Meaning of ICA
International Commercial Arbitration or ICA as we know it, is a means of settling disputes under the diverse international commercial contracts of business. It also includes within its ambit, an International contract, wherein one of the parties to the Arbitration proceeding is a bonafide resident of our country and the other body is incorporated outside India in a foreign country. Section 2(1)(f) of the Arbitration and Conciliation Act 1996 helps define International Commercial Arbitration as under:
“international commercial arbitration” means 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 a national of, or habitually resident in, any country other than India; or
- a body corporate which is incorporated in any country other than India; or
- a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or
- the Government of a foreign country;
After due inspection and analyses of the above definition of the ICA, the demarcation between regular arbitration proceedings and those under an ICA can be clearly identified. The agreements which fall under the purview of an International Commercial Arbitration can hence be distinguished from others and thus the manner of proceeding with the arbitration for such cases can be determined accordingly.
Evidently, when International Parties become involved in a commercial business dispute, most organizations resort to arbitration as the preferred means of settling the dispute since litigating over the issue could be highly time consuming and tedious as per Indian laws. International Commercial Arbitration (ICA) is primarily conducted over previously agreed terms and conditions between the two contracting parties respectively instead of resorting to the national codes of law and the technical procedures involved. With modernization and globalisation the traditional modes of settling disputes in Court does not work well, as the procedures under the said codes are very tedious and consume a lot of time in settling the disputes and thus arbitration is the most sought after means of resolving disputes, particularly in a dispute arising from an international commercial business.
With the expansion of trade and the ever flourishing business environment marking its spot within foreign territories, it becomes highly tedious to apply the traditional and conventional laws while resolving disputes which occur under International Commercial Contracts. Furthermore, it has been observed that the Judges may also not be able to adjudge over international trade and commerce as effectively as is required due to the already overburdened legal system which has several cases pending and due for judgment under the procedural laws in place already. This is why, Companies these days, end up opting for International Arbitration Agreements within their business contracts and the disputes are arbitrated over more effectively instead of seeking a resolve through the means of litigation which becomes nearly impossible.
Procedure under ICA in India after the Amendment Act of 2015.
The Supreme Court has been given the power to initiate Arbitration under the Arbitration and conciliation Act 1996 which has recently been amended by the amendment Act of 2015. The relevant procedures given under the Amendment Act can be better described below for more understanding of the same:
1. for sub-section (12), the following sub-section has been substituted,
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and
(b) where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.’;
To understand the above section we can have a look at the sub-sections mentioned therein as enlisted below.
2. Definitions: (1) In this Part, unless the context otherwise requires,
- (4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder.
- (5) Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto.
- (6) Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue.
- (7) An arbitral award made under this Part shall be considered as a domestic award.
- (8) Where this Part:
(a) refers to the fact that the parties have agreed or that they may agree, or
(b) in any other way refers to an agreement of the parties, that agreement shall include any arbitration rules referred to in that agreement
- 10. Number of arbitrators.—
(1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number.
(2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator.
After due analyses of the above sections it can be inferred clearly that in case of any failure to ever constitute an arbitral tribunal, the same can be constituted by the Supreme Court of India in the case of international Arbitration, as opposed to National Arbitration wherein only the High Court has the power to constitute the Arbitral tribunal. However, it is very important for there to exist is a contractual relationship, or rather rights in personam which are mandatory for any reference of disputes to arbitration proceedings. When analysed with precision, in the case of the amendments, we can determine that the law has tried to adopt the universal practices from the International Bar Association Guidelines over the Conflict of Interest which is better known as the IBA Guidelines.
Disputes not Arbitrable
Despite arbitration being the most sought after mechanism available for resolving any disputes, there are still certain matters over which, as per the law, arbitration proceedings cannot be conducted for the purposes of delivering due justice in a fair and ethical manner. This has even been enumerated in the case of Booz Allen and Hamilton Inc V. SBI Home Finance Ltd by the Supreme Court, wherein the apex court has clearly defined and listed down the disputes which cannot be referred to arbitration proceedings and must be litigated over for the purposes of maintaining justice and preserving the rights of individuals. The list of cases which cannot be referred to arbitration are given below:
a) Criminal offences
b) Guardianship matters
c) Insolvency and winding up proceedings
d) Matters concerning probate, letters of administration, succession certificate etc
e) Eviction proceedings
f) Patents, trademarks, copyright
g) Anti-Trust/ competition laws
h) Bribery/Corruption Laws
i) Fraud
Hence, apart from the above mentioned list of disputes which has been highlighted by the landmark Supreme Court judgment in Booz Allen and Hamilton Inc. vs SBI Home Finance Ltd., as far as international Commercial Arbitrations are concerned, the Supreme Court can refer the matter to Arbitration if the clauses within the Agreement are very indicative and suggestive that in case of any disputes the parties may refer the matter to Arbitration for resolving the same.
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