This article is written by Vidhur Sanjeev Malhotra, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from Lawsikho.
Arbitration is an alternative dispute resolution process that helps resolve conflicts between two private parties outside the court machinery by submitting to one or more arbitrators who make a binding decision on the dispute. Arbitration is conducted pursuant to an arbitration agreement or an arbitration clause in an agreement governing the commercial relationship between the parties. Arbitration is seeing an exponential gain in the present times as most domestic and international businesses engaged in commercial dealing’s resort to arbitration for resolving their disputes. Arbitration clauses have now become a standard feature in contracts between business entities because resolving disputes takes place much faster and in a confidential manner without the need to go to court.
In international as well as domestic business entities; disputes are inevitable and to resolve these disputes often parties approach Arbitral institutions. In institutional arbitration, both parties submit their disputes to these institutions and they provide smooth administration and supervision of the dispute resolution process and arbitrate disputes according to their institutional rules with the consent of the parties. Institutes also maintain high quality of fairness and expertise by providing an expert panel of arbitrators based on the subject matter of the disputes. This makes institutional arbitration more suitable for business entities.
What is American Arbitration Association
American Arbitration Association (AAA) is an arbitral institution that is focused on providing fair, effective, efficient and economical methods of dispute resolution through a solution-oriented service. It is the world leader in conflict management with core values of integrity and service. The AAA was founded in 1926, with the goal of helping to implement arbitration as an out-of-court solution to resolving disputes. Many business entities approach this organisation in order to get their disputes resolved through its Arbitration or Mediation rules. The American Arbitration Association has administered 6,329,324 cases since the year 1926 and have resolved 289,221 cases in the year 2020 (as of September, 2020). It is known for the high quality of its panels of arbitrators and mediators, including a large, complex case panel.
The AAA’s Arbitration and Mediation procedures provide a streamlined, cost-effective arbitration process and also given an option for mediation in cases having claims more than $75,000. It also provides access to dispositive motions, greater clarity concerning the exchange of information between the parties, inclusion of emergency relief to allow for temporary injunctions, a higher focus on arbitrators effectively managing the process with additional tools and the right for parties to seek sanctions for abusive conduct and for arbitrators to deal with non-paying parties. AAA is trusted by a lot of businesses and have handled various disputes successfully. The statistics can be accessed here.
What is International Centre for Dispute Resolution
Parties based in America or from any other part of the world can resort to this organisation for the administration of their disputes. The American Arbitration Association handles the disputes of parties from America, while it has a separate International division called the International Centre for Dispute Resolution (ICDR) which provides dispute resolution services to parties outside America and in matters involving cross-border transactions.
The ICDR established in 1996, provides a top-quality service platform of the AAA with a different international operational structure that includes rules, arbitrators, mediators, administration, case-management staff and executive management. The professionals working at ICDR are fluent in various business languages and are multilingual professionals that makes it easier to manage and assist cases of parties all around the globe. In an agreement where two international parties have agreed to arbitrate disputes through International Centre for Dispute Resolution (ICDR) or the American Arbitration Association (AAA) without stating any particular rules, the arbitration shall be administered in accordance with the ICDR rules. The ICDR offers modern international dispute resolution procedures, a highly experienced and trained panel of international arbitrators that includes arbitrators from all over the world. It also offers a broad network of cooperative agreements and a state-of-the-art administrative technology.
In resolving cross- border conflicts various international parties resort to arbitration. Many nations worldwide including India are a signatory to the New York convention and recognize foreign awards.
ICDR rules applicable to an Indian party
When an Indian party through its Arbitration clause refers and agrees to resolve their disputes through the American Arbitration Association, the dispute shall be governed by the International Arbitration rules of ICDR also known ICDR rules. The Arbitration proceedings under these rules will be administered by the International Centre for Dispute Resolution or by an individual appointed by them. Further in this article, I will be discussing the procedural aspect of resolving disputes under these rules and how will an indian party’s procedure for resolving disputes look like in a step-by-step process
Step 1: For any party who wants to initiate arbitration proceeding under these rules; the Claimant (initiating party) is required to send a notice of arbitration to the Administrator and also at the same time to the Respondent (opposite party).
Step 2: The arbitration will commence on the date when the Administrator receives the Notice of Arbitration. The ICDR also has a system of online filing to initiate arbitration at www.icdr.org. The contents which needs to be included in the Notice of Arbitration can be seen under Article 2 of these rules.
Step 3: Once the Administrator receives the receipt of the Notice of Arbitration, he shall acknowledge the commencement of arbitration by communicating it with all the parties.
Step 4: The respondent is required to make a written reply or counterclaim to the notice of Arbitration by the claimant within 30 days from the date of commencement of arbitration. This reply shall be made to the claimant, to any other parties and to the administrator and shall include the same contents as that of the Notice of Arbitration.
Step 5: The claimant shall then within 30 days submit a counterclaim to the respondent, administrator or the other parties.
Step 6: The administrator in accordance to Article 5 of these rules can also invite parties to mediate the dispute and unless the parties decide otherwise, the mediation shall proceed concurrently with the arbitration proceedings.
Step 7: Before the constitution of the Arbitral tribunal, the parties under Article 6 can app for an emergency relief by explaining the nature and the reason for seeking such a relief and its application must be submitted along with the submission of the Notice of Arbitration to the Administrator and to all the other parties. This interim relief or award passed by the emergency arbitrator will be binding on the parties.
Step 8: The number of Arbitrators presiding over the arbitral proceedings shall be in accordance with the agreement between the parties. If not, then the administrator will appoint one or more odd number of arbitrators depending upon the complexity of the case. The procedure for appointment of arbitrators may be agreed by the parties, in the absence of an agreed procedure between the parties the administrator will look after the appointment with the consent of all the parties to the case by suggesting a list of names among which parties will be given 15 days to select an arbitrator.
Step 9: The arbitral tribunal has the jurisdiction to determine the scope, existence or the validity of the arbitration agreement. The arbitral tribunal may conduct the arbitration proceedings in the manners it considers appropriate provided it shall be subject to these arbitration rules and the parties are treated with equality.
Step 10: Immediately after the tribunal is constituted, the parties will be called for a preliminary hearing to discuss the substantive issues of the case and procedural matters, such as exchange of information, witness lists, and decide the dates and timeframe of the proceedings. A proper schedule/framework is established as to how the proceedings will go ahead. After the preliminary hearing, the parties meet to exchange or present information and exchange the required documents. The parties shall work efficiently in accordance with the schedule without causing unnecessary delay. The tribunal shall manage the information exchange between the parties.
Step 11: According to Article 23 of the rules, the arbitral tribunal shall manage the hearings of the parties in accordance with the schedule made in the preliminary hearings. The parties shall be intimated about the dates, time and the place of the hearing 15 days in advance. The tribunal also indicates the parties the further details in relation to the hearing like the witness lists who shall be examined and if written evidence is to be produced by the parties.
If the party fails to submit an answer or counterclaim the arbitral tribunal may proceed with the arbitration. Later, if no further submissions are to be produced by the parties or if the tribunal is satisfied the tribunal may close the hearing.
Step 12: Upon the closing of the hearing, the award shall be made in writing by the arbitral tribunal within a period of 60 days from the date of the closing of the hearing unless otherwise agreed by the parties or specified by law.
Step 13:’ The award shall be signed by the arbitrators and it must state the date on which the award was made and also the place of arbitration in accordance to Article 17 of the rules. It is important that the award must remain confidential and shall be made public only upon the consent of the parties.
Step 14: Any party to the dispute, within 30 days after receiving the receipt of the award along with a notice to the other party can request to the arbitral tribunal for any typographical or clerical error in the award or request for an additional award; after-which the tribunal may have 30 days to act on to the request made by the party. A brief Arbitration road-map of the American Arbitration Association (AAA) can be accessed here for more information.
The parties can also add an additional party to arbitration by submitting a notice of arbitration against that party to the Administrator. Unless all the parties otherwise agree, no additional party will be joined. The parties in accordance with Article 9 of the rules may amend or supplement its claim, counterclaim or defence unless the arbitral tribunal states it to be inappropriate. Article 10 defines the form of transmission of the notices by one party to the administrator and the other party.
Can the appointment of an arbitrator be challenged
A party can challenge the appointment of the Arbitrator by issuing a written notice to the Administrator within 15 days after being notified of the appointment within 15 days from any circumstance of impartiality or independence may arise. If any one party does not concur to the challenge of the appointment of the arbitrator, the administrator may have the sole discretion to make a decision on the challenge.
How is the place of arbitration decided
If the parties have not agreed upon the place of arbitration, the administrator may initially determine the place of arbitration after-which the Arbitral tribunal may finally decide the place within 45 days of its constitution. If the parties have not agreed upon the language of the arbitration proceedings, the language in the documents relating to the arbitration agreement shall be considered.
Sample clauses used in international disputes
The arbitration clause in the agreement between international/indian parties that refers to administer the disputes under the rules of AAA or ICDR; the clause authorizes its administration by AAA’s international division which is the ICDR. This is given under Article 1 of the International arbitration rules of the ICDR. The sample clauses used by international parties, referring to AAA and ICDR are as follows:
- Any controversy or claim arising out of or relating to this contract shall be determined by arbitration in accordance with the International Arbitration Rules of the International Centre for Dispute Resolution.
For strategic or long-term commercial international contracts, the parties may wish to provide a “step” dispute resolution process encouraging negotiated solutions, or mediation in advance of arbitration or litigation. A model step clause and mediation clause follow.
- In the event of any controversy or claim arising out of or relating to this contract, the parties hereto shall consult and negotiate with each other and, recognizing their mutual interests, attempt to reach a solution satisfactory to both parties. If they do not reach settlement within a period of 60 days, then either party may, by notice to the other party and the International Centre for Dispute Resolution, demand mediation under the International Mediation Procedures of the International Centre for Dispute Resolution. If settlement is not reached within 60 days after service of a written demand for mediation, any unresolved controversy or claim arising out of or relating to this contract shall be settled by arbitration in accordance with the International Arbitration Rules of the International Centre for Dispute Resolution.
- In the event of any controversy or claim arising out of or relating to this contract, the parties hereto agree first to try and settle the dispute by mediation administered by the International Centre for Dispute Resolution under its rules before resorting to arbitration, litigation, or some other dispute resolution technique.
For further reference to a sample guide for drafting a dispute resolution clause and different types of clauses provided by the American Arbitration Association can be accessed here.
An Indian party while handling a dispute where the clause refers to American Arbitration Association (AAA) should follow the ICDR rules. AAA and the ICDR have been extremely successful in resolving disputes of various businesses and even cross-border disputes. Arbitration and especially institutional arbitration have now become a boon for huge commercial as well as other parties to resolve their disputes smoothly and in a fast-track manner.
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