Question

Matters have been taken to arbitration. Imagine you are a consultant and your guidance to the Arbitration process is required. You have a couple of questions to explain the method of arbitration process and procedures.

1. What are Domestic Arbitral Awards and Foreign Arbitral Awards? Give an example of a project location and parties subject to a Foreign Arbitral Award? Under what circumstances would a convention award be requested?

2. When do you appoint the arbitrator? What are the qualifications and disqualifications of an arbitrator?

3. Can you challenge the appointment of arbitrators and on what grounds? What is the procedure if you want to challenge the appointment of the said arbitrator? Under what circumstances can an arbitral award in arbitration be vacated?

Answer 1

1.What are Domestic Arbitral Awards and Foreign Arbitral Awards? Give an example of a project location and parties subject to a Foreign Arbitral Award? Under what circumstances would a convention award be requested?

The Arbitration and Conciliation Act, 1996 (hereinafter referred to as A&C Act') accompanied by certain provisions of the Code of Civil Procedure, 1908 form a complete code on the enforcement of arbitral awards in India. The term arbitral award' may be defined in simple language as final decision reached by the Arbitration tribunal so constituted to resolve a dispute and connotes to the last stage in arbitration proceeding. It is worthy to mention that arbitral award is not defined in the A&C Act, but the Hon'ble Supreme Court up to a certain extent has been able to define the same in the case of Centro trade Mineral and Metal Inc v. Hindustan Copper Ltd[i], wherein the court observed:
In view of subsection 2 and 7 of section 2 read with section 44 of the Act the award passed by the ICC arbitrator was not a domestic award. Subsection 7 of 2 provides that an arbitral award made under part-I shall be considered as domestic award. So, the domestic award means an award made under the territory of India (under Domestic Arbitration) and it also includes an international arbitral award, where one party is other than India on any citizen, government or institution other than India but award made in the territory of India. [ii]

And in lieu of the same, the enforcement or execution of the Arbitral Award is governed by Chapter VIII (Section- 36 & 36) under Part-I of the A&C Act, which in depth is discussed in the latter parts of this write-up.
Further, to understand the term foreign award it is worthy to peruse section-44 of the A&C Act, which defines foreign award' as:
In this Chapter, unless the context otherwise requires, foreign award means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October 1960:

1. in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
2. in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.

And, the enforcement of the same is governed by Part-II titled as Enforcement of Certain Foreign Awards' of the A&C Act, which is discussed in the latter parts of this article.

The Arbitration & Conciliation Act, 1996: A Brief Overview

The A&C Act was enacted on the lines and in recognition of the UNCITRAL Model Law 1985 and the UNCITRAL Conciliation Rules, 1980 and came into effect on 22nd August 1996 which extends to the whole of India with a rider for the State of J&K u/s. 1(2) of the Act (which has no significance after the abrogation of Article 370 of the Indian Constitution) for achieving the following purpose as has been defined in its long title,
An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto.

Preamble. —WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985;
AND
WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980;
AND
WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation;
AND
WHEREAS the said Model Law and Rules make a significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations;
AND
WHEREAS it is expedient to make a law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules….[iii]

Thus, this article will now trace the stage after the publication of the award, as has been shown in the image hereinabove attached.

Enforcement Of Domestic Awards

Section 36 of the A&C Act is a complete guide on the enforcement of domestic awards, which shall be executed and enforced in the way identical to that of execution of Decree under C.P.C. 1908, as awards are at par as Decree as has been defied u/s. 2(2) of C.P.C. 1908.

It is pertinent to mention here, that the award holder (the person in whose favour the arbitral award is made or passed) have to wait for 90 days before applying for the enforcement or execution proceeding of the arbitral award (which can also include the extension of further 30 days, on sufficient grounds for condonation of delay) either from the date of passing of award or any correction made, thereby, whichever is later.

It is noticeable that, Prior to the recent Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act), an application for setting aside the award would tantamount to a stay on proceedings for execution of the award. However, by virtue of the Amendment Act, a party challenging an award would have to move a separate application in order to seek a stay on the execution of an award.

2. When do you appoint the arbitrator? What are the qualifications and disqualifications of an arbitrator?

Arbitration is a popular form of alternative dispute resolution that is used by many individuals and businesses to resolve disagreements in place of pursuing a lawsuit. Knowing the role an arbitrator plays will help you understand the process and be more effective if you participate in arbitrations.

An arbitrator reviews testimony and evidence presented by the disputed parties at a hearing and resolves the dispute by issuing a decision that may include an award of money. You can think of an arbitrator as a private judge hired by the disputing parties to resolve their dispute. If the arbitration is binding, the parties cannot seek a reversal of the decision in court except under very limited circumstances. However, the successful party can seek help from a court in enforcing the arbitrator's decision.

An arbitrator serves as the decision-maker and 'referee' in an arbitration proceeding, much like a judge during court litigation. The arbitrator is bound by the rules outlined in the parties' arbitration agreement. If he is a member of a special arbitration organization, such as the American Arbitration Association, he will be bound by the rules of that organization as well, including a set of ethical rules.

An Arbitrator's Duties

An arbitrator has several duties. Among them are:

• Interpreting and applying the rules and laws applicable to the arbitration
  • The applicable rules should be outlined in the arbitration agreement. The parties may also designate a particular state's law to govern the dispute in the arbitration agreement.
• Managing the scope of discovery that can be undertaken by both parties
  • Discovery is a formal process of investigation to determine facts relevant to the dispute. The investigation can include taking witness statements and reviewing documents required to be disclosed by the other disputing party.
• Conducting the arbitration hearing in which both sides of the dispute may submit testimony, other evidence such as documents, and arguments
  • Each side's position may be summarized in a written document, often called a statement of the case, and be submitted to the arbitrator to review as part of the hearing process.
• Making a decision resolving the dispute based on the testimony, evidence and arguments submitted by both sides of the dispute
  • A decision may include granting an award of money.

Either party may propose the disqualification of a Tribunal member once the Tribunal has been constituted (Article 57 of the ICSID Convention).

A proposal to disqualify an arbitrator must be made promptly and, in any event, before the proceeding is declared closed (ICSID Arbitration Rule 9). Failure to object promptly will result in the rejection of the proposal.

Grounds for Disqualification

An arbitrator may be disqualified on the ground of incapacity, manifest lack of the qualities required by Article 14(1) of the ICSID Convention or ineligibility for appointment under Articles 37 to 40 of the ICSID Convention (Articles 56 and 57 of the ICSID Convention, Arbitration Rule 8 and 9).

Article 14(1) of the ICSID Convention specifies the qualities required of Panel members. They must possess high moral character, recognized competence in the fields of law, commerce, industry or finance, and reliability to exercise independent judgment. These qualities must also be met by candidates appointed from outside the Panel.

Articles 38 and 39 of the ICSID Convention contain the nationality requirements applicable to members of a Tribunal. Non-compliance with these nationality requirements constitutes the second ground for disqualification under Article 57 of the ICSID Convention.

Qualification of Arbitrators

The parties should ideally follow an agreed procedure for appointing the arbitrators. However if that fails and an application is filed in court for appointment, the Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to any qualifications required of the arbitrator by the agreement of the parties.
A clause in the agreement,which provides for settling the dispute by arbitration through arbitrators having certain qualifications or in certain agreed manner is ordinarily followed by the courts and not derogated from unless there are strong grounds for doing so. The appointment of an arbitrator can be challenged within 15 days after he learns of the constitution of the arbitral tribunal or after becoming aware of the circumstance that he does not possess the necessary qualification.
It is not open to a party, especially in government contracts, to contend that appointment of only one arbitrator only by one of the parties to the dispute will violate the principle that no man can be a judge in his own cause if that party had voluntarily entered into the contract with knowledge of this fact and had thus accepted the terms and conditions of the contract. The question of its maintainability before the arbitral tribunal stating that the arbitration clause in the contract between the parties is void and unenforceable law cannot be accepted.

3. Can you challenge the appointment of arbitrators and on what grounds? What is the procedure if you want to challenge the appointment of the said arbitrator? Under what circumstances can an arbitral award in arbitration be vacated?

The Arbitration and conciliation Act of 1996 states that parties can determine the number of arbitrators they wish to appoint however, this should not be an even number.If they are unable to do so, the arbitral tribunal shall consist of a sole arbitrator. The statutory requirement of odd numbers of arbitrators is can be moved away from, which means that if they wish to exercise an option of choosing even number of arbitrators and agree to not to challenge the award thereafter, the award rendered would be a valid and binding. If neither of the parties challenge the composition then any challenge to the composition must be raised by a party before the time period prescribed under the Act, failing which it will not be open to that party to challenge the award after it has been passed by the arbitral tribunal. The Act enables the arbitral tribunal to rule on its own jurisdiction. A challenge to the jurisdiction of the arbitral tribunal cannot be raised, after the submission of the statement of defense although the party might have participated in the appointment of the arbitrator and might have appointed the arbitrator himself. Both parties can choose the arbitrators.