Domestic Arbitration and International Arbitration

INTRODUCTION

When there are disputes are differences between the parties and when this party’s do not want a judicial process Brother there were non-judicial process we appoint arbitrator under a contract where in this contract is to be agreed that both the parties, and this process is known as Arbitration. The laws and the rules in India are stated under Arbitration and Conciliation Act, 1996. Under this act no right is given to any of the party to go for the arbitration is there is no arbitration clause signed between the parties before the contract of the parties. The parties can only go for arbitration if there is proper document signed between the parties before the contract. It is clearly mentioned in the Section 2(1) of the arbitration act that an arbitration agreement is an agreement which is defined under Section 7 of Arbitration Act.[1]

It has been stated under section 7 of the arbitration act that an arbitration agreement is an agreement under which the parties submit their all the disputes which have been arise or which may arise at certain period of time in respect of legal relationship. Under the Article 51 of Constitution of India it has been clearly stated that the state has to respect the international law and treaties which are organised between the people of one country to another and encourage the settlement of the disputes which may arise by arbitration. This has been clearly stated under Article 51, clauses (c) and (d). As the number of judicial cases is rising day by day the President of India is promoting Indian Arbitration and Conciliation Act, 1996. Under this act the parties save their time as well as money. As such there is no proper definition of domestic arbitration under the law of this act whereas International Arbitration is clearly defined under this act.

DOMESTIC AND INTERNATIONAL ARBITRATION

The Arbitration and Conciliation Act, 1996 includes both Domestic as well as International Arbitration. Under this act at least one party has to be an Indian national. There are three parts under this act. Part 1 deals with the arbitration and contains 10 chapters relating to Section 22 section 43 of Arbitration and Conciliation Act, 1996. Whereas part 2 is related to the enforcement of certain foreign awards and contains sections from section 44 to section 60 of Arbitration and Conciliation act, 1996. Whereas part 3 is related to the conciliation and contains sections from section 61 to section 81 and part 4 is related to the Supplementary provisions.

Section 2(2) is defined as follow “this part shall apply where the place of arbitration is in India”.

DOMESTIC ARBITRATION

Domestic Arbitration only takes place when does disputes arise between when the both parties are from India and is governed under Indian law and when parties follow the Indian jurisdiction.[2] The reason why the Domestic Arbitration is growing in our country is because the disputes are settled fast and the money is charged very less.

There must be 4 qualities that has to be fulfilled under the Domestic Arbitration

  1. The Arbitration should take place in India.
  2. The subject matter of the contract should be in India.
  3. The disputes which are there is a parties should be governed by Indian law or should be governed under the Indian jurisdiction.
  4. The procedure must be followed as is written under the Indian law.

Under the Indian Arbitration and Conciliation Act Amendment Bill the definition of the term Domestic Arbitration was stated as “domestic arbitration means an arbitration relating to the dispute arising out of legal relationship weather contractual or not where none of the part is

  1. An individual who is Nationality is not an Indian.
  2. A corporate body which is incorporated outside India.
  3. Any Association or a body of individuals which controlled and exercised in any other country than India.
  4. Government of a foreign country.

There is still conflict going on in the courts of India related to part 1 of International Commercial Arbitration. In the case of Dominant Offset Private Limited versus Adamouske Strojirny AS, two agreements were made by the petitioners related to the following concern for the technology transfer and. Purchase of certain machineries. Under this agreement it was created stated that the Arbitration would take place in London and the Arbitration Tribunal would take place in the International Chamber of Commerce in Paris. When the dispute occurred the party filed petition in the High Court of Delhi. This petition was file for the enforcement of arbitration agreement. The court really studied this matter. After starting this matter the courts stated that part 1 of the act only applies to the international commercial arbitration which is conducted outside India. Moreover, the court also stated that section 11 which is related to the appointment of arbitrators can be done under Section 8.[3]

This decision was also followed in the case of Olex Focas Private Limited versus Skodaexport Company Limited. In this case the High Court ruled that

“A careful reading and scrutiny of the provisions of 1996 Act leads to the clear conclusion that sub-section (2) of Section 2 is an inclusive definition and it does not exclude the applicability of Part I to this arbitration which is not being held in India. The other clauses of Section 2 clarify the position beyond any doubt that this Court in an appropriate case can grant interim relief or interim injunction. However, it was stated by the court that that the court has to be extremely cautious while granting the relief in the cases where the arbitration takes place outside India and both the parties is foreigners”[4]

In the case of East Coast shipping versus MJ Scrap it was stated by the Calcutta High Court that part 1 of the act only applies when the arbitration takes place in India. Whereas this view was endorsed by Delhi High Court in the case of Marriott International versus Ansal hotels Limited.

INTERNATIONAL ARBITRATION

International arbitration can take place in India outside India. The place of the arbitration depends on the dispute and the subject matter of the dispute. The law which is applicable in arbitration can be foreign law or Indian law. It all depends on the nature of the contract and rules of conflict of laws.[5]

The most important Contribution of International Arbitration and Conciliation Act, 1996 is the definition of International Commercial Arbitration. International Commercial Arbitration is defined under clause (f) of subsection 1 of section 2 of Arbitration and Conciliation Act, 1996.

Under this International commercial arbitration which is related to the disputes that arise out of a legal relationships and it depends on the nature whether they are contractual or not and they are considered as commercial under the law which is in force in India and where at least one of the party is –

  1. Individual who is the national or a resident of any country other than India.
  2. Corporate body that is incorporated in any country other than India.
  3. A company or an association to Central management is exercised in any country other than India
  4. And the Government of a foreign country

Therefore it is clear that International commercial arbitration can take place in India also. Arbitration only becomes an International Arbitration when there is at least 1 party which is outside India or the subject matter of the dispute does not take place in India. Under International arbitration the laws applicable can be Indian law as well as foreign law; this depends on the rules of conflict of laws.[6]

MEANING OF THE TERM INTERNATIONAL

A Different sets of rules is formed when the international or domestic arbitration takes place. There are special rules which are form for the mistake as well as International arbitration. These rules are only applicable in very legal system of the world. The countries which has different legal system of rules related to the Arbitration are Australia, Canada, Bermuda and United States of America where the Federation Arbitration act is only applicable when there is International or Interstate Arbitration. Other countries such as France, England etc. opts for the Unified Regulation.[7]

 SCOPE OF THE TERM INTERNATIONAL

An arbitration matter will be known as International arbitration matter only if

  • The matter is related to dispute.
  • Such disputes must arise out of legal relationship.
  • It doesn’t matter whether such disputes are contractual or not.
  • The dispute must be those which are considered as commercial under Indian jurisdiction

It is all in the hands of arbitrators to decide whether and international commercial arbitration agreement is there or not.

CRITERIA FOR ESTABLISHING INTERNATIONAL CHARACTER

There are three ways in which arbitration can be characterized as International character of arbitration

1.      THE OBJECTIVE CRITERIA

Under the objective criteria the main focus is on the subject matter of the dispute and the International and National character of transaction. The objective criteria are stated under the Article 1492 of the French Code of Civil Procedure.

Under this it is written that arbitration can be early International if it is involved in international commercial interest. There are many cases that have used the concept of French case Law in the international transaction.[8]

 2.     THE SUBJECTIVE CRITERIA

This criterion mainly focuses on the different nationality and the nature of the business of the party to the arbitration agreement. Under this parties individuals are the companies must come from different jurisdiction. This was introduced by English Application law, England Arbitration Act, 1975, Section 1 (4)(a)(b) and Arbitration Act, 1979, Section 3(7)(a)(b).

The 1996 Arbitration Act has included the provision that has clearly stated the difference between International arbitration as well as domestic arbitration. But this was not brought into effect; the section related to this is Section 85.

3.     THE MODERN COMBINE CRITERIA

Under these criteria both subjective as well as objective criteria is combined. This is the combination. Article 1(3) states that Arbitration is International if the parties who have the agreement have their businesses in the different states. It also states that the arbitration is international if the place of arbitration is determined. Under this two parties have to agree that the subject matter of the Arbitration Agreement is related to more than one country.

The modern law is created a flexible system for determining the international character of arbitration. There are alternate criteria mentioned under this. Under article 1(3)(c) it has been stated that all the parties are allowed it to dispute at the international level without any foreign link. There are some countries like Hungary and Canada under which modern law was omitted in the case of internationality.

The countries like Hong Kong offer the parties to arbitrate there dispute to the domestic level as well as international law. Under the Article 832 of Italian Code of Civil Procedure, there was a merger of subjective as well as objective criteria. The Section 202 of United States Federal Arbitration act defines the Arbitration Agreement. It was defined in the New York Convention. Foreign arbitration is conducted outside India and as a result foreign award what is enforced not in India

 TYPES OF ARBITRATION UNDER INTERNATIONAL ARBITRATION

 AD HOC ARBITRATION

This is a type of arbitration which is agreed and arrange by the parties them self without any involvement of any institution. The proceedings and the procedure is conducted as per the agreement done by the parties. This type of arbitration can be domestic International or foreign Arbitration. When there is any disagreement on the appointment of arbitrator then section 11 of Arbitration and Conciliation Act, 1996 gives power to the Chief Justice of High Court or the Chief Justice of Supreme Court to be appointed as arbitrators. The provision which was made has really changed the role of arbitrator institutions in India.

 INSTITUTIONAL ARBITRATION

This is a type of arbitration under which the rules are established by Arbitration Organisation. Such rules are related to the provisions of Arbitration act and its procedure under institutional arbitration domestic as well as International arbitration disputes are deal. There are number of Commercial organisations which have Commercial Arbitration in India. Several merchant Associations are even formed which provide house arbitration facilities between the sellers and their dispute which is related to the Purchase of the mode of payment or anything. In house arbitration is also provided by Stock Exchange of India resolving disputes between the members and the others.

DIFFERENT CONVENTIONS

EUROPEAN CONVENTION

Only European convention has stated the definition of International Arbitration. “Under European Convention, arbitration shall apply to all the Arbitration Agreements  and conclusion for the purpose of setting dispute arising from international trade between physical and legal person having when concluded the agreement there habitual place of residence or their seat is indifferent contracting states.[9]” Under European convention both subjective as well as objective criteria are present.

NEW YORK CONVENTION

The New York convention aim is to provide the application to the foreign awards. No definition of international arbitration is stated under this convention. The two main approaches under this convention are the modernization and liberalisation of arbitration. It mainly focuses on the transfer of International arbitration into domestic level.

DIFFERENCE BETWEEN INTERNATIONAL ARBITRATION AND DOMESTIC ARBITRATION

For an arbitration to be known as domestic arbitration the following ingredients should be present

  1. Both the parties who signed arbitration agreement must belong to the same country.
  2. The agreement leads to the arbitration in the country of the parties to the arbitration agreement.
  3. Where are as under International arbitration one of the parties has to be a foreigner.

This has been really has acted in the case of gas Authority of India Limited versus SPIF CAPAG. The New York convention will only apply if there is presence of foreign element. In the case of Nirma Limited vs Lurgi Energie Und Entsorgung GMBH, it was seen that a contract between a foreign party and a Indian party was made and when the dispute was there the arbitration proceedings were made in India and both the agreed that they will follow the laws of India.

International Commercial Arbitration is clearly defined under section 2(1)(f) of the Arbitration and Conciliation Act, 1996. The Definition as stated under this act makes no difference between the disputes which takes place inside India and the disputes which take place outside India.

PART 1 OF THE ACT

Section 2(2) states that part 1 will only apply where there is a place of arbitration in India. If it is not in India part I do not apply. Therefore, it should be clearly mentioned that part 1 will only apply if the arbitration takes place inside the India where as if arbitration takes place outside India part 1 will not apply.

By saying this it should be cleared that part 1 will not apply under International Commercial arbitration which takes place outside India. Whereas, the provisions of part 1 will be followed if the dispute of arbitration is held in India. There are certain obligations which were made by Supreme Court related to International Commercial Arbitration. The Supreme Court stated that part 2 will only apply if is there is convention in the country. The courts stated that part 1 will compulsory apply to the arbitrator matters which takes place inside India.


[1] Arbitration Law Journal February 2010

[2] Ashwini K Bansal – Arbitration Procedure and Practise – Lexis Nexis, 1st Edition 2009

[4] Peter H. Kaskell – Commercial Arbitration at It’s Best. Successful Strategies for Business Users – Thomas J. Stipanowich, 2001 edition.

[5] Domestic and International Arbitration, Arbitration Law Journal.

[6] The Arbitration and Conciliation Ordinance, 1996

[7] Supra note 4

[8] Van Oord ACZ India Pvt Ltd. v. Gujarath Adani Port Pvt. Ltd 2005 (2) Arb LR 58:2005 (2) RAJ 303 (Guj).

[9] Peter H. Kaskell, Commercial Arbitration at It’s Best. Successful Strategies for Business Users, Commercial Arbitration at It’s Best. Successful Strategies for Business Users.

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