Rajdip Das
Techno India University
Abstract
Arbitration is a method used for resolving conflicts without involving the court system. This study focuses on analyzing and comparing arbitration laws in India, the UK, the US and the UNCITRAL Model Law. The research will delve into the development of arbitration laws in India particularly looking at the Arbitration and Conciliation Act, 1996. It will also address some challenges faced by arbitration in India such as case delays and judicial interference. Additionally, comparisons will be made between the UK and the USA arbitration laws known for their processes. The comparative analysis will cover topics like enforcing Unilateral Arbitration agreements, legislation governing arbitration including amendments, arbitrability of disputes non-arbitrable matters and key legal decisions affecting the law. Furthermore, it will assess the effectiveness of the Model Law which provides guidance for countries that are developing their own arbitration regulations. This study aims to offer insights into arbitration laws across these regions.
Furthermore, the research explores how international arbitrations are managed by examining how local laws align with agreements and best practices. It also looks into issues related to arbitrability in regions and recent developments, in those areas. By examining these elements, the research aims to reveal commonalities, variations and new patterns, in arbitration rules, among nations. The main objective of this research is to offer an understanding of the arbitration regulations, in these areas assess the advantages and disadvantages of each nation’s system and present viewpoints for policymakers, business leaders, experts and individuals involved in trade and conflict resolution. The research strives to act as a guide for everyone engaged in settling disputes through arbitration offering a blueprint, for creating arbitration structures in various regions.
Keywords: UNCITRAL Model Law, Arbitration laws, Arbitrability, Unilateral Arbitration Agreements
Introduction
According to the data released by the Delhi Arbitration Centre in the year 2023, there were 9707 arbitration cases were listed before the arbitration Centre, among them 8153 cases were heard. There has been a consistent increase in the number of cases in the past few years.[1] According to Statista’s data, more than 48% of the arbitration cases remained unresolved for over a year. Additionally, 23% of the cases remained unresolved for a period of 10 to 20 years.[2] As per the data of the Delhi Arbitration Centre, 897 arbitration cases were disposed of in the year 2023. This shows that Indian arbitration laws require many reforms including a faster disposal mechanism. In recent years arbitration has emerged as one of the popular dispute resolution mechanisms internationally to avoid litigation as far as possible. The main topic of discussion in this article is a comparative analysis of the arbitration laws of India, the UK, the USA, and the UNCITRAL Law. The article aims to identify the benefits and drawbacks of each country’s arbitration system.
Research Methodology
The research paper discussed is built on an examination of data gathered from origins, such, as governmental and non-governmental statistics, legal precedents and academic writings. This information has been meticulous. Explained to assess the frameworks, court decisions, recent advancements and consequences in the realm of arbitration practice. The paper references an array of materials to provide a perspective on the current status of arbitration practices highlighting both their advantages and drawbacks. Through this inspection, the paper aims to illuminate the challenges confronting the field of arbitration and propose suggestions, for enhancing its efficacy moving forward.
Review of Literature
Arbitration has become a widely accepted method for deciding commercial disputes globally. It offers numerous advantages such as confidentiality and flexibility and the Arbitrating parties possess the option to select arbitrators who have the specialized knowledge. There are numerous studies that analyze and compare the Arbitration laws in India with international Arbitration laws. “Arbitration Procedures and Practice in the United States: Overview by Hioureas, Younger, Schimmel, Bard, Reiner, Nicolas and Figueroa, F. Hoag LLP” has briefly explained the legal process of Arbitration and their application in the USA. “Arbitration procedures and practice in the UK (England and Wales): Overview by Williams, Lal and Hornshaw, Akin Gump LLP” has briefly explained the arbitration procedures and their application in the United Kingdom. “In brief: arbitration agreements in the United Kingdom by Macfarlanes LLP” has briefly explained which legal disputes are possible to resolve through Arbitration and also outlined the conditions that would make an agreement valid for the purpose of arbitration.
Arbitrability of Dispute
India
India has adopted the UN Model Law relating to arbitration and thereafter passed the Arbitration and Conciliation Act, 1996. Therefore, according to the UN Model law in India general rule of law is that any disputes are in nature. However, several matters are not arbitrable and required to go through litigation.
In a landmark judgment of Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1[3] the Supreme Court laid down the following four-fold test to decide whether a matter comes under Arbitration. The Supreme Court held that in the following cases a dispute will not be arbitrable:
- Arbitration cannot be used to resolve disputes that are reserved for adjudication by public courts. These matters are not arbitrable.
- Disputes that involve rights and obligations under special statutes where parties enjoy statutory protection, such as disputes under rent control laws are not arbitrable.
- Disputes that are of significant public interest and require the attention of the judiciary.
- Disputes related to violation of rights in rem are non-arbitrable.
The above list is not exclusive in nature in the above judgment the Supreme Court laid down the guidelines on the basis of which it will be determined whether a dispute is arbitrable in nature or not.
United Kingdom
United Kingdom has not adopted the UN Model Law relating to arbitration. The Arbitration Act 1996 is the statutory law that governs arbitration in the United Kingdom. However, the statutory law governing arbitration has been drafted keeping in mind the UN Model law therefore both laws are similar in nature. Therefore, the general rule is that any dispute is arbitrable in nature. However, several matters are not arbitrable and required to go to court.
In the landmark case of Clyde & Co LLP v Bates van Winkelhof [2011] EWHC 66[4], the Supreme Court of the United Kingdom declared that disputes involving the interpretation of statutory rights and obligations of a statute are generally non-arbitrable in nature.
In addition to the above the following matters are also not arbitrable:[5]
The criminal courts have exclusive authority over criminal offences and disputes. The criminal disputes cannot be resolved through arbitration. Most Family law matters, such as divorce and child custody disputes, are typically resolved through family courts and are not arbitrable. Consumer disputes for sums under £5,000 are not arbitrable as they fall under consumer protection laws and Disputes involving mandatory law or public policy are usually non-arbitrable.
United States
UNCITRAL Model Law related to arbitration has not been implemented by the USA. However, several of its states have implemented the UN Model law in the state jurisdiction. In the USA Federal Arbitration Act (the “FAA”) is the statutory federal law that governs arbitration. However, several provisions of the FAA are influenced by the UN model law.
The Central Act doesn’t put any restrictions regarding whether a dispute can be resolved through Arbitration. Therefore, most of the disputes can go through arbitration United States. The US courts have always followed the minimum intervention policy therefore the courts have historically not limited the arbitrability of a dispute.
In the case of AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), [6] the central issue was whether the state could restrict certain arbitration agreements that prevent class-action lawsuits on the grounds that such agreements were unfair. The court decided that the FAA requires that agreements that are made for Arbitration are binding, and enforceable and take precedence over state laws even if the state law prohibits arbitration. The Supreme Court of the U.S.A. has decided that if a state law contradicts the FAA, the FAA will be followed. The Court emphasized enforcing private agreements related to arbitration as per their conditions and reversed the ruling made by the district court.
The FAA will be followed if it conflicts with state law, according to the recent decision of the Supreme Court of the U.S.A. The Court emphasized on the importance of upholding private arbitration agreements as per their terms and overturned the ruling made by the district court.
Arbitration and Conciliation Act in India
This Act governs both domestic arbitration in India in addition also international arbitration in India and is the primary legislation. Its objective is to establish an equitable and fast environment for resolving disputes. The Act came into force on January 25, 1996. The Act provides the method for appointing the arbitrator and her duties and also emphasizes that the arbitrator shall always maintain neutrality. The sections for the grounds of challenging arbitral awards are present in the Act.
Amendments
The Act has been amended several times to make sure that the arbitration cases are dealt with speedily and to make the arbitration process simpler. The below are the significant Amendments made in the Act to date:
The 2019th Amendment introduced several significant changes in the Act such as the establishment of an Independent entity called the Indian Arbitration Council that aims to promote arbitration.[7] The Amendment Act of 2021 granted courts the power to unconditionally stay the implementation of an arbitral award if there was a fraudulent influence while drafting the arbitration agreement.
Arbitration Laws in the UK
Principle Legislation
In the United Kingdom, the primary law that governs arbitration is the Arbitration Act, 1996. The Act gives a framework that governs arbitration both nationally and internationally. The Act was enacted on October 30, 1996, and it received Royal assent on 17 June, 1996. As the United Kingdom did not adopt the UN Model Law on arbitration, this Act is different in many ways from the UN Model Law. [8]
The Act is pro-arbitration, granting parties the freedom to choose the arbitration procedure. This includes articles regarding the capacity of the tribunal, the process, and grounds for setting aside awards.
Amendments
The Act has undergone several amendments over the years to keep up with the latest changes. The final report regarding possible reforms to the Act was published by the Law Commission of England & Wales on September 6, 2023. The below are the significant Amendments introduced by the Arbitration Amendment Bill 2023:[9]
In the non-presence of a specified governing law for the arbitration agreement, it will be presumed that the law of the arbitration seat is the governing law. The bill proposes to provide express power to the arbitrators to decide a case on a fast-track basis. The bill proposes to change how courts handle disputes over the authority of a tribunal to issue rulings under the Act with the aim is to avoid a re-hearing of the case on jurisdictional issues that were already addressed by the tribunal.
Case Law
In the case of H v G [2022] HKCFI 1327[10],famously known as the Hong Kong Case, the Fiona Trust doctrine was not applicable. Both parties agreed to a building contract with an arbitration clause but excluded warranty disputes from the agreement. As a result, this intention displaced the Fiona Trust doctrine. The court recognized that the parties’ specific intention to not include certain specific disputes from arbitration was evident. Consequently, the doctrine isn’t applicable to those specific disputes. This decision highlights the need to consider the parties’ actual intentions.
Arbitration Laws in the USA
Principle Legislation
- Federal Legislation:
In the US, the Central law that governs arbitration is the FAA. The FAA was passed in 1925.[11] The Act aims to reduce judicial intervention. The pro-arbitration stands have been upheld by the US judiciary several times and it has developed arbitration in the US. FAA regulates both international and domestic arbitration. After the recent amendments in FAA now evidence related to arbitration can be collected from non-parties situated in the US. This tool has expanded the range of findings in arbitration proceedings[12]
- State Legislation
In the US, the FAA is the main law that governs Arbitration. However, there are also state laws that govern arbitration in the US. The state arbitration laws are only applicable to the jurisdiction of that state. In case there is any contradiction between state laws and the FAA the FAA will supersede the state laws.
UNCITRAL Model Law
UNCITRAL’s Model Law was adopted in 1985. It is designed as a general model for the legislative drafting of laws that govern international commercial arbitration. It promotes compliance with its principles by country signatories enhancing certainty and uniformity in international commercial arbitrations.
TheUN Model Law covers vital issues relating to recognizing and executing the arbitration agreements, organizing the process of conducting arbitrations, and reasons based on which it is possible to challenge or enforce an award. In comparing the UN Model Law with the laws of India. In India, whether a dispute can be resolved through Arbitration depends on its civil nature and the existence of a prior agreement to refer it to arbitration. English law lacks an express definition of arbitrability, relying on case law to determine, whether a dispute can be determined through Arbitration.[13]
Enforceability of Unilateral Arbitration Agreement
India
Castrol India Ltd. v. Apex Tooling Solutions, 2015, 1 LW 961 (DB).[14]
The central legal question to be pronounced by the High Court of Madras was if a dispute resolution clause in the agreement that allows only one to choose between civil proceedings or arbitration is enforceable. The civil suit’s stay application was dismissed by the court and the parties were directed to arbitration. The validity of unilateral Arbitration clauses was upheld by the court. The court also discussed international practices regarding arbitration clauses and held that mutuality is not a necessary condition for such clauses to be valid.
In another case,It was decided that in this case clause 13 of the contract bars the plaintiff from enforcing their rights through ordinary courts or alternative dispute resolution methods. It was held that agreements that are void and cannot be made enforceable as they impose an absolute bar on the buyer from enforcing rights.[15]
There is an ongoing dispute among Indian courts concerning the enforceability of unilateral arbitration agreements. While some courts have supported the validity of such agreements, others courts have deemed them to be unjust and disregard public policy.
United Kingdom
Mauritius Commercial Bank Ltd v Hestia Holdings Ltd and another [2013] EWHC 1328 (Comm))[16]
The England Court confirmed that arbitration agreements with unilateral jurisdiction clauses are valid. Such clauses permit one party to initiate legal proceedings in a certain jurisdiction, while the other party has the discretion to start legal proceedings elsewhere. The court held that such clauses are valid under Common law. The court’s decision upheld the enforceability of such jurisdiction clauses.
United States
E-Z Cash Advance, INC. vs. Harris (2001)[17]
The court decided that a valid agreement must always be reciprocal, If a contract fails to provide mutual obligations, it is considered to be null and void because there is a lack of reciprocity. The court highlighted the importance of ensuring mutuality of consideration in arbitration agreements. The court decided that without mutual obligations on both parties, an arbitration clause may be deemed unenforceable.
Recent Developments
Recently, the Diversity and Inclusion policy has been implemented by The New York International Arbitration Center, and measures have been taken to enhance diversity on its Board and Executive Committee.[18] Similarly in India, The MCIA Annual Report 2023 shows that 47% of all arbitrators appointed by MCIA were women. The data shows that measures have been taken to enhance diversity in arbitration centres.[19]
In a recent case, the Delhi High Court held that when engaging in commercial transactions, Sovereign Immunity cannot be claimed by a foreign state since it is not carrying out its functions in a Sovereign capacity but, rather, as a ‘Commercial Entity’. In addition, when a State consents to participate in a business transaction that includes an agreement of arbitration, the government forfeits its ability to claim immunity from the enforcement of the arbitral decision.[20] In addition to the recent developments, many jurisdictions have allowed virtual hearings of arbitration disputes after the COVID-19 pandemic.
Suggestions
Nations shall clearly define arbitrability in their Arbitration Law, it reduces the requirements for interpretation by courts. Nations shall provide Fast-track arbitration processes in case of emergencies. Nations shall promote awareness of arbitration so that the burden on courts can be reduced. Nations shall authorize a regulatory body to continuously amend arbitration laws to align the laws with international standards and recent requirements. Legislative clarity shall be provided on the enforceability of unilateral arbitration agreements to remove ambiguity. Virtual hearings and electronic case management systems shall be adopted to reduce the backlog of cases and to promote transparency. Nations shall promote diversity among the Arbitration Centres to increase the representation of marginalised communities. Nations shall incentivize private sector involvement in arbitration centre management for more efficient and specialized services. Nations shall also incorporate arbitration into legal education to increase competence in handling arbitration cases
Conclusion
In summary, this article highlights the differences between arbitration laws in India, the UK, and the USA. It focuses on the legal frameworks, court rulings, and recent developments of law in each nation. While India has made some progress in developing its arbitration procedures by reducing judicial contravention. India requires investment in infrastructure and technology to expedite the disposal of arbitration cases. In contrast, the UK, and the USA have already taken a flexible approach to arbitration with arbitration regulations in place. India shall reduce the number of non-arbitrable subject matters to reduce the burden of cases on the judiciary. For example, India could allow arbitration in marital disputes to reduce the time to decide the case. This approach will carve a way for amicable settlements of such disputes and will allow courts to focus and decide on important matters. These recommendations aim to enhance the effectiveness, efficiency, and inclusivity of arbitration processes globally. By implementing these measures, nations can optimize their arbitration framework despite differences in jurisdiction, we observe that there are several common provisions in the laws such as party autonomy and enforceability of arbitration agreements.
[1] Delhi International Arbitration Centre: Statistics, Delhi International Arbitration Centre,
https://dhcdiac.nic.in/statistics-2/ (last visited Mar 16, 2024).
[2] Manya Rathore, India: Age-wise pendency of arbitration cases 2022 Statista (2023), https://www.statista.com/statistics/1356526/india-age-wise-pendency-of-arbitration-cases/#:~:text=The%20data%20for%202022%20shows,for%20ten%20to%20twenty%20years (last visited Mar 16, 2024).
[3] Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1
[4] Clyde & Co LLP v Bates van Winkelhof [2011] EWHC 66
[5] Andy Mather et al., In brief: Arbitration agreements in United Kingdom Lexology (2023), https://www.lexology.com/library/detail.aspx?g=cbe4ae36-7095-4b65-b992-4dcb96c39d80 (last visited Mar 16, 2024).
[6] AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)
[7] Arbitration and conciliation (amendment) act, 2019, https://legalaffairs.gov.in/sites/default/files/arbitration-and-conciliation(amendment)-act-2019.pdf (last visited Mar 16, 2024).
[8] Arbitration Act 1996, Legislation.gov.uk, https://www.legislation.gov.uk/ukpga/1996/23/enacted (last visited Mar 16, 2024).
[9] Chloe Edworthy Jonathan Pratt, Arbitration bill introduced to Parliament MACFARLANES, https://www.macfarlanes.com/what-we-think/in-depth/2023/arbitration-bill-introduced-to-parliament/#:~:text=This%20amendment%20will%20ensure%20that,agreement%20and%20separability%20will%20apply (last visited Mar 16, 2024).
[10] H v G [2022] HKCFI 1327
[11] Federal Arbitration Act, Legal Information Institute, https://www.law.cornell.edu/wex/federal_arbitration_act#:~:text=The%20Federal%20Arbitration%20Act%20is,the%20arbitration%20agreement%20is%20valid (last visited Mar 16, 2024).
[12] 28 U.S.C. § 1782
[13] Diganth Raj Sehgal, Analysing the law of International Commercial Arbitration in India W.R.T. the UNCITRAL Model Law Amendment, 2006 iPleaders (2021), https://blog.ipleaders.in/analysing-law-international-commercial-arbitration-india-w-r-t-uncitral-model-law-amendment-2006/ (last visited Mar 16, 2024).
[14] Castrol India Ltd. v. Apex Tooling Solutions, 2015, 1 LW 961 (DB)
[15] Emmsons International Ltd. vs Metal Distributors (UK) and ANR. on 7 January 2005, Indian Kanoon, https://indiankanoon.org/doc/1080027/ (last visited Mar 16, 2024).
[16] Mauritius Commercial Bank Ltd v Hestia Holdings Ltd and another [2013] EWHC 1328 (Comm))
[17] E-Z Cash Advance, INC. vs. Harris (2001)
[18] Arbitration Procedures and Practice in the United States: Overview, Foley Hoag, https://www.foleyhoag.com/getattachment/1204351c-9c78-40ba-a061-6e9b7a85aafb/Foley-Hoag-Product-Liability-Update-January-2023.pdf?lang=en-US (last visited Mar 16, 2024).
[19] MCIA Annual Report 2020, Mumbai Centre for International Arbitration, https://mcia.org.in/wp-content/uploads/2016/05/Annual-Report_2020.pdf (last visited Mar 16, 2024).
[20] KLA Const. Technologies Pvt. Ltd. v. The Embassy of the Islamic Republic of Afghanistan, AIRONLINE 2021 DEL 1605