THE INFLUENCE OF ARBITRAL INSTITUTIONS ON THE ARBITRATION PROCESS

This article is written by Kushal of BA.LLB of Chanderprabhu Jain College of Higher Studies and School of Law, New Delhi, an intern under Legal Vidhiya

ABSTRACT

This essay addresses the obligation and authority placed on arbitral institutions to protect the integrity of arbitral processes in international arbitration, institutional arbitration has a lot going for it over ad hoc arbitration. The author emphasises how important arbitral institutions may be in keeping arbitration participants accountable. The arbitral institutions’ rule-making function accomplishes this goal. The goal may also be accomplished by the institutions by using their extensive authority to appoint arbitrators and to manage arbitration processes in relation to parties, arbitrators, and party representatives. This essay makes the case for arbitral institutions’ ongoing and increased participation in maintaining the fairness of arbitral procedures.

KEYWORDS

Arbitration, international, ad hoc arbitration, institutions, process, tribunal, arbitrator, court.

INTRODUCTION

Arbitration is a procedure whereby two or more parties resolve disagreements about their rights and obligations by referring the matter to an arbitrator who makes a legally binding decision and applies the law, rather than the parties taking the matter to court. Since arbitration is a different dispute resolution procedure, it coexists with the legal system. The primary goal of an arbitration process is to resolve the disagreement quickly, in a way that is legally binding, and without resorting to a lengthy legal process in a court of law.

Over the past thirty-five years, arbitration has replaced national court litigation as the go-to process for settling international business disputes. Without the ground breaking work of the top arbitral institutions in the world, our reliance on international arbitration would not have been feasible in the modern era. Since their founding, organisations like the American Arbitration Association, the London Court of International Arbitration, the ICC International Court of Arbitration, and others have focused their efforts on developing protocols for the conduct of arbitral proceedings, encouraging the enactment of contemporary arbitration legislation, and educating users and neutrals about appropriate arbitration practice.

The role played by arbitral institutions in providing quick, unbiased administrative support for cases submitted for arbitration by parties in dispute has been equally important to the overall efficacy of international commercial arbitration. As stated by Redfern and Hunter, “even if the parties themselves — or their legal advisers — have little or no practical experience in the field, an established and well-organized arbitral institution can do much to ensure the smooth progress of an international commercial arbitration.”

TYPES OF ARBITRATION PROCESS

There are two primary kinds of arbitration proceedings. These are

• Ad-Hoc Arbitration
• Institutional Arbitration

AD-HOC ARBITRATION

Ad-hoc arbitration is a type of arbitration procedure in which parties to a tribunal dispute will convene and conduct arbitration between themselves, adhering to the rules that have been agreed upon in advance by the parties or, in the absence of any agreement between the parties, to the rules that have been established by the tribunal. There are no hard and fast rules, though, as many parties may decide to abide by different ones. For example, the disagreeing parties may choose to obey the norms established by their trade union.

The practice of ad-hoc arbitration is unique as the disputing parties select the arbitrator of their choosing, and those arbitrators then choose another arbitrator by mutual agreement. The senior arbitrator, the presiding arbitrator, would be chosen by these arbitrators for convenience’s sake. Keeping in mind several considerations like the amount of the claim, the complexity of the dispute, etc., many parties choose to appoint retired judges of the Supreme Courts or the High Courts as the presiding arbitrator.

This process has a disadvantage. Because senior judges are the preferred arbitrators by the parties and because there are only so many of them, the arbitration process can take up to a full year to complete. As a result, it defeats the entire goal of the arbitration process, which was to settle the parties’ disagreement quickly and effectively.

INSTITUTIONAL ARBITRATION

When using institutional arbitration, the parties in dispute present their case to an organisation that has been chosen to handle the arbitration procedure. The institution then arbitrates the disagreement in front of the parties in accordance with the guidelines they have set down. However, the organisation does not arbitrate the disagreement. A panel chosen by the institute oversees the entire procedure.

Not every institute offers the same kinds of services. Some organisations only offer the principles and regulations that will serve as the foundation for the process (London Maritime Arbitration Association). Others give the parties a list of potential arbitrators but do not actually select the arbitrators (Society of Maritime Arbitrators in New York).

A few organisations oversee the arbitration procedure as a whole (International Court of Arbitration of the International Chamber of Commerce)

ARBITRATION INSTITUTION

A crucial component of institutional arbitration is an arbitral institution. A permanent organisation with its own set of arbitration rules governing the services it offers and other procedural features of arbitration is typically referred to as an arbitral institution.

COMPARISON WITH AD HOC ARBITRATION

One way to characterise ad hoc arbitration is to compare it to the idea of institutional arbitration. Ad hoc arbitrations are carried out in accordance solely with the parties’ agreement and the relevant legislation, without the assistance of an institutional arbitration framework or set of rules. An ad hoc arbitration may occasionally receive specific logistical support from an arbitral institution; this type of arbitration is frequently referred to as “ad hoc arbitration administrated by an arbitral institution.” For example, even though an arbitral institution may provide certain logistical services, such as acting as a fund holder of the arbitrators’ fees, an arbitration conducted under the UNCITRAL Arbitration Rules and administered by that institution is generally regarded as an ad hoc arbitration.

OBJECTIVES OF ARBITRAL INSTITUTIONS

Arbitral institutions serve several objectives within the realm of alternative dispute resolution (ADR). Here are some of the primary objectives of arbitral institutions:

1. Promoting and facilitating the resolution of disputes through arbitration
2. Providing a speedy and cost-effective dispute resolution mechanism
3. Encouraging the use of arbitration and providing a framework for the conduct of arbitration proceedings
4. Saving money and time
5. Reaching a mutual agreement between the two parties of the disputes
6. Encouraging impartiality, justice and fairness
7. Providing Administrative Support Improving the Arbitration Process’s Efficiency
8. Ensuring Legal Standards Compliance
9. Retaining and maintaining Privacy and confidentiality
10. Helps in reducing and reaching to a conclusion in cross border disputes efficiently.
11. Enabling the Implementation of Awards that Encourage Professionalism and Excellence
12. Promoting the Advancement of Arbitration Practice and Law

ADVANTAGES OF ARBITRAL INSTITUTIONS

• Reputation of the Institution

The institution’s reputation is one of the main benefits of choosing institutional arbitration. Decisions made in the name of any esteemed institution are more easily upheld because they are recognised by the majority of other organisations.

• Effective Management

Another benefit of arbitral institutions is that they offer the parties skilled personnel to oversee the entire procedure. The administrative team will set the guidelines, make sure that the deadlines are met, and make sure everything proceeds as smoothly as possible.

The arbitrator in an ad hoc arbitration must handle all administrative tasks, it could divert him from his main goal.

• Unambiguous Rules

Usually, the institution sets the arbitration’s rules. There isn’t any more disagreement between the parties over the procedural norms, unlike in an ad hoc arbitration. Also, since these institutions have gone through numerous arbitration cases and are aware of potential outcomes, the rules are designed with every scenario in mind.

Furthermore, there is flexibility in the rules. There is a way to object to any aspect of the procedure that is inconsistent.

• The arbitral panel

The fact that arbitration organisations have a large panel of specialists who serve as arbitrators is one of their main advantages. These organisations also have arbitrators with a variety of specialisations, enabling them to settle any kind of disagreement.

In order to guarantee that there is no prejudice based on the parties’ nationality, major organisations like the International Chamber of Commerce maintain a network of national committees for the appointment of arbitrators.

• Oversight

In addition to managing the arbitration process, an organisation oversees it by reviewing the sanctioned award or penalty to make sure that due process was followed and that the parties were properly informed before making their decision.

• Standard Operating Procedure

Many institutional arbitrators clearly state that even in the event that one of the parties fails to act according to the rules during the procedures, the proceedings will go forward and not end in the middle. For example, Article 21(2) of the ICC[1] Rules stipulates that the Tribunal will carry out the procedures if any party fails to show up for the proceeding without providing a legitimate cause, even after it has been properly called by the institution.

FEW OF THE WORLD’S PROMINENT ORGANISATIONS FOR INTERNATIONAL ARBITRATION INCLUDE:

• International Chamber of Commerce International Court of Arbitration

The International Court of Arbitration was founded in 1923, Paris. With less of a national flavour than any other top arbitral institution, it is widely regarded as the world’s preeminent institution for international commercial arbitration.

The International Court of Arbitration of the International Chamber of Commerce is not a court and does not make decisions or serve as an arbiter in and of itself. Instead, it is an administrative body that, in accordance with the ICC Rules, has supervisory and appointing authority.

• London Court of International Arbitration

The LCIA was established in 1892 and is widely regarded as the second most well-liked organisation in Europe for international commercial arbitration.

In recent years, the LCIA has worked hard and with increasing success to dispel the myth that it is primarily an English-speaking organisation. It has nominated five non-English presidents in a row, and several non-English practitioners serve as vice presidents.

There is no institutional review of draft awards or Terms of Reference mechanism in the LCIA Rules.

• Vienna International Arbitration Centre

With its headquarters located in Vienna, the Vienna International Arbitral Centre (VIAC) was founded in 1975. It solely handles international arbitrations, as required by the VIAC Rules, which stipulate that the dispute must have an international nature or that at least one of the parties be of non-Austrian descent.

During the Cold War, VIAC was initially intended to serve as a forum for East/West economic conflicts. Parties from Russia or Central and Eastern Europe continue to make up a sizable portion of VIAC’s docket, which is indicative of these origins.

• Singapore International Arbitration Centre

When the Singapore International Arbitration Centre (SIAC) was first founded in 1991, it was used to settle disputes involving contracts related to banking, insurance, shipping, and construction. A broader range of conflicts, including those involving energy, finance, joint ventures, sales, and other issues, have been brought before SIAC more recently, in line with Singapore’s growing significance as a global hub for commerce and finance.

The majority of non-Singaporean attendees are from China and India. The UNCITRAL Rules form a major part of its regulations.

THE ROLE OF ARBITRATION INSTITUTIONS IN INDIA

In India, arbitration institutions are essential to the advancement of arbitration as the go-to process for resolving disputes. They offer direction, encouragement, and assistance in overcoming obstacles from the past. These organisations, including the Arbitration Promotion Council of India (APCI), concentrate on accrediting and educating arbitrators. A committed arbitration community is cultivated by accredited arbitrators.

Additionally, they support institutional arbitration since it streamlines and organises the procedure and lessens the workload on Indian courts. Reforms to policy, such as the Arbitration and Conciliation Amendment Act, 2019[2] (the “2019 Amendment”), have played a major role in increasing the significance of institutional arbitration.

The purpose of the Arbitration Council of India (ACI) is to increase the impartiality and efficiency of institutional arbitration. Sections 43-A to 43-M[3] were added by the 2019 Amendment, establishing the ACI. In order to position India as a top arbitration destination, ACI’s responsibilities include promoting arbitration, mediation, conciliation, and other ADR techniques; establishing policies; evaluating arbitral institutions; credentialing arbitrators; and fostering talks. Nevertheless, in spite of the 2019 Amendment, the ACI’s complete implementation is still pending.

With research, education, and training, the India International Arbitration Centre (IIAC) aims to establish India as a major arbitration hub by sending arbitrator appointments to organisations like the Mumbai Centre for International Arbitration (MCIA), Indian courts—especially the Hon’ble Supreme Court—support institutional arbitration and establish a standard for simplified and effective arbitration procedures.

HISTORICAL VIEW

Due to the challenges, they encountered, Indian parties preferred using arbitration venues in cities like Singapore and London. Previously, India relied heavily on informal and improvised arbitration procedures. These difficulties included the lack of reliable institutions, the interference of the judiciary, the absence of a society devoted to arbitration, and imprecise formulations of public policy. As a result, India’s standing as a location that welcomes arbitration was damaged, with numerous Indian cases being sent to organisations like the Singapore International Arbitration Centre (SIAC).

Nonetheless, the government and judiciary of India have acknowledged the necessity of institutional arbitration promotion and reforms. There may be a move in the nation from ad-hoc to institutional arbitration as a result of recent events.

DEVELOPMENTS FROM THE COURT

By sending an arbitrator appointment to the Mumbai Centre for International Arbitration (MCIA) in July 2017, the Hon. Supreme Court supported institutional arbitration. This action reduced delays by changing the old, time-consuming practice of courts carefully examining arbitration agreements.

The Court’s ruling established a precedent for the appointment of arbitrators through institutions, demonstrating support for arbitration and bolstering MCIA’s credibility. Delays are minimised for these organisations by their effective access to arbitrators.

THE INSTITUTES OF ARBITRATION IN INDIA

The wide range of arbitration institutions in India is essential to the expansion and advancement of the arbitration market within the nation. A few prominent organisations that support effective and reliable dispute resolution are the Indian Council of Arbitration (ICA), Mumbai Centre for International Arbitration (MCIA), and the International Centre for Alternative Dispute Resolution (ICADR).

Furthermore, a major driver of change is the India International Arbitration Centre (IIAC), which was founded in accordance with the India International Arbitration Centre Act. With a staff of seasoned professionals, including the Chairperson, a former Supreme Court judge, the IIAC aims to establish itself as India’s premier arbitration organisation for both local and international disputes. Its duties encompass research, instruction, administrative assistance, upholding panels of qualified arbitrators, and encouraging cooperation with both domestic and foreign organisations. India’s determination to establish itself as a leading arbitration centre providing prompt and effective dispute settlement services is embodied by the IIAC.

RELATED CASE LAWS

CAJ v. CAI [2021][4]

The court determined that the tribunal had exceeded its jurisdiction and violated natural justice when it granted the appellants an extension of time, even though the respondent had not been given a reasonable opportunity to address the matter (such as by presenting additional evidence, cross-examining the appellants’ evidence, or submitting additional legal submissions).

BTN v BTP [2021][5]

The defendants were not allowed to argue for a greater quantum of costs by attempting to change the basis of the costs ordered from standard to indemnity basis, according to the Singapore High Court’s additional judgement on the quantum of costs from a set aside hearing.

CBS v CBP [2021][6]

The arbitrator’s decision to forgo allowing a hearing for oral witness testimony, in the absence of express authority to do so, was a violation of natural justice, leading the Singapore court to throw aside the arbitral judgement.

MISC Berhad v Cockett Marine Oil (Asia) Pte Ltd[7]

Instead of using the tighter criteria that other common law jurisdictions apply to anti-arbitration injunctions, the Malaysian courts seemed to have taken a more lax stance when it came to interlocutory injunctions.

CONCLUSION

India’s arbitration institutions are essential to the country’s development as a major arbitration hub. They promote policy reforms, encourage the development of an institutional arbitration community, and are in line with recent court rulings and legislative developments that support this strategy.

India’s unquestionable arbitration success necessitates a persistent dedication to accepting institutional arbitration, fostering an arbitration culture, and making sure that laws and policies are favourable of arbitration. India’s commitment to placing institutional arbitration at the centre of its dispute resolution system is demonstrated by the creation of the India International Arbitration Centre. India has the potential to become a global leader in arbitration with concentrated efforts, attracting both domestic and foreign parties looking for a reliable and effective way to resolve disputes.

Arbitration institutions are becoming more and more important as India’s position as a major participant in the world economy continues to increase. Their efforts not only help Indian companies and people, but they also improve India’s standing as a top location for international arbitration. By means of sustained cooperation and inventiveness, these establishments will reinforce India’s standing as a major participant in the arbitration domain, propelling India’s trajectory towards transforming into a worldwide arbitration superpower.

REFERENCES

1. Aria.law.columbia.edu https://aria.law.columbia.edu/issues/5-1-4/the-institutions-role-in-managing-the-arbitration-process-vol-5-no-1-4/ (last visited on 1st March 2024)
2. Mololamken.com https://www.mololamken.com/knowledge-what-are-arbitral-institutions-and-why-do (last visited on 1st March 2024)
3. Nexislexis.co.uk https://www.lexisnexis.co.uk/legal/guidance/institutional-arbitration-an-introduction-to-the-key-features-of-institutional-arbitration (last visited on 1st March 2024)
4. Jusmundi.com https://jusmundi.com/en/document/publication/en-institutional-arbitration#:~:text=An%20arbitral%20institution%20is%20an,other%20procedural%20aspects%20of%20arbitration (last visited on 1st March 2024)
5. Linkedin.com https://www.linkedin.com/pulse/role-arbitration-institutions-promoting-developing-india-vllp2017  (last visited on 1st March 2024)
6. Internationalarbitration.in https://www.internationalarbitration.in/areas/institutional.html (last visited on 1st March 2024)
7. Blog.ipleaders https://blog.ipleaders.in/institutional-arbitration-india/ (last visited on 1st March 2024)
8. Legalserviceindia https://www.legalserviceindia.com/article/l64-Ad-Hoc-and-Institutional-Arbitration.html (last visited on 1st March 2024)
9. Rmlnluseal.home https://rmlnluseal.home.blog/2021/05/16/institutional-arbitration-can-india-efficiently-deal-with-it/  (last visited on 1st March 2024)
10. Paper.ssrn.com https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3085576  (last visited on 1st March 2024)
11. Kluwerarbitration.com https://arbitrationblog.kluwerarbitration.com/2022/02/01/2021-in-review-southeast-asia/  (last visited on 1st March 2024)

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[1] Article 21(2), ICC rules, signing date – 1^st June, 1975

[2] The Arbitration and Conciliation (Amendment) Act, 2019. No. 33, Acts of Parliament, 2019. [9th August, 2019.] (India)

[3] The Arbitration And Conciliation (Amendment) Act, 2019, §43-A to 43-M,  No. 33, Acts of Parliament, 2019. [9th August, 2019.] (India)

[4] CAJ v. CAI [2021] SGCA 102

[5] BTN v BTP [2021] SGHC 38

[6] CBS v CBP [2021] SGCA 4

[7] MISC Berhad v Cockett Marine Oil (Asia) Pte Ltd [2021] MLJU 563

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