor v Dana Gas Egypt Ltd228 the English High Court held that the UNICTRAL Rules that provide for ―final, conclusive and binding‖ does not exclude the possibility of appeal on a point of law. It is, therefore, important that parties agreeing to arbitrate in London under the UNICTRAL Rules include clear and unambiguous wording in their arbitration clause if they want to prevent the possibility of an appeal on a question of law. This is because the legal system recognises that the parties have decided that they are to be bound by the decision of the arbitrators as an alternative to the national court. The law, therefore, gives effect to the intention of the parties and enforces the award just as it would a national court judgment. The House of Lords decision in Lesotho Highlands Development Authority v Impregilo Spa and others229 clarifies the basis on which arbitral awards may be challenged in the English courts and affirms the underlying policy of the English Arbitration Act 1996, which is to reduce court interventio n in the arbitration process to a minimum. In terms of the recognition and enforcement of arbitral awards, it should be noted that unlike a challenge to the award by way of an appeal - this will probably not take place in the seat of arbitration; as the seat of arbitration may specifically have been chosen for its neutrality to the parties. Thus, it will be entirely fortuitous if the party to whom enforcement is required happens to have assets located within the neutral country chosen as the seat of the arbitration. The key consideration on enforcement is obviously the location of assets to enforce against; and the application for recognition and enforcement will be driven by that factor. In such an application, the powers of the state in which those assets are located are exercised through its national courts.

227

The words ―final, conclusive and binding‖ does not exclude the possibility of an appeal on a point of law. Article 26.9 of the LCIA Arbitration Rules and Article 28(6) of the ICC Rules include wording which is effective to exclude the right of appeal (under section 69 of the Arbitration Act 1996) to the English Court. The UNICTRAL Rules do not contain such wording. 228 [2009] EWHC 2097. 229 [2005] UKHL 43.

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The method of recognition and enforcement to be adopted depends on the place where the award was made – i.e. whether it qualifies as a NYC award. As there are 144 countries that are signatories, this is often not a point of significant practical importance. It also depends on the relevant provisions of the law at the place of intended enforcement. The procedure to be followed in any given case will vary from country to country, and it is important to obtain advice from experienced

lawyers who

practise in the particular jurisdiction where

enforcement of an arbitral award is sought. In terms of procedure, by way of example, there may be differences in the time limits for making the application. In England, it is 6 years; but in the US it is 3 years. Also, it is often necessary to have the original or certified copies of the arbitration agreement and award. It may also be necessary to serve a translation of the award, which can sometimes require the formality of obtaining consular attestation in the country of origin. There are several different ways in which a national legal system can provide for the enforcement of arbitral awards: 

Where the laws of the country of enforcement provide that, with the leave of the court, the award of an arbitral tribunal can be enforced directly without the need for deposit or registration (as in England).



Where the award is deposited, or registered, with a court following which it may be enforced as if it is a judgement of that court (as in Switzerland).



Where it is necessary to apply to the court for some form of recognition as a preliminary step to enforcement (as in France).

The formalities required under the NYC are straightforward. The party seeking such recognition and enforcement is required to produce to the relevant court the duly authenticated original award, or a duly certified copy of it; and the original agreement to arbitrate, or a duly certified copy of it. If the award and the arbitration agreement are not in the official language of the country in which recognition and enforcement is sought, certified translations are needed.

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Once the necessary documents have been supplied, the court will grant recognition and enforcement unless one or more of the 5 grounds for refusal, listed in the NYC, are present. The burden of proof for establishing any ground is upon the party seeking to object to the enforcement; and, even then, there is a residual discretion to enforce the award, The grounds are as follows: 

The parties to the arbitration agreement were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.



The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case.



The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced.



The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.

The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made. For a recent Court of Appeal judgment on the first ground - where the arbitration agreement underlying the award is ―not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was mad.‖ - the English Court of Appeal has recently refused enforcement of a NYC award. 113 | P a g e

In Dallah Estate and Tourism Holding Company v Ministry of Religious Affairs of the Government of Pakistan230 Dallah sought unsuccessfully to enforce in England a US$20m award it had obtained against the Ministry in an ICC arbitration in Paris. Dallah was a Saudi Arabian company that provided accommodation, transport and other services to Muslims undertaking the Haj. The Ministry was responsible for the safety and welfare of Muslims from Pakistan. The Ministry was not named as a party to the contract containing the arbitration agreement, and did not sign it. During the arbitration, the arbitral tribunal (which included Lord Mustill) decided that the Ministry was a party to the arbitration agreement. In the absence of any governing law clause (or any other indication in the contract as to which law should be applied to determine whether the Ministry was a party) the arbitral tribunal had applied ―transnational general principles and usages reflecting the fundamental requirements of justice in international trade and the concept of good faith in business.‖In the English enforcement proceedings, pursuant to the NYC (and s. 103 of Arbitration Act 1996) the question whether the Ministry was a party to the arbitration agreement had to be determined applying French law, as the ―law of the country where the award was made‖. Dallah appealed to the Court of Appeal, which held:Where enforcement of a NYC award in England is opposed on the basis that the arbitration agreement is ―not valid‖, the court is required to consider all relevant factual evidence relied on by the party seeking to establish that the arbitration agreement is ―not valid‖. Where the same factual evidence was also considered by the arbitral tribunal, the court is required to carry out a rehearing rather than merely a review. It is not necessary for the party opposing enforcement also to seek to have the award set aside by the courts at the seat of arbitration. Thus, the fact that the Ministry had not sought to challenge the award in the supervisory court (i.e. France) did not render the award final and conclusive between the parties.Whilst the Court of Appeal retained some discretion to permit enforcement even when one of the grounds for refusal had been established, the discretion should not be exercised when the Ministry had never been a party to the arbitration agreement.Leave to appeal to the Supreme Court in Dallah was given in January 2010.

230

27 [2009] EWCA Civ 755

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CHAPTER8. SEMINAR AND ARBITRAL PROCEEDINDS REPORT

8.1 THE DELHI INTERNATIONAL ARBITRATION CENTRE: A SEMINAR ON ETHICS IN ARBITRATION The author has attended the seminar on the topic of ―Ethics in Arbitration‖ held by The Delhi International Arbitration Centre on Saturday, 1st September 2018 at India International Centre, New Delhi. The author along with 5 other students from Faculty of Law, Jamia Millia 115 | P a g e

Islamia were lucky enough to attend the seminar as delegates and attained words of wisdom from reputed personalities in the field of arbitration. SESSION 1: Conflict of Interests in Appointment of Arbitrators In the first session, the chair Justice A.P. Shah, Mr. Gopal Subramanium and Mr. Hiroo Advani put light upon the topic of Conflict of Interests in Appointment of Arbitrators. The panellists discussed the pros and cons surrounding unilateral appointments, however, the negative factors associated with this practice appear to be going on a rise. • The default rule should be that all arbitrators are appointed jointly by the parties or by a neutral appointing authority especially in an arbitration consisting of a sole arbitrator. • The amended Section 12 of the Act requires that a person who has been approached for a possible appointment as an arbitrator to disclose in writing the circumstances which are likely to raise justifiable doubts as to his or her independence or impartiality to act as an arbitrator. • However, there has been less emphasis by the courts on continuous duty of arbitrators to disclose potential conflicts of interest. It is necessary that a proper disclosure also includes the information that the arbitrators could have known through investigation. • Section 12 of the Act does not address the question that what if there was a duty to disclose which has been breached by the arbitrator. Does that breach automatically debar the arbitrator? There is no provision for any interlocutory challenge before a court to a bias situation and the party has to wait until the award is pronounced. • The idea of doing away with practice of unilateral appointments is in line with possibility to get rid of conflicts of interest to protect institution of Arbitration, since this issue affects trust and confidence that Arbitration provides to parties. • Some of the obvious problems that these suggestions could bring are that it is possible that the parties will not be able to agree on the name of the arbitrator, or will not be entirely be satisfied by the appointment made by the Institution. 116 | P a g e

• Also, confidentiality is one of the features which make arbitration attractive to parties as a means of dispute resolution thereby, making it difficult to implement the idea of publication of awards. • There is also a dire need for a mechanism to enable the parties‘ to access all relevant information regarding the proposed arbitrator that can help in identifying issues of conflict of interest and to verify if the disclosure provided by the arbitrator is correct.Lastly, it is for the arbitrators to set for themselves a higher moral standing. SESSION 2: Challenges to Arbitrators In the second session, the chair Justice S.J. Vazifdar, Mr. Gourab Banerji and Ms. Zia Mody put light on the challenges to arbitrators in an arbitration proceeding and can be summarised under the below bullet points. • Article 15(1) of the SCC Rules provides that a party may challenge an arbitrator ―if circumstances exist which give rise to justifiable doubts as to the arbitrator‘s impartiality or independence or if he/she does not possess the qualifications agreed by the parties.‖ The rules do not define ―justifiable doubts‖, or explain which circumstances may legitimately give rise to such doubts. Therefore, when determining whether a challenge filed under this provision should be sustained, the SCC Board looks to applicable law and best practices in international arbitration for guidance. • A party who wants to challenge an arbitrator must submit a written statement to the Secretariat setting forth the reasons for the challenge. The challenge must be filed within 15 days from when the circumstances giving rise to the challenge became known to the party. Failure by a party to challenge an arbitrator within the stipulated time period constitutes a waiver of the right to make the challenge. • When a challenge is filed by a party, the Secretariat gives the other party and the arbitrators an opportunity to submit comments on the challenge. If the other party agrees to the 117 | P a g e

challenge, the arbitrator must resign. In all other cases, including in those where the arbitrator offers to voluntarily step down but one party objects, the Board makes the final decision on the challenge. The SCC Secretariat compiles a memorandum for the Board, which includes the grounds for challenge, the comments submitted by the arbitrator and the other party, and an analysis of the circumstances based on SCC precedent, legal authorities, the IBA Guidelines. • The Board discusses the challenge at one of its monthly meetings, or electronically in situations where an urgent decision is needed. Once the SCC Board has made a decision, the parties and the arbitrators are notified whether the challenge was sustained or dismissed. The SCC currently does not provide reasons for its decisions, but may begin doing so in the future. The SCC aims to handle all challenges to arbitrators efficiently, and so as to avoid delaying the arbitral proceedings. Arbitrators and opposing parties are typically given one week to comment on the challenge, and the SCC Board usually renders its decision within 4 weeks of the challenge being filed.

SESSION 3: Fees of Arbitrators In the third session, the Chair Justice Mukul Madgal, Ms. Meenakshi Arora and Mr. K.V Vishwanathan put light on the topic of fees charged by the Arbitrators for an arbitration proceeding. It can be summarised under the following bullet points: • In the event, the arbitral tribunal is a sole arbitrator, he shall be entitled to an additional amount of twenty-five per cent on the fee payable as per the table set out above. • The above is a ―Model‖ fee structure and the High Court may modify it to the extent required as indicated in the section as under: 118 | P a g e

(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule. Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.‘‘ • However, it can be implied that without a specific enhancement granted by the Court, the schedule fee may be considered as the ―Upper Limit‖ of what the law considers as ―Reasonable‖. • We may also note that the schedule mentions that if the Arbitral Tribunal is a sole arbitrator, he shall be entitled to an additional 25% of fees. This confirms that what the schedule represents is the total fees that has to be shared by all the members of the Arbitration Panel. • Some of the major Arbitral Institutions in India used to specify a schedule of fees in their rules and indicate that the scheduled fees would be applicable to each of the members of the Arbitration Panel. This used to discourage the parties in going for multi member Arbitration Panel which is good to enhance the credibility of the Panel. Now that the schedule mentions that the fees mentioned in the schedule is for the total panel, it actually encourages setting up of a multi member panel for all arbitrations. • However, if any Arbitrator or an Arbitration panel decides to charge a fee lower than what is specified, there is no reason for any Court to object. 8.2 ARBITRATION PROCEEDINGS BEFORE SH. S.M. AGGARWAL, HON’BLE SOLE ARBITRATOR CASE NO. 32/2017 ARBITRATION PROCEEDINGS BETWEEN: M/S SIMPLEX PROJECTS LTD. …………………………………………… CLAIMANT AND NEW DELHI MUNICIPAL COUNCIL ………………...……………………RESPONDENT 119 | P a g e

Due to Mrs. Madhu Saini‘s efforts and contacts with the New Delhi Municipal Council, students of 4th and 5th Year of Faculty of Law, Jamia Millia Islamia went on to attend live arbitration proceedings between the parties of the arbitration in the case of M/S SIMPLEX PROJECTS LTD. v. NEW DELHI MUNICIPAL COUNCIL. The facts of the case were that there was an agreement made on 25th April 2008 between the M/S Simplex Projects Ltd. having a registered office at 12/1, Nellie Sengupta Sarani, Kolkata- 700087, through its Director J.K. Bagri S/o SH. Balkishan Bagri, of the ONE PART and New Delhi Municipal Corporation, Palika Kendra, New Delhi through its Chief Engineer (C-11) Of the OTHER PART. The party shall include their respective successors in office. WHEREAS

M/S Simplex Projects Ltd., Have agreed to undertake the work of

―Improvement/ Upgradation of Talkatora Indoor Stadium to existing of Talkatora Indoor Stadium at the tendered amount of Rs. 19,18,82,l72/- which is 81% above the Estimated cost of Rs. 10,60,13,469/- as per the terms & conditions of work award letter dated 17.4.2008 and general terms & conditions annexed thereto.

Now, therefore, this AGREEEMENT WITNESS as under:-The stipulated period of completion of work is Twelve Months and time is the essence of the contract. In WITNESS whereof, the parties have hereinto set and subscribed their hand and seals on the day and the year first above written.The dispute arose between the parties when certain dues amounting to more than 20 Crores was left to be paid by the New Delhi Municipal Corporation in regard to the services provided by the claimant company, i.e. M/s Simplex Projects Ltd. Hence, the present Arbitration proceedings were filed below very abled and experienced Retired District Court Judge of Delhi, Sh. S.M. Aggarwal as the sole arbitrator in the instant case. The instant arbitration proceedings have surpassed the admission/denial stage and were in final stage of arguments and a claim note containing details of outstanding dues to the extent 120 | P a g e

of approx. Rs. 23.49 Crores was filed by the claimant. By attending the proceedings, it gave practical knowledge to the students and answers the following questions were been answered by the experience. How to Register for Arbitration through Indian Council of Arbitration? A written application to the registrar, asking for an arbitration, has to be initiated by the parties. Registrar, as deem fit, may reject the request on reasonable grounds. What are the Issues which Can be Taken Up for Arbitration and Who Can Be A Party to Arbitration? Disputes insurance,

relating building

to

commercial matter including shipping,

construction,

engineering,

sale,

technical assistance,

purchase,

banking,

know-how,

patents,

trademarks, management consultancy, commercial agency or labor are taken up by the Indian Council of Arbitration. As per Rule 4, ICA Rules: Parties to arbitration can be a resident of India or foreigner. Even two or more foreign parties might enter into arbitration under the rules of Indian Council of Arbitration. What is required is their mutual consent.

In the case where a party to a dispute referred for arbitration is a foreign national, it will be assumed that he has submitted to the jurisdiction of India and all the substantive and procedural law to be applied will be Indian according to Rule 6, ICA Rules. Is the Decision of Indian Council of Arbitration Binding? Yes. Under Rule 8 of Indian Council of Arbitration Rules, the decision of the arbitrators over any dispute will be final and the parties to the arbitration are bound to follow it.

Who are Appointed as Arbitrators Under the Rule?

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•

A register is maintained by the registrar of ICA which includes the name and other such

important details of the arbitrators of Indian Council of Arbitration. •

The panel of arbitrators includes both Indian and foreign arbitrators. Arbitrators from time

to time are recommended by the members of the Council or any other person or organization. • Where a party to dispute ask for an arbitrator living in the foreign land, it will be the duty of the party to dispute to accommodate the arbitrator he demanded. Subject to certain exceptions, all the expenses will be incurred by the party demanding such foreigner arbitrator. •

Age limit or retirement tenure of an arbitrator is 80. After the age of 80, any person

automatically ceases to be an arbitrator as per the rules of Indian Council of Arbitration. What are the Steps towards Filing for an Arbitration? • Step 1: Party to a dispute can directly approach the registrar through an application as mentioned in the first paragraph. After the application is duly accepted, a notice is sent to the other party or parties, as the case may be. • Step 2: On receiving the receipt of the application, the registrar will send a notice to the other party to the dispute. The letter will include a copy of the claim statement and the attached documents and a time period of 30 days or as the time period set up by the registrar will be given to the other party to the dispute to show cause of their side of the case. • Step 3: A counterclaim can be made by the respondent, provided the counterclaim arises from the same transaction as the original claim. Counterclaim have to be supported with all the relevant documents and to the counterclaim, the claimant may within twenty-one days of the notification of the counterclaim or within such extended time, submit a statement in reply to the counterclaim. • Step 4: Three copies of all statements, replies and other documents and papers, as well as appended documents, must be supplied to the registrar.

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Step 5: Number of Arbitrators to Settle the Dispute • Where the amount involved in the dispute is less than or equal to INR 1 crore, the arbitration will be arbitrated by a single arbitrator. Provided, where the parties specifically ask for arbitrators, it will be the duty of ICA to provide the parties in a dispute with such three arbitrators. • Where the amount involved in the dispute is more than INR 1 crore and less than or equal to INR 15 Crore, the ICA will be duty bound to provide the parties with three arbitrators. If the party insists the arbitration is to be instituted by a sole arbitrator in such case, ICA will be duty bound to comply with the demands of the parties to a dispute. • In the cases where parties cannot come to a unanimous selection of arbitrator– If the parties fail to agree on the person to be appointed as sole arbitrator within the time granted by the Registrar, the Registrar in consultation with the Chairman of the Committee and in his absence in consultation with the member of the Governing Body designated by the Chairman, shall appoint the sole arbitrator from among the Panel of Arbitrators.

• In the cases where one party to a dispute is a foreign national- In such cases, the registrar will appoint an arbitrator who does not belong to any country as the proposing parties do. • Where parties are not satisfied with the selection of arbitrator by the registrar-The Challenge of an arbitrator shall be made within 30 days after his appointment has been communicated to the challenging party or within 30 days of his becoming aware of the reasons for which the challenge is made. The judge will be members of ICA committee. What is the Amount of Money to be Deposited before Initiation of Arbitration? Registrar orders the party to pay a particular amount before the initiation of arbitration to incur the expenses in arbitration. This includes the procedural cost as well as expenditure to support the arbitrators. Equal share is drawn from both the claimant and the respondent. What if any Party to a Dispute Defaults in Paying the Advance Amount Before Arbitration? 123 | P a g e

When one of the parties neglects or refuses to make the deposit, the Registrar or the arbitral tribunal as the case may be may require such deposit whether in relation to a claim or a counterclaim to be made by the other Party to the dispute (Claimant or Respondent as the case may be). In addition to all these, INR 500 is a concession charge of ICA for providing of basic infrastructures for facilitating the arbitration. Where any Party to a Dispute Fails to Cooperate with Indian Council of Arbitration. Where a claimant does not file all the requisite documents, papers, etc. or does not deposit the appropriate fees, the arbitration procedure will come to a halt. In such a case, the arbitration proceedings will proceed as it is assuming the presence and awareness of the respondent. What shall be the place of Arbitration? The place or venue of arbitration shall be India. The Arbitration proceedings shall be held at such place or places in India as the arbitral tribunal may determine to have regard to the convenience of the arbitrators and the parties. In a case in which one or both the parties are from overseas, the arbitration proceedings may also be held at any place outside India at the discretion of the arbitral tribunal.

Is there any provision of Fast Track Arbitration? The party to a dispute can opt for fast track arbitration. The arbitration will be done within 36 months. What to Do if One is Not Satisfied with Arbitration Process In such a case, parties are free to approach the court but only in special circumstances. First, an application has to be forwarded to the registrar who in turn will forward it to arbitration tribunal and if the arbitration tribunal is satisfied, an appeal may lie in the court.

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CONCLUSION The Law of arbitration in India has gone through deep changes in recent decades. Regulations on enforcement of foreign awards have significantly improved in recent years. This has been achieved through adoption of new legislations as well as accession to international and regional conventions. India became a party to the New York Convention of 1958, as the single most important convention on the recognition and enforcement of foreign awards with effect from October 11,1960. It has been a breakthrough that erased the uncertainties and suspicions that marred an interest to resort to arbitration with Indian parties. At the regional level, India did not join any convention. India should, however, accelerate the process of considering accession to, and ratification of, international and regional conventions on enforcement of international arbitration awards in order of their priority for its commercial relationships with the outside world. At the international level, it has been said the convergence of legal systems or harmonization of commercial law will, in the long run, 125 | P a g e

stabilize

and

strengthen

national economies and

will create a healthy competitive

environment. As to arbitration legislation, alongside the modernization of the Indian legal system, its law of arbitration has also been significantly improved since 1940. While arbitration practice used to be regulated according to the New York Convention of 1958, since then there has been a trend towards codification and institutionalization of the practice. It can be said that the legal structure required for modern arbitration is now in place in the country. The diversity of religious and custom, have not been major impediments on the way towards modernization of arbitration, save for foreign arbitration. Nevertheless, the existing Indian law of arbitration law has departed, to a large extent, form traditional law. It can be said that the Indian law of arbitration is primarily influenced by modern internationally accepted patterns of arbitration, such as the Model Law. Such influence is mainly conveyed through western legal systems, particularly that of the United Kingdom. This is an advantage Of the type of legal transplant experienced with regard to the Indian law of arbitration that it has been made possible through the English legal system, whose rich background in arbitration is very much similar to that of India. The United Kingdom has been the pioneers of western countries to adopt modern laws.

The long history of its legal system, the magnitude of the cases brought before its courts, and the insightfulness of many of its legal writers have made it into a relatively reliable authority for the adoption new laws. As touched upon before, many other pieces of legislation in India have been inspired by the English model. Hence, the adoption of an arbitration law identical to the English Arbitration Law guarantees some degrees of compatibility with the rest of the legal body in India. The modernization of the Indian arbitration law can be better understood within the wider context of the Asian region, where most of countries, in recent decades, have adopted present arbitration laws conforming to international standards, and established modern arbitration centers. They have intended to enhance their domestic arbitration practice, as demanded by their business communities, and to attract international arbitration. Present Indian law of arbitration is an achievement realized in a relatively short period of time. Nevertheless, there are some difficulties and lacunae that need to be dealt with. The 126 | P a g e

Indian legal system provides for a comprehensive set of rules governing commercial arbitration. Most of these rules are provided for in a statute, separate from other sets of laws, that is, Law of Arbitration 1940, while the rest are integrated in other statutes such as the Arbitration Act, 1996 for civil and commercial disputes. The Indian legislature has intended to encourage and facilitate arbitration. Under the law, arbitration is a regulated and reliable method of dispute resolution, with binding and enforceable outcomes. Present Indian law of arbitration allows both institutional and Ad hoc types of arbitration. There are several bodies engaged in international arbitration in India, such as such as Indian Council of Arbitration, Federation of Indian Chamber of Commerce and Industry, etc. The law is, however, particularly in favor of Ad hoc arbitration, where the parties can freely choose arbiters as well as procedural and substantive rules of arbitration. The process of the development of the Indian law of arbitration indicates a move towards strengthening the contractual features of arbitration, at the expense of its judicial features. Such a move can bolster the confidence of foreign businesses. The extent of court intervention

in

the

arbitration

process

is

now

limited.

Nevertheless,

safeguarding

arrangements are stipulated to guarantee a healthy arbitration process and, more importantly, compliance with its outcome. For instance, an arbitration tribunal decides on its own jurisdiction; and only after the issuance of the award, the competence of the tribunal can be challenged at a court. On the other hand, dilatory tactics such as a challenge to the appointment of an arbitrator cannot obstruct the proceedings, unless either the tribunal or the court grants such a challenge. The move towards emphasize on the contractual feature of arbitration has, however, been undermined by giving too much power to the court, in case of disagreement between the parties. Under Article 34 the Arbitration Act,1996, the competent court has the power to set aside an award made under the Act, if the applicable law has not been applied. This may be interpreted as allowing the substantive review of awards, which is contrary to what is accepted

in many advanced

legal systems. Moreover, specifying too many formal

requirements for an arbitral agreement or award, in order to be valid, might frighten foreign parties from resort to arbitration in India. An important issue, in this regard, is the power of the court to set aside an award, which is to secure a just and rightful solution for the dispute.

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Internationally, however, the tendency is towards restricting the power, in order to prevent its abuse by a reluctant party. Indian law, too, should move in this direction, without compromising the rights of the parties to have an effective judicial control. This can be achieved by limiting the grounds for setting aside an award. Particularly, the ground of failure to apply the applicable law to the dispute should be removed, as it unnecessarily opens the way for the substantive review of awards. Similarly, the provision allowing the court to set aside an award, if there is a defect or indicates of them in the arbitration award or in the proceedings to the extent that it affects the terms of the award, should be removed, as it does not provide a clear definition of such defects. Moreover, Indian law should allow the parties to agree on a waiver of their right to bring before the court a request for vacating the award, what is not permitted under the current law. Unlike the Arbitration Act, 1940, the Arbitration Act, 1996 recognizes International Commercial Arbitration, but somehow treats it similarly from domestic arbitration, as same Courts have jurisdiction to deal with the issues relating to the two types of arbitration. Nevertheless, the distinction between domestic and international arbitration is not sufficiently taken into consideration, as international arbitration should be subject to less restrictions and scrutiny, and be provided with a more favourable treatment. The grounds for vacating a domestic award can be more than those leading to setting aside a foreign award. For instance, a crystal distinction should be made between domestic public policy, which is applied to domestic awards, and international public policy, which in certain circumstances is applied to international awards issued under Indian law. More importantly, the Arbitration Act,1996 recognizes recourse to foreign arbitration. It also contains a definition of foreign arbitral awards, and makes a distinction between domestic and foreign awards. Under the Arbitration Act 1940, it was assumed that foreign awards must be treated as if they were domestic ones, that is, they were subject to the legal procedure and scrutiny applicable to domestic awards and, more importantly, subject to judicial review. This is no longer the case. However, again, lack of a definition of international public policy applicable to foreign awards is a deficiency of Indian law that needs to be addressed. The Arbitration Act, 1940 addressed the issue of enforcement very briefly; and the Indian court was assumed to have the power to examine meticulously an award, when considering 128 | P a g e

its enforcement. Since there was no rule on the enforcement of foreign awards, they, too, were assumed to be subject to retrial and to the similar extent of legal scrutiny. By enacting the Arbitration Act, 1996, the Indian arbitration law has shifted towards a proenforcement position, to the extent that it can also be said that the law is generally more than the Model Law facilitative of enforcement of arbitral awards. It is relatively straightforward to apply for the enforcement of awards made under the Act, 1996, whether in or outside of India. Since it has already been possible to challenge such awards at the Indian court by drawing upon the relatively extensive grounds for vacating them, the grounds for refusing enforcement of an award are restricted. Awards can be refused enforcement, only if they are: (a) against a decision already made by Arbitral Tribunal and Courts, (b) contrary to the public policy of India, or (c) if the requirements of due process have not been observed in making them. A feature of the Act, 1996 is that while a request for enforcing an award can only be made after the expiry of the ninety day period for challenging the award, the suspension of enforcing the award is also permitted, if the award is being challenged in the court.

Making a distinction between domestic and foreign awards, the Act, 1996 even more facilitates the enforcement of foreign and international awards. Also, the Supreme Court decision allows enforcement of foreign arbitral awards, without requiring a review of their merit. While Indian law of arbitration recognizes the effect of multilateral conventions or bilateral treaties, if they are applicable to a foreign award, under the New York Convention (1958) or Geneva Convention (1927), the most favourable law or conventions can be applied, when enforcing a foreign award. Hence, it is possible to go for the ―most favourable regime‖ of enforcement available within the Indian legal system and treaties joined by India. As a matter of fact, in many aspects, the current Indian law is more than the New York Convention facilitative of enforcement of foreign and international awards. In certain aspects, however, the Indian law lags behinds the Convention and universally accepted standards. For instance, while the grounds expressed in Article V of the Convention may result in the non-enforcement of an award, Indian law obliges the court to refuse enforcement of an award, if such grounds exist. The latter also mentions non-compliance with the rules of morality as a ground for the refusal of enforcement of an award, whereas no 129 | P a g e

such a ground is recognized under the Convention. Such a requirement may lead to broad or conflicting interpretations, undermining the required Uniformity. Finality, It is an ideal time for a reform of Indian‘s arbitration legislation. By acknowledging globally accepted practices and rules, the Indian law of arbitration should be amended with a view to removing the serious lacuna and difficulties mentioned above and to improve its arbitration landscape on a domestic as well as international level. Adoption of various legislations

regulating

bodies engaged

arbitration,

including international arbitration,

setting up

several

in arbitration, whether domestic or international, and accession to

international and regional conventions and treaties should be accomplished while an attempt is made at co-ordination between them. Lack of such co-ordination leads to confusion, and undermines the very rationale of resort to arbitration, which is simplicity and saving of time. Careful regional or international convergence and legal transplants in the area of International Commercial Arbitration may be useful, if they are compatible with the rest of legal body in India.

BIBLIOGRAPHY Books Referred: 1. Madabhushi Sridhar, Alternate Dispute Resolution, Lexis Nexis, 1st edition 2006,Nagpur. 2. S.P.Gupta, The Arbitration and Conciliation Act, 2nd edition 2008, Allahabad law agency. 3. O. P. Malhotra, The Law and Practice of Arbitration and Conciliation, New Delhi Lexis Nexis Butterworths, 1st ed., 2002. 4. P. C. Markanda, Law relating to Arbitration and Conciliation,Nagpur, Wadhwa andCo, 6 th ed., 2006. Websites Referred: 1. https://www.arbitrationindia.com. 2. https://en.wikipedia.org/wiki/ArbitrationandConciliationAct1996. 130 | P a g e

3. www.legalservicesindia.com/../Interim-Measures-under-Arbitration,-Conciliation-Act. 4 https://legaldesire.com.

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