Arbitration, Conciliation

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ALTERNATIVE DISPUTE RESOLUTION METHODS

ARBITRATION AND

CONCILIATION

Presentationby

D C Tanna, Advisor (Legal)

Indian Merchants¶ Chamber IMC Marg, IMC Bldg, Churchgate, Mumbai ± 400 020

On August 24, 2004



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What is Arbitration?

ItIt isis oneone of of thethe AlternativeAlternative DisputesDisputes ResolutionResolution MethodsMethods (ADR)(ADR)

SimplySimply stated,stated, ³Arbitration³Arbitration isis thethe business business world¶sworld¶s ownown wayway of of findingfinding

aa fair fair outcomeoutcome of of aa business business dispute´dispute´

ItIt isis uniqueunique asas aa methodmethod of of disputedispute closureclosure.. ItIt doesdoes notnot useuse thethe courtscourtsor or methodsmethods of of legallegal systemssystems but but unlikeunlike other other alternativesalternatives toto court,court, itit isis

binding binding uponupon thethe parties parties andand isis finalfinal inin disposingdisposing of of thethe disputedispute..

OxfordOxford EnglishEnglish DictionaryDictionary definesdefines itit as,as, µTheµThe settlementsettlement of of aa matter matter atatissueissue by by oneone whomwhom thethe parties parties agreeagree toto refer refer thethe claimsclaims inin order order totoobtainobtain andand equitableequitable decision¶decision¶..

TheThe keykey wordword inin thethe definitiondefinition isis ³³ agree´agree´.. ArbitrationArbitration takestakes place place onlyonly by by anan agreementagreement.. InIn mostmost of of thethe countriescountries by by lawlaw decisionsdecisions of of Arbitrator Arbitrator areare enforcedenforced moremore or or lessless inin thethe samesame wayway asas judgment judgment of of thethecourtcourt.. InIn IndiaIndia under under thethe ArbitrationArbitration andand ConciliationConciliation ActAct 19961996 awardsawardsgivengiven by by ArbitratorsArbitrators areare enforcedenforced likelike courtcourt decreesdecrees but but ArbitrationArbitration

process process startsstarts onlyonly if if therethere isis anan agreementagreement between between thethe disputingdisputing thethe parties parties toto refer refer thethe disputedispute toto Arbitrator Arbitrator..



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How Is It Different From Justice Dispensation by Courts?

ArbitrationArbitration Court ProceedingsCourt Proceedings

By AgreementBy Agreement By LawBy Law

FreedomFreedom toto ChooseChoose

Your Your ownown Arbitrator Arbitrator

VenueVenue

LanguageLanguage

ProcedureProcedure toto be be followedfollowed

TimeTime FrameFrame for for DeliveryDelivery of of AwardAward

No such freedom No such freedom

³³

³³

³³

³³

³³

Privacy is MaintainedPrivacy is Maintained No Privacy No Privacy

No Stigma Attached No Stigma Attached Stigma is AttachedStigma is Attached

Speedier Speedier -- Civil Procedure Code &Civil Procedure Code &

Evidence Act do not applyEvidence Act do not apply

TimeTime ConsumingConsuming -- CivilCivil ProcedureProcedure

CodeCode && EvidenceEvidence ActAct StrictlyStrictly ApplyApply

Less ExpensiveLess Expensive CostlyCostly

AwardAward isis finalfinal andand binding binding.. GroundsGrounds for for

settingsetting asideaside awardaward havehave been been reducedreduced

considerablyconsiderably..

Judgements are appealable.Judgements are appealable.

No Bitterness After Award No Bitterness After Award Bitterness may remain in loosing party.Bitterness may remain in loosing party.



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11.. Former Former Chief Chief JusticeJustice PP N N BhagwatiBhagwati onceonce observed,observed,

³I³I amam pained pained toto observeobserve thatthat thethe judicial judicial systemsystem inin thethecountrycountry isis almostalmost onon thethe vergeverge of of collapsecollapse.. TheseThese areare

strongstrong wordswords II amam usingusing but but itit isis withwith considerableconsiderable

anguishanguish that,that, II saysay soso.. Our Our judicial judicial systemssystems isis creakingcreaking

under under thethe weightweight of ofarrears´arrears´..

22.. ItIt isis estimatedestimated thatthat therethere areare aboutabout twentytwenty millionmillion casescases

awaitingawaiting disposaldisposal inin over over eighteight thousandthousand courtscourts inin thethe

countrycountry.. AverageAverage period period takentaken for for disposingdisposing of of eveneven

criminalcriminal casescases isis notnot lessless thanthan aa decadedecade.. InIn civilcivil casescasesthethe situationsituation isis eveneven worseworse.. ItIt isis notnot unusualunusual thatthat itit

takestakes atat leastleast twotwo decadesdecades for for aa civilcivil suitsuit toto getget eveneven

listedlisted for for hearinghearing..

Why Arbitration



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continued

33.. EvenEven after after thethe formationformation of of variousvarious TribunalsTribunals ii..ee.. ± ± CentralCentral

AdministrativeAdministrative Tribunals,Tribunals, Motar Motar AccidentsAccidents CompensationCompensation

Tribunals,Tribunals, CustomsCustoms ExciseExcise andand GoldGold AppellateAppellate TribunalTribunal

(CEGAT)(CEGAT) andand IndustrialIndustrial TribunalsTribunals etcetc.. thethe dispensationdispensation of of

justice justice hashas notnot become become speedyspeedy..

44.. TimeTime takentaken by by thethe courtscourts inin disposingdisposing of of cases,cases, provisions provisions of of

appeal,appeal, far far--rangingranging andand protracted protracted andand oftenoften confusingconfusing evidenceevidence

andand procedures, procedures, lack lack of of confidentialityconfidentiality andand prospect prospect of of

inconsistentinconsistent judicial judicial outcome,outcome, andand expensesexpenses involvedinvolved inin

litigationlitigation allall havehave contributedcontributed inin makingmaking arbitrationarbitration aa preferred preferred

mechanismmechanism for for solvingsolving commercialcommercial disputesdisputes especiallyespecially inin

countriescountries likelike IndiaIndia.. ItIt hashas four four distinctdistinct factorsfactors toto commendcommend itit

± ± speed,speed, finality,finality, cheapnesscheapness andand justice justice..

55.. ThatThat isis whywhy allall over over thethe worldworld thethe recentrecent trendtrend isis toto shiftshift fromfrom

litigationlitigation toto AlternativeAlternative DisputesDisputes ResolutionResolution (ADR)(ADR) MethodsMethods

whichwhich includesincludes arbitrationarbitration conciliationconciliation andand mediationmediation..



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P

rocess of Arbitration

VeryVery SimpleSimple under under thethe RulesRules of of

ArbitrationArbitration of of IMCIMC..



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R ules of Arbitration and R ules of Conciliation of IMC

BasedBased onon thethe ArbitrationArbitration andand ConciliationConciliation Act,Act, 19961996 whichwhich inin turnturn isis

based based onon ModelModel LawLaw && RulesRules recommendedrecommended by by thethe generalgeneralAssemblyAssembly of of thethe UnitedUnited Nations Nations..

UnitedUnited Nations Nations CommissionCommission onon InternationalInternational TradeTrade LawLaw(UNCITRAL)(UNCITRAL) waswas establishedestablished by by thethe generalgeneral AssemblyAssembly of of UnitedUnited Nations Nations inin 19661966 toto removeremove or or reducereduce thethe obstaclesobstacles toto thethe flowflow of of internationalinternational tradetrade duedue toto disparitiesdisparities inin nationalnational lawslaws governinggoverning

internationalinternational tradetrade.. TheThe commissioncommission amongstamongst other other thingsthings adoptedadopted ArbitrationArbitration RulesRules

inin 19751975,, ConciliationConciliation RulesRules inin 19801980 andand ModelModel LawLaw ononInternationalInternational CommercialCommercial ArbitrationArbitration inin 19851985..

IndiaIndia hashas adoptedadopted UNCITRALUNCITRAL ModelModel LawLaw onon InternationalInternationalCommercialCommercial ArbitrationArbitration andand RulesRules of of ConciliationConciliation andand based based onon

themthem enactedenacted ArbitrationArbitration andand ConciliationConciliation Act,Act, 19961996 andand based based ononthethe saidsaid ActAct RulesRules of of ArbitrationArbitration of of IMCIMC havehave been been framedframed.. ThusThusaspectaspect of of globalisationglobalisation isis takentaken carecare of of by by IMCIMC..

Now Now withoutwithout goinggoing deepdeep intointo historicalhistorical aspectsaspects II willwill telltell youyou aboutaboutthethe process process of of ArbitrationArbitration under under RulesRules of of ArbitrationArbitration of of IMCIMC..



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Process of Arbitration

VeryVery SimpleSimple under under thethe RulesRules of of ArbitrationArbitration of of IMCIMC..

SubmitSubmit toto IMCIMC aa writtenwritten requestrequest for for arbitrationarbitration andand sendsend aastatementstatement of of claimclaim alongalong withwith allall supportingsupporting documentsdocumentsrelatingrelating toto thethe claimclaim..

IMCIMC willwill sendsend thethe claimantclaimant andand thethe defendantdefendant aa copycopy of of RulesRules of of ArbitrationArbitration alongalong withwith aa listlist of of ArbitratorsArbitrators onon itsits

panel panel andand ask ask both both thethe parties parties toto appointappoint by by mutualmutual consentconsentanan Arbitrator Arbitrator fromfrom amongstamongst thethe PanelPanel of of ArbitratorsArbitrators of of IMCIMC..

SimultaneouslySimultaneously thethe defendantdefendant willwill be be askedasked toto submitsubmit hishis

defencedefence statementstatement withwith allall thethe supportingsupporting documentsdocuments ononwhichwhich hehe wantswants toto relyrely..

If If thethe parties parties failfail toto appointappoint Arbitrator Arbitrator or or ArbitratorsArbitrators by bymutualmutual consent,consent, IMCIMC proceeds proceeds toto appointappoint anan Arbitrator Arbitrator or or ArbitratorsArbitrators asas thethe casecase maymay be be dependingdepending uponupon termsterms of of thethe

contractcontract between between thethe parties parties or or thethe amountamount of of claimclaim asas thethecasecase maymay be be..



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FeesFees payable payable towardstowards AdministrationAdministration andand ArbitratorsArbitrators areare alsoalso collectedcollected

inin advanceadvance either either fullyfully or or partially partially dependingdepending uponupon thethe circumstancescircumstances.. BeforeBefore Arbitrator Arbitrator isis appointedappointed allall preliminary preliminary work work isis completedcompleted by by IMCIMC..

HenceHence onceonce Arbitrator Arbitrator isis appointedappointed hehe straightstraight awayaway commencescommences

arbitrationarbitration proceedings proceedings.. PreliminaryPreliminary work work likelike receivingreceiving statementstatement of of

claimclaim fromfrom Claimant,Claimant, defencedefence statementstatement fromfrom defendantdefendant counter counter--claimclaim if if

anyany r replyeply toto counter counter claim,claim, documentsdocuments onon whichwhich parties parties wantwant toto rely,rely, etcetc..

isis completedcompleted by by IMCIMC.. BeforeBefore commencingcommencing proceedings proceedings or or eveneven duringduring proceedings proceedings Arbitrator Arbitrator

alsoalso exploresexplores possibilities possibilities of of settlementsettlement between between thethe parties parties..

If If nono settlementsettlement isis reachedreached thenthen DependingDepending uponupon amountamount of of claimclaim counter counter

claimclaim if if anyany number number of of witnesswitness toto be be examined,examined, crosscross--examinationexamination

etcetc..attemptattempt isis mademade toto finishfinish proceedings proceedings withinwithin 66 monthsmonths fromfrom thethe datedate

of of appointmentappointment of of thethe Arbitrator Arbitrator withwith thethe coco--operationoperation fromfrom both both thethedisputingdisputing parties parties..

TheThe AwardAward givengiven by by thethe Arbitrator Arbitrator isis finalfinal andand binding binding onon thethe parties parties andand

cancan be be enforcedenforced likelike aa decreedecree of of thethe courtcourt..

continued



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Fast Track Arbitration

IMC rules also provide for Fast Track ArbitrationIMC rules also provide for Fast Track Arbitration TheThe parties parties maymay optopt itit for for expeditiousexpeditious disposaldisposal of of casecase

inin aa fixedfixed timetime frameframe..

TheThe Arbitrator Arbitrator isis authorisedauthorised toto decidedecide thethe disputedispute onon

thethe writtenwritten pleadings, pleadings, documentsdocuments andand writtenwrittensubmissionssubmissions withoutwithout anyany oraloral hearingshearings..

TheThe Arbitrator Arbitrator cancan callcall for for anyany further further informationinformation andand

or or clarificationclarification requiredrequired..

TheThe oraloral hearinghearing onlyonly if if joint joint requestrequest isis mademade by by both both

thethe parties parties or or if if thethe Arbitrator Arbitrator considersconsiders itit necessarynecessary inin

anyany particular particular casecase..



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What IMC does for Arbitration

IMC provides infrastructure for institutional arbitration at a very reasonableIMC provides infrastructure for institutional arbitration at a very reasonablecost.cost.

It provides facilities for fully airconditioned venues of different sizes to suitIt provides facilities for fully airconditioned venues of different sizes to suitthe different requirements of the parties.the different requirements of the parties.

ItIt provides provides secretarialsecretarial assistanceassistance toto thethe arbitrator arbitrator for for recordingrecording thethe proceedings proceedings andand givinggiving thethe awardaward..

ItIt hashas anan updatedupdated RulesRules of of ArbitrationArbitration whichwhich areare based based onon thethe provisions provisions of of thethe ArbitrationArbitration && ConciliationConciliation Act,Act, 19961996 withwith suchsuch additionsadditions asas areare

supplementarysupplementary andand areare permissible permissible.. ItIt hashas alsoalso gotgot separateseparate setset of of RulesRules for for ConciliationConciliation..

ItIt hashas gotgot PanelPanel of of ArbitratorsArbitrators consistingconsisting of of eminenteminent RetiredRetired JudgesJudges of of SupremeSupreme CourtCourt andand HighHigh Court,Court, veryvery eminenteminent SolicitorsSolicitors andand Advocates,Advocates,other other eminenteminent ProfessionalProfessional CharteredChartered Accountants,Accountants, Architects,Architects,Businessmen,Businessmen, EngineersEngineers andand IndustrialistsIndustrialists havinghaving veryvery highhigh integrityintegrity andandrespectrespect inin thethe societysociety..

ItIt alsoalso hashas thethe PanelPanel of of ConciliatorsConciliators consistingconsisting of of expertexpert conciliatorsconciliators andand businessmen businessmen..

AA Number Number of of CasesCases involvinginvolving largelarge amountamount havehave been been disposeddisposed of of by byarbitrationarbitration inin aa veryvery shortshort timetime..



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What Is R equired to be Done To Take Advantage of

Facilities Offered

TheThe PartiesParties shouldshould simplysimply taketake carecare toto ensureensure thatthat ananappropriateappropriate clauseclause isis insertedinserted inin allall their their Contracts,Contracts, PurchasePurchaseOrdersOrders etcetc..,, toto thethe effecteffect thatthat anyany disputedispute or or differencesdifferencesarisingarising between between thethe parties parties outout of of or or relatingrelating toto thethe ContractContractshallshall be be referredreferred toto ArbitrationArbitration inin accordanceaccordance withwith thethe RulesRulesof of ArbitrationArbitration of of thethe IMCIMC..

TheThe ClauseClause recommendedrecommended by by IMCIMC toto be be insertedinserted inin allall thetheContractsContracts isis asas followsfollows::

³Any³Any disputedispute or or differencedifference whatsoever whatsoever arisingarising between between thethe parties parties outout of of or or relatingrelating toto thethe contractcontract or or constructionconstruction

meaning,meaning, scope,scope, implementationimplementation operationoperation or or effecteffect of of thisthiscontractcontract or or thethe breach breach thereof thereof shallshall be be referredreferred toto arbitrationarbitrationinin accordanceaccordance withwith thethe RulesRules of of ArbitrationArbitration of of thethe IndianIndianMerchants¶Merchants¶ Chamber Chamber andand thethe awardaward mademade inin pursuance pursuancethereof thereof shallshall be be finalfinal andand binding binding onon thethe parties parties..´́



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continued

³Any³Any disputedispute or or differencedifference whatsoever whatsoever arisingarising between between thethe parties parties

outout of of or or relatingrelating toto thisthis contractcontract or or construction,construction, meaning,meaning, scope,scope,

implementation,implementation, operationoperation or or effecteffect of of thisthis contractcontract or or thethe validityvalidity

or or thethe breach breach thereof,thereof, shallshall be be referredreferred toto ConciliationConciliation for for amicableamicable

settlementsettlement inin accordanceaccordance withwith thethe RulesRules of of ConciliationConciliation of of thethe

IndianIndian Merchants¶Merchants¶ Chamber Chamber andand if if notnot satisfactorilysatisfactorily resolvedresolved inin

conciliationconciliation shallshall be be referredreferred toto ArbitrationArbitration inin accordanceaccordance withwith thethe

RulesRules of of ArbitrationArbitration of of thethe IndianIndian Merchants¶Merchants¶ Chamber Chamber andand thethe

awardaward mademade inin pursuance pursuance thereof thereof shallshall be be finalfinal andand binding binding onon thethe

parties´ parties´..



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Annexure:1

Arbitrator¶s Fee (R evised on 1st November, 2002)

The Arbitrator¶s fee (for each arbitrator) will be fixed separately with

regard to the amount in dispute in each case, as under and will be shared

equally by both the parties.

Upto Rs. 5,00,000/Upto Rs. 5,00,000/-- Rs. 20,000/Rs. 20,000/--

From Rs. 5,00,001/From Rs. 5,00,001/-- toto

Rs. 10,00,000/Rs. 10,00,000/--

Rs. 20,000/Rs. 20,000/-- plus Rs. 900/ plus Rs. 900/-- per lac of the per lac of the

amount exceeding Rs. 5,00,000amount exceeding Rs. 5,00,000


Rs. 100,00,000/Rs. 100,00,000/--

Rs. 24,500/Rs. 24,500/-- plus Rs. 700/ plus Rs. 700/-- per lac of the per lac of the

amount exceeding Rs. 10,00,000/amount exceeding Rs. 10,00,000/--


Rs. 500,00,000/Rs. 500,00,000/--

Rs. 87,500/Rs. 87,500/-- plus Rs. 25000/ plus Rs. 25000/-- per crore of per crore of

the amount exceeding Rs. 100,00,000/the amount exceeding Rs. 100,00,000/--

From Rs. 500,00,001 toFrom Rs. 500,00,001 to

Rs. 100,000,000Rs. 100,000,000

Rs. 1,87500 /Rs. 1,87500 /-- plus Rs. 15625/ plus Rs. 15625/-- per crore of per crore of

the amount exceeding Rs. 500,00,000/the amount exceeding Rs. 500,00,000/--

Over Rs. 100,000,000Over Rs. 100,000,000 RsRs.. 22,,6565,,625625//-- plus plus RsRs.. 62506250//-- per per crorecrore of of

thethe amountamount exceedingexceeding RsRs.. 100100,,000000,,000000//--



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continued

In addition to the above:In addition to the above:

EachEach arbitrator arbitrator willwill be be entitledentitled toto receivereceive aa specialspecial FeeFee for for

studystudy of of thethe pleadings, pleadings, casecase material,material, writingwriting of of thethe awardaward

etcetc.. withwith regardregard toto thethe amountamount inin disputedispute inin eacheach casecase asas

under under ::--

Upto Rs. 5,00,000Upto Rs. 5,00,000 -- Rs. 3,000/Rs. 3,000/-- lumpsumlumpsum

Rs. 5,00,001 to Rs. 10,00,000Rs. 5,00,001 to Rs. 10,00,000 -- Rs. 6,000/Rs. 6,000/-- lumpsumlumpsum

Rs. 10,00,001 to Rs. 100,00,000Rs. 10,00,001 to Rs. 100,00,000 -- Rs. 10,000/Rs. 10,000/-- lumpsumlumpsum

Over Rs. 100,00,001 and aboveOver Rs. 100,00,001 and above -- Rs. 15,000/Rs. 15,000/-- lumpsumlumpsum



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Annexure: 2

Administrative fee (R evised from 1Administrative fee (R evised from 1stst November, 2002)November, 2002)

TheThe administrativeadministrative feefee willwill be be willwill be be fixedfixed separatelyseparately withwith regardregard toto thethe amountamountinin disputedispute inin each,each, casecase asas under under andand willwill be be sharedshared equallyequally by by both both thethe parties parties..

Upto Rs. 5,00,000/Upto Rs. 5,00,000/-- Rs. 10,000/Rs. 10,000/-- lumpsumlumpsum

From Rs. 5,00,001 to Rs. 10,00,000From Rs. 5,00,001 to Rs. 10,00,000 Rs. 20,000/Rs. 20,000/-- lumpsumlumpsum



From Rs. 100,00,001 to Rs. 5,00,00,000From Rs. 100,00,001 to Rs. 5,00,00,000 Rs. 1,50,000 lumpsumRs. 1,50,000 lumpsum

From Rs. 500,00,001 to 100,000,000From Rs. 500,00,001 to 100,000,000 Rs. 2,00,000/Rs. 2,00,000/-- lumpsumlumpsum

Above Rs. 100,000,000Above Rs. 100,000,000 Rs. 2,00,000/Rs. 2,00,000/-- lumpsumlumpsum

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Arbitration, Conciliation