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ADR Mechanisms Conciliation Arbitration Expert Determination
CONCILIATION
The Part III of the Arbitration and Conciliation Act, 1996 ("Act") provides for recognition of conciliation in commercial disputes. [Section 61]
Unless the parties have specifically excluded conciliation procedure, they are free to take recourse to conciliation prior to arbitration.
Confidential process. Proceedings cannot be relied on in a subsequent arbitration / litigation. Conciliator cannot be presented as a witness. Restriction on initiating arbitral or judicial proceedings during conciliation proceedings except for preserving rights. [Section 77] Settlement arrived before the conciliator has the same status as an arbitral award.
ARBITRATION-KEY ASPECTS
Section 5 of the Act a deliberate departure from UNICTRAL Model law. Section 5 starts with non-obstante clause and limits the scope of judicial intervention. Section 8 limits discretion of courts and mandates the court to refer the parties to arbitration when there is an arbitration agreement. Arbitral tribunal is competent to rule on its own jurisdiction including the validity of the arbitration agreement. [Section 16]
An appeal lies against an order if the arbitrator decides that he does not have jurisdiction or if the arbitrator decides that he has exceeded the scope of his authority.
INTERIM PROTECTION
Both the court and the arbitral tribunal have the power to grant interim protection.
Under section 9, court can allow interim protection 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.
Generally, pre-arbitration notice invoking arbitration is required or the court must be satisfied that effective steps to commence arbitration would be taken. [Sundaram Finance Ltd. vs. NEPC India Ltd., AIR 1999 SC 565] .
Under section 17, the arbitral tribunal can also order interim measures of protection. Problem of enforceability. The arbitral tribunal can draw negative inference in case of non-compliance.
Section 17 would operate only during the existence of the arbitral tribunal not pre or post arbitration.
EMPLOYEE ARBITRATORS
Government, statutory body or PSU contracts, where a government employee is named as an arbitrator.
Senior officer of the government body who was not involved with the execution of the contract and was independent and impartial - not barred from functioning as arbitrator merely because their employer is a party to the contract. [Indian Oil Corporation Ltd. and Ors. vs. Raja Transport, (2009) 8 SCC 520]
However, there is an obligation independence and impartiality.
FOREIGN ARBITRAL AWARDS Part I applies to domestic arbitrations, while Part II applies to international commercial arbitrations. International commercial arbitration is defined under section 2 (f) of the Act, For the Act to apply, the arbitration must be commercial as defined under the Indian law. And at least one party is Foreign national or habitually resides in a foreign country. A corporation, which is incorporated in a country other than India. Government of a foreign country. Body of Individuals, association or a company whose central management or control is exercised in a foreign country. Bharat Aluminium Co. vs. Kaiser Aluminium Technical Service Inc. [2012 (8) SCALE 333] overruled Bhatia International [(2002) 4 SCC 105] and Venture Global [(2008) 4 SCC 190]. The most important impact is that in international commercial arbitration held abroad Part I of the Act will not apply. Hence, section 34 setting aside the award or Section 9 interim measures cannot be resorted to.
Bharat Aluminum to apply only post 06.09.2012. Therefore, any application for relief under section 9 or 34 in respect of foreign seated arbitration will continue to be governed by the Bhatia principle. If existing international arbitration agreements are pre 06.09.2012, advisable to have them amended.
Upon reaching a solution, DRB members make a recommendation in writing to both parties.
DRB PROBLEMS
Ministry of Road Transport & Highways new EPC model places great emphasis on DRBs. Done away with mediation process. A World Bank study (2007) on the operation of dispute resolution mechanisms for civil works in India concluded that the operation of DRBs had been ineffective. The DRBs took far longer than contractually mandated to make their recommendations and faced high rejection rate.
It was noted that the success of DRBs depended on the intent of the contract personnel to manage the contract professionally and efficiently. Where the DRBs had been established on time, site visits conducted regularly, and disputes referred by parties promptly, the results were positive.
EXPERT DETERMINATION
EXPERT DETERMINATION
Expert determination is an important method of dispute resolution preceding arbitration / litigation. Resolving disputes by experts can be very effective where technical issues are involved. However, an expert determination is not a binding arbitration award. [Joint Investments Pvt. Ltd. v.
The Courts in India have shown an inclination to enforce multi-tiered dispute resolution clauses. However, there is a conflict of view. Stages preceding to arbitration / litigation can be waived by the parties.
The parties should decide between institutional and ad-hoc arbitration. Benefits? The parties should select a set of arbitration rules and use the model clause recommended for these arbitration rules as a starting point. The scope of dispute subject to arbitration should not be limited. The parties should select the seat of arbitration practical and juridical factors. Despite Bharat Aluminum, its better to expressly exclude Part I of the Act. The parties should specify the number of arbitrators impact on overall cost, duration and the quality of the arbitral proceedings. The parties should specify the method of selection and replacement of arbitrators and, when ad-hoc arbitration is chosen, should select an appointing authority.
The parties should specify the language of arbitration. Language of documentation, effect of choice on arbitrators / counsels must be considered.
The parties should indicate the rules of law governing the contract, venue, seat of arbitration, etc.
Alternative dispute resolution mechanisms such as conciliation, DRBs, expert determination, etc. should be clearly specified.
Parties may consider specifying the powers of the arbitral tribunal to grant interim relief.
WRIT REMEDY
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