Adr notes

Unit 4

International Commercial Arbitration

As companies move into foreign markets, they may come across legal conflicts come from difference in laws, regulations,
business customs, linguistic and cultural barriers, and misunderstandings. To address such issues, companies may need the support
of legal experts who specialize in handling cross-border disputes.

What is International Commercial Arbitration?

International commercial arbitration is a process of resolving disputes between parties in different countries through an arbitrator
or a panel of arbitrators. It involves submitting the dispute to arbitration instead of pursuing litigation in a court of law. The
arbitrator or panel of arbitrators will make a binding decision on the dispute.

International commercial arbitration can be used to resolve various disputes, including those related to contracts, intellectual
property, investments, and construction. It is often used in cases where the parties involved in the dispute have a commercial
relationship and wish to maintain a working relationship after the dispute is resolved.

How Does International Commercial Arbitration Work?

The process of international commercial arbitration typically begins with the parties involved in the dispute signing an arbitration
agreement. This agreement outlines the terms and conditions of the arbitration process, including the rules of procedure, the
choice of arbitrator or arbitrators, and the place of arbitration.

Once the arbitration agreement is signed, the arbitration process can begin. The arbitrator or panel of arbitrators will hear evidence
and arguments from both sides and make a decision on the dispute. This decision is final and binding, and can only be challenged
in limited circumstances, such as if there was a serious irregularity in the arbitration process or if the decision is contrary to public
policy.

International commercial arbitration is governed by various international conventions and national laws, including the United
Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. This model
law provides a comprehensive framework for the conduct of international commercial arbitration proceedings.

Advantages of International Commercial Arbitration

There are several advantages to using international commercial arbitration to resolve cross-border disputes.

 Arbitration is often faster and more efficient than traditional litigation. This is because arbitration proceedings are usually less
formal and more flexible than court proceedings, which can be time-consuming and costly.
 Arbitration allows the parties involved in the dispute to choose their own arbitrator or panel of arbitrators. This means that the
parties can select an arbitrator or arbitrators who have expertise in the subject matter of the dispute, leading to a more informed
and fair decision.
 Arbitration is often more confidential than traditional litigation. Court proceedings are usually public, which means that sensitive
information about the parties involved in the dispute can be made public. In contrast, arbitration proceedings are usually private,
which means that the parties can keep the details of the dispute confidential.
 Arbitration awards are easier to enforce across borders than court judgments. This is because most countries have signed the New
York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which provides a framework for the
recognition and enforcement of arbitration awards in different countries.

New-York and Geneva Convention online dekhlio

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UNCITRAL model:

With the emergence of Global & liberal trade worldwide, there has been huge increase in the exchange of goods & services on the
global level. With such emergence, comes the disputes amongst people & businesses & an inevitable need was felt to introduce a
mechanism for resolution of disputes.

The domiciliary(related to) courts were over burdened with the number of increasing conflicts amongst participating people on the
international forum. For the speedy disposal of conflicts, Arbitration Dispute Resolution has come into existence for the
settlement between the parties & countries.

The UNCITRAL Model law on Arbitration is an international legal framework that provides the set of provisions on international
commercial arbitration conduct & management. It came into being on 21st June, 1985. It is one of the three pillars of arbitration
created by the UN to assist countries with different legal system in harmonizing their arbitration laws. As the model law is not a
treaty, government are free to copy or modify it. Over 70 jurisdictions have already accepted it.

The model law consists of 36 Articles classified in 9 chapters covering all the stages of arbitration from limitation of court
intervention to the recognition and imposition of the award by balancing b/w the parties freedom to choose their own procedure &
the need to provide default rules to fill potential gaps.

Relevance of UNCITRAL Model law

it is the vital legal part of the UN in the field of international trade law. Every nation has very contrasting laws in general.
arbitration has an international suggestion to it with often being international in nature. Thus, it needs uniformity of states & in
that regard domestic laws of arbitration that has been included b/w different countries needs to be in uniformity. If not so, would
result in creating hurdles to the smooth flow of trade.

Hence, it plays an vigorous role in scrapping out the hardships. It has been formulated to assist the nations to set up their
domiciliary law & modernize their arbitration laws while keeping in mind the needs of international commercial arbitration.

The aim & objective of modern law was to majorly eliminate the concern for inadequacy of national laws & disparity b/w the
states concerned.

Lately, UNCITRAL promote Arbitration Rules have come into existence as were being adopted on 21st July, 2021 & entered into
effect on 19 th September, 2021. These rules function as discretionary preference of parties.

Uncetral Law & Uncitral Rules

UNCITRAL Rules are the exhaustive bunch of rules requiring the party to give consent for the conduct of arbitral proceedings
b/w the participating parties. It pursue to provide competency in the procedures by laying out requirement of the reasonableness of
cost & review mechanism.

On the contrary, Model laws dispense bunch of patterns legislation of different nations can alter by being a part of their
domiciliary legislation on arbitration.

Both plays an indispensable role in international commercial arbitration in order to harmonize the global trade.

Principles of Model law on International Commercial Arbitration

It empowers the parties to freely choose their rules applicable on the arising conflicts. Majorly, the principles are agreeable and
adaptable.

Following are the binding principles:

 Party Autonomy:
It lays down the parties with fair platform to have substantial control over the process for the removal of disputes. Parties
are also provided with the option to alter the needs & requirements.

 Separability:
The arbitration clause in the contract is liberated and stays stand even if the substantial contract get invalid or becomes
void. As per the Arbitration & Conciliation Act, 1996, an arbitration maybe in the form of as a clause in a contract or a
separate agreement.

 Competence:
competence: Competency of an arbitral tribunal is of utmost importance to rule in its own jurisdiction. This principle is
given recognition by numerous convention on international arbitration.

 Territorial Principle:
it facilitates the tribunal to regulate people & events within its jurisdiction, with excepting the tribunal to regulate the
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 people & events outside its boarders.

 Enforceability:
It takes care & mandates that the decision resolving the dispute the executed in all the nation concerning the mention
dispute in hand. Also, to accommodate the winning party to credit the assets of losing party based in & around the world.

UNCITRAL Model law in India

Arbitration was never been alien to India & has its existence since the ancient times. History being from 1889 arbitration
legislation to provisions under CPC, 1908, India has tremendously developed arbitration by ratifying Geneva protocol,1923 &
Geneva Convention,1927 under Arbitration Act, 1937. 1940's Arbitration Act was an attempt to consolidate & amend the law
pertaining to domiciliary conflicts.

To reduce the already overworked judicial system in India, the legislation introduced Arbitration & Conciliation Act, 1996 for
speedy, thrifty, & flexible disposal of disputes. The foundation principle of the act is UNCITRAL Model laws, 1985 covering
both international & domestic commercial arbitration.

The demarcation of the act is in such a way that it consists of two parts, first being when both domestic and international
arbitration are in India itself. Second part provides for foreign awards along with their execution under the New York Convention
and the Geneva Convention. It sets the standard clause for arbitration agreement & also provides the interposition of the courts
when the tribunals are not functioning adequately.

Further, it talks about the composition & jurisdiction of tribunals. Additionally, it also states the provision for arbitral award, its
execution, mannerism of proceedings.

Keeping in view, the lately given pronouncements by the judicial authorities shows the intent of the government to support the
developments in the said field & in making India a hub of institutional arbitration.

Enforcement of Foreign Award and Jurisdictional Issues:

Arbitration is a process of effectively and efficiently solving of disputes. It provides easy resolution of the conflicts and prevents
time-consuming court proceedings and lengthy documentation for those who are willing to get timely solutions of their conflicts
and disputes. Arbitration has proved to be very effective method for dispute-solving.

Foreign Arbitration Awards, were introduced to protect and promote interests of parties who want speedy resolutions through
modern methods rather than traditional ones.

These awards proved to be helpful and also promoted the growth of Arbitration agreements in the country.

According to Indian Law, Under Arbitration & Conciliation Act, 1996 there exist two avenues for the enforcement of foreign
awards, these are the New York Convention and the Geneva Convention.

Types of arbitral award which is in unit 3 notes describe here also:

Enforcement of Arbitral Awards:

1.Enforcement of Domestic Awards

An award holder would have to wait for a period of three months after the receipt of the award prior to applying for enforcement
and execution. During the intervening period, the award may be challenged in accordance with Section 34 of the Act. After
expiry of the said period, if a court finds the award to be enforceable, at the stage of execution, there can be no further challenge
as to the validity of the arbitral award. Prior to the recent Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment
Act”), an application for setting aside an award would tantamount to a stay on proceedings for execution of the award. However,
by virtue of the Amendment Act, a party challenging an award would have to move a separate application in order to seek a stay
on the execution of an award.

Process for Challenge and Enforcement:

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 2.Enforcement of Foreign Awards:

 India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York
Convention”) as well as the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”).
 If a party receives a binding award from a country which is a signatory to the New York Convention or the Geneva
Convention and the award is made in a territory which has been notified as a convention country by India, the award would
then be enforceable in India.
 The enforcement of a foreign award in India is a two-stage process which is initiated by filing an execution petition. Initially,
a court would determine whether the award adhered to the requirements of the Act. Once an award is found to be enforceable
it may be enforced like a decree of that court. However, at this stage parties would have to be mindful of the various
challenges that may arise such as objections taken by the opposite party, and requirements such as filing original/
authenticated copy of the award and the underlying agreement before the court.

WHAT IS CONVENTION?

Convention in a general sense means, an agreement made between two or more state, for the function, regulation & benefit of all
of them.

A convention is a very basic term which signifies traditional ways of doing something or behaving in a particular manner. The
various States for the maintenance of international security, well-being, peace and order agree among them on certain guidelines,
principles & procedures and Code of conduct.

The most common conventions include industry, trade, transport and professional conventions.

INTERNATIONAL COMMERCIAL ARBITRATION CONVENTION:

GENEVA CONVENTION

Geneva Protocol, 1923 or Geneva Convention, 1927 were the two important conventions which laid the foundation for execution
of the arbitration agreements and foreign arbitral awards.

Under Geneva Protocol, 1923 enforced compulsory settlement of disputes and also founded a method to determine the aggressor
in international disputes or conflicts. Under this, a nation or country which refused to compromise with the rules & guidelines
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mentioned, was regarded as the aggressor and the country against whom aggression was practiced was entitled to receive
compensation from the league members.

Under Geneva Convention, 1927 Article (1)[i] states that an arbitral award in pursuance of the agreement, shall be recognized as a
binding and shall be enforced according to the rules of procedure of the country, the award is relied upon.

NEW-YORK CONVENTION

New-York Convention (New-York,1958) also known as the United Nation Conventions for the recognition and enforcement of
Foreign Arbitral Awards, 1958 is one of the most well-known and most important convention of the United Nations in the history
of Arbitration agreements, laws, international trade and relations. Under the New York Convention, recognition is being given to
the rights of the states to arbitrate, and to enforce the foreign Arbitration Awards.

The UNCITRAL adopted the first edition of notes regarding the arbitral proceedings in 1996 and the second edition in 2016. In
2016, a secretariat guide regarding the arbitral proceedings was also published. The main focus of the New-York Convention, as
mentioned in its title, was the recognition and enforcement of Foreign Arbitral Awards.

PROVISIONS UNDER ARBITRATION AND CONCILIATION ACT, 1996

Under, Arbitration & Conciliation Act, 1996 two avenues for the recognition and enforcement of Foreign Awards are mentioned.
These are: –

1. New-York Convention
2. Geneva Convention

NEW-YORK CONVENTION

Sec 52 provides that provisions under New-York Convention will not be applicable in case of Geneva Convention.

Section 44-52 of the Arbitration and Conciliation Act, 1996 contains the provisions for Foreign Awards contained under New-
York Convention.

As per the New-York Convention, the term ‘Foreign Award’ means an arbitral award based on conflicts among the nations or
people arising out of contractual or non-contractual obligations, but is must be legal obligation of the parties and must be regarded
to be as commercial according to the law of India, enforced on or after 11th October, 1960.

1. In pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies,
and
2. In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by
notification in the Official Gazette, declare to be territories to which the said Convention applies.[ii]

The above-mentioned provisions state the essential requirements for the enforcement of foreign arbitral awards, these
requirements are as following: –

 There must exist a written agreement for Arbitration regarding such convention
 The award must be given in a country or nation which is reciprocating territory or state and such information must be
notified by the central government.

Sec 45 of the act states that, in case any of the party, is prevented from doing anything or seized from performing an action for
which the arbitration agreement was made (in reference to sec 44) in such case the state shall provide such party or anyone
claiming the right (through or under such party) with the arbitration.[iii]

Sec 46 of the act defines ‘When the ‘Foreign Award’ will be binding’. According to Sec 46 enforcement of Foreign Awards shall
be applicable to all the persons, between whom such agreement was made or entered into.[iv]

Sec 48 of this act defines ‘Conditions for the Enforcement of Foreign Awards’. Section 48 imposes certain objections on the
enforcement of Foreign Awards by putting up certain conditions. It states that Arbitration award shall not be provided if: –

1. The agreement of Arbitration due to some reason became invalid (such as incapacity of parties)
2. The parties didn’t have prior notice of the arbitral proceedings or was incapable of presenting his case.
3. Award was for some reason not falling under the terms of submission to Arbitration or it contains matters beyond the
scope of subject of Arbitration.
4. If arbitral proceedings were not according to what was agreed between the parties.
5. The agreement was not yet binding upon the parties or was set aside by judicial authorities for review.

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 6. Subject matter was not capable of Settlement by Arbitration.
7. Enforcement of award would be contemporary to the public policy in India.

Sec 49 provides for the ‘Enforcement of Foreign Award’. Enforcement of foreign awards depends upon the discretion of the
courts. These Arbitral Awards will be enforced, if the court feels the need for their enforcement.

GENEVA CONVENTION

Sec 60 of the Arbitration and Conciliation Act, 1996 provides that provisions under Chapter II of Part IV of this act will not affect
any right of any person to avail any ‘foreign award’, if this chapter has not been enacted.

Sec 53-60 of the Arbitration and Conciliation Act, 1996 deals with the recognition and enforcement of Foreign Awards under
Geneva Convention.

Sec 53 of this act defines the term ‘Foreign Award’ as arbitral award on differences relating to matters considered as commercial
under the law, in India made after 24th July, 1924.

Sec 54 of this act defines the ‘Power of the Judicial Authorities to refer parties to Arbitration’ any judicial authority in case of a
dispute arising between the parties among whom the arbitration agreement was made or entered into, shall refer the parties or
anyone claiming through or under them, to the arbitrator’s decision.[v]

Sec 55 of this act defines – ‘Foreign Awards When Binding’. The foreign awards under Geneva Convention, will be binding for
all the purposes on any person who is a party under such contracts and it shall also be relied upon as a defense in case of legal
arbitral proceedings.[vi]

Sec 57 of this act defines ‘Conditions for enforcement of Foreign Awards’. This section restricts or imposes certain restrictions on
enforcement of Foreign Awards by putting up certain conditions. These are as follows: –

1. If the award is given in pursuance of agreement which is valid according to the law.
2. The subject matter of award is capable of settlement under Arbitration.
3. Award must be constructed according to the instructions mentioned in arbitration agreement.
4. The decision for the award has been made final in a country and such decision is not open to any amendments.
5. Enforcement of the award is not contrary to the public policy of Indian Law

Sec 58 of this act defines ‘Enforcement of Foreign Awards’. The enforcement of Foreign Awards under Geneva Convention
depends upon the discretion of the court regarding the matter. If the court finds the need, then it will grant such award.