INTERNATIONAL

ARBITRATION

Submitted to: Submitted by:Dr Navdeep Kaur Komal Agrawal

INTERNATIONAL ARBITRATION

International arbitration is a leading method for resolving disputes arising from international commercial agreements and other international relationships.

The practice of international arbitration has been developed so as to allow parties from different legal and cultural backgrounds to resolve their disputes, generally without the formalities of their respective legal systems.

WHY INTERNATIONAL ARBITRATION

There are a number of reasons that parties elect to have their international disputes resolved through arbitration. These include

1)The desire to avoid the uncertainties and local practices associated with litigation in national courts,

2)The desire to obtain a quicker and more efficient decision, relative enforceability of arbitration agreements and arbitral awards (as contrasted with forum selection clauses and national court judgments)

3)The commercial expertise of arbitrators and the parties freedom to select and design the arbitral procedures, confidentiality and other benefits.

FEATURES

International arbitration is sometimes described as a hybrid form of dispute resolution, which permits parties abroad flexibility in designing arbitral procedures.

For example, consider the International Bar Association (IBA)'s Rules, these rules adopt neither the common law jurisdictions nor follow fully the civil law in eliminating entirely the ability to engage in some disclosure-related practices. The IBA Rules blend common and civil systems so that parties may narrowly tailor disclosure to the agreement's particular subject matter.

EFFECTS

Wide adoption of these rules in international arbitration has led in practice to an unexpected use by

common law practitioners to limit disclosure by civil law practitioners to expand it.

International arbitral practice has given rise to its own non-country-specific standards of ethical conduct which are believed to apply in international proceedings and, more to the point, to the arbitrators who are appointed to conduct them.

DIFFERENT FROM DOMESTIC ARBITRATION

International arbitration is a significant variant of the practice in many countries of arbitration, from which it is derived and shares many features. It is not just the fact that -

international arbitration arises in the context of international contracts that makes it different.

In the international dispute resolution community, it is widely accepted to be a different entity entirely, involving different practices and rules, and being represented by a different community of arbitrators and legal practitioners.

ARBITRATION V/S MEDIATION

Tough both are characterized as forms of ADR (Alternative Dispute Resolution), in countries where mediation is new or struggling to be introduced as a concept, this association has given rise to the misleading impression that mediation is a form of non-binding arbitration, with the arbitrator proposing or suggesting outcomes based on an assessment of the parties' rights.

In fact, arbitration and mediation or conciliation are fundamentally different: the former is a binding determination of legal rights, the latter form of dispute resolution involve facilitated negotiation which aims at producing a consensual settlement. The one leads to a binding determination (arbitration), the other only in the event the parties agree to settle their dispute on mutually satisfactory terms (mediation).

ADVANTAGES OF INTERNATIONAL ARBITRATION

• Promotes goodwill

• Sound and Cogent Decision

•inexpensiveness

• Reducing the Psychological Costs

privacy confidentiality

Quality of the Decision

quickness

ADVANTAGES OF INTERNATIONAL ARBITRATION Quickness: - Arbitration procedure is simpler and much quicker than

litigation. Under the Arbitration Act, the arbitrators have to make the award within four months from the date of entering on the reference. Usually an arbitration case may be settled between four months to one year.

Inexpensiveness: - The costs and expenses involved in arbitration are much less than in those involved in the litigation. Apart from the arbitration fee, which is just 2 percent of the claim value or even less, the other incidental expenses are rather moderate and low.

Promotes Goodwill: - Arbitration hearing takes place in very friendly and cordial atmosphere and thereby promotes friendly trade relations between the parties. The arbitrator is a person chosen by the parties themselves on the basis of their faith and confidence in him.

Sound and Cogent Decision: - In arbitration, the parties choose an arbitrator having knowledge and experience in the line of trade to which the dispute relates. This helps in avoiding unnecessary delay caused due to lack of knowledge on the part of judges.

CONT.. Privacy: - Arbitration proceedings are not open to public

and arbitrators' decisions are not published in law reports like the court decisions. Therefore, arbitration preserves the privacy and trade secrets of the parties involved in the arbitration.

Reducing the Psychological Costs of Litigation: The speed of arbitration and the informality of the process, couples with a less-confrontational discovery process minimizes and allows the parties to quickly get on with their lives.

Confidentiality: Unlike court cases, arbitration proceedings are not public. The case will not be tried in the newspaper.

Quality of the Decision: Arbitrators knowledgeable in employment law may render more rational and predictable decisions that juries which may be swayed by emotion.

DISADVANTAGES OF ARBITRATION

Limited appeal rights: By law, arbitrators' decisions are meant to be final, and can be appealed only on limited grounds.

More frequent utilization: Employees can more easily challenge personnel decisions. However, employers should accept the possibility of increased challenges, as a tradeoff to the far greater cost savings which arbitration offers.

ENFORCEMENT OF INTERNATIONAL ARBITRATION

Arbitration becomes international when: at least one of the parties involved is

resident or domiciled outside India or the subject matter of the dispute is abroad. In this case, the law applicable to an

arbitration proceeding depends upon the terms and conditions of the export contract and the rules of conflict of laws.

ENFORCEMENT OF AWARDS

Depending upon the export contract, arbitration can take place either in the exporter's or importer's country. The whole philosophy behind the system of arbitration for settling commercial disputes is that the awards should be voluntarily honored by the parties concerned.

But, sometimes a party against whom the decision is made, does not either comply with or delays compliance with the award. To overcome this problem, a number of countries have provided for legal remedies for the enforcement of awards rendered therein.

However, difficulties may arise when an award is to be enforced in country other than where it is' given. This is because there exists a wide disparity and complexity in the laws and procedures of different countries in respect of enforcement of such awards.

LAW FOR ENFORCEMENT OF FOREIGN AWARDS IN INDIA

Prior to 1996, 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 laid down the framework within which domestic arbitration was carried in India while the 'other two Acts dealt with foreign awards. However, the Arbitration and Conciliation Act, 1996 has repealed the earlier Acts. The new Act has strengthened and clarified the provisions relating to international commercial arbitration.

PROCEDURE FOR ARBITRATION Inclusion of Future Dispute Clause: If the parties to the

export contract desire to settle all future' disputes relating to the contract through arbitration, then the same can be done by inclusion of 'Future Dispute Clause' in the export contract. If the export contract does not provide for an arbitration clause then the parties to the contract later by an agreement, usually written, submit a controversy to one or more arbitrators for arbitration. This is called a 'Submission Agreement'.

Initiation of Arbitration: The party desirous to 'apply for arbitration should make an application to the Secretary along with prescribed registration fees and the following details: -

-The names and addresses of the parties to the disputes. -Full details of the applicant's case. -Original (or duly certified copies) of such documents and

information relevant to the case.

Fees and Expenses: The fees and expenses incidental to

the 'arbitration procedure and the award’ include: - Registration fee - Administrative fee and - Arbitrator's fee

The registration fee is fixed while the amount of other two, fees is determined by the 'Bench’ on the basis of the amount of suit and the time spent on the case. In, addition, traveling expenses incurred by the arbitrator or the Secretary and applicable stamp duty is also included in the total cost.

Constitution of Bench: On receipt of the application, the Secretary constitutes a Bench for the adjudication of the dispute or difference. The Bench consists of one or three arbitrators selected form a 'Panel of Arbitrators' maintained by the Council. The Panel includes qualified and experienced persons from various lines of trade and the legal profession. It also' includes persons of various foreign nationalities. The appointment of arbitrator is made in accordance with the Council’s Rules. "

Deciding the Venue: The arbitration proceedings are held at such places in India or abroad as the bench may determine taking into consideration the provisions of the export contract.

Declaration of Awards: When the Bench of arbitrators signs the award, the Secretary gives a notice in writing to the parties to the arbitration about the amount of fees and charges payable in respect of the arbitration and the award declared. The Secretary sends a true copy of the award to the parties by registered post provided the arbitration Costs have been fully paid. The party, which wishes the award to be filed before the court, shall pay the prescribed fee to, the Indian Council of Arbitration (ICA), in addition to, the court fees.

Enforcement of Awards: The spirit behind the system of arbitration for settling commercial disputes are that the awards are voluntarily complied with by the parties concerned. But, sometimes a party against whom the decision is made, does not either comply with or delays compliance with the award. To, overcome this problem, a number of countries have provided legal remedies for the enforcement of awards rendered therein

GUIDELINES FOR SETTLEMENT OF TRADE DISPUTE

Exporters should project a good image of the country abroad to promote exports. With this objective in mind, an enduring relationship with foreign buyers is of the utmost importance, and trade disputes, whenever they arise, should be settled as soon as possible.

The majority of complaints from foreign buyers are with regard to quality. Other complaints are usually for unethical commercial dealings on the part of Indian exporters and can be categorized as non-supply of goods after confirmation of the orders, non-payment of agreed commission, non-adherence to the delivery schedule etc.

ACTION AGAINST ERRING EXPORTERS

Section 8 empowers the Director General of Foreign Trade to suspend or cancel the Importer Exporter Code Number which is a prerequisite for any export or import, where the Director General of Foreign Trade has inter alia reason to believe that the exporter has committed an economic offence as a specified by the Government or

That any person has made an export import in a manner gravely prejudicial to the trade relations of India with any foreign country or to the interests of other persons engaged in imports or exports or has brought disrepute to the credit or the goods of the country.

Sector 9(4) empowers the Director General of Foreign Trade or the officer authorized by him to grant license, to suspend or cancel any license granted under the Act. Rule 10 of the Foreign Trade (Regulation) Rules, 1993 lays down the conditions for such cancellation under Section 9(4) of the said Act. This includes cases where the license has been obtained by fraud, suppression of facts or misrepresentation and where the licensee has contravened any law relating to Custom or Foreign Trade or the Rules & Regulations relating thereto

Section 11(2) of the Act provides for imposition of fiscal penalty in cases where a person makes or abets or attempts to make any import or export in contravention of any provisions of the Act, any Rules or Orders made there under or the Export-Import Policy. Rule 11 of the Foreign Trade (Regulation) Rules, 1993 requires an exporter to state in the shipping bills or any other documents prescribed under the Customs Act, 1962, the value, quality and description of export goods to the best of his knowledge and belief and to certify that the quality and specification of the goods are in accordance with the terms of the export contract and has also to subscribe a declaration at the foot of such a document that the statements made by him are true

. Paragraph 14.6 of the Export-Import Policy AM 1997-2002 empowers

the Director General of Foreign Trade to take action against an exporter, if it comes to his notice or he has reason to believe, has made an export in a manner gravely prejudicial to (1) trade relations of India with any foreign country; (2) to the interests of other persons engaged in exports or imports and (3) has brought disrepute to the credit or the goods of the country.

The Director General of Foreign Trade has powers

under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992, to direct any Registering Authority to register or deregister an exporter or otherwise issue such directions to them consistent with and in order to implement the provisions of the Act, the Rules & Orders made there under, the Policy or the Handbook. Besides, the Registering Authorities viz. Export Promotion Councils, Commodity Boards etc. may also take appropriate necessary action and view on the application furnished by the exporters for registration if, prima facie, there are reasons to believe that he has indulged in any form of unfair, corrupt or fraudulent practice

THANK YOU