Scroll Top

INTRODUCTION TO INTERNATIONAL COMMERCIAL ARBITRATION

INTRODUCTION

ICA (International Commercial Arbitration) is generally the usage of arbitrary power to solve disputes standing up due to outer border marketable businesses. This usually prevents the competent parties to the dispute from unnecessarily approaching the national courts. It also assures that not even one party among the two should be put in a position to visit the jurisdiction of which they are not aware of the procedure for resolving their disputes. Let’s take an example. Suppose Company X is incorporated in America and Company Y in India and the two of them enter into a contract for the supply of imported products of high value. Now there occurs a dispute and on top of that no arbitration clauses are provided, so any one of the parties would be required to bring their prerogative before any of the domestic courts whose rules, laws and provisions are external to them. Thus, ICA came into existence to resolve such disputes and bring them to a neutral state.

Indian perspective on constituents of an ICA dispute

To make the ICA process applicable to Indian disputes, those disputes must arise out of some legal relationship. Here at least one of the parties must be a foreign resident or national; or at least one of the two should be an external body corporate; or one of the two parties should be a company, an association or the body of individuals whose main management is controlled across the border. So, if any one of the parties falls into the category mentioned earlier, such arbitration will be considered an International Commercial Arbitration.

Selecting an appropriate Institution for ICA

An arbitral institution is an organization that brings about and monitors the arbitration proceedings. They perform different types of functions like appointing authorities, providing managerial backing, acting as registry, and some other services like technical care etc. The parties have a right to choose their procedural laws for dealing with these disputes and they may either rely on the arbitral institutions for such procedures. Some of the parties even seek the advice of their lawyers to decide on the institution to be chosen considering the convenience of planning made for the commencement of arbitral proceedings. The choice of the arbitral institution for commencing the proceedings is the main element which must be known to each lawyer when an agreement is to be drafted constituting an arbitration clause.

The difference in applicability of Indian laws between the domestic and the international commercial arbitration

Part 1 of the Arbitration and Conciliation Act, 1996 applies to ICA where the seat of arbitration is in India. Moreover, if the seat is outside India, only sections 9, 27, and 37(1)(a) & (3) will be applicable disputes.

The difference between foreign awards and international commercial arbitration

Arbitration award with its seat outside India is a foreign award and thus all ICA awards are foreign awards when the seats are outside India. Every award is an ICA with the seat of arbitration in India, which is a foreign award. Part 2 (comprising 2 chapters) of the Arbitration and Conciliation Act, 1996 is applied to all foreign awards enforced in India.

Note- Not all arbitral awards in ICA are foreign awards, only an arbitral award with its seat outside India is a foreign award.

Factors considered while choosing an Arbitral Institution

Institutional arbitration is the preferred way to carry out arbitral proceedings. There are many factors to be considered for choosing an arbitral institution. Those factors are-

  1. Location of an institution,
  2. Arbitration cost;
  3. Qualifications and credibility of the board of arbitrators upheld by the institution;
  4. Substantive law of arbitration.
Location of an institution

The location of an arbitral institution is the main element to be kept in mind while resolving the problems. The same is to be differentiated between parties’ locations as well which determines the applicable law of dispute because the parties find it time-consuming to travel to the office of arbitration. The choice of the institution has to be definite by considering the mentioned factors:

  1. Proximity of the arbitral centre and ease of access to such venue.
  2. Video conferencing facilities.
  3. Choice of venue.
Cost of Arbitration

Another important factor to be taken into consideration is the cost or fees for such proceedings. The base fee includes the arbitrator and administrative fee paid to the institution.

Qualifications and credibility of the board of arbitrators upheld by the institution

Picking an appropriate arbitrator is one of the most important choices made by the parties, the parties need arbitrators who can relate to and understand their minutiae and the subject of such problems. Most of the reputed international arbitral institutions have experts on their boards who are specialised in the law of many of the jurisdictions.

The substantive law of arbitration

Depending upon the independent/ substantive law applicable to the problems between the parties, they may preferably choose an institution located in the same jurisdiction. Despite this, the institutions that are well acquainted with the rules of a specific seat must be chosen, which might depend on the schedule of listed arbitrators in an arbitrational institution. Choosing the correct institution has a great impact on the outcome of arbitration proceedings. No rules can be laid down as the choice of institution is a painstaking exercise involving weighing factors against the needs of clients and the facts of the problems.

Conclusion

In crux, the objective of this article is very simple. This article will fill in one’s mind with the following intricacies:

  • Understanding the meaning of international commercial arbitration.
  • Learning the difference between Foreign Awards and other awards in ICA.
  • Understanding the basic concepts relating to ICA.
  • Understanding the importance of choosing a suitable arbitral institution.
  • Understanding the key factors to be taken into consideration by parties while choosing an arbitral institution to resolve their arbitral dispute.
  • Learning the features of various notable arbitral institutions while deciding the choice of the institution to conduct the arbitral proceedings.

Author(s) Name: Shrishti Baranwal (Banasthali Vidyapith)