International & Domestic Arbitration
Arbitration is a form of Alternate Dispute Resolution wherein a dispute is submitted by agreement between the parties to the arbitrators, who make a binding decision on the dispute. By choosing arbitration, the parties opt for a private dispute resolution procedure instead of litigation.
It is a form of binding dispute resolution which is contract-based. Basically, a party’s right to refer a dispute to arbitration completely depends on the existence of an arbitration agreement between them and the other parties to the dispute that the dispute may be referred to as Arbitration. By entering into an arbitration agreement, the parties agree to refer their dispute to a neutral tribunal to decide their rights and obligations. One of the attractions of arbitration is that it is easier to enforce an award than it is to enforce a court judgment.
Features of Arbitration
Arbitration can take place in India or abroad when the arbitration proceedings, the subject matter of the contract, and the merits of the dispute are governed by respective contracts & laws. White Code facilitates international and domestic arbitrations through its sister concern organization "VIA Mediation & Arbitration Centre"
Domestic Arbitration
Domestic Arbitration takes place in India when the arbitration proceedings, the subject matter of the contract, and the merits of the dispute are all governed by Indian Law, or when the cause of action for the dispute arises wholly in India or where the parties are otherwise subject to Indian jurisdiction. In the domestic arbitration, the cause of action for the dispute should have arisen wholly in India or the parties are otherwise subject to Indian jurisdiction. Domestic arbitration is an attractive option for the settlement of disputes.
In a domestic arbitration:
1) The arbitration takes place in India
2) The subject matter of the contract is in India
3) The merits of the dispute are governed by Indian Law.
4) The procedure of arbitration is also governed by Indian Law.
In the Indian Arbitration and Conciliation (Amendment) Bill 2003, the definition of the term domestic arbitration was given as:
‘Domestic Arbitration’ means an arbitration relating to a dispute arising out of a legal relationship whether contractual or not, where none of the parties is:
Where the place of arbitration is in India and shall be deemed to include international arbitration and international commercial arbitration where the place of arbitration is in India.
International Arbitration
International Arbitration can take place either within India or outside India in cases where there are ingredients of foreign origin relating to the parties or the subject matter of the dispute. The law applicable to the conduct of the arbitration and the merits of the dispute may be Indian Law or foreign law, depending on the contract in this regard, and the rules of conflict of laws. The most significant contribution of the 1996 Act is the categorical definition of international commercial arbitration. Clause(f) of sub-section (1) of section 2 of the 1996 Act defines international commercial arbitration as arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is:
Thus it is clear from the above discussion that international arbitration can take place in India in accordance with the same procedure as domestic arbitration. Arbitration becomes ‘international’ when at least one of the parties involved is resident or domiciled outside India or the subject matter of the dispute is abroad. In International arbitration, the law applicable may be the Indian Law or foreign law, depending on the terms of the contract in this regard and the rules of conflict of laws.
Criteria For Establishing ‘International’ Character
There are three ways of establishing the international character of arbitration. The arbitration may be international because;
(a) Its subject matter or its procedure or its organization is international or
(b) The parties involved are connected with different jurisdiction; or
(c) There is a combination of both
European Convention
Only the European Convention attempts a definition of an international arbitration when it is setting out its scope of application. In Art 1(1) (a) it states;
Both the subjective and the objective criteria are present. They are to be applied cumulatively. Unfortunately, the first criterion may prevent some arbitration which is international from falling within the scope of the Conventions.
Differences Between International And Domestic Arbitration
Domestic arbitration is one where the following two ingredients are present:
1) Both the parties to the arbitration agreements are nationals or residents of the same country.
2) The agreement provides for arbitration in the country of the parties to the arbitration agreement.
The arbitration agreement will be considered as an international arbitration agreement where one of the parties is a foreigner, notwithstanding the fact that the arbitration is to take place in a particular country as highlighted in the case of Gas Authority of India Ltd. v. SPIF CAPAG. The New York Convention will apply to an arbitration agreement if it has a foreign element or flavor involving international trade and commerce, even though such an agreement does not lead to a foreign award.
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