Arbitration

What Is Arbitration?

Arbitration is a process of dispute resolution in which a neutral third party (called the arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. It is the means by which parties to a dispute get the same settled through the intervention of a third person, but without having recourse to court of law.

What Is Arbitration Agreement?

1. Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not.
2. The parties make an agreement that instead of going to the court, they shall refer the dispute to arbitration.
3. The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Where an arbitration clause is included in a contract and the contract is avoided due to misrepresentation or fraud, the arbitration clause may still continue to be binding.
4. Where, however, there was no contract at all between the parties or contract was void ab initio, the arbitration clause cannot be enforced.
5. An arbitration agreement/clause must be in writing. Although no formal document is prescribed, however, it must be clear from the document that the parties had agreed to the settlement of dispute through arbitration.
6. Where the arbitration agreement or clause is contained in a document, the parties must sign the document. Besides, the arbitration agreement may be established by-
   • an exchange of letters, telex, telegram or other means of telecommunication; or
   • an exchange of statements of claim and defence in which the agreement is alleged by one party and is not denied by the other.

Appointment Of An Arbitrator

Who May Be Appointed

A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. In case of an international commercial arbitration, where the parties belong to different nationalities, the Chief Justice of India may appoint an arbitrator of a nationality other than that of the parties.

Number Of Arbitrators

The reference may be made either to a single arbitrator or a panel of odd number (i.e. 3, 5,7, etc.) of arbitrators. The parties are free to fix the number of arbitrators by agreement. If there is no agreement, the reference shall be made to a sole arbitrator.

Grounds For Challenging Apppointment

The appointment of an arbitrator may be challenged if

1. circumstances exist that give rise to justifiable doubts as to his independence or impartiality or
2. he does not posses the qualifications agreed to by the parties.