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International Commercial Arbitration

With the world becoming one and rising together towards achieving its common objective, getting involved in cross border trades, disputes in trades and other matters are quite normal, which further requires judicial interference to maintain peace between the parties involved. With the courts being overfilled and overburdened with the backlog of millions of cases, these rising international trades and businesses with its numerous disputes further worsen the condition of the Indian judiciary system by increasing the pendency at various level of courts in India, further leading to wastage of resources, money, and power, all thanks to the efficient system of maintaining law and order in the country. Thus, to solve these disputes rationally within a stipulated and prevalent time period, International Commercial Arbitration comes to rescue. 

International commercial arbitration has existed for a long time. It is simply a mechanism that focuses and aims to settle disputes and various trade controversies arising outside the court within a prescribed framework either by mutual consensus or third party interference or some other way, which is within the legal framework of the system and country. With rapid globalization and high growth rates, the rise in international businesses has made International Commercial Arbitration a common and quite popular way of settling disputes, surpassing litigation, saving millions of resources that may be exhausted if the matters were left to the mercy of litigators and judiciary. 

With countries frequently modernizing and amending their arbitration policies, these countries aim towards creating an open and liberal legal framework with a subtle and flexible system, providing arrays of opportunities to international businesses, attracting their attention in order to boost the economy and fate of their countries.

What is International Commercial Arbitration?

Section 2(1)(f) of The Arbitration and Conciliation Act, 1996 states and defines International commercial arbitration as an 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 

  • An individual who is resident or habitual resident of any country other than India.
  • Corporate body incorporated in any country other than India
  • A company whose central management lies outside the country India.
  • The government of any country.

As per the guidelines issued by the Supreme Court in the case of TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd where it stated that though the company had its entire management abroad since it was incorporated in India, the company was bound to have nationality ‘Indian‘, for the act.

The act further recognized and clearly stated that in case a company has nationalities of more than one country i.e. it has or is eligible for dual nationality, with its registration in India and operations in a foreign land, its Indian identity is bound to be superior, and its status as a foreign corporation will not be valid implying the place of incorporation equates to its nationality.

Elements of Arbitration

Arbitration though is used as a major part of the law or mechanism of International Commercial Arbitration, its definition remains undefined, yet today. Though its definition is left to the control of borders, so that it can be modified time and again as per the needs, the principles and elements of this vague term are still defined, providing the context within which its definition should be made.

The principles or major characteristics of Arbitration may be defined as follows. Its definition whenever created, for any act or any dispute, it should contain these principles, in order to be accepted legally.

  • It is a mechanism for settling disputes
  • It is a private procedure
  • It can’t be forced i.e. it is consensual
  • It leads to a final binding and determination of the obligations and rights of the parties using the mechanism.

Why choose International Commercial Arbitration?

As the parties involved in the dispute are themselves responsible for the appointment of arbitrators, it provides them with the freedom and flexibility to choose their arbitrators with their discretion, who they think is capable and possess necessary and adequate skills as per the business is related. For instance, in a construction project, an engineer who has been involved in the project closely might give a better perspective of the situation as compared to the judge in the high court is likely to be not aware of the field. Thus, arbitration provides enough scope for the parties to act on their own terms.

Arbitrators are often chosen for a specific dispute. The arbitrator chosen by the parties shall be involved from the starting to the conclusion of the project, thus giving a complete and detailed judgment of the situation as compared to the judiciary where the case or dispute will be left to the discretion of different judges at different levels of hearing, with all of them having different perspectives of a particular case, unaware of the basis on which the proceedings were carried by those involved previously, thus leading to various discrepancies. Since arbitration offers a greater degree of flexibility, moulding it according to the needs of the dispute, the system of international arbitration attracts the attention of many business personals and companies who might want to ignore the tedious process of litigation, opting for a more personalized and steady approach.

Furthermore, the flexibility of the system also helps and enables the parties involved to create a uniform and unbiased legal landscape for them, which suits their project and business line rather than being exposed to the unbiased judicial system of opposition’s home country as a court may lean towards its home company intentionally or unintentionally. Since the parties involved can choose their own arbitrators, with their own will or through mutual consensus, the situation can be more appealing, rational and neutral, eliminating all sorts of uncertainties and biases that might have arisen in any judicial system.

Conclusion

With the world continuing to move rapidly with the policies of globalization and liberalization, the importance and the way the International Commercial Arbitration was perceived earlier has changed significantly. As the legal system continues to fight the million pending files that have been struggling for years, the International Commercial Arbitration has not only helped businessman worldwide to develop a system that is quite easy and prevalent to their needs but has also played a crucial role in widening the gap between the judiciary and its people, helping them deal with unnecessary delays and congestion that might arise due to the rising businesses and its dispute, making it a win-win situation for both the people as well as the system as at the end of the day both the systems perform one common function i.e. justice and that is the only thing that the system stands for as “Justice should prevail, whatever the case may be”.

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