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The Jury Is Out
If you use a Tata Photon dongle for connecting to the Internet or, let’s say, have booked a holiday through travel agency Cox & Kings, chances are that you have agreed to an arbitration clause as part of the Terms of Service set forth by these companies. Yes, that long document filled with legalese that you probably did not bother to read. The clause would state that if a dispute arises between you and the service provider, the dispute will be settled through arbitration.
Photo Credit :
|Mesilim, the king of the Sumerian city state Of Kish (in IRAQ now), with the advice of god Satarana, is said to have resolved a dispute in 2500 BC regarding the right to use an irrigation canal on the border between two warring cities, Lagash and Umma. This is taken to be the first recorded case of arbitration. Today, the warring Hiranandani siblings have taken their dispute over their right to the estimated Rs 3,000-crore real estate empire to an arbitration panel including Cherie Blair, Queen’s Counsel.|
Arbitration, by its nature, is the most informal form of dispute resolution. Any two parties who disagree with each other on anything can agree to thrash things out in front of a mutually accepted arbitrator. In most commercial disputes today, each party nominates one arbitrator, and the two arbitrators mutually decide on a presiding arbitrator (all three are expected to be impartial). Proceedings can be held anywhere. There is no stipulation on the background or qualifications of an arbitrator.
Since several contracts have to be sifted through, parties prefer retired judges, or even practising lawyers such as Harish Salve and Zia Mody to act as arbitrators. Arbitration works because it carries the stamp of law. Indian arbitration is governed by the Arbitration and Conciliation Act, 1996, which gives it the status of a court verdict. In case of global arbitrations, the New York Convention mandates that an award in a foreign territory be respected in the territories of all signatories.
Why are arbitrations becoming popular in the business world, as an alternative to court cases? There are plenty of reasons. In most of the developed world, and increasingly in India as well, arbitrations are seen as the panacea to the costs of proceeding through the normal judicial system. Specially for disputes between parties of different countries, the general distrust of local courts has favoured this parallel and neutral system.
|146 countries have assented to the New York convention of the Recognition and Enforcement of Foreign Arbitral Awards (1958)|
(BW Pic By Ritesh Sharma)
|THE OTHER WAY|
Arbitrations offer many advantages over court deals
|SETTLEMENT ZONES:International Dispute Resolution Centre in London (far left) and Maxwell Chambers, an arbitration facility, in Singapore|
(Photographs courtesy: DRC/LCIA and Bloomberg)
Ciccu Mukhopadhaya, a noted arbitrator who is on the SIAC panel and, till recently, a partner with law firm Amarchand & Mangaldas & Suresh A. Shroff & Co, says that Indian arbitrators somehow fail to see why cases should be time-bound. “Arbitrations at Singapore and London follow the ‘chess clock’ method. Parties must finish arguments within the time allotted to them. Delays in filing documents or being present for hearings could attract heavy penalties, and, result in losing the case itself.”
|INDIA DOES NOT HAVE A PROPER BODY FOR ARBITRATIONS. A LOT OF CASES HERE FOLLOW AN AD HOC PROCESS, NOT AN INSTITUTIONAL ONE|
|When Standard Motors products of india (which made the standard brand of cars) was wound up, workers of the company and the banks fought a 12-year long legal battle in the courts over the rights to the proceeds. Finally, in 2006, came a commercial mediator who helped both parties reach a settlement in three months time.|
Mediation, is a process whereby a mediator sits with both parties separately, goes through their arguments and defenses, and helps them reach a point at which both of them can agree. A mediation award is then ratified by a court and becomes binding on both parties.
For example, in the ongoing border dispute between Assam and Nagaland, commercial mediator and Chennai-based advocate Sriram Panchu has been appointed to get parties to arrive at a consent..
Mediators say this is, perhaps, the most cost-effective way of resolving disputes, and leaves much less bad blood between the parties. Conciliation, another form of Alternate Dispute Resolution is slightly different — it involves positive suggestions by the conciliator on how each party can contribute to the consensus building.
Can the two processes, mediation and arbitration, be combined? Several developed economies are trying it out, with the mediator first trying to resolve issues that parties can agree on, and if there still remains any areas of disputes, that is arbitrated.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.