DISPUTE SETTLEMENT

N D Sharma

ARBITRATION

Arbitration:• The settlement of a matter (disputes) at

issue by one or more arbitrators to whom the parties agree to refer their claims in order to obtain an equitable decision instead of carrying it to the established tribunal of justice; and is intended to avoid formalities, the delay, the expense and vexation of ordinary litigation.

ARBITRATION

Essential Ingredients of an Arbitration:• A written agreement• A dispute • A reference to arbitrate Why to Arbitration: Speed, quality, informality,

confidentiality, cost effectiveness (economy) and finality; (Not always true!!)

TYPES OF ARBITRATION

Type by Nature:• Domestic • InternationalType by Procedure:• Institutional • Ad hoc (includes contractual in-built

arbitration as also provisioned under 6(2) of the Act)

• Statutory arbitration

TYPES OF ARBITRATION PROCEDURE

Institutional:• Concerned institution (ICC like) will: i) determine

whether there is a prima facie agreement to arbitrate; ii) appoint arbitrators; iii) decide challenges against the arbitrators; iv) ensure that arbitrators are conducting arbitration in accordance with rules of the institution,

• NEPCA under Clause 6 of its Rules provides for i) and II) only and advises the Parties which may or may not be accepted

TYPES OF ARBITRATION PROCEDURE

Ad – hoc:• In ad hoc cases, the arbitrators

themselves will administer the arbitration, as far as this is possible. However, should problems arise in setting the arbitration in motion or constitution of the panel (or possibly in other circumstances), the parties may have to require the assistance of a state court.

INTERNATIONAL INSTITUTIONS FOR

ARBITRATION • The Permanent Court of Arbitration located

in the Peace Palace, The Hague. • United Nations Commission on International

Trade Law (UNCITRAL)• International Chamber of Commerce (ICC)• International Center for Settlement of

Investment Disputes (ICSID)• London Court of International Arbitration

(LCIA)• American Arbitration Association (AAA) 

PROVISION of ARBITRATION ACT AND NEPCA RULES

• Number of arbitrators as in the agreement otherwise ordinarily three, as in UNCITRAL model law; [S.5(1)]

• NEPCA Rule 11 preference for Sole Arbitrator

• If the number of appointed arbitrators is even number, then they must add one to make uneven; [S. 5(2)]

• NEPCA Rule 12 (5) provides Presiding Arbitrator as an optional arrangement only

PROVISION of ARBITRATION ACT AND NEPCA RULES

• Time for referring to arbitration specified- 3 months – [S. 6(1)]

• NEPCA Rule 60 days (Rule 23)• Appointment method as stipulated in the

arbitration agreement, otherwise each party to nominate one and nominated ones to appoint third who shall be chief arbitrator; [S.6(4)]

• Appointment of arbitrator/s through intervention of the Court [S. 7)]

PROVISION of ARBITRATION ACT AND NEPCA RULES

• Counter claims may be filed along with the Statement of defense; [S.14(3)]

• Failure to submit the statement of fact

within 3 months of the appointment of arbitrators will cause termination of arbitration, failure to submit defense statement may cause ex-parte decision (S.15)

PROVISION of ARBITRATION ACT AND NEPCA RULES

• Arbitrators enabled to decide on the challenge to the jurisdiction of the Arbitrators (S. 16)

• Party dissatisfied with the decision of the tribunal on jurisdiction may file an application with the Appellate Court at that stage although continuation of arbitration not stopped; [S. 16(2) and 16(6)]

PROVISION of ARBITRATION ACT AND NEPCA RULES

• Arbitration proceedings, except while making award, to continue despite absence of any one of the 3 or more arbitrators; [S. 17(4)]

• Unless otherwise provided by the arbitration agreement the Nepal law shall be substantive law applicable to arbitration; [S. 18]

PROVISION of ARBITRATION ACT AND NEPCA RULES

• The Arbitrators are conferred upon power to issue, upon request of either party, interim or preliminary or provisions orders or conditional decision subject to filing application by the dissatisfied party before the Appellate Court; [S.21(1).g and 21 (2)]

• Rule 9 has detailed out the procedure and timeframe for such filing of application

PROVISION of ARBITRATION ACT AND NEPCA RULES

• Time limit for pronouncing the award – within 120 days (ordinarily) from the date of receipt of the docs under s. 14 and within 30 days from completion of the hearing; [S.24)

• Court ( District Court) assistance may be requested by the arbitrator to examine any evidence concerning the dispute, notwithstanding anything otherwise stated in other laws in vogue; [S.23]

PROVISION of ARBITRATION ACT/NEPCA RULES

• Majority Award, failing which the Chief Arbitrator’s decision to prevail [S.26]

• Reasoned Award [S.27]

• Challenge to the Award may be filed through an application before the Appellate Court on the specified grounds [S.30]

ARBITRATION

PROCEDURE

STATEMENT OF CLAINS AND DEFENSE

The Statement of Claims along with the request for Arbitration should preferably, though not mandatory, be submitted in the following Format, contents wise:

• Names of the Parties involved and the Tribunal

• Contents• Management Summary• Narrative to include

STATEMENT OF CLAINS AND DEFENSE

• Heads of Claims – by item• Facts chronologically – not opinion of the party• Evidence – record• Contract Conditions attracted• Discussion - Entitlement - Causes and effect analysis - Quantum - Appendices

STATEMENT OF CLAINS AND DEFENSE

• Defense Statement too may be in the same format, though not mandatory here too

• Answer must however be specific on the defense to be relied upon stating the facts related to the defenses

• Respondent also have the right to assert counter-claims against the Claimant

DOCUMENTATION

Written submissions:• Written submissions come in different forms and

are given different names. They include the Request for Arbitration and Answer, statements of case and defense

• Consider whether written submissions to be sequential or simultaneous. Whilst simultaneous submissions enable both parties to present their case but may not make things quicker also may result in inefficiency if the parties raise different issues in their submissions and extensive reply submissions are required.

DOCUMENTATION

Documentary evidence• Organization of documents from the outset of the

case ,the parties should consider using a coherent system for numbering or otherwise identifying documents produced in the case. System can be established with the arbitral tribunal at the time of the case-management conference.

• Parties will normally each produce the documents upon which they intend to rely. Each party should consider avoiding requests for production of documents from another party unless such production is relevant and material to the outcome of the case.

ARBITRATION PROCESS

ARBITRATION PROCESS

Preliminary Hearing following oath taking:

To agree with the parties:

• Venue

• Language

• Time frame

• Verification of documents submitted by parties

• Discovery of documents – including internal memorandums

ARBITRATION PROCESS

• Share list of the prospective witnesses and the names of the Counsels, if intended to be represented by.

• Tentative time schedule including for site visit, if required.

• Fix modality of future communication

Failing agreement on any above, Tribunal to give directions

ARBITRATION PROCESS

Parties to decide on whether or not empower Tribunal to act/fuction as:

amiable compositeur• Permit the arbitrators to decide the dispute

according to the legal principles they believe to be just, without being limited to any particular national law.

ex aequo et bono:• To decide the case on the basis of what is just

and fair under the circumstances, and not strict rules of law (Latin for, in justice and fairness).

ARBITRATION PROCESS

Hearings:

• Establishing the facts of the case (Draw TOR)

• Minimizing the length and number of hearings

• Telephone and video conferencing

• Providing submissions in good time

• Cut-off date for evidence

• Closure of Proceedings

• Interim decision or Award (Conservatory)

ARBITRATION PROCESS

• No new or different claim can be submitted without the arbitrators consent

• Arbitrators are empowered to rule on the relevancy of the evidence and testimony

• Arbitrator’s ruling on the objections raised

• Arbitrators to consult with each other on the above; ruling to be announced by the presiding arbitrator

ARBITRATION PROCESS

Arbitrators to take notes:

• By themselves or through an appointed assistant

• Tape recording of the proceeding allowed

Hearing sequence may be in the following sequence or otherwise:

• Opening statement for the Claimant

• For the Respondent

ARBITRATION PROCESS

• Presentation by Claimant or his Counsel claim by claim

• Production of evidences

• Witnesses from both sides, is any,

• Cross examination of witnesses sequence wise

• Closure

ARBITRATION PROCESS

Award Requirements:

• Certain complying with the submission

• Award to be final unless Tribunal decides to issue an interim Award

• Award must be reasoned one

• Award may be a decision as to the rights of the parties without any involvement of money

ARBITRATION PROCESS

Costs• Using allocation of costs to encourage

efficient conduct of the proceedings• The arbitral tribunal has discretion to

award costs in such a manner as it considers appropriate.

• It may be helpful to specify at the outset of the proceedings that in exercising its discretion in allocating costs the arbitral tribunal will take into account any unreasonable behavior by a party.