The Arbitration and Conciliation Act 1996 governs both domestic and international arbitration in India. The act, which took effect on August 22 1996, repealed the following acts:

· The Arbitration (Protocol and Convention) Act 1937;
· The Arbitration Act 1940; and
· The Foreign Awards (Recognition and Enforcement) Act 1961.

The government has followed the United Nations Commission on International Trade Law Model in an effort to bring uniformity to the field of arbitration. However, the model law concerns international commercial arbitrations and so some aspects of domestic law have yet to be addressed.

Spirit of Arbitration

The act was drafted with regard to economic reforms that were initiated by the government in 1991. The act considerably reduces the power of the courts to intervene, with arbitral awards becoming automatically executable. Section 5 of the act specifies the reduction of judicial intervention as one of its main objectives.

The act allows the parties an arbitration agreement to determine the procedure and appointment of arbitrators, as well as the substantive law to be followed and the arbitral venue. The arbitrators must explain their reasoning for handing down an award, with a view to encouraging efficient and fair arbitration proceedings.

In the event of conciliation proceedings, a settlement agreement has the same effect as an arbitral award, being enforceable as though it were a decree of the court.

Part 1 of the act covers domestic arbitration, while Part 2 deals with the enforcement of foreign awards in international commercial arbitration. Part 3 covers the application and scope of conciliation proceedings.

Agreements

An arbitration agreement must be in writing and can take the following forms:

· A document signed by both parties;
· An exchange of letters, telexes, telegrams or other means of communication that provides some record of the agreement; or
· An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by another.

Both parties must be bound to refer a dispute to arbitration; an agreement to refer to the option of only one party is not valid. Pursuant to a recent ruling, any wording in an arbitration clause which implies that the parties may choose to refer their disputes to arbitration will render the clause invalid.

Enforcement by Judicial Authorities

Section 8 of the act provides that the judicial authorities may refer to arbitration, the subject matter of an arbitration agreement. Applications should be accompanied by the original arbitration agreement (or a certified copy thereof), and submitted by the party forwarding his or her first statement as to the merits of the dispute.

A similar provision can be found in Part 2 of the act concerning international arbitration under the New York and Geneva Conventions, (Section 45 and Section 54 respectively), whereby the judicial authorities will refer the parties to arbitration upon the application of one of the parties. In such cases, a certified copy of the arbitration agreement is not required and the application need not be made before submitting any statement on merits.

Arbitral Tribunals

The parties to an arbitration agreement are free to decide the procedure for appointing arbitrators. The act provides that there must be an odd number of arbitrators.

The parties can appoint a sole arbitrator, or each party can nominate an arbitrator, with these jointly appointing a chairperson. Where a party fails to appoint an arbitrator within 30 days or the two appointed arbitrators fail to agree on the appointment of a chairperson, the aggrieved party can make an application to the court, and the chief justice or a person or institution designated by him will decide the appointment (Section 11).

Proceedings

All parties to the arbitration should be treated equally and the principles of natural justice must be adhered to.

Parties and witnesses should not be questioned in the absence of others. In addition, all parties must receive due notice of the proceedings and have an opportunity to present their case. Generally, representation by lawyers is never refused.

Interim Measures

Section 9 allows a party before, during or after the award is made (but before it is enforced) to apply for interim relief to preserve and secure the subject matter/amount in dispute under the arbitration agreement. This rule applies to both domestic and international arbitration (see "Challenge to Award - Supreme Court Defines Jurisdiction").

Awards and Recourse

An arbitral award must be made in writing and must be signed by the members of the arbitral tribunal. An award for any sum carries an interest rate of 18% from the date of the award until the date of payment, unless otherwise agreed. The arbitral tribunal will specify the costs payable.

Under Section 34 arbitral awards can be challenged

If a party proves that:
· It was prevented from attending the arbitration through incapacitation;
· The arbitration agreement is not valid under the applicable law;
· It did not receive proper notice of the appointment of an arbitrator or the arbitration proceedings;
· The arbitral award deals with a dispute that falls outside the terms of arbitration or goes beyond the scope of reference; or
· The composition of the tribunal or the proceedings did not accord with the agreement of the parties.

The court may also set aside an award if it finds that (i) the subject matter of the dispute cannot be settled by arbitration under existing law, or (ii) the arbitral award conflicts with public policy.

An application to set aside an award must be made within three months of the date of the award being handed down. This period can be extended for 30 days only.

Enforcement of Foreign Awards

Part 2 of the act deals with the enforcement of awards in international commercial arbitration. Chapter 1 deals with New York Convention awards while Chapter 2 deals with Geneva Convention awards.

In international arbitrations, the judicial authorities can refer the subject matter to arbitration at the request of either party, unless it finds that the agreement is null and void, inoperative or incapable of being performed.

A foreign award is enforceable by decree. The grounds for refusing to enforce a foreign award are similar to those for setting aside a domestic award.

Comment

The act has brought about a radical change in the approach to the settlement of disputes through alternative dispute resolution methods, specifically arbitration and conciliation. It is now hoped that the timeframe for arbitral proceedings will be shortened in order to make it both time-effective and cost-effective.