CHANKYA NATIONAL LAW UNIVERSITY

Institutional Arbitration: An

Analysis A Project on Alternative Dispute Resolution

By : Prasen Gundavaram

Roll 5451

To: Mr. Hrikeshmanu

Faculty of Constitutional Law II

ACKNOWLEDGEMENT

First of all I want to thank GOD for enabling me to successfully complete this project. Then I

would like to give my sincere thanks to our respected Alternative Dispute Resolution teacher,

Mr. Hrikeshmanu, who has guided me all the way in completing this project and enlightening

me from time to time in understanding the technicalities pertaining to the project

Then I would like to give sincere thanks to our librarians who have helped me all the way in

searching through the source materials and guiding me in my research work at the library.

The list couldn’t be completed without thanking all my friends and family who have

encouraged me in successful accomplishment of this project and been a pillar of support all

through the completion of the project.

Prasen Gundavaram

Roll Number: 5451

VI Semester

Contents

ACKNOWLEDGEMENT ......................................................................................................... 2

Research Methodology .............................................................................................................. 1

Introduction ................................................................................................................................ 2

Growth of International Arbitration ........................................................................................... 4

Standard Conventions ................................................................................................................ 5

I. New York Convention .................................................................................................... 5

II. ICSID Convention ....................................................................................................... 6

Major Institutions ....................................................................................................................... 7

I. International Chamber of Commerce Court of Arbitration ............................................ 7

II. American Arbitration Association .............................................................................. 8

III. London Court of International Arbitration .................................................................. 9

IV. Indian Council for Arbitration..................................................................................... 9

New Institutions ....................................................................................................................... 11

I. World Intellectual Property Organization Arbitration Center ...................................... 11

II. Asia/Pacific Center .................................................................................................... 12

Why Institutional is Preferable to Ad Hoc Arbitration ............................................................ 13

Future Capacities That Would Advance The Movement Toward Responding To Parties’

Perceived Needs ....................................................................................................................... 18

Conclusion ............................................................................................................................... 22

Bibliography ............................................................................................................................ 24

1

RESEARCH METHODOLOGY Aims and Objectives:

The aim of the project is to present a detailed study of the topic “Telangana: A Constitutional

Perspective” through reports, suggestions and different writings. The aim has been to come to

a conclusion very much indigenous.

Scope and Limitations:

Though the topic “Telangana: A Constitutional Perspective” is an immense project and pages

can be written over the topic but because of certain restrictions and limitations we might not

have dealt with the topic in great detail.

Sources of Data:

The following secondary sources of data have been used in the project-

1. Books

2. Internet

3. Reports

Method of Writing and Mode of Citation:

The method of writing followed in the course of this research paper is primarily analytical.

The researcher has followed Uniform method of citation throughout the course of this

research paper.

2

Introduction

Arbitration of disputes between international parties dates from the days of ancient

Greece.1 Although arbitration was not considered the standard method by which to resolve

such differences, there is some evidence that parties from different cities agreed to arbitrate

disputes either by mutual consent or by agreeing to a boilerplate pre-dispute clause providing

for such a mechanism.2 An example of such a clause appeared as early as 421 B.C. in an

agreement between Athens and Sparta, known as the Pease of Nicias:

It shall not be permissible for the Lacedaemonians and their allies to make war upon

the Athenians and their allies or to inflict upon them damage in any manner under

any pretext whatsoever. The same prohibition is made to the Athenians and their

allies as to the Lacedaemonians and their allies, but if there should arise a difference

between them they will remit its solution to a procedure according to a method upon

which they will come to an agreement.3

One author, noting that this agreement lasted only six years, pointed to the faulty

construction of the clause, as it contained only an agreement to arbitrate without providing

important details relating to selection of the arbitrator, the tribunal, or the procedure.'*

Sloppy construction of that agreement has been proffered as a contributing factor to the

demise of the Greek city-states.4

Based upon these notions, one wonders whether the fate of the ancient Greeks would

have been different had they sought the assistance of a neutral, third-party institution for

guidance and support throughout both the drafting stages of the arbitration agreement and the

administration of the ensuing procedure. Significantly, it has been noted that “[c]ustom could

propel the use of arbitration to settle disputes between city-states on an ad-hoc basis. But for

permanency’s sake, arbitration needed to be institutionalized to make it an automatic and

continuing part of the political landscape in which the Greek city-states existed.”

The lesson to be learned from this piece of history is that institutions do make a

difference. On a general level, arbitration administered and supervised by an institution can

1 Henry T. King, Jr. & Marc A. LeForestier, Arbitration in Ancient Greece, DISP. RESOL. J., Sept. 1994, at 38, 40.

2 Id.

3 JACKSON H. RALSTON, INTERNATIONAL ARBITRATION FROM ATHENS TO LOCARNO 157 (1929).

4 Id. The authors recognized that the agreement’s “sloppy construction” was only one factor of many that led to the

end of the Pease of Nicias. Other factors included the lack of desire for peace by either Athens or Sparta, and the

suspicions each side had of the other. Id.

3

only benefit the participating parties.5 The focus of this article is how institutional arbitration

specifically addresses parties’ needs. Essential to this discussion is a preliminary description

of the standard conventions, case law, and statutory provisions, all of which provide support

for the recognition and enforcement of arbitration awards. Of further importance to this topic

are the major players—some of the significant institutions, including a few newly created

specialty organizations.

A large part of this article is devoted to the role of the institution and its positive impact

on the dispute resolution procedure. In addition, the article compares institutional arbitration

to unadministered, or ad hoc, arbitration. Finally, in an effort to acknowledge and respond to

the perceived needs of parties who select arbitration as the method by which to resolve their

disputes, the article focuses on particular ways institutions may seek to improve the process

in the future for party participants.

5 See Matthew L. Wald, Attendants at American Get Pay Raise of 17% by 97, N.Y. TIMES, Oct. 11, 1995, at A-14. A

contemporary instance of institutional contributions to business and political issues is the airline strike in November

1993 in which President Clinton asked the parties to submit the dispute to arbitration and continue airline flights in the

interim. Id. The matter was amicably concluded under the auspices of the American Arbitration Association. Id.

4

Growth of International Arbitration

An increase in international trade and investment, coupled with a reluctance on behalf of

parties to bring their disputes before a foreign court system, has created a growing market for

the resolution of international disputes by arbitration.6 As a result, experienced institutions

have emerged providing impartial arbitration services, time tested rules for the conduct of

arbitral proceedings, and most importantly, an effective treaty network guaranteeing the

enforcement of arbitral agreements and awards.6 Those who are familiar with this industry

are well aware that the growth of international arbitration would not have been possible

without the intellectual and operational support of the various administering institutions.

Parties to international agreements enjoy many advantages in pursuing arbitration to

resolve their disputes, including privacy of the proceedings, likely maintenance of the

business relationship if the parties so desire, and savings in both cost and time. In addition,

the parties may decide many aspects of the proceedings, including the arbitrators, governing

law, language, and a neutral locale. Finally, participants may also retain existing counsel.

6 Michael F. Hoellering, Arbitration of International Commercial Disputes, in ARBITRATION & THE LAW: AAA GENERAL

COUNSEL’S ANNUAL REPORT, 1993-94 124 (1994) [hereinafter Hoellering, International Commercial Disputes].

5

Standard Conventions

Although most arbitration awards are complied with voluntarily, there are instances in

which a party may fail to comply with an award. Because arbitrators do not have the power

to enforce arbitration awards, statutes and treaties are available to assist successful parties.

Under the Indian Arbitration and Conciliation Act, any party to an arbitration may apply to a

specified court for an order confirming the award, and once the award is confirmed, the party

can enforce it akin to a judgment of the court. The Supreme Court of the India also has

provided support for parties seeking to enforce awards judicially by consistently upholding

the enforceability of arbitration agreements.

Of further significance are the various bilateral and multilateral treaties which play an

important role in assisting parties who seek enforcement of an arbitral award. Conventions

stipulate support for the use of arbitration and specify the conditions for enforcement of

foreign arbitration agreements and awards. Below are some of the most widely known and

utilized conventions for the recognition and enforcement of awards.

I. New York Convention

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral

Awards (New York Convention)7 was prepared and entered into force in 1959.8 As of

October 1994, ratifications and accessions to the New York Convention totaled 101

countries.9 The New York Convention provides for mutual recognition and enforcement of

arbitral awards by contracting states, and limits the defenses that may be raised in opposition

to the confirmation of an award, in an attempt to eliminate duplicative litigation following an

7 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June

10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3 [hereinafter New York Convention].

8 Id. The New York Convention, however, was not entered into force in the United States until December 29,

1970. Id.

9 Scoreboard of Adherence to Transnational Arbitration Treaties (as of October 1, 1994), NEWS AND NOTES FROM THE

INSTITUTE FOR TRANSNATIONAL ARBITRATION, Oct. 1994, at S-l [hereinafter Scoreboard of Adherence]. As of October 1, 1994, the

New York Convention had been ratified or acceded to by Algeria, Antigua and Barbuda, Argentina, Australia, Austria,

Bahrain, Bangladesh, Barbados, Belarus, Belgium, Benin, Bosnia and Herzegovina, Botswana, Bulgaria, Burkina Faso,

Cambodia, Cameroon, Canada, Central African Republic, Chile, China, Colombia, Costa Rica, Cote d’Ivoire, Croatia,

Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominica, Ecuador, Egypt, Estonia, Finland, France, Georgia,

Germany, Ghana, Greece, Guatemala, Guinea, Haiti, Holy See, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan,

Jordan, Kenya, Korea, Kuwait, Latvia, Lesotho, Luxembourg, Macedonia, Madagascar, Malaysia, Mali, Mexico, Monaco,

Morocco, Netherlands, New Zealand, Niger, Nigeria, Norway, Panama, Peru, Philippines, Poland, Romania, Russian

Federation, San Marino, Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden,

Switzerland, Syrian Arab Republic, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine,

United Kingdom, United States of America, Uruguay, Yugoslavia, and Zimbabwe. Id.

6

arbitration.10 The New York Convention applies to awards made in the territory of a state

other than the state in .which the recognition and enforcement of the award is sought, as well

as to “arbitral awards not considered as domestic awards in the state where the recognition

and enforcement are sought.”16

Although Article V of the New York Convention sets forth five grounds for the refusal of

enforcement,11 there has been a reluctance among American courts to reverse an award on

the basis of any of these defenses.12 In fact, “courts have been careful to take into account the

strong public policy favoring arbitration and to adopt standards and define defenses in a

manner that can be uniformly applied on an international scale. They have therefore

construed narrowly any defenses to the enforcement or recognition of an award.”13 The New

York Convention, however, also permits courts to refuse to enforce an award if the subject

matter of the arbitration is not capable of settlement by arbitration under the law of the

country in which enforcement is sought, or if it would be contrary to the public policy of that

country.14

II. ICSID Convention

The Convention on the Settlement of Investment Disputes of 1965 (ICSID

Convention),15 sometimes referred to as the “Washington Convention of 1965,” established

an autonomous and self-contained dispute resolution system.16 The system is administered by

the International Center for Settlement of Investment Disputes (ICSID), an international

institution created by the ICSID Convention.17 ICSID provides a forum for the arbitration of

investment disputes between governments and foreign investors. Arbitral awards rendered

pursuant to the ICSID Convention “shall be binding on the parties and shall not be subject to

appeal or to any other remedy except those provided for in [the ICSID] Convention.”18

The arbitration procedure is governed entirely and exclusively by the ICSID

Convention.19 Neither the procedure nor the awards rendered thereunder are subject to

challenge in the national courts of contracting states.20 In fact, the self-contained nature of

the ICSID Convention limits the role of national courts to recognition and enforcement of

(Richard J. Medalie ed., 1991).

11 Id. art. V, § 1, 21 U.S.T. at 2520.

12 Rivkin, supra note 15, at 135; see Scherk v. Alberto-Culver, 417 U.S. 506, 520 n.15 (1974).

13 Id.

14 New York Convention, supra note 12, art. V, § 2, 21 U.S.T. at 2519.

Convention].

16 Aron Broches, Observations on the Finality of ICSID Awards, 6 ICSID REV. 321, 322 (1991).

17 Id.

18 ICSID Convention, supra note 26, arts. 50-53, 17 U.S.T. at 1291; Broches, supra note 27, at 322.

19 Broches, supra note 27, at 322.

20 Id.

7

awards.21 In order for ICSID to have jurisdiction, the dispute must satisfy the following three

criteria: (1) a “legal” dispute arising “directly out of an investment”; (2) a dispute between a

contracting state, or its designated constituent and a national of another contracting state; and

(3) the parties to the dispute have consented in writing to ICSID’s jurisdiction.22 As of

October 1994, ratifications and accessions to the ICSID Convention totaled 113.23

21 Id.

22 Michael P. Hoellering, Arbitration Involving Foreign Governments and Their Instrumentalities, in ARBITRATION &

THE LAW: AAA GENERAL COUNSEL’S ANNUAL REPORT, 1992-93 124, 127 (1993) [hereinafter Hoellering, Foreign Governments],

23 Scoreboard of Adherence, supra note 14, at S-l

7

Major Institutions

Institutional arbitration is that which is administered by any one of the existing specialist

arbitral institutions under its own rules of arbitration. Arbitral bodies offer institutional

advantages that can expedite the progress of an arbitration. “[Arbitration institutions can

perform many and varied functions in the international arbitral process, ranging from strict

and extensive control over the progress, conduct, cost and financial administration of

proceedings to more limited, even essentially ancillary services.”30

Among the leading institutions are the ICC International Court of Arbitration (ICC), the

American Arbitration Association (AAA), the London Court of International Arbitration

(LCIA), and the China International Economic and Trade Arbitration Commission

(CIETAC).24 These institutions, with the exception of CIETAC, offer a truly international

proceeding, conducting hearings worldwide and maintaining wholly international panels of

arbitrators. The AAA’s panel of arbitrators, in fact, incorporates nationals from

approximately fifty-five different countries.

I. International Chamber of Commerce Court of Arbitration

The ICC administers and supervises International Chamber of Commerce arbitration,25

handling approximately 350 new international cases each year.26 The ICC Rules contemplate

further institutional guidance and supervision over the arbitration proceedings than do the

rules of other institutions.27 These rules delegate to the institution certain functions that are

typically reserved for the arbitrator. For instance, whereas other institutional rules provide

that it is the arbitrator who decides the prim a facie validity of the arbitration agreement,

under the ICC Rules, it is the institution that has the authority to make this determination.28

Additionally, and rather importantly, the ICC reviews the arbitrator’s final award, prior

to its signing, to ensure its enforceability.29 The ICC Rules require the arbitrator, before

signing the award, to submit it in draft form to the International Court of Arbitration. The

Court may lay down modifications as to the form of the award and, without affecting the

arbitrator’s liberty of decision, draw the arbitrator’s attention to substantive issues.42

24 Rivkin, supra note 15, at 127-28.

25 W. LAURENCE CRAIG ET AL., INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION 19 (2d ed. 1990).

26 Rivkin, supra note 15, at 127.

27 Id. at 127 n.22.

28 INTERNATIONAL CHAMBER OF COMMERCE, ICC RULES OF CONCILIATION AND ARBITRATION art. 7 (1988) [hereinafter ICC RULES].

29 Rivkin, supra note 15, at 127.

8

In an ICC arbitration, parties must have “Terms of Reference,” a procedure which has

been compared to a pre-hearing conference and described as an opportunity for the arbitrators

to get to know each other and counsel, and to become familiar with the case.30 Under this

rule, before proceeding with the preparation of the case, the arbitrator will draw up, on the

basis of the documents or in the presence of the parties and in light of their most recent

submissions, a document defining his terms of reference, which will then be reviewed by the

ICC.

The ICC’s fees are typically based on the amount in issue. In exceptional cases, however,

the ICC may set the fees below or above the indicated scale, after considering additional

items such as the complexity of the case, the duration of the proceedings, and the time spent

by the arbitrators.

II. American Arbitration Association

Although the AAA is known primarily for domestic arbitration, the number of

international arbitrations it handles is growing, fluctuating between 200 and 250 cases per

year.31 The AAA administers international cases worldwide via its International Arbitration

Rules, its Commercial, Patent, Employment, and Securities Rules, and its Supplementary

Procedures for Large, Complex Disputes. The AAA also administers cases under IACAC

Rules, and will act as appointing authority or administrator or both for the United Nations

Commission on International Trade Law (UNCITRAL) Rules. The AAA’s Rules are

designed to be used by other arbitral institutions as administering bodies, and were developed

for the flexible administration of international disputes.

Once AAA efforts to organize the proceedings have culminated in the constitution of the

tribunal, under these rules arbitrators enjoy broad autonomy in the conduct of the

proceedings, as long as the parties are provided due process.66 For instance, as contrasted with

the ICC Rules, the AAA’s Rules do not contemplate detailed scrutiny by the institution of the

arbitrator’s award before it is released to the parties.

Arbitrators appointed by the AAA often serve without compensation if the whole matter

can be concluded in a day. For more complicated arbitrations, the AAA negotiates a fee with

the arbitrators and the parties.

30 Transnational Dispute Resolution: Litigation or Arbitration? Part II, Where is Justice Best Achieved? An

Arbitrator’s View, 6 WORLD ARB. & MEDIATION REP. 125, 125 (1995). 31 Rivkin, supra note 15, at 127.

9

III. London Court of International Arbitration

The LCIA is a specialist organization which concentrates almost exclusively on

institutional, fully administered international disputes, handling approximately eighty to

ninety new international cases each year. Although based in London, it provides

comprehensive services for arbitrators under its own rules and under the UNCITRAL

Arbitration Rules under any system of law and in venues throughout the world. With respect

to cases which are not to be administered by the LCIA, the Court of the LCIA, through its

president and vice presidents, is reluctant to act as an appointing authority for arbitrators.

Unlike the ICC, the rules of the LCIA are less intrusive and provide the tribunal and the

parties with greater freedom. For example, whereas the ICC requires most of the payment for

its services early in the arbitration, the LCIA spreads the payments over the course of the

arbitration. The fees are based on work completed and are established by the LCIA after

consultation with the parties before the arbitrator is appointed.32 Although other institutions

appoint arbitrators from many different countries, the LCIA tends to appoint English Queen’s

Counsel as its arbitrators.

IV. Indian Council for Arbitration

For over 40 years, the Indian Council of Arbitration has been providing users of arbitration

with an unrivaled array of time-tested services that include ICA Arbitration, ICA Conciliation

and ICA Maritime, as well as education and training programs. Coupled with our quality case

administration and panel of arbitrators. ICA is the one resource for all your dispute resolutions

needs.

In most of the industrialised countries, central or national arbitral organisations have been

established which provide facilities for arbitration of commercial disputes. They enjoy unique

prestige and confidence of the trade and industry. In India, the Indian Council of Arbitration

established in 1965 is the apex arbitral organisation In most of the industrialised countries,

central or national arbitral organisations have been established which provide facilities for

arbitration of commercial disputes. They enjoy unique prestige and confidence of the trade

and industry. In India, the Indian Council of Arbitration established in 1965 is the apex

arbitral organisation In most of the industrialised countries, central or national arbitral

organisations have been established which provide facilities for arbitration of commercial

32 Id.

10

disputes. They enjoy unique prestige and confidence of the trade and industry. In India, the

Indian Council of Arbitration established in 1965 is the apex arbitral organisation

Council For National and International Arbitration

A Premier International Arbitration Institution based in India and promoted by leading

arbitration practitioners. Council For National and International Commercial Arbitration

(CNICA) was founded on January 2004 at the Metropolitan Port City of Chennai (Madras),

India.

Council For National and International Commercial Arbitration (CNICA) is a leading

Arbitration and ADR service provider upholding the highest standards in the domestic and

international arbitration arena.

Council For National and International Commercial Arbitration (CNICA) aims at well

administered domestic and international institutional arbitration. The objective of the CNICA

inter alia is to provide the best platform for Arbitration and ADR mechanisms.

CNICA’s panel of arbitrators consist of eminent legal practitioners, retired High Court and

Sub-ordinate Judges, Engineer, Chartered Accountants, Corporate secretaries, Medical

practitioners, Surveyors , Valuers, Architects, In- house lawyers, etcetera.

Council For National and International Commercial Arbitration (CNICA) provides Arbitration

and ADR services for Construction Industries, Financial Services, Maritime, Logistic

Industries, IT enabled services etcetra.

Council For National and International Commercial Arbitration (CNICA) entered a new face

on March 23rd 2005 by establishing an arbitral venue in the prime business district at Chennai

(Madras) with five state of art arbitral hearing rooms. CNICA also provides 100% secretarial

assistance for ad hoc arbitrations. The Venue is a fully loaded with all necessary latest

technologies to facilitate arbitral proceedings. CNICA boast of its exclusive arbitration books

and literatures in its library.

11

New Institutions

As can been seen from the progressive development and creation of various new

institutions, fully administered arbitration of international disputes is certainly not a static

movement. Not only are new institutions being developed, but there is also a recognition of

the need for some to be highly specialized in particular industries. An institution such as the

newly established World Intellectual Property Organization’s (WIPO) Arbitration Center,33 as

well as the anticipated development of the Commercial Arbitration and Mediation Center for

the Americas (CAMCA),74 are both directed at serving discrete subject matter, and suggest a

second level of specificity beyond the more general providers of international arbitration

services. With the advent of these and other specialized institutions, parties with specific

kinds of disputes may now engage in a highly specialized administration of services with

rules, procedures, and panels of arbitrators designed to suit their particular needs.

I. World Intellectual Property Organization Arbitration Center

The WIPO Arbitration Center commenced operations in October of 1994, offering

specialized services for the resolution of international intellectual property disputes.34 The

center administers mediations, arbitrations, expedited arbitrations and a combined mediation

and arbitration procedure.35 In order to serve the interests of parties who choose WIPO for its

specialized services, the WIPO Arbitration Center maintains lists of specialized mediators and

arbitrators.36

The WIPO Arbitration Rules were based, originally, on the UNCI- TRAL Rules, and

were developed by the Secretariat and refined by a group of international arbitration expert

advisors.37 Several new features and modifications distinguish the WIPO Rules from the

UNCITRAL Rules, however, including several provisions directed specifically at intellectual

property disputes: a provision on the protection of trade secrets at issue in an arbitration,

provisions on the confidentiality of the circumstances of an arbitration, and provisions

relating to certain procedural aspects of intellectual property litigation.38

33 For a discussion of the WIPO Arbitration Center, see infra part IV.A.

34 Kenneth Parks et al., WIPO Arbitration Center Opens, 7 J. PROPRIETARY RTS. 33, 33 (1995).

35 Id.

36 Id.

37 Ted E. Pons, Arbitration Protects Intellectual Property, DISP. RESOL. J., June 1994, at 6, 7.

38 World Intellectual Property Organizational Document ARB/OR/2, Oct. 18, 1993.

12

II. Asia/Pacific Center

In recognition of the enormous growth of trade and investment in the Asia/Pacific region,

the Asia/Pacific Center for the Resolution of International Business Disputes (Asia/Pacific

Center) was founded in 1985.39 The Asia/Pacific Center is headquartered in San Francisco,

and operates under the auspices of the AAA.40 The Asia/Pacific Center offers arbitration,

mediation, and conciliation services, in addition to conducting various educational

programs.88 Notably, the Center sponsors an international arbitrator training workshop, in

which prospective arbitrators are given intensive role-play training with typical problems

arising in the course of an international commercial arbitration.41

39 Id.

40 Id.

41 Id.

13

Why Institutional is Preferable to Ad Hoc Arbitration

The institution’s participation in the arbitral process is a delicate balance between

providing the necessary supervision and guidance while according the parties and the tribunal

freedom to dictate the conduct of the proceedings. Without the assistance of the institution,

the stated goals of arbitration—namely, speed, economy, and justice—could not be efficiently

realized.42 Institutional arbitration provides the quality assistance, guidance, and supervision

that disputants especially need when choosing to resolve their problems outside of the

courtroom.43 Administrative support clarifies the issues prior to the actual hearing, enabling

the arbitrator to tackle the relevant substantive issues.44

Ad hoc arbitration, in contrast, involves arbitration outside the established administrative

bodies.45 The parties and the arbitrators are “on their own” for all aspects of the case.94 They

must either develop their own rules in their arbitration agreement or at the time of the

arbitration, or use standard rules that have been promulgated to assist parties in ad hoc

arbitration—i.e., UNCITRAL Arbitration Rules.9 Moreover, the parties must arrange to

appoint arbitrators and deal with such issues as objection, compensation, hearing

arrangements, and award procurement.46

The stated goals of an ad hoc system include the prompt resolution of disputes, as well as

the avoidance of costs in the form of administrative and arbitrators’ fees specified in the rules

of many of the institutional bodies. One authority suggests, however, that ad hoc arbitration

fees on the continent of Europe may be even higher than those charged by some institutions.97

Although it has been stated that an ad hoc arbitration system can work where the parties or

their counsel are experienced in arbitration and are cooperative, it has also been noted that

“the potential for either a lack of arbitration experience and knowledge or a lack of cooper-

ation, increases greatly after a dispute arises, often resulting in visits to the courthouse.”98

In a non-administered arbitration, burdens such as objections to the continued service of

the arbitrators, scheduling of hearings, and collection and disbursement of arbitrator

compensation, will fall upon the parties and can produce awkward results.47 This section

outlines the invaluable role of the institution in various aspects of the arbitral proceeding and

how this role serves to prevent the problems associated with an ad hoc system.

42 George H. Friedman, The Administered Proceeding, N.Y. L.J., Aug. 4, 1994, at 3 [hereinafter Friedman,

Administered Proceeding].

43 Id. at 3-4.

44 Id.

45 Id. at 3.

46 Friedman, Administered Proceeding, supra note 90, at 3.

47 Id.

14

a) The Selection of Arbitrators:

The choice of arbitrators is the first and foremost task that is undertaken after the parties agree

to resort to arbitration for dispute resolution. The arbitrators are the steering wheel of the ship

of arbitration.

Ad hoc arbitration provides the parties the freedom to decide the number of arbitrators

to be selected in addition to the right to choose the arbitrators according to their discretion

without any limitations. On the other hand, institutional arbitration involves the option of a list

of arbitrators provided to the parties for their perusal to determine the arbitrators to be chosen.

The objective of the entire selection process is to have an unbiased, efficient and experienced

arbitrator. When the parties are given unguided discretion to choose the arbitrators in ad hoc

arbitration, the probability of choosing a partial adjudicator is higher than through the

institution which verifies and prevents the existence of any biases or similarities between the

parties and the arbitrator.

In addition, ad hoc arbitration which is heavily dependent on the arbitrator is done by

retired judges in India who are trained in procedural law rather than arbitration which hinders

the speedy disposal of the dispute. In contrast, arbitrators through institutions are not only

trained but also specialised in the subject matter of the dispute which increases the efficiency

of the process. Therefore, it can be concluded that in the matter of selection of arbitrators,

institutional arbitration ensures fulfilling the objectives of efficiency and specialisation.

b) Flexibility v. Predictability:

The adoption of ad hoc arbitration involves drafting of procedure to be followed by the

parties. The advantage of the process is that the parties can be flexible in detailing the process

and creating a structure which is suitable and conducive to their needs. On the other hand,

institutional arbitration involves the implementation of the predetermined rules by specialised

arbitrators. Therefore, the choice boils down to be one of flexibility in ad hoc arbitration

compared to predictability in institutional arbitration.

In India, due to the lack of skills as well as experience in arbitration, the formation of a

flawless procedure is not only time-consuming but expensive. This, too often leads to

unpredictable results which in turn lead to the negation of the very objectives of arbitration.

This results in a huge onus on the parties to ensure the success of dispute resolution. Even in

the circumstances that the parties manage to determine the rules to be followed, there is no

certainty that every unseen contingency will be dealt with which is possible while adopting

15

the time- tested rules by the institution. Therefore, in terms of the rules and procedure to be

followed, there is a certainty that institutional arbitration will not be interrupted and deferred

due to lack of foresight.

On weighing the two approaches, even though flexibility might be limited under

institutional arbitration, predictability in the process ensures that the parties can go ahead with

the process without the fear of inconsistencies leading to a failure in the arbitration process.

c) Procedural Matters:

It has been explained that there is a probability that due to the lack of considering every

contingency that could arise while determining the rules for ad hoc arbitration or formulation

of rules by the arbitral institution, procedural difficulties might arise. In institutional

arbitration, the organisation and the arbitral tribunal are available to provide assistance

especially in the selection of the arbitrators that might arise during the course of the

proceedings. On the other hand, the only recourse available to the parties entering into ad hoc

arbitration on the dispute of some procedural matters would be to approach the national

courts. Approaching the national courts might result in an inordinate delay and defeat the very

purpose of entering into an arbitration agreement for speedy disposal of the dispute.

Therefore, on the procedural front, institutional arbitration triumphs over ad hoc arbitration.

d) Administrative Hassles:

There are administrative matters involved in the process of arbitration which range from the

fixation of fees of the arbitrator, administrative fees, fixing the time limit for the disposal of

the dispute among others. These matters can be time consuming and cumbersome to deal with

especially since the parties are involved in multiple tasks. Ad hoc arbitration requires the

parties to settle these administrative matters with the arbitrator which can lead to

uncomfortable situations. On the other hand, institutional arbitration has an administrative

secretariat which deals with these administrative matters thereby unburdening the parties of

the dispute. With the secretariat playing the role of the middle man, the relations of the parties

with each other as well with the arbitrator are maintained. For the performance of the

administrative functions, specialised personnel are employed and a fee charged in the

institutions leading to efficiency. Therefore, on a cost- benefit analysis of the same,

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institutional arbitration is more consumer- friendly.

e) Cost:

One of the driving forces for people to engage in ad hoc arbitration is to avoid extra costs like

the administrative fees and the high arbitration amounts charged during the course of

institutional arbitration. Ad hoc arbitration does not have an arbitral institution that assists in

the administrative and procedural matters. The parties are required to make all the

arrangements to conduct the arbitration. However, due to the absence of skill and expertise,

incorrect decisions are often made which leads to higher costs. In India, illiteracy and

language barriers are a major hindrance for the success of ad hoc arbitration. The success of

the entire process is based on the co-operation between the parties which might fail resulting

in the need for court intervention thereby increasing the costs by leaps and bounds. Therefore,

though institutional arbitration involves high costs, the effect of the same is negated when

compared to the ad hoc arbitration. If both the models add to the same cost burden, the

professionalism and efficiency involved in the institutional method proves to be more

effective.

f) Delay:

Inordinate and incessant delays in the judicial proceedings led to the rise of arbitration and

alternative dispute resolution techniques. However, due to the procedural inefficiencies and

lack of co-operation, delays are possible in the ad hoc system as well. On the other hand,

institutional arbitration confers a specific time limit on the arbitral tribunals for the disposal of

the case. This supervision and prescribing a flexible deadline curtails the delays and

encourages speedy disposal of cases in consonance with the objectives of arbitration.

In India, recourse to any form of judicial intervention would result in delays which

could last for generations due to the arrears and pendency of suits. Therefore, the best

incentive for the spread of arbitration is to exercise and guarantee expeditious results which

are possible only through institutional arbitration and not ad hoc which is dependent on the

demands of the parties.

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g) The Award:

Parties enter the arbitration process with an aim to get an award or order leading to the

resolution of an outstanding dispute. The award is usually given by the arbitrator after

providing both parties with a fair hearing and opportunity to present the requisite evidence.

Therefore, the award in an arbitration suit is reached only after following the principles of

natural justice. The arbitration suits also grant the right to the arbitrator to pass an interim

order or award to prevent any party from defaulting.

When the final order is passed by the arbitral tribunal, whether it is through ad hoc or

institutional technique, the order is said to be final and binding in the eyes of the law. In

India, the Arbitration and Conciliation Act, provides for challenging this order only on

certain limited grounds like that of non- fulfilment of the principles of natural justice, ex-

parte order, invalid agreement between the parties among others. Due to the limited available

grounds for challenging the award, the finality of the award due to dissatisfaction cannot

usually be challenged unless it can be proved that there has been non- application of mind by

the arbitrator. The benefit of institutional arbitration as compared to ad hoc arbitration with

respect to the award is that there is a screening and scrutiny process involved before the

finality of the award is declared. This screening process done by the institution panellists

ensures that no injustice has been done in order to save the parties’ money and time by

preventing the necessity to take resource with the courts.

On studying India’s position with respect to arbitration, it is noticed that ad hoc

arbitration can be used only to resolve disputes of smaller claim and less affluent parties. On

the cost- benefit analysis of institutional and ad hoc arbitration, the superiority of the former

in terms of efficiency, expediency and justice is noticed beginning from the selection of the

arbitrators to the finality and challenging the award. The need to bring in the restoration of

trust in the system of dispute resolution through legal means, lightening the burden on the

Indian judiciary as well as ensure speedy disposal of disputes especially in commercial

matters, institutional arbitration is the best option available. Therefore, reforms as

recommended further ought to be undertaken in the Indian system to encourage the use of

arbitration mechanisms generally and in particular develop the institutional arbitration

technique to co-exist with the prevalent ad hoc mechanism.

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Future Capacities That Would Advance The Movement Toward Responding To Parties’ Perceived Needs

Arbitral institutions striving to provide a quality service that is both fair and efficient

must continuously monitor the needs of its users. In doing so, institutions can improve upon

the services offered in accordance with the parties’ perceived needs. Below is a discussion of

two items which may be considered when evaluating the kinds of arbitration services an

institution can offer.

A. Arbitral Capacity to Grant Interim Relief

Interim measures of protection are available through arbitrators; this power is contingent

upon the wording of the parties’ contract and applicable arbitration rules. Injunctions and

attachments are the types of provisional remedies most frequently requested, but a broader

range of provisional relief may be awarded by arbitrators in the course of an arbitration.48

One author has classified the nature of interim measures into three broad categories: “(1)

measures which relate to the taking and preservation of evidence, (2) measures which aim at

preserving the status quo, and (3) measures which aim to prevent the transfer or dissipation

of assets.”49 These are provisional, temporary in nature, and urgent.50 Despite the arbitrator’s

authority, it is still the courts that are frequently burdened by parties’ requests to grant such

relief, because of limitations on the tribunal’s authority: tribunals do not possess all of the

normal powers of a court.180 For instance, in certain circumstances, such as when arbitrators

have not yet been appointed or where third parties are involved, the courts will be required to

provide assistance.181 It is important to keep in mind, however, that parties opting to use

arbitration to resolve their disputes expect to remain free from court intervention during the

proceedings. The UNCITRAL Arbitration Rules and several institutional rules touch on the

topic of interim measures.102 The UNCITRAL Arbitration Rules refer to the arbitral

tribunal’s taking, at the request of either party, “any interim measures it deems necessary in

respect of the subject- matter of the dispute, including measures for the conservation of the

goods forming the subject-matter in dispute, such as ordering their deposit with a third person

or ordering the sale of perishable goods.”103 It has been said that this rule is “far short of the

48 See ALAN REDFERN & MARTIN HUNTER, INTERNATIONAL COMMERCIAL ARBITRATION 306-07 (2d ed. 1991) (describing the types of

interim measures allowed under typical arbitration rules).

49 D. Alan Redfern, Arbitration and the Courts: Interim Measures of Protection—Is the Tide About To Turn?, 30

TEX. INT’L. L.J. 71, 78 (1995).

50 Id.

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kind of interim measures that might well be needed in the modern world of international

commerce.”184 The AAA Rules provide that upon request by any party, the tribunal may take

whatever interim measures it deems necessary regarding the subject matter of the dispute,

including measures for the conservation of goods.51 The ICC Rules only refer to the “relevant

powers reserved to the arbitrator” without indicating what these powers are,100 and the LCIA

Rules provide that the tribunal shall have the power to “order the preservation, storage, sale

or other disposal of any property or thing under the control of any party.”52 Where the rules

do not provide the necessary authority to grant the relief sought, it may be useful for the

parties to have an avenue other than the judiciary through which to obtain a remedy. One

author has suggested that institutions could amend the standard form rules of arbitration in

order to clarify the type of interim measures which arbitrators are empowered to order.168 By

consenting to arbitrate under such rules, the parties would then be deemed to have agreed that

the arbitrators possessed those powers.158 The author quickly pointed out, however, that

“there is a limit to the measures which arbitrators can impose, even with the agreement of the

parties; and there is also the problem of ensuring that such measures are effective when im-

posed by a private tribunal rather than by a court of law.”53 Another possible response to this

inevitable problem of burdening the courts each time a party seeks provisional relief beyond

the power of the tribunal, is for institutions to make arbitrators available to respond to

requests for preliminary relief where it is sought in connection with a dispute subject to an

arbitration clause. This would ensure compliance with the expectations of the parties, while

attempting to harness the potential for arbitral resolution of the dispute. The institution could

assemble a preselected group of expert neutrals with requisite qualifications, including

lawyers and industry experts, who could be available on a standby basis, subject to

immediate designation by the court.

To date, no institution has created such a mechanism for dealing with interim relief. It

may, however, be in the interest of arbitral bodies to investigate the possible advantages and

disadvantages to having such a procedure in place.

B. Option for Appellate Review

The notion of appellate review of an arbitral award within an institution is a relatively novel

idea. Under such a system, parties to arbitration agreements could agree, either at the time of

contract or upon submission of the dispute to arbitration, that appellate review of the award

51 AAA Int’l Rules, supra note 47, art. 22.

52 RULES OF THE LONDON COURT OF INT’L ARBITRATION art. 13.1(h) (1985) [hereinafter LCIA RULES],

53 Id.

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will take place within the institution, in accordance with the institution’s rules. Most

importantly, institutional appellate review would only occur where there is express

agreement among the parties. Perhaps by keeping the review within the institution, there may

be no need to pursue review of the award in court. Additionally, institutional review affords

the parties an opportunity to correct error, to review newly established evidence, and to

evaluate any allegations of bias. In order to accommodate the expectation of the parties that

arbitration is a cost-effective, speedy resolution of international disputes, institutional

appellate review would need to be accomplished within a short, fixed span of time.

Establishing a new panel of neutrals responsible only for appellate review would be one way

to expedite the review process. The petition for rehearing might be focused and restricted to

the seven limited items set forth in the New York Convention for determining when the

recognition and enforcement of an award will be refused in a national court.161 There are,

however, certain negative aspects associated with this concept of institutional appellate

review. For instance, review of the award could lengthen the time and increase the cost of

the process. Appellate review, however, would not be mandated, but would be available for

parties who wish to have internal review of the award. While there has been little experience

with this type of procedure, the following example may provide useful information. The

ICSID Convention incorporates provisions allowing for interpretation,54 revision103 or

annulment.55 of an award by a tribunal, preferably the one which rendered the award. The

annulment procedure has been distinguished from an “appeal,” the latter described as review

by another body of the decisional process as well as of the substance of the award, which

may result in its reversal or modification.56 In contrast, annulment invalidates, in whole or in

part, the arbitral decision, or lets the decision stand if the plea for annulment is rejected.57

Annulment, by negating the decision in whole or in part, returns the parties, as to the portion

negated, to their original litigating positions.58 Article 52 of the ICSID Convention lists the

following five grounds upon which annulment may be granted:

(1) that the Tribunal was not properly constituted;

(2) that the Tribunal has manifestly exceeded its powers;

(3) that there was corruption on the part of a member of the Tribunal;

(4) that there has been a serious departure from a fundamental rule of procedure; or

54 ICSID Convention, supra note 26, art. 50, 17 U.S.T. at 1289.

55 Id. art. 52, 17 U.S.T. at 1290-91.

56 Broches, supra note 27, at 322.

57 ICSID Convention, supra note 26, art. 52, 17 U.S.T. at 1290-91.

58 Id.

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(5) that the award has failed to state the reasons on which it is based.168

Critics have suggested that annulment is too readily available, thereby undercutting the

finality of ICSID awards and greatly delaying the total process.59 Consequently, arbitration

may proceed indefinitely—a series of annulments undoing a series of arbitrations.60 In re-

sponse to some of this criticism, it has been pointed out that international commercial arbitral

awards outside of the ICSID regime generally may be attacked not only in the courts of the

state where the award was rendered, but also in the courts of those states where enforcement

or recognition is sought.61 Furthermore, the proceedings in those courts may be subject to

appeal.172 In contrast, the ICSID system provides only one opportunity for such an attack—

the annulment proceeding under discussion.62 Under ICSID, “[t]he award . . . shall not be

subject to any appeal or to any other remedy except those provided for in [the ICSID]

Convention.”63 Concern has also been expressed as to the arbitral decision-making process

generally, and the capacity for error by the respected arbitrators,64 as well as to the notion

that a second tribunal will yield a better decision than the first.176 It has been stated that:

The key for the foreseeable future will be that the review panel answer a question

different from that answered by the original tribunal. If the tribunal was confronted

with deciding whether it possessed jurisdiction, the review panel should consider

whether the decision as to jurisdiction was manifestly wrong. In other words, the

standard of review should be used to keep the primacy of decision with the initial

tribunal since there is little reason to believe that the review panel’s decision would

be more accurate. The review panel thus exists primarily to deal with the grossly

aberrant decision.177

To the extent the parties believe that appellate review would be a benefit, they could

either design such review in the arbitration clause, or seek drafting assistance from an

institution. Arbitral institutions might also consider incorporating into their rules a limited

mode of appellate review giving parties, once again, the opportunity to include that aspect of

the rules should they deem it appropriate.

59 Caron, supra note 166, at 47. '

60 Id.

61 Id. at 52.

62 Id.

63 ICSID Convention, supra note 26, art. 53(1), 17 U.S.T. at 1291.

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Conclusion

India forms as a strategically sound model for study as not only is it the world’s largest

democracy but also a developing nation facing immense repercussions of docket explosion.

This only enunciates the need to develop an alternative mode for dispute resolution through

arbitration. The reforms mentioned with respect to the Indian model can be applied to the

developing countries reeling under similar problems.

The prevalent arrangement of institutional arbitration is not favourable for developing

countries and it can be concluded that one size that is used even in other countries does not fit

all The biggest problem in developing with respect to institutional arbitration is the lack of

availability and accessibility to the masses as well as the lack of awareness of the existence

of that media. The aim of the reforms is to expand the adoption of institutional arbitration

from international commercial disputes to domestic disputes in developing countries.

Keeping these objectives in mind as well as the constraints faced by a normal litigant which

include poverty, illiteracy and unawareness, a number of suggestions have been furthered.

The proposal put forth envisages scaling down the culture of institutional arbitration to a

scale such that it is acceptable, available and accessible to the masses. The proposition put

forward is to not only reform the existing institutions to make them more vibrant but also to

create new institutions specifically for certain disputes of a particular subject matter. To tap

the arbitration of domestic disputes, it is necessary for the formation of a tribunal and

organisation dealing with only domestic disputes.

Further, the researcher advocates a symbiotic relation between the courts and the

arbitration institutions to ensure that the court is not over-burdened by the suits which can be

disposed off through arbitration. The consequences of arbitration like maintenance of good

relations among parties and institutional support of supervision, time-limit and scrutiny are

proposed to be inculcated in a mechanism analogous to the informal arbitration bodies like

the Panchayat at the grass-root levels.

Conclusively, even though it is true that institutional arbitration is the ideal situation

aimed at, the contemporary burden on the courts and the lowering trust of the people on legal

method necessitates the coexistence of ad hoc and institutional arbitration for domestic and

international commercial disputes in developing countries with India as a model proposed.

23

As institutional arbitration develops, there will be a shift among the people preferring the

same over ad hoc arbitration following the rule of supply and demand.

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BIBLIOGRAPHY

Dr. S. C. Tripathi, The Arbitration and Conciliation Act, 1996 (4th ed., Allahabad:

Central Law Publications, 2009).

S. J. Sutton and J. Gill, Russell on Arbitration (22nd edn., London: Sweet and

Maxwell).

G. K. Kwatra, The New Arbitration and Conciliation Law of India (New Delhi: The

Indian Council of Arbitration, 1996).

Mr. D. Rautray, Master Gide to Arbitration in India (New Delhi: CCH India, 2008).

W. K. Slate II, “International Arbitration: Do Institutes Make a Difference?” 31 Wake

Forest Law Review