International Commercial Arbitration

In this article, you will read about International Commercial Arbitration, UNCITRAL Model Law, Arbitration Agreement and steps involved in International Commercial Arbitration.

Introduction

International Commercial Arbitration has been gaining a lot of importance in recent times. With the increase in globalisation, there has been an increase in international trade and commerce. As a result, there have been many disputes that have arisen between parties from different countries. International Commercial Arbitration provides an efficient and effective solution to resolve such disputes.

Bare Act PDFs

Arbitration is a form of alternative dispute resolution (ADR) where the parties agree to resolve their dispute through an impartial third party called the arbitrator. In International Commercial Arbitration, the parties to a dispute come from different countries. The arbitration can take place in any country, and the parties can choose any law to govern the arbitration.

International Commercial Arbitration is also a form of alternative dispute resolution (ADR) that involves resolving disputes between parties from different countries through an impartial third party called the arbitrator. It is a private and consensual process that provides an efficient and effective means of resolving international trade and commerce disputes.

India has been one of the leading countries in promoting International Commercial Arbitration. The Indian Arbitration and Conciliation Act, 1996 (the Act) governs arbitration in India. The Act is based on the UNCITRAL Model Law on International Commercial Arbitration, the internationally accepted arbitration standard.

UNCITRAL Model Law

The UNCITRAL Model Law on International Commercial Arbitration is a set of internationally recognised rules that provide a uniform framework for conducting International Commercial Arbitration. It was first adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985 and has since been adopted by numerous countries worldwide.

The Model Law is designed to ensure that International Commercial Arbitration is conducted fairly, efficiently, and effectively, and it provides a clear and comprehensive set of rules for the conduct of arbitration proceedings. The Model Law has been instrumental in promoting the use of International Commercial Arbitration to resolve disputes arising from international trade and commerce.

Bare Act PDFs

The UNCITRAL Model Law on International Commercial Arbitration consists of four parts.

  • Part I of the Model Law sets out the general provisions governing International Commercial Arbitration. This includes provisions on the scope of application of the Model Law, the definition of an arbitration agreement, the composition of the arbitral tribunal, and the procedures for conducting the arbitration.
  • Part II of the Model Law deals with recognising and enforcing foreign arbitral awards. This part sets out the procedures for enforcing foreign arbitral awards in the country where they are being enforced and provides guidance on the grounds for refusing the enforcement of a foreign arbitral award.
  • Part III of the Model Law deals with the conciliation of international commercial disputes. It guides the procedures for conducting conciliation proceedings, including the appointment of conciliators, the role of the conciliator, and the effect of a settlement agreement reached through conciliation.
  • Part IV of the Model Law deals with recognising and enforcing arbitral awards. This part sets out the procedures for enforcing arbitral awards in the country where they were made and in other countries that are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Together, these four parts of the UNCITRAL Model Law provide a comprehensive framework for the conduct of International Commercial Arbitration and conciliation and the recognition and enforcement of arbitral awards. The Model Law has been widely adopted by countries worldwide and is considered one of the most important legal instruments governing international commercial dispute resolution.

Arbitration Agreement Under International Commercial Arbitration

An arbitration agreement is a contract between the parties to a commercial dispute that provides for the resolution of the dispute through arbitration. In International Commercial Arbitration, the agreement must meet certain requirements to be enforceable under the laws of different countries.

Under the UNCITRAL Model Law on International Commercial Arbitration, which has been adopted by many countries, including India, an arbitration agreement must meet the following requirements:

  • The agreement must be in writing: The agreement can be in any form, such as a separate agreement or a clause in a larger contract. It must be in writing, including electronic communication, and signed by the parties or contained in an exchange of letters, telexes, telegrams, or other means of communication.
  • The agreement must relate to a commercial dispute: The agreement must relate to a dispute arising out of a commercial relationship, which includes any transaction for the supply or exchange of goods or services, distribution agreements, licensing agreements, and other commercial relationships.
  • The parties must have intended to submit their dispute to arbitration: The parties must have intended to submit their dispute to arbitration, which can be demonstrated by the inclusion of an arbitration clause in the contract or by an express agreement to arbitrate.
  • The arbitration agreement must be valid: The arbitration agreement must be valid under the law applicable to it, which may be the law chosen by the parties or the law of the country where the arbitration takes place.

The Arbitration and Conciliation Act of 1996 sets out the legal framework for arbitration in India.

Section 7 of the Arbitration and Conciliation Act defines an arbitration agreement as an agreement by the parties to submit their disputes to arbitration. Section 7 also requires the agreement to be in writing and may be contained in exchanging letters, telexes, telegrams, or other means of communication.

Section 8 of the Arbitration and Conciliation Act provides for the judicial reference of parties to arbitration in accordance with an arbitration agreement.

Section 11 of the Arbitration and Conciliation Act provides for the appointment of arbitrators in cases where the parties are unable to agree on the appointment of an arbitrator or the appointment procedure.

Overall, an arbitration agreement is a key element in International Commercial Arbitration, as it provides the framework for resolving disputes in a manner that is efficient, flexible, and cost-effective.

Related: Arbitration Council of India – Composition, Functions, and More

Where the Term “International Commercial Arbitration” Is Defined in India?

Section 2(1)(f) of the Indian Arbitration and Conciliation Act of 1996 defines the term “International Commercial Arbitration” and sets out the essential criteria that arbitration must meet to be considered as an International Commercial Arbitration under Indian law. According to this section, arbitration is considered an International Commercial Arbitration if:

  • At least one of the parties to the arbitration agreement is a person who is not a citizen of India or is a resident of a foreign country.
  • The place of arbitration, as agreed by the parties in the arbitration agreement, is outside India.
  • The subject matter of the dispute is commercial.

This definition is important because it determines the applicability of certain provisions of the Arbitration and Conciliation Act. For example, Part II of the Act, which deals with the enforcement of foreign arbitral awards, only applies to International Commercial Arbitrations.

Additionally, the Act provides a separate set of procedures for the conduct of International Commercial Arbitrations, which are designed to ensure that the arbitration is conducted in accordance with international best practices and is efficient, effective, and fair.

Steps Involved in International Commercial Arbitration

International Commercial Arbitration is a widely recognised method for resolving disputes that arise in cross-border commercial transactions. The steps involved in an International Commercial Arbitration proceeding typically include the following:

  • Drafting the arbitration agreement: The first step in International Commercial Arbitration is drafting an arbitration agreement, which is a contract between the parties that provides for resolving disputes through arbitration. The agreement should specify the rules that will apply to the arbitration, the language in which the arbitration will be conducted, and the place of arbitration.
  • Selection of arbitrators: Once a dispute arises, the parties must select an arbitrator or a panel of arbitrators to hear the case. The selection of arbitrators is typically governed by the rules of the chosen arbitral institution or by the parties’ agreement.
  • Preliminary conference: The arbitrator(s) will typically hold a preliminary conference with the parties to discuss procedural matters such as the exchange of evidence, the timetable for the proceedings, and the conduct of the hearing.
  • Exchange of evidence: The parties will exchange evidence, including witness statements, expert reports, and documentary evidence.
  • Hearing: The arbitration hearing is conducted in accordance with the rules agreed upon by the parties. The hearing may take place in person or by video conference and will typically involve the presentation of evidence and arguments by the parties and witnesses.
  • Issuance of the award: Once the hearing is concluded, the arbitrator(s) will deliberate and issue a written award, which is final and binding on the parties. The award will typically include the reasons for the decision and any remedies ordered by the arbitrator(s).
  • Enforcement of the award: The final step in International Commercial Arbitration is the enforcement of the award. Suppose the parties are unable to settle. In that case, the successful party may seek to enforce the award in courts where the unsuccessful party has assets in accordance with the relevant laws and conventions.

These steps provide a general overview of the typical process involved in International Commercial Arbitration. However, the specific steps and procedures may vary depending on the rules and procedures agreed upon by the parties or the arbitral institution administering the arbitration.

Advantages of International Commercial Arbitration

The parties involved in International Commercial Arbitration have the freedom to choose the law governing the arbitration, where the arbitration will be held, and the arbitrator deciding the dispute. This flexibility ensures that the parties are governed by a law they are comfortable with and that the arbitrator has the necessary expertise to decide the dispute.

International Commercial Arbitration provides several advantages over traditional litigation in national courts, such as confidentiality, flexibility, and speed. The parties can keep the arbitration proceedings and award confidential, which is particularly important in commercial disputes where they do not want their dispute to become public. The parties can also choose the place of arbitration and the law that will govern the arbitration, which ensures that the arbitration is conducted in a manner that is convenient for the parties and tailored to their specific needs.

International Commercial Arbitration has become an essential tool for resolving international trade and commerce disputes. It provides a means of resolving disputes that is efficient, effective, and flexible, and parties from different countries are increasingly using it to resolve their disputes.

Closing Thoughts

A rapidly expanding economy requires a dependable and consistent conflict resolution mechanism to draw foreign investment. Given the significant number of cases awaiting resolution in Indian courts, domestic and international business entities have developed a firm inclination towards resolving disputes through arbitration.

International Commercial Arbitration has emerged as a preferred method for resolving commercial disputes between parties from different countries. It offers a flexible, efficient, and neutral means of dispute resolution that is often preferred over traditional litigation.

The UNCITRAL Model Law on International Commercial Arbitration provides a widely accepted framework for international arbitration, which many countries, including India, have adopted.

The Arbitration and Conciliation Act of 1996 is a key legislation in India that sets out the legal framework for arbitration. With the growing need for global trade and investment, International Commercial Arbitration’s importance will likely increase in the coming years.

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Suhani Dhariwal
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