Arbitration is a type of Alternative Dispute Resolution (ADR) and it is used when the parties fail to settle their dispute through litigation. Contrary to litigation, in Arbitration, the parties are at freedom to choose their own tribunal (arbitrator(s)). The decision of the Arbitrator(s) is binding on both the parties and enforceable in the courts, unless otherwise is agreed by the parties. The main purpose of arbitration is to achieve fair resolution of the dispute by an impartial third party. Arbitration provides flexible, better-quality justice, less time consuming and less expensive resolution of the dispute.
MEANING OF ARBITRATION
Arbitration is a method by which a dispute is settled by an independent third party. It is a private dispute resolution procedure in place of litigation and the decision of the Arbitrator is binding upon the disagreeing parties. The dispute is usually decided either by a sole arbitrator or an arbitral tribunal (of odd number). The role of an arbitrator is similar to that of a judge and it is their responsibility to ensure that the parties get a fair and just opportunity to present their case, and deliver an award accordingly, which is final and binding on the parties.[i]
The characteristics of arbitration are:[ii]
- Arbitration is mutual, i.e., both the parties have to agree to it. If an arbitration clause is not present in the relevant contract beforehand, the parties can insert an arbitration contract in case of further disputes arising under a contract.
- Arbitration is neutral, the parties are at freedom to choose the applicable law, language, appropriate nationality and venue of the arbitration, which ensures that no party enjoys a home court advantage.
- The parties have the power to choose the Arbitral Tribunal. They are free to choose the arbitrators, given the number is not even.
- The award decided by the arbitral tribunal is final and binding. The award is easy is to enforce.
TYPES OF ARBITRATION
Arbitration can be divided into two categories:
- On the basis of jurisdiction.
- On the basis of procedure and rules (in India).
ON THE BASIS OF JURISDICTION:
- Domestic Arbitration.
- International Arbitration.
- International Commercial Arbitration.
ON THE BASIS OF PROCEDURE AND RULES:
- Ad-hoc Arbitration.
- Institutional Arbitration.
- Fast track Arbitration.
ADVANTAGES OF ARBITRATION
Arbitration is a part of the ADR, whose main purpose is to provide fast, flexible and reasonable dispute resolution in comparison to Litigation. Some of the advantages of arbitration are:[iii]
- Neutral nature.
- Freedom of the parties to choose their own arbitrators.
- Confidentiality in contract to the open court proceedings.
- Easy enforcement of the award.
DISADVANTAGES OF ARBITRATION
Along with the advantages of arbitration, there are some added disadvantages to arbitration. Some of them are:[iv]
- There has to be a good faith and consensus among the parties for arbitration to be carried out.
- An arbitrator’s power is not even to find someone in contempt of court.
- The decision of an arbitrator has limited scope to challenge.
It can be concluded that Arbitration is generally the most efficient form of remedy for settlement of disputes amongst the parties. It is time saving, flexible, confidential and cost efficient too. Hence, it remains a popular means of dispute resolution in both the private and public sector.
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