Arbitration and Mediation

Jyoti Dahiya: How are errors in an Arbitral Award corrected? Do the parties challenge minute errors/clerical mistakes under Section 34 of the Act?

Vishakha Gupta: Oh no! if that was the case, the courts would merely become a court of correcting clerical mistakes! The legislature has considered this and has inserted Section 33 of the Arbitration and Conciliation Act, 1996 that allows for correction and interpretation of an award. 

In the context of arbitration awards, the correction of errors, whether they are typographical, clerical, or other similar mistakes, is essential to ensure that the final award accurately reflects the intended decisions of the arbitral tribunal. Parties can address such errors through specific provisions under the Arbitration and Conciliation Act, 1996. 

Akin to section 152 of the code of civil procedure code, 1908 speaks of correction of judgments or decrees or orders on account of clerical or arithmetical mistakes or errors arising from accidental slip or omission is Section 33 of the Act. 

Here is an overview of how errors in an arbitral award are corrected:

1. Section 33 of the Act: Section 33 of the Arbitration and Conciliation Act, 1996, is the primary provision that deals with the correction and interpretation of arbitration awards. It distinguishes between two types of remedies:

   1. Correction of Award: This remedy allows for the rectification of errors in the original award. These errors can be of a computational, clerical, or typographical nature, or similar mistakes. Parties have 30 days from the receipt of the award to review it and approach the arbitral tribunal in case of any errors. The arbitral tribunal itself can also, within 30 days of passing the award, correct such errors on its own initiative.

   2. Additional Award: In cases where the arbitral tribunal has omitted to address certain claims that were made before it, parties can request an additional award. The tribunal has 60 days from the receipt of such a request to issue the additional award.

2. Effect of Correction: When corrections are made to the award, particularly for arithmetical or clerical errors, the original award effectively merges into the corrected award. As a result, the period of limitation for challenging the award starts anew from the date of receiving the corrected or amended award.

3. Separate Status for Additional Award: An additional award is treated as a distinct and separate award. It does not merge with the initial award, and each award retains its individual status.

The availability of these provisions under Section 33 of the Act ensures that parties can address and rectify errors that may have a material impact on the arbitration award. This mechanism promotes fairness and accuracy in the arbitration process and helps avoid disputes stemming from inadvertent errors in the award.

04 November 2023 #ConversationsInLaw #errors #CorrectionOfArbitralAwards #AdditionalAwards

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Jyoti Dahiya: Does arbitration follow the rules of evidence and procedure as does litigation?

Vishakha Gupta: Not mandatorily. If parties make it compulsory to follow, then yes - rules of evidence and procedure may be followed by the arbitral tribunal. 

Jyoti Dahiya: What do you mean “if the parties make it compulsory”? Do parties also decide these aspects in an arbitration?

Vishakha Gupta: Yes! In addition to party autonomy in arbitration, another essential aspect is procedural autonomy. This concept empowers the parties involved in arbitration proceedings to design their own procedural framework. In the absence of such an agreement, it grants the arbitral tribunal broad discretion in shaping the conduct of the proceedings. This freedom enables parties to customize the rules governing the implementation of their chosen method of dispute resolution, tailoring them to their specific needs or even introducing entirely new procedures. However, this autonomy is subject to certain mandatory provisions of the jurisdiction applicable.

One notable departure from traditional litigation in India, is that technical rules of evidence, such as those found in the Evidence Act and Civil Procedure Code are not obligatory for the arbitral tribunal to follow. Instead, the arbitral tribunal possesses the authority to determine issues concerning the admissibility, materiality, relevance, and weight of the evidence presented during the arbitration. The paramount concern is that the procedure adopted and followed by the arbitral tribunal must adhere to principles of fairness, reasonableness, and the fundamental tenets of natural justice.

This principle is enshrined in Section 19 of the Indian Arbitration Act, which underscores the significance of conducting arbitration proceedings in a manner that upholds fairness and justice. Under this provision, parties are given considerable leeway to shape the arbitration process to suit their unique circumstances, while the arbitral tribunal is entrusted with the responsibility of ensuring that the procedure remains equitable and reasonable throughout the arbitration. 

This emphasis on procedural autonomy is a fundamental aspect of arbitration, offering parties the flexibility to craft a dispute resolution process that best serves their interests and objectives.

28 October 2023 #ConversationsInLaw #ProceduralAutonomy #Arbitration

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Jyoti Dahiya: I'm curious, can there be an even number of arbitrators appointed in an arbitral tribunal?

Vishakha Gupta: Interesting thought! Setting up an arbitral tribunal requires a lot of important choices, and choosing arbitrators is one of the first ones. There are many things that can affect the choice of number of arbitrators,, such as the value of the disputes and whether they are national or worldwide. Most of the time, though, people choose an odd number of arbitrators, like one, three, or five. The main reason for this odd number rule is to avoid deadlocks and make sure that decisions are made by the majority, in case there is no consensus.

The odd number rule is considered essential to avoid situations where arbitrators in an even-numbered panel hold differing opinions,  which would make it impossible to make a final decision. Because of this, the odd number rule is not only allowed by most domestic arbitration laws and international agreements, it is seen as the only acceptable way to settle disputes through arbitration.

In some places, if both sides agree on an even number of judges, that could be a reason to end the arbitration process. To avoid such a situation could lead to either change the even number that was originally picked to an odd number or make the arbitration agreement null and void. In this case, mandatory laws take precedence over party autonomy. 

When the decision of the tribunal is to be made in consensus, the case for a two-arbitrator panel is strong. A tribunal with two arbitrators not only saves money, but it also encourages cooperation, making it more likely for both sides and arbitrators to come to an agreement. In the event that the two arbitrators can't come to an agreement, the parties can use other types of procedures, like picking a referee arbitrator or an ‘umpire’.

This method might work pretty well, but it shouldn't be used for international commercial arbitration because it could be hard to carry out the decision in places where even-numbered arbitrations aren't allowed because of public policy concerns. Questions about who will lead, how much time should be set aside for talks, and who is responsible for telling the parties and choosing an umpire can make things even more complicated.

For instance, the Washington Convention (1965), the Convention on the Settlement of Investment Disputes between States and Nationals of Other States - International Centre for Settlement Of Investment Disputes says that the tribunal must have either one judge or an odd number of arbitrators chosen by both sides. It makes it clear that even-numbered tribunals are not allowed. The UNCITRAL Model Law 1994, on the other hand, is more flexible and lets the parties choose the number of arbitrators themselves as long as they follow some rules.

However, while the appointment of an odd number of arbitrators is more common, when there are three arbitrators, things can still get stuck. This is especially true if each arbitrator has a different idea about how to settle the disagreement and doesn't give the presiding arbitrator the final say. This shows that the majority rule doesn't always work. An even number of judges isn't often used, but it is in some cases, like when there are disagreements about shipping or commodities. 

Jyoti Dahiya: You will have to tell me more about shipping and commodities arbitration, and how even-number panels work in such cases.

21 October 2023 #ConversationsInLaw #Arbitration #NumberOfArbitrators

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Jyoti Dahiya: Can arbitration be initiated in all disputes that arise between parties, whether it is a commercial dispute or a matrimonial dispute or even a case of negligent driving?

Vishakha Gupta: Unfortunately, no. Not all conflicts can be subjected to arbitration. Arbitrability, the crucial concept of determining which disputes are suitable for arbitration and which must be left to the jurisdiction of courts, is fundamental in the world of arbitration.

Under the UNCITRAL Model Law on International Commercial Arbitration, the arbitrability of a dispute plays a pivotal role in the enforcement of arbitral awards. An arbitral award may be set aside if the court finds that the subject matter of the dispute is not arbitrable under the State's laws (here, State means the country whose courts have jurisdiction). The non-arbitrability doctrine is equally relevant at the enforcement stage. If the competent authority in the country where enforcement is sought determines that the subject matter is not suitable for arbitration under its laws, the recognition and enforcement of the arbitral award may be refused.

Jyoti Dahiya: Oh! Why is it so? If the parties are agreeable, why is there an embargo on the subjects that can be referred to arbitration?

Vishakha Gupta: The non-arbitrability doctrine is founded on the idea that some matters are so intertwined with public interests or the rights of third parties that they are uniquely within the purview of governmental authorities. Non-arbitrable issues include: criminal cases, child custody, family disputes, and bankruptcy matters. In addition, each jurisdiction decides which disputes may or may not be arbitrated based on its political, social, and economic policies.

The question of arbitrability can arise at four distinct points in an arbitrated dispute. It begins with the court deciding whether to enforce an arbitration agreement. Arbitrators may also decide the scope of their competence, and the court in the country where the arbitration took place might hear actions to set aside the award. Finally, a court may be asked to recognize and enforce the award.

In many cases, arbitration rules give arbitrators the discretion to determine their own jurisdiction, invoking the Kompetenz-kompetenz doctrine. Different legal systems around the world have varying approaches to arbitrability.

Under the Indian Arbitration and Conciliation Act, 1996, disputes arising from a legal relationship, whether contractual or not, are generally considered suitable for arbitration. However, there are exceptions, though not specifically listed in the Act. The Supreme Court has identified several examples of non-arbitrable disputes, including criminal offences, matrimonial disputes related to divorce and child custody, guardianship matters, insolvency and winding-up issues, testamentary matters, and eviction or tenancy matters, which are all governed by special statutes.

Understanding arbitrability is critical when navigating the world of arbitration. It ensures that only suitable disputes are resolved through this alternative means, respecting the legal and societal norms of individual jurisdictions while preserving the efficiency and confidentiality arbitration offers.

Jyoti Dahiya: So, most commercial disputes are arbitrable, though excluding insolvency. Family matters and criminal actions are not arbitrable, even if the parties are agreeable amongst themselves.

14 October 2023 #ConversationsInLaw #Arbitration #SubjectMatter #Arbitrability

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Jyoti Dahiya: So, what happened on the second day of the arguments in the matter of challenge of the N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. [N.N. Global II] [1]?

Vishakha Gupta: On the second day of deliberations in the Supreme Court, the Petitioners concluded their arguments. Their assertions revolved around the imperative need to accord full force to Section 5 of The Arbitration and Conciliation Act, 1996 (as amended) [the “Arbitration Act”]. They contended that the matter of stamp duty should be viewed as a rectifiable defect that should never impede the existence or validity of an arbitration agreement. Consequently, they urged that it should not be a point of consideration for the court under section 11 of the Arbitration Act. In their argument, they emphasised the doctrines of separability and Kompetenz-kompetenz, underscoring that it is the arbitral tribunal that should rightly hold the authority to decide the fate of an unstamped or inadequately stamped arbitration agreement, rather than the court under Section 11 of the Arbitration Act. They concluded their submissions with the assertion that the aim should be to empower arbitral tribunals with greater authority rather than constraining their powers by expanding the scope of the courts under Section 11 of the Arbitration Act.

The Respondent's submissions commenced by challenging the jurisdiction of the Constitutional Court to entertain the present case. They argued that, while the Supreme Court is an institution that seeks to achieve ends through legal means, it cannot act beyond its jurisdiction. They contended that the matter of M/s. Bhaskar Raju and Brothers & Anr. vs. M/s. Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram and other Charities & Others[2], being a curative petition, falls within a limited jurisdiction that does not encompass the reference of a matter to a Constitutional Bench.

In response to this challenge, the Chief Justice pointed out that the constitutional issue in the case carries significant implications for commercial life in the country. As a constitutional court, the Supreme Court has a responsibility to address it in the public interest. The Court is not obliged to wait for a future case that may be more appropriate and instead leave the law in a state of uncertainty. Another Hon’ble judge expressed the view that the Respondents appeared more concerned with questioning "Why in my curative petition?" The Court also observed that for this reason the matter has been re “In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899”. 

The Respondents also argued that an unstamped agreement cannot be deemed valid. They referred to the Stamp Act, contending that for any instrument to be legally executed in India, the requisite stamp duty must be paid either before or during execution. If not, an application must be made to rectify the omission. Addressing the argument put forth by the Petitioners on 11th of October 2023, which posited that according to Section 2 of the Indian Contract Act, 1872, an unstamped arbitration agreement is unenforceable but not void, the Respondents argued that Section 2(g) clearly states that "an agreement not enforceable by law is said to be void." Therefore, since an unstamped arbitration agreement is unenforceable, it is, by extension, considered void.

Another contention raised by the Respondents was that the interpretation that "examination" under Section 11(6A) of the Arbitration Act represents a limited power of the courts is fundamentally flawed. They contended that the examination of existence inherently encompasses the examination of validity, as an invalid agreement cannot legally exist.

On the conclusion of these arguments, the Supreme Court has reserved its judgement on the issue of the validity of an unstamped arbitration agreement.

Jyoti Dahiya: We shall all be looking forward to the final judgement, which shall lay down the law on the issues of whether arbitral tribunals themselves have to decide the validity of an agreement brought before them, and whether lack of adequate stamping is a curable defect or it renders an agreement unenforceable under law.

12 October 2023 #ConversationsInLaw #Arguments #SupremeCourt #Arbitration #NNGlobal #CurativePetition

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Jyoti Dahiya: Did you know a constitutional bench was sitting today in the Supreme Court to hear an arbitration matter? 

Vishakha Gupta: Yes! The legal landscape in India has recently witnessed a significant development concerning the relationship between the requirements of stamping and the validity of arbitration agreements. This crucial matter came under the scrutiny of the Supreme Court, which, in the case of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. [N.N. Global II][1], took the exceptional step of referring it to a seven-judge bench for reconsideration.

In this judgement, the court delved into the intricate interplay between the necessity of stamping arbitration agreements and their enforceability. The ruling held that arbitration agreements lacking the required stamp duty are not to be considered contracts within the purview of Section 2(h) of the Indian Contract Act. Consequently, these unstamped agreements are rendered unenforceable under Section 2(g) of the Contract Act. In succinct terms, the court declared that "an unstamped instrument, when it necessitates stamping but lacks it, not only fails to qualify as a contract but is also devoid of legal enforceability."

In a recent development, a seven-judge bench deliberated on the case of M/s. Bhaskar Raju and Brothers & Anr. vs. M/s. Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram and other Charities & Others. This matter was presented in the form of a Curative Petition(C) No. 44/2023 in R.P(C)No. 704/2021, connected to C.A.No. 1599/2020, and referred to as Arbitration Case No. 25/2023.

During the extensive arguments presented, one of the senior counsels astutely observed that this marked the second instance in which a seven-judge bench was assembled to deliberate on matters pertaining to arbitration. The first such occurrence transpired in the case of SBP & Co. v. Patel Engg. Ltd.[2]

Four Senior Advocates put forth compelling arguments before the Supreme Court today,  summarised as: 

1. Section 5 of the Arbitration Act explicitly precludes any court intervention except in cases expressly stipulated in the Act. Building upon that, Section 11(6A) employs the phrase "confine to the examination of the existence of an arbitration agreement," while Section 16 of the Act employs the phrase "may rule on its own jurisdiction, including ruling on any objections, with respect to the existence or validity of the arbitration agreement." Additionally, Section 34 allows for a second review of the existence and validity of the arbitration agreement. This emphasises that judicial intervention, as mandated in each of these sections, is contained within the scope of the respective sections and cannot extend beyond them.

2. Section 33 of the Stamp Act employs the term "examination," which is distinct and separate from the powers vested under the Arbitration Act and cannot be equated with those powers.

3. A notable exception to NN Global II is raised due to the potential compromise of the stringent timelines stipulated by the Arbitration Act, which are fundamental to the arbitration process. No such mechanism of timelines is provided under the Stamp Act. The second exception relates to the significant public policy issue at stake. The maintainability of a petition should not be subject to a mandatory fiscal pre-condition unless explicitly mandated by Parliament. For instance, a challenge under Section 34 necessitates a deposit of 75% of the claims awarded. The established pattern generally includes the phrase, "the petition shall not be entertained." In the present case, Parliament has not explicitly specified such a requirement.

Jyoti Dahiya: It will be interesting to see how the Supreme Court rules on the issues!

Vishakha Gupta: Yes, I am particularly interested to see the definitive judgement on whether unstamped or deficiently stamped agreements can be referred to arbitration. Let see how the arguments pan out tomorrow.

11 October 2023 #ConversationsInLaw #Arguments #SupremeCourt #Arbitration #ConversationInLaw #NNGlobal

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Jyoti Dahiya: You said the ‘Request for arbitration’ also includes appointment of the arbitral tribunal. What does that mean? 

Vishakha Gupta: Unlike courts, which are standing bodies/institutions of law, the body to adjudicate upon the disputes is chosen, created, appointed by the parties. This is one of the grander differences between arbitration and other forms of dispute resolution - while parties have no role to play in choosing which judge shall hear their matter in court; in arbitration the parties choose their arbitrators. The chosen persons can be anyone who consents to undertake such an important position of rendering justice. There is no standard, national or international list. 

In an ad hoc arbitration, when a sole arbitrator is chosen to preside over the dispute, either party may propose names of arbitrators, while the other party may confirm any one of the names agreeable and hence, an arbitrator is chosen amicably. In the event of three arbitrators to be selected to create a panel, the parties nominate each of their named arbitrators, who in turn select the third presiding arbitrator. In the event the parties are unable to select an arbitral tribunal, the parties approach the Court of Law to appoint an arbitrator for them. 

Jyoti Dahiya: Are there any bodies that can assist the parties in this process?

Vishakha Gupta: Yes, such arbitrations are known as institutional arbitrations; where the arbitration takes place under the aegis of the chosen institutions. These institutions also maintain a list of persons to choose from, to act as arbitrators. Some of these institutions are @ Indian Council of Arbitration (ICA), @ London Court of International Arbitration (LCIA), @ International Chamber of Commerce (ICC), @ Singapore International Arbitration Centre (SIAC), and many more.

Jyoti Dahiya: Does all this have to be covered in the Request for Arbitration even if the contract or Arbitration Agreement already mentions whether there is one or three arbitrators and/or the institution the parties have specified for the arbitration?

Vishakha Gupta: Normally, the contract will only specify whether there is one arbitrator or three, and if any of the institutional arbitrators is involved. However, within the Request for Arbitration, the party invoking arbitration would normally propose the actual name(s) of the arbitrator, and also any other necessary procedural steps. It is rare for the contract itself to specify the arbitrators’ names.

Jyoti Dahiya: What would those steps look like?

Vishakha Gupta: Let’s take that up next week!

30 September 2023 #ConversationsInLaw #ArbitrationTribunal #RequestForArbitration

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Jyoti Dahiya: Let’s say someone has an arbitration agreement or arbitration clause. How do they initiate an arbitration?! 

Vishakha Gupta: Whether domestic or international arbitration, the initial step is either sending a formal "Notice for arbitration" or making a "Request for arbitration". This is a crucial and mandatory step, because if this step is skipped, it could give the party/ies a right to challenge the award later. 

Here's why it's so important: Firstly, the parties to the arbitration agreement are to be informed that a dispute has arisen and the claims of the other party. The notice also identifies the procedure to appoint the arbitral tribunal; whether the parties consensually choosing a sole arbitrator or appointing each of their nominee arbitrators, to create a three person tribunal. Failure of the receiving party to take action on this arbitration notice entitles the other party to approach the court of law to seek appointment of the arbitral tribunal.  This notice also helps understand the commencement of the period of limitation for the parties. 

In essence, the "Notice for arbitration" or "Request for arbitration" is like the first step in starting a formal arbitration process. It's critical because it ensures clarity, fairness, and adherence to the established rules and procedures, ultimately making the arbitration process smoother and legally sound. Any arbitration proceedings which are commenced without a “Notice for arbitration” would be unsustainable in law.

Jyoti Dahiya: Is there any specific format for such a notice?

Vishakha Gupta: No, but the notice must cover these aspects:

• Informing the other party formally that there is a dispute.

• Invoking arbitration as per the arbitration agreement.

• Suggesting arbitrators where required.

• Stating the time within which the other party must accept and respond to the notice.

23 September 2023 #ConversationsInLaw #initiatingArbitration #NoticeOfArbitration

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Vishakha Gupta: Did you know that an arbitration agreement does not merely serve the purpose of referring the parties to arbitration, but, instead, it is the powerhouse of powers? 

Jyoti Dahiya: Powerhouse? Why do you say that?

Vishakha Gupta: From this agreement, we derive jurisdiction of the arbitral tribunal - that is- in the event of dispute, which court of law shall have supervisory powers. We also derive, as determined by the parties, the number of arbitrators on the arbitral tribunal, appointment of the arbitral tribunal, in which country (the ‘seat’, as we discussed below - see '"Seat" vs "Venue" of arbitration in international arbitration'), the powers and procedure to be followed by the arbitral tribunal. Under the arbitration agreement, first the existence of a dispute is important and thereafter, the parties may and often do, determine the kind of disputes that may be referred to arbitration. 

Jyoti Dahiya: Why would the ‘existence of a dispute under the arbitration agreement’ even be a question?!

Vishakha Gupta: There are certain issues that cannot be determined in arbitration or one party may allege that the dispute so raised is not capable of being adjudicated by way of arbitration. This is called “arbitrability” of a dispute i.e. a dispute capable of being resolved through arbitration. For example: a murder of an employee would not be adjudicated through arbitration. However, illegal termination of an employee may be determinable by the process of arbitration. 

16 September 2023 #ConversationsInLaw #arbitration #ArbitrationAgreement

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Jyoti Dahiya: My client is in the business of manufacturing garments and procures its raw material (cotton) from a vendor in Gujarat. Due to crop failure, the vendor has defaulted in providing the raw material. My client has initiated arbitration, but the vendor says he did not agree to arbitration! 

Vishakha Gupta: I am assuming that there was a written agreement between the parties for the procurement of the raw material? 

Jyoti Dahiya: Yes, of course. The agreement had an “arbitration clause”! 

Vishakha Gupta: Well, in that case, if the parties have indeed consented to resolve their disputes through arbitration, this consent cannot be withdrawn unilaterally. The consent, specifically, “free consent”, is the essential cornerstone of arbitration. As long as the agreement to arbitrate forms part of the original contract, then, even if the original contract has either been terminated, or even is non-est in law, the obligation for the parties to arbitrate survives. This falle from the principle of “party autonomy” - that is, the expression of the will of the parties is represented through the proceedings of arbitration. 

In case the vendor is not willing to commence arbitration amicably, your client may enforce the arbitration clause by approaching the courts/tribunal/institution that has the jurisdiction, to appoint the arbitral tribunal. 

09 September 2023 #Conversationsinlaw #arbitration #arbitrationagreement #consent #partyautonomy

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Jyoti Dahiya : You mentioned that determining the seat for arbitration is of significant importance at the time of contract conclusion. But, when do the parties actually need to agree to go for arbitration? Is it necessary to include it in the original contract, or is it possible for them to establish this agreement even after disputes have already arisen?

Vishakha Gupta : Before there can be a valid arbitration, there has to be a valid agreement to arbitrate. This agreement, often referred to as an "arbitration clause", is usually an integral part of a contract. This clause outlines the process to be followed in case a dispute arises, stipulating that if the parties have chosen arbitration as their method of dispute resolution, the matter will be referred to arbitration rather than to court. Importantly, this arbitration clause or agreement is put in place before any disputes have emerged. It is, in fact, finalised at the outset when the parties are entering into a contract or forming a relationship for a specific purpose.

The second part of your question is intriguing. Parties might decide to refer a dispute to arbitration amicably once it arises. This is termed a "submission agreement". Essentially, when a dispute comes up, the parties collaboratively agree on the approach to resolve the issue through arbitration. However, it's worth noting that once a dispute arises, the parties often lack the willingness to cooperate and find common ground, making it challenging to reach submission agreements.

Here's a word of caution: During this stage, parties typically struggle to engage in productive discussions due to differing viewpoints. As a result, reaching a consensus at this point to submit themselves to arbitration might prove to be quite difficult.

So, while submission agreements do exist, parties seldom opt for them in practice.

#ConversationsInLaw #arbitration #ArbitrationAgreement

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Jyoti Dahiya followed up the last query with: What about international arbitrations? Is there a bigger difference between “seat” and “venue” there?

Vishakha Gupta:

“International” arbitrations are those that transcend national boundaries. They could be between countries, between a country and a company,  or between two companies in different countries. One of the most important factors in choosing where to hold the arbitration is its neutrality and lack of connection with the parties and the dispute.This is called a “Seat” of arbitration. Do note that where parties choose to hold their arbitration, the arbitration is accordingly subject to the national law of that place. For example: If an international arbitration is held in Geneva, Switzerland, the “seat” of the arbitration is Geneva, and so the mandatory provisions of Swiss law apply to the proceedings. The tribunal’s award shall become a “Swiss” award. 

This is the “lex arbitri” or the procedural law applicable to the arbitration.. You can look at it as the outer framework for the arbitration. Thus, the “seat” of arbitration is only a legal construct. The aspect of the applicable procedural law may not have been chosen by the parties. Geographical advantages apply to the location of the actual hearings, or the “venue” of the arbitrations. Practically, the venue  is the physical location where the hearings and all other activities are held. If the parties so desire, the venue can be in a different location, even a different country from the seat. 

Jyoti Dahiya: So that means that it is more critical in an international contract to be clear about both the seat and venue of arbitration, because the seat determines the law that would apply, and the venue can be separate and chosen for its geographical convenience.

Vishakha Gupta: You got it. Do you have any other questions on seat and venue?

Jyoti Dahiya: Not as of now, but those reading may. Would you like to pitch in?

29 August 2023 #ConversationsInLaw #Arbitration #Jurisdiction #InternationalArbitration

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Jyoti Dahiya: Hi Vishakha, the parties want to put a clause on the seat/venue of arbitration in a contract. Can the parties choose “seat” and “venue” interchangeably? 

Vishakha Gupta: The seat and venue of arbitration have been given different connotations in law, despite the Arbitration and Conciliation Act, 1996 (“Act”) not defining either “seat” or “venue” and instead using the term “place of arbitration”. 

Section 20 of the Act provides that place of arbitration can either be decided by the parties or the Tribunal and notwithstanding such determination, arbitration hearings can be held at any place other than the agreed / determined place of arbitration, for the convenience of the parties.

Over time, by way of several judgments, it has been clarified that the seat governs the applicable law, rules and which courts have jurisdiction over the arbitration and the venue is only the physical location where the arbitration hearings are held. For domestic arbitrations, parties specifying the seat of arbitration is absolutely sufficient. This means that, on specifying the seat, the parties decide that Part 1 of the Act shall be applicable to the dispute, enforcement and appeal shall lie before the courts in which the seat is. 

Lets go one step ahead: what if parties use the word or term “venue” instead of “seat” instead. Then, in such an instance, the said “venue” shall inexorably be considered as the “seat” of the arbitration proceedings, unless there is any contrary indication thereto.

From this arises another question, can “seat” and “venue” be used interchangeably in the realm of international arbitration as well? Let's discuss that, next.

19 August 2023 #ConversationsInLaw #Arbitration #Jurisdiction

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Jyoti Dahiya asked Vishakha Gupta the difference between arbitration and mediation and when to choose either one. Vishakha Gupta said:

“For understanding, it is easier to club arbitration and litigation together, while mediation is different from these two.

“Like litigation, arbitration is a formal process, but is more private and confidential, and stays within the parties involved and the arbitrator. However, like litigation, it consists of a trial including document verification, hearings, evidence review and a final decision/award. Having said that, the arbitration process is flexible. For example, with consent of the parties, it can be tailor-made; the parties may dispense with oral evidence. 

“Mediation is an informal process of resolution of a dispute, without the entire gamut of trial, procedure and formality that is required to be followed in arbitration and litigation. Parties mutually agree to appoint a neutral third party to facilitate a resolution, rather than decide the dispute by rendering an award or judgement. The role of the mediator is limited to ensuring the continuity of communication between the parties in the room. The advantage of mediation is that the resultant decision, if any, from the mediation process is binding on the parties. 

“The selection of a particular method for resolving a dispute hinges upon the extent of communication taking place between the involved parties. In the initial stages of a conflict, when the parties remain receptive to listening to one another but struggle to articulate their own perspectives effectively, mediation emerges as the preferred approach. Conversely, in cases where communication has completely broken down, confidentiality is crucial, and the disputes are unsuitable for a public trial, arbitration becomes the appropriate course of action.”

Do you have a dispute that needs to be mediated or needs resolution through arbitration? Did this help you decide?

12 August 2023 #Arbitration #Mediation #ConversationsInLaw

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