by Rahil Setia (Army Institute of Law, Mohali)
Arbitration is referred to the process of dispute resolution between two or more parties taking into account their mutual rights/liabilities. Arbitration is essentially an ADR process supplementing the litigation. Parties prefer arbitration as; it is binding and saves them from litigation. It simplifies legal processes and makes India attractive for investors. (Dugar, 2019).
Arbitration, as mode of dispute resolution has been in practice since ancient times. Presently, it is being regulated by Arbitration and Conciliation Act, 1996. Ad hoc arbitration has been famous until now, in which parties mutually decide amongst themselves, about various aspects of the procedure of arbitration that would govern them. (Jha, 2016). However, it also needs the parties to make efforts own their own, because it is not regulated by any Arbitral Institution.
Concept of institutional arbitration has recently gathered popularity in the Indian ADR system. It refers to the process in which a dedicated institution would assist the parties in carrying out arbitration process. Arbitration agreement itself, could state about the institution which the parties to the dispute, may agree to carry out the process of arbitration. Rules of Institution supplement the provisions of Arbitration and Conciliation Act, 1996. Some arbitral institutions of national and international repute are, Hong Kong International Arbitration Center, Japanese Commercial Arbitration Association, ICDR Rules of American Arbitration Association, Mumbai Center for International Arbitration, Indian Council of Arbitration., etc. (Working Paper on Institutional Arbitration Reforms in India, 2017).
Some of the advantages of institutional arbitration are as follows:
Clear Rules: Each institution of arbitration has its own set of rules and regulations to govern the procedure of arbitration between the parties, this rules out any confusion that may arise between the parties in relation to the rules of procedure, moreover, rules are also made taking into account all the eventualities that may or may not arise.
Efficient Handling of Defaults: Sometimes a party to the arbitration may default in appearing before the tribunal or the panel, in such cases also institutions have clearly defined rules to prevent the arbitration proceedings from getting unnecessarily delayed because of any irrelevant excuses of the party.
Fixed-Remuneration: After the proceedings sometimes there may be a clash as to what should be the remuneration of the arbitrators in case of ad hoc arbitration which is not the case with institutional arbitration where the remuneration of the arbitrators is already laid down.
High Quality: It may be said with certainty that the quality of arbitration in the institutional arbitration would definitely be very good considering that the panel of arbitrators that they the institutions would appoint for handling a particular case would be experts in their special fields and there are less chances of biasness on the part of arbitrators that would ensure good quality of arbitration proceedings.
Institutional-Oversight: Institutions also maintain a proper oversight to ensure that due process of law has been complied with by the arbitrators and that the rules of natural justice have been followed. They also look that proper reasoning for a particular award or a punishment has been given or not by the arbitrators. This would save the parties from any problems that may arise later on and also keep the arbitrators under strict check so that they do not exceed their powers.
Command Higher Respect: Any arbitration award under the guidance of an institution of arbitration is bound to command higher reputation as it would seem more formal and thus, it would also be easier to execute it since most of the other bodies would consider it to be legally sound, making it easier for them to trust arbitration award. (Rastogi et al., 2020).
Some of the disadvantages of institutional arbitration are as follows:
Sometimes Over-Administrative: Some parties may feel that institutional arbitration is over-administrative and therefore it may seem to them that it is rather consuming more time because of certain compliances that the parties may feel are unnecessary.
Lesser Autonomy to Parties: Since in institutional arbitration the rules are clearly laid out and not much control is given to the parties, so, some of the parties may feel that their autonomy over the process of arbitration has been taken away from them by the institution and they may feel themselves to be bound by such procedures, as they may not want to comply with them. (Sarma et al., 2009).
Element of Strictness: Sometimes, the parties may not be able to follow the strict guidelines or the procedures laid down by the institution and they may find themselves in trouble some situations which may force them to think that, rather than easing the process, institutional arbitration on the other hand has got them in a tough situation where they might feel burdened.
Various factors may decide whether institutional arbitration would be suitable for parties or not. It would be more suitable for the disputes that are of international nature as that may serve to bring parties closer and remove cross-border divides. True success of any form of arbitration is dependent upon the parties, the arbitrators and their good intentions. (Vadapalli, 2020).