Arbitration

Vivasvan Prakash and Shrey Uttam on Role of National Courts in International Commercial Arbitration

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INTRODUCTION

Indian judiciary has around 17000 professional and diligent judges however the system is under strain with almost more than 30 million cases in pendency leading to delays which are endemic and an unnecessary hurdle plaguing our system. On an average a commercial case in India takes around 5 to 15 years to reach its judgment stage. This complex legal mechanism along with delay in justice adversely impacts the ease of doing business in India. With rising Indian aspiration to become leading economy in Asia and subsequently to match the prowess of Chinese economy it is pivotal that an investor friendly atmosphere in form labor reforms, easy clearances and a mechanism which is effective to deal with any disputes was to be created. Indian state has taken concrete steps in past form of bring in special legislation known as Arbitration and Conciliation Act, 1996 which has seen subsequently amended in 2015. Further to make India an arbitration hub certain suggestion have been tabled in parliament in form arbitration and Conciliation (Amendment Bill) 2018, one of the key highlights of this bill are creation of an arbitration council for grading arbitration institutions. Minimum court inference and timely disposal of cases is the mantra to create business friendly environment

ROLE OF NATIONAL COURTS IN INTERNATIONAL COMMERCIAL ARBITRATION

The national court plays a vital role in international commercial arbitration in situations like when a contracting party tries to bring the dispute before the national court instead of taking the dispute before the arbitral tribunal as agreed by both of the concerned parties then national courts interfere for the sake of justice. An English Judge, Lord Mustill had compared the relationship between national courts and arbitrators to a relay race. As when the arbitration proceeding begins then the baton is in the hands of the national courts for enforcing the arbitration agreement however, when arbitrators takes over the burden then it keeps with himself till the passing of an award.

The role of national courts can be divided into three phases which have been reproduced below:

  1. At the beginning of the arbitration proceeding
  2. During the arbitration proceeding
  3. At the end of the arbitration proceedings

AT THE BEGINNING

Nowadays, whenever any party is entering into a contract then they are making sure that the dispute must be resolved through any alternative dispute mechanism and arbitration is one of them. It is done to cut short the time period and amount of money which are very less as compared to litigation. When arbitration proceeding starts then there are minimum three situations where the court’s interference is extremely important. They can be:

  1. Enforcement of the arbitration agreement
  2. Establishment of the arbitral tribunal/appointment of arbitrators
  • Challenges to the jurisdiction

Enforcement of arbitral agreement

Considering a situation when a contracting party is trying to avoid the arbitral proceeding by initiating a court proceeding over the same dispute then court’s interference becomes important. As the power has been vested in the hands of the national courts through Article II of New York Convention and Article 8 of UNCITRAL Model Law however, as far as in Indian legislation is considered then it would be fruitful to see the provisions mentioned in the sections 8 and 45 of the Arbitration and Conciliation Act, 1996. All the provisions mentioned states the same that whenever, any such situation arrives then the national court will refer the party to arbitrator/arbitral tribunal as the case may be until or unless the court finds the agreement null or void.

Establishment of the arbitral tribunal/appointment of arbitrators

In a case, where any party is trying to sabotage the arbitration proceeding by not taking part at the initial stages of the proceeding as agreed in the agreement by both the parties that they will appoint the arbitrators or constitute the arbitral tribunal. Nonetheless, one the party is not doing so then in that case it has been clearly mentioned in the section 11 of the Arbitration and Conciliation Act, 1996 that the national court can interfere in such a situation and can appoint the arbitrators or constitute the arbitral tribunal[i].

Challenging the arbitral jurisdiction of the tribunal

There are other situations as well when the role of national courts becomes important and this is one of them. If any party is trying to challenge the jurisdiction of the arbitral tribunal then the same can be made only at the initial stage of the arbitral proceeding. One thing is very important to point here that in case any party gets success in challenging the jurisdiction of the arbitral tribunal then in that case, the whole proceeding of the arbitration gets terminated.

The whole discussion is being supported with the help of the UNCITRAL Model Law and Section 16 of the Arbitration and Conciliation Act, 1996. The decision on the issue of the jurisdictional challenge rests with the concerned national courts.

There are following grounds on which the jurisdiction can be challenged and the same have been reproduced below:

  1. On the existence of the agreement
  2. On the validity of the agreement
  3. On the scope of the agreement

ROLE OF NATIONAL COURTS DURING THE ARBITRATION PROCEEDINGS.

At this stage, the burden has been shifted to the arbitrators and now it is the responsibility of the arbitrators to conduct the arbitration proceedings. Nevertheless, there have been situations where the interference of the national courts becomes very important for the sake of proper and fair arbitration proceeding. During the arbitral proceeding, whenever any evidence is to be recorded or an order needs to be made for the preservation of the property then in those situations the role of national courts are crucial. The same has been recognised in the Arbitration and Conciliation Act, 1996 through the section 9 which heads Interim Measures of Courts[ii].

ROLE OF NATIONAL COURTS AT THE END OF THE ARBITRATION PROCEEDINGS

This is the last of the arbitration proceeding and at this stage, the burden again goes back to the national courts. Here, the arbitrators have already performed their duties by passing an arbitral award after conducting a fair and proper arbitration proceeding but like litigation in arbitrations also there is an aggrieved party and in order to provide justice to the aggrieved one the Arbitration and Conciliation Act, 1996 provides for the setting aside of the arbitral award under section 34 of the said Act.[iii]Not only has this, the national courts also played an important role at the stage of enforcement of the arbitral awards and the same has been provided under section 48 of the said Act[iv].

Along with the above said duties, the national courts have another role i.e., the national courts also play a significant role for the correctional proceedings as provided under section 33 of the said Act. The role of the national courts end at this stage and the whole burden then shifts to the appellate court in case there is any appeal as may be provided in the said Act.

CONCLUSION

The whole purpose of the arbitration is to lessen the economic burden of the parties as litigation is very costly and reduces time as already mentioned above. But at some stages the role of national courts is very important for the sake of proper and fair proceedings. Due to the said very reason the UNCITRAL Model Law and New York Conventions and National law have provided various stages when the national courts have given power to interfere in the proceedings of the arbitration proceedings. Although it has been clearly kept in mind that there should be no overreaching of the judiciary on the arbitration then it would create a problem at the arbitration proceedings. Keeping the problems in mind the legislators have come up with an amendment in the year 2015 which clearly restricts the role of national courts at different stages such as by using words like ‘prima facie’ in section 11 of the Act and moreover, the courts have also restricted the scope after interpreting the provisions correctly and resolved the issue of applicability of Part I in foreign awards in BALCO’s Case[v]which is the landmark judgment in arbitration jurisprudence. Therefore, it can be said that the role played by national courts is important but the same must be done with some restrictions.

[i]See Section 11 of the Arbitration and Conciliation Act, 1996

[ii]See Interim measures given under section 9 of the Arbitration and Conciliation Act, 1996.

[iii]Section 34 of the Arbitration and Conciliation Act, 1996

[iv]Section 48 of the Arbitration and Conciliation Act, 1996

[v]Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, (2012) 9 SCC 552.

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