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Laws relating to Arbitration & Conciliation (both Domestic &International)The Arbitration and Conciliation Act, 1996is the prime legislation relating to domestic arbitration,international commercial arbitration and enforcement of foreign arbitral awards and also to define the law

relating to conciliation and for matters connected therewith or incidental thereto. It repealed the threestatutory provisions for arbitration:- (i)the Arbitration Act, 1940; (ii)the Arbitration (Protocol andConvention) Act, 1937; and (iii)the Foreign Awards (Recognition and Enforcement) Act, 1961.

Domestic Arbitration is defined as an alternative dispute resolution mechanism in which the parties get theirdisputes settled through the intervention of a third person and without having recourse to the court of law.It is a mode in which the dispute is referred to a nominated person who decides the issue in a quasi-judicialmanner after hearing both sides. Generally, the disputing parties refer their case to an arbitral tribunal andthe decision arrived at by the tribunal is known as an 'award'.

While, the term 'international commercial arbitration' means "an arbitration relating to disputes arising outof legal relationships, whether contractual or not, considered as commercial under the law in India andwhere at least one of the parties is:- (i) an individual who is a national of, or habitually resident in, anycountry other than India; or (ii) a body corporate which is incorporated in any country other than India; or

(iii) a company or an association or a body of individuals whose central management and control isexercised in any country other than India; or (iv) the Government of a foreign country".

The major provisions relating to Arbitration in the Act are:-

The parties to a present dispute may make an agreement called as the 'arbitration agreement' thatinstead of going to the court, they shall refer the dispute to arbitration. The parties to theagreement may refer to arbitration, a dispute:-

Which has arisen or which may arise between them,

In respect of a defined legal relationship, whether contractual or not.Thus, all matters of civil nature whether they relate to present or future disputes may form thesubject matter of reference. Even disputes such as infringement of intellectual property rights shallalso be covered.

Although no formal document is prescribed, an arbitration agreement/clause must be in writing. Ifthe arbitration agreement/clause is contained in a document, the document must be signed by theconcerned parties. Besides, the agreement may be established by:- (i) an exchange of letters,telex, telegram or other means of telecommunications; or (ii) an exchange of statements of claimsand defence in which the agreement is alleged by one party and is not denied by the other.

The disputes that cannot be referred to arbitration are:- Insolvency proceedings.

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Lunancy proceedings.

Proceedings for appointment of a guardian to a minor.

Question of genuineness or otherwise of a will or matter relating to issue of a probate.

Matter of criminal nature.

Matters concerning public charitable trusts.

Disputes arising from and founded on an illegal contract.

The agreement mandatorily requires the appointment of an arbitrator. An arbitrator is a personappointed, with or without mutual consent of the contending parties, for the purpose ofinvestigation and settlement of a difference or dispute referred to him. The arbitral tribunal may beconstituted by one or more arbitrators. The parties are free to fix the number of arbitrators byagreement. Accordingly, the reference may be made either to a single arbitrator or a panel of oddnumber (i.e. 3,5,7 etc) of arbitrators. If there is no agreement, the reference shall be made to asole arbitrator.

Unless otherwise agreed by the parties, an arbitrator may be of any nationality. In case of aninternational commercial arbitration, where the parties belong to different nationalities, the ChiefJustice of India may appoint an arbitrator of a nationality other than that of the parties.

The parties are free to agree on a procedure for appointing the arbitrator or arbitrators. If there issuch an agreement, the appointment has to be made in accordance with it. The agreement mayprovide for the number of arbitrators, qualifications of arbitrator, procedure of appointment,procedure of challenging the appointment, termination of appointment, procedure to be followed byarbitrators, place of arbitration, language, etc.

The duties of the Arbitral Tribunal are:- (i) to act independently and impartially and treat the partiesequally; (ii) to give each party full opportunity to present his case.

The parties may agree on the procedure to be followed by the arbitral tribunal in conducting itsproceedings. In the absence of such agreement, the arbitral tribunal may conduct the proceedings

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in the manner it considers appropriate and shall be empowered to determine the admissibility,relevance, materiality and weight of any evidence. The tribunal shall decide whether to hold oralhearings for presentation of evidence or for oral argument, or whether to conduct the proceedingson the basis of documents and other materials.

An arbitral award shall be made in writing and shall be signed by the members of the arbitraltribunal. The award shall state its date and place of arbitration. The arbitral award shall state thereasons upon which it is based, unless the parties have agreed that no reasons are to be given or incase of award on a settlement between the parties. A signed copy of the award shall be delivered toeach party.

An arbitral award is itself enforceable as a decree of the court, normally after three months from thedate on which it was received by the parties, provided no application for setting aside the award ismade or if it is made the same has been rejected. The arbitral award shall be final and binding onthe parties and persons claiming under them respectively.

The arbitral proceedings shall be terminated when:- The final arbitral award is made,

The claimant withdraws his claim, and the respondent does not object to it,

The parties agree on the termination,

The continuation of proceedings has for any other reason become unnecessary orimpossible.

The Arbitration and Conciliation Actprovides statutory recognition to conciliation as a distinct mode ofdispute settlement. Conciliation is defined as the process of amicable settlement of disputes by the partieswith the assistance of a conciliator. It differs from arbitration in the sense that in arbitration the award is thedecision of the third party or the arbitral tribunal, while in the case of conciliation the decision is of theparties which is arrived at with the mediation of the conciliator.

The major provisions relating to Conciliation in the Act are:-

A party initiating the conciliation shall send a written notice to the other party, briefly identifying thesubject of the dispute and inviting it for conciliation. The conciliation proceedings shall commenceon acceptance of invitation by the other party. If the party initiating conciliation does not receive areply within 30 days from the date the invitation was sent or within the specified period, it may optto treat this as a rejection and inform the same to the other party. If it rejects the invitation, therecan be no conciliation proceeding.

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Unless otherwise agreed there shall be one conciliator. The parties may however, agree that thereshall be two or three conciliators, who shall act jointly. The sole conciliator shall be appointed bymutual consent of the parties. In case of two conciliators, each party may appoint one conciliator. Incase of three conciliators, each party may appoint one conciliator and the third conciliator may beappointed by mutual agreement of the parties who shall act as the presiding conciliator. However,the parties may agree that a conciliator shall be appointed or recommended by an institution or aperson.

Each party shall submit to the conciliator a brief written statement describing the general nature ofthe dispute and the points at issue. A copy of the same shall be sent to the other party. Theconciliator may require of each party to send a detailed statement supported by documents andother evidence, a copy whereof shall be sent to the other party also. Any factual informationconcerning the dispute received by the conciliator from a party, shall be disclosed to the other partyto allow it an opportunity to present any explanation, except however, when a party gives anyinformation subject to a condition that should be kept confidential.

The parties involved shall co-operate with the conciliator in good faith, comply with requests forsubmitting written materials, providing evidence and attending meetings. A party may submit to theconciliator suggestions for the settlement of the dispute.

The functions of a Conciliator are:- To assist the parties in an independent and impartial manner, to reach an amicable

settlement of their dispute.

To be guided by principles of objectivity, fairness and justice.

To give consideration to rights and obligations of the parties, trade usages, circumstancessurrounding the dispute and any previous business practice between the parties.

To conduct the conciliation proceedings in an appropriate manner, taking into account thecircumstances of the case and wishes of the parties.

To make proposals for a settlement of the dispute.

Not to act as an arbitrator or as a representative of a party in any arbitral or judicialproceeding in respect of the same dispute, unless otherwise agreed by the parties.

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Not to act as a witness in any arbitral or judicial proceedings.

If it appears to the conciliator that a settlement is possible, he shall formulate the terms of apossible settlement and submit them to the parties for their observations. The conciliator shall thenreformulate the possible settlement in the light of observations received from the parties. If theparties reach on a settlement, they may draw up and sign a written settlement agreement with theassistance of the conciliator. The conciliator shall authenticate the settlement agreement and furnisha copy thereof to each of the parties. The settlement agreement shall be final and binding on theparties and shall have the same effect as of an arbitral award.

The conciliation proceedings shall be terminated when:- A settlement agreement is signed by the parties,

A written declaration is made by the conciliators after consultation with the parties, thatfurther efforts at conciliation are no longer justified,

A written declaration is made by the conciliator, after the deposits required in relation tocosts of the proceedings are not received from the parties, that the proceedings areterminated,

A written declaration is made by the parties to the conciliator, that the conciliationproceedings are terminated,

A written declaration is sent by a party to the other party and the conciliator, that theconciliation proceedings are terminated.

'Foreign Award' has been defined to mean "an award on differences between persons arising out of legalrelationships, whether contractual or not and considered as commercial under the law in force in India, andmade in pursuance of an agreement in writing for arbitration to be governed either by the New YorkConvention or by the Geneva Convention, in the territory of a notified foreign State". Some of the provisionsof the Act relating to foreign award are:-

Where a commercial dispute covered by an arbitration agreement to which either of the Conventionapply, arises before a judicial authority in India, it shall at the request of the party be referred toarbitration.

The party applying for the enforcement of a foreign award shall produce the original award or a dulyauthenticated copy thereof, the original arbitration agreement or a certified copy thereof, and

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evidence to prove that the award is a foreign award.

If the court is satisfied that the foreign award is enforceable, the award shall be deemed to be adecree of the court. An appeal shall lie against the order of the court refusing to refer the parties toarbitration or refusing to enforce a foreign award.

Any foreign award which is enforceable under the Act, shall be binding and may be relied upon bythe parties by way of defence, set off or otherwise in any legal proceedings in India.