International Unilateral Arbitration India

INTRODUCTION

Evolution of Arbitration

The evolution of Arbitration in India is quite interesting, with the earliest known treatise mentioning arbitration being the "Brhadaranayaka Upanishad" as under Hindu Law.^[1] It elaborated on the various kinds of arbitral bodies including three chief bodies namely the local courts ‘Puga', the people who were engaged in same professions called 'Srenis' and the members who were concerned with various social matters of any specific community ‘Kulas’ and these bodies were then cumulatively called Panchayats. Their functioning was quite similar to that of the modern day arbitral tribunals, with the main focus on solving disputes amicably, with consent, in a cost and time effective manner. Modern arbitration law took its roots in India way back in 1772 by way of the Bengal Regulation Act (1772), which in turn was a product of numerous successful dispute resolution streak between various parties which chose to do so via a tribunal. The same was thereafter promulgated in the other presidencies, namely Madras and Bombay under the Madras Regulation Act (1802) and the Bombay Regulations Act (1799).

The present day law and its importance

After multiple changes in the law, and various consolidating enactments, the current law is governed by the Arbitration and Conciliation Act (1996) as amended in 2015. Arbitration in its current form presents a platform, where an expeditious and effective dispute resolution mechanism is provided, unlike the judicial framework consisting of Courts and the prolonged duration taken in resolving the simplest of matters. Apart from the lackadaisical working of Courts, the complexity of law, especially when dealing in multiple jurisdictions, is why people as well as corporations would prefer to rely instead on an arbitration agreement for their commercial transactions, as well as other matters wherein there may be possibility of some future dispute.

The focus of this research note thus revolves around the importance of having a documented arbitration agreement, which as per my hypothesis, is absolutely essential for the fulfilment of the various advantages that arbitration as a framework has to offer, with special emphasis on international commercial arbitration. The note will also take into consideration the nexus between commercial relationship and the law of arbitration.

THE FORM OF THE ARBITRATION AGREEMENT

The agreement to submit to arbitration any specified disputes is the foundation stone laid for international arbitration. It is the written record of the parties’ consent to submit to arbitral proceedings. This consent is indispensable to any dispute resolution process outside domestic courts. The very existence of such processes depends on the agreement arrived on by the concerned parties. All domestic legislation of most nations on international commercial arbitration and all international conventions state the requirement of there being a written agreement to arbitrate. It is impertinent to take note of the views of Redfern, wherein it is stated that “The reason for the imposition of this requirement is self-evident. A valid agreement to arbitrate excludes the jurisdiction of the national courts and means that all such disputes between the relevant parties should be resolved by way of a private method of dispute resolution system, namely arbitration.”^[2] There thus exist good reasons for making sure that existence of an arbitration agreement as defined above should indeed be clearly established and the best method for ensuring this is having the evidence produced in writing.^[3]

The position in India vis-à-vis International Practices

The Contract Act^[4] “in India provides for voidness of any agreement which may restrain any legal proceedings.”^[5] However, there is an exception made in this section with regard to arbitration agreements, thus solidifying the requirement of a written arbitration agreement, apart from that in the Arbitration and Conciliation Act.  In an arbitration seated in India, Section 7 of the Arbitration and Conciliation Act becomes applicable, wherein very detailed requirements for the validity of an Arbitration Agreement are laid out, based on UNCITRAL Model Law. Recently in a Bombay High Court judgment delivered on 19th September, 2013, in Mody v Kerwala,^[6] the Single Judge considered the validity requirement that of arbitration agreement, namely that it should be in writing necessarily. “The learned single Judge further held that Section 7 does not only impose such a requirement of the arbitration agreement being in writing; but also that it provides for the exclusive methods for successfully proving the existence of any such written agreement.”^[7]

A minority of countries do allow even oral agreements to serve as valid arbitration agreements if there are references to its terms in writing or in case the oral agreement is recorded by either of the parties. Such is the case in the Swedish Arbitration Act. On the other hand, under the English arbitration law, while there is a formality of having a written arbitration agreement, such requirement is very liberal and allows for any written instrument, to serve as the agreement with a low threshold. That being that the Courts in multiple occasions have found that even though the agreement needs to be written, it need not be signed, only that it should a formal written instrument agreeing to submit future differences to arbitration.