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July 19, 2023

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Advancing Arbitration: The Arbitration and Conciliation Act

Arbitration and Conciliation Act: Key Provisions Explained

Introduction

Business and commercial conflicts are often associated with time consuming legal proceedings that are extremely costly. Arbitration and conciliation are alternative conflict resolution methods that facilitate the mutual and formalized termination of a conflict by a mutually agreed settlement.

The Arbitration and Conciliation Act, 1996 is an act that was adopted in India that regulates domestic arbitration, international commercial arbitration, the implementation of foreign arbitral awards, and conciliation. The act was executed on 16 August 1996.

Basic knowledge of the key provisions of the act will assist companies, contracting parties, and specialists in the field with the conflict resolution process.

What is Arbitration and Conciliation Act, 1996?

The law relating to arbitration and conciliation was combined and revised by the act. It also provided for the rules for recognition and enforcement of foreign arbitral awards.

Following are the important rules of act:

Domestic arbitration
International commercial arbitration
Enforcement of foreign arbitral awards
Conciliation proceedings
Duties and powers of arbitral tribunals
Challenges to arbitral awards
Enforcement of arbitral awards

The Act was strongly inspired by the UNCITRAL Model Law on International Commercial Arbitration and UNCITRAL Conciliation Rules.

Important Provisions in the Arbitration and Conciliation Act

1. Section 7 - Arbitration Agreement

Section 7 provides for the arbitration agreement. The parties may agree that any dispute concerning their contractual and/or legal relationship shall be subject to arbitration.

The necessity of drafting an arbitration clause correctly arises due to the fact that the arbitration agreement represents the intent of the parties to resolve their dispute through arbitration, rather than ordinary litigation.

2. Section 8 - Reference to Arbitration

If there is an arbitration agreement between the parties, the court, under section 8, may refer the dispute to arbitration.

3. Section 9 – Interim Measures of Protection by Court

According to section 9, the parties have the right to apply to a court for obtaining interim measures such as securing the goods or property, the amount in dispute, and any other necessary protection.

4. Section 11 - Appointment of Arbitrators

Section 11 pertains to the appointment of arbitrators. The Act provides a scheme in relation to the appointment where the parties cannot complete the appointment procedure as per their agreement.

Appointment of the right and independent arbitrator is an essential element in ensuring the integrity of arbitration.

5. Section 12 - Disclosure and Challenge of Arbitrators

The arbitrators shall disclose circumstances giving rise to reasonable doubts about their independence or impartiality.

6. Section 16 - Jurisdiction of the Tribunal

Section 16 follows the notion that the tribunal can determine the issue of its jurisdiction, including any questions in connection with the existence or validity of the arbitration agreement.

7. Section 17 - Interim Measures by Arbitral Tribunal

The tribunal may also provide any such interim measure that is deemed fit during the process of arbitration, which gives the parties protection without having to take each issue of interim nature to the court.

8. Section 18 – Equality of Treatment of Parties

Section 18 requires equality of treatment of the parties involved and gives each party an opportunity to put forward their case. This is an essential procedural safeguard ensuring equality of treatment during the process of arbitration.

9. Section 29A - Time Limit for Arbitral Award

The Act includes provisions regarding the time limit for arbitral awards.

10. Section 34 - Setting Aside of An Arbitral Award

The section outlines the process through which an application is made to have an arbitral award set aside based on grounds stipulated in statute.

It is important to note that this does not constitute the right to an appeal on the merits of the case.

11. Section 35 - The Finality of Arbitral Awards

The section outlines how the arbitral awards become final, taking into account the remedies provided under the Act.

The provision helps to achieve the goal of obtaining a conclusive dispute resolution process.

12. Section 36 - Enforcement of Award

Section 36 contains the provisions of the execution of arbitral awards, taking into account the relevant requirements of the statute.

Enforcement is crucial since the worth of arbitration is not just about reaching a decision but also the enforceability of that decision.

Conciliation under the Act

The Act also provides for conciliation including how proceedings are commenced, appointment of conciliators, communication between parties, settlement agreements and confidentiality.

Section 73 of the Act states that where there is a settlement reached as a result of conciliation, the agreement has certain legal standing under the Act. The status and effect of such settlement agreements are set out in Section 74 while Section 75 concerns confidentiality.

Whereas arbitration is a process in which the dispute is decided by the arbitrator in an award, conciliation involves the resolution of disputes through reaching a settlement.

Comparison Between Arbitration and Conciliation

Arbitration	Conciliation
Dispute is decided by a tribunal/arbitrator	Conciliator assists in reaching an agreement
Leads to an arbitral award	Conciliation usually leads to a settlement agreement
Adjudicatory process	Collaborative process
Evidence and arguments presented by parties	Parties negotiate with the assistance of conciliator

Why Is This Act Important for Businesses?

Arbitration and conciliation can be important alternatives for businesses to litigation when handling their commercial and contractual disputes and offer them a structured legal process.

Advantages of arbitration and conciliation are:

Structured dispute resolution
Procedural flexibility
Confidentiality
Expert determination in case where apprpriate
Interim protection methods
Legally binding process
Negotiated settlement via conciliation

But the effectiveness of arbitration will depend highly on good arbitration agreement, selection of arbitrators, procedural process and drafting of commercial contracts.

Conclusion

The Arbitration and Conciliation Act, 1996 is one of the significant elements of the dispute resolution mechanism of India. All the concerned elements of the process have been dealt with in this act, right from the arbitration agreement and appointment of the arbitrator to interim relief, arbitral awards, enforcement of awards, and conciliation.

It will be beneficial for the businesses to get familiarized with the key elements of Section 7, 9, 11, 12, 16, 17, 29A, 34 and 36 of the act while making their business contracts. As the arbitration process consists of complicated legal matters, it will be wise for the disputing parties to take legal advice for their disputes.

FAQs

1. What is the distinction between Arbitration and Conciliation?

In arbitration there is an award by the arbitrator. In conciliation, for mutual settlement the conciliator helps the parties.

2. How is an arbitrator appointed under the Arbitration and Conciliation Act?

Both the disputants have the freedom to decide the method of appointing an arbitrator. Should they fail in this endeavor, then the relevant section of the Arbitration and Conciliation Act will come into play. The section handles the arbitration process of appointing.

3. What is an arbitral award?

It is the award made by the tribunal in regards to the matter brought to its consideration.

4. Is conciliation legally binding?

A settlement reached through conciliation when accompanied by a settlement agreement duly executed by the parties binds the parties in accordance with the Arbitration and Conciliation Act, 1996.

5. Can parties seek interim relief during arbitration?

Yes. The parties may seek interim measures from a court under Section 9 or from the arbitral tribunal under Section 17 subject to the requirements of the Act.

6. Why is an arbitration agreement important in a contract?

An arbitration agreement provides that the parties have agreed to submit disputes falling within a specified scope to arbitration. A clear agreement of Arbitration helps to avoid doubts at the time of dispute

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