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Role of Arbitral Institutions In the Modern World
by P.K. Ravindranatha Menon*

Cite as : (2004) PL WebJour 21

Arbitration is a process of dispute resolution in which a neutral third party (arbitrator) renders a decision after hearing both the parties. Where arbitration is voluntary, the disputing parties select the arbitrator and confer on him the authority to render a binding decision.1

The law on arbitration in India is at present contained in three enactments, namely, the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. It is widely felt that the 1940 Act, which contains the general law of arbitration, has become outdated. The Law Commission of India, several representative bodies of trade and industry and experts in the field of arbitration have proposed amendments to this Act to make it more responsive to contemporary requirements, it is also recognised that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms. Like arbitration, conciliation is also getting increasingly worldwide recognition as an instrument for settlement of disputes. There is, however, no general law on the subject in India.

The United Nations Commission on International Trade Law (UNCITRAL) adopted the Model Law on International Commercial Arbitration in 1985. The General Assembly of the United Nations has recommended that all countries should give due consideration to this Model Law in view of the desirability for uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. The UNCITRAL also adopted in 1980 a set of Conciliation Rules. The General Assembly of the United Nations has recommended the use of these Rules in cases where the disputes arise in the context of international commercial relations and the parties seek amicable settlement of their disputes by recourse to conciliation. An important feature of the said UNCITRAL Model Law and Rules is that they have harmonised concepts on arbitration and conciliation of different legal systems of the world.

Though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Act, namely, the Arbitration and Conciliation Act, 1996 has consolidated and amended the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and defined the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules:

The main objectives of the Act are as under:

(i) to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation;

(ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration;

(iii) to ensure that the Arbitral Tribunal gives reasons for its arbitral award;

(iv) to ensure that the Arbitral Tribunal remains within the limits of its jurisdiction;

(v) to minimise the supervisory role of courts in the arbitral process;

(vi) to permit an Arbitral Tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes;

(vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court;

(viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an Arbitral Tribunal; and

(ix) to provide that for purposes of enforcement every arbitral award made in a country to which one of the two international conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award.

Arbitration has to be looked up to with all earnestness so that the litigant public has faith in the speedy process of resolving their disputes by this process.

The success of the institution of arbitration like a judicial institution depends upon the confidence the institution could create and establish in the mind of the public. Confidence of the public depends upon the character, credibility, impartiality and uprightness of the persons who are called upon to arbitrate. It is the dedication and devotion of the arbitrator to the cause he is called upon to arbitrate with the proverbial judicial aloofness from the parties and the quickness of perception and perfection, exactitude and uprightness in the disposal of the cases that could bring image, reputation and popularity to the institution of arbitration.

The attitude and reaction of the public to the reports and findings of Commissions held by retired judicial and quasi-judicial authorities and bureaucrats have been negative. Some arbitrators known for their integrity, ability, impartiality while working as judicial officers or administrators or professionals have been found to be lacking in integrity, honesty and impartiality. These have weakened the credibility of arbitration as an alternative to adjudication.

Though arbitration is an alternative, it cannot be a substitute for the judiciary. Even to become an effective alternative, the arbitrator whether a lawyer, retired judicial or quasi-judicial authority or bureaucrat should have the great qualities of a Sitting Judge — impartiality, integrity, rectitude, uprightness and courteous behaviour and the preparedness and patience to learn and listen.

It should be our aim to raise a band of such arbitrators and create an atmosphere conducive to the development of qualities essential for the sustenance of arbitration because arbitration holds the key for resolution of disputes in the new world.


* Senior Counsel, Govt. of India, Kerala. Return to Text

1. Black’s Law Dictionary defines “arbitration” thus: Return to Text

“An arrangement for taking and abiding by the judgment of selected persons in some disputed matter, instead of carrying it to established tribunals of justice, and is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation.”

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