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Awards And Remedies Under International Commercial Arbitration

It is difficult to say the exact origin of arbitration, but the documented that commenced to be used very early, since the slave states. The two divine books Quran (Koran) and the Bible provide references for the resolution of disputes through arbitration and mediation, except that arbitration is also mentioned in Greek mythology[1].

The development of arbitration is an alternative means for resolving commercial disputes, both in terms of internal (state disputes) as well as in terms of external (international disputes), went on to achieve a high level of use by different businessmen to settle their trade disputes, and no arbitration has a more proficient way of resolving commercial disputes. Parties usually choose arbitration because they have several advantages as compared with arbitration courts, for example they make faster resolution of disputes, arbitrators are chosen by the parties themselves and have different professional fields which guarantee upright research on the issue, lower costs, flexible rules, arbitration proceedings are generally private, etc.

International commercial arbitration is a substitute method of resolving disputes between private parties arising out of commercial transactions conducted across national boundaries that allows the parties to avoid litigation in national courts.

Section 2(1)(f)[2] of THE ARBITRATION AND CONCILIATION ACT, 1996 defines an International Commercial Arbitration as the legal relationship which must be considered commercial, where either of the parties is a foreign national or resident, or a foreign body corporate or a company, the association or body of individuals whose central management or control is in foreign hands. Under Indian law, arbitration with a base in India, but involving a foreign party will also be regarded as an International commercial arbitration, and will be subject to Part I of THE ARBITRATION AND CONCILIATION ACT. However, Part I of the Act would have no applicability on the parties if an International commercial arbitration is held outside India but the parties would be subject to Part II of the Act.

What is Arbitration Award?

The decision of an Arbitral Tribunal is termed as an ‘Arbitral Award’. The decision of the Arbitral Tribunal is done by the majority. The Arbitral Award is presented in writing and signed by all the members of the tribunal. An arbitrator can resolve the dispute only if both the parties expressly authorize him to do so. It must include the reasons for the award, unless the parties have agreed that no reason for the award is to be given. The Award should be dated and the place where it has been made should be mentioned (i.e. the seat of arbitration). A copy of the award should be given to each party separately. Arbitral Tribunals can also make interim awards.

These procedures have been transferred from Article 32 of the UNCITRAL arbitration rules of the 1976’s, though not literally. Article 32 is completed when tiny is done this amendment and completion of Law in 2010. This form is provided in almost all of the international conventions (Convention Geneva 1961 New York Convention of 1958) and the state arbitration laws (Croatian law, Albania Law, Kosovo law etc.) for example the UNCITRAL rules of the arbitration say: “the decision will be in writing and shall be final and binding on the parties”. The most important part of the award is its transparency in which the arbitrator decided express how are different points of argument between the parties in conflict and the consequences of such a decision.

The arbitral tribunal shall issue its award based on the right of the parties as acknowledged by the competent right. In the absence of such acknowledgement by the parties, the arbitral tribunal shall apply the law acknowledged by the rules of private international law.

Arbitral awards concurrently represent the completion of the proceedings. The arbitration shall take all actions concluded by issuing the final award, as Turner points out: “The arbitration award should be as a result of weighing conflicting claims of the parties, evidence and submissions presented during proceedings”[3]. Kosovo Law on Arbitration by the award means “the inclusion of all orders issued by the arbitral tribunal, whether temporary, partial, procedural, substantial or final on all matters, including costs”[4]

While under Croatian law article 2.1.8 defines award comes as an award on the merits of the conflicts. According to the authors Redfern and Hunter an award is the final outcome of the arbitration process which is binding and not as in the case of mediation which have a recommendation to the parties on which the parties may accept or reject, as an arbitral award is not as irrefutable award court to represent only the primary step in the procedure. There are generally two types of award:

  1. The final award (which settle down all matters referred to arbitration) and
  2. Award temporary or partial (which the tribunal awards on some of issues and not on all matters of procedure).

Interim Reliefs

Under the Act, the parties can seek out interim relief from courts and arbitral tribunals under Sections 9 and 17 respectively. A party may before or during arbitral proceedings or at any time after the making of the arbitral award but must be before it is enforced can apply to a court for seeking interim measures and protections, including interim injunctions, under Section 9 of the Act.

The Arbitral Tribunal, in accordance with Section 17, can also provide with interim measures of protection or ask a party to provide proper security in connection with the matter of the dispute, as it found appropriate, during the course of the arbitral proceedings. However, the powers of the Arbitral Tribunal were narrow, as compared to the powers of the court under Section 9 of the Act. Applicability of the 2015 Amendment Act has made significant changes which will affect the grant of interim reliefs in arbitration proceedings which is commenced after October 23, 2015.

Remedies and Recovery of Costs

While the most common remedy sought and granted in international arbitration is the award of damages of course other remedies are also available. Parties in the international arbitration proceedings are usually able to seek the same form of relief as they would get in the court litigation, with the most common form of relief being compensatory damages with interest. Parties in international arbitration proceedings also are frequently awarded with reimbursement of their attorneys’ fees and some other arbitration costs.

While the amount of reimbursement is usually left to the discretion of the arbitral tribunal, a general guideline is that the recovery of costs and fees follows with the award in that if a party prevails on the merits of its claim or defence, it will recover its costs and fees in a similar percentage to its recovery or avoidance of damage.

Identifying the law that regulates the availability of remedies can be problematic. Some reviewers suggest that in civil law systems, remedies are considered part of the substantive law and will be regulated by the same law that regulates the substance of the parties’ dispute whilst in common law systems, remedies are a matter of procedure and are regulated by the law of the seat. Applying this method, if the seat of the arbitration is in a civil law country, the law regulating the substance of the parties’ dispute would apply to the question of remedies. By contrast, if there is a seat of the arbitration is in a common-law country, the tribunal would apply the law of that seat of the arbitration to determine the availability of remedies.

Unfortunately in the reality, position is not so clear-cut. It is not made clear whether common law courts will apply the law of the seat to all matters concerning remedies. For instance, English law treats the quantification of damages as procedural law, but the availability of the various heads of damage as substantive law. Furthermore, in the arbitration context, it is not totally clear whether the English Arbitration Act 1996 treats remedies as procedural or substantive; that the parties may agree the availability of the remedies suggests that it is substantive.

A tribunal is not obliged to apply the same approach as to choice of law issues as would be adopted by the domestic court located in a same jurisdiction as the seat. A tribunal may, for example, be conscious that the seat of the arbitration has been chosen specifically because it has no connection with either of the party or their contractual relationship, to provide a neutral venue. It may consensus with neither party’s expectations that the law of the seat should be applied to govern available remedies. Furthermore, the tribunal may be sensible of its obligation to render an enforceable award, and also it may be aware that applying the law of the seat could lead it to award the remedy that would not be enforceable at the one or more likely enforcement venues.

Challenge to an Award

Section 34 provides for the grounds and manner for challenge of the arbitral award. The time period for the challenging arbitral award is before the expiry of 3 months from the date of receipt mentioned in the arbitral award (and a further period of 30 days on the sufficient cause being shown for condonation of delay). If that period expires, then award holder can apply for execution of the arbitral award as a decree of the court. But as long as this period has not elapsed the enforcement is not possible. Under Section 34 of the Act, a party can challenge the arbitral award on the following grounds

  1. The parties of the agreement are under some incapacity;
  2. The agreement is void;
  3. The award contains decisions on matters which is beyond the scope of the arbitration agreement;
  4. The composition of the arbitral authority or the arbitral procedure was not as to the accordance with the arbitration agreement;
  5. The award has been suspended or set aside by a competent authority of the country in which award was made;
  6. The subject matter of dispute cannot be settled by the arbitration under Indian law;
  7. The enforcement of the award would be contrary to the Indian public policy.

Conclusions

Arbitral awards represent the conclusion of the arbitration proceedings began by the petition which are based on the arbitration agreement of the parties and eliminate the possibility that the issue to be resolved through the state courts. Arbitration awards are binding on each of the parties. Arbitral awards have the effect like a judgment (res iudicata) and are directly executable and it cannot be appealed. These Arbitral awards cannot be appealed because they are considered to be equal, or have the power of final awards as of the courts.

Arbitration of international commercial arbitration award shall be recognized in at least two states to permit the enforcement (execution) of the award, and it belongs to the state of an arbitral award (arbitration award belongs to the state where there is place of arbitration) and the State in which enforcement is sought of international commercial arbitration award. International unification of the law of arbitration would allow a greater faith for parties to choose arbitration as a way of resolving disputes between them, because recognition or award by any State shall not be put in question.

[1] STEVEN C. BENNETT, ESQ-ARBITRATION-essential concepts, NLP IP Company, American Lawyer Media, 2002, fq. 9

[2] “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—

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country

[3] 9 Ray Turner, Arbitration Awards- A Practical Approach, Blackwell Publishing Ltd, 2005,pg. 3

[4] 0 Arbitration Law of Kosovo, article 2

This article is authored by Nistari Sinha, Second-Year, B.A.LL.B student at Amity Law School, Chattishgarh.

Also Read – Settlement of dispute outside the court

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