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The term "Alternative Dispute Resolution (ADR)" is often used to describe a wide variety of dispute resolution mechanisms
that are short of, or alternative to, the full-scale court process. The very concept of Alternative Dispute Resolution (ADR)
and its spirit emanates to find a better, and more wholesome collaborative method of resolving disputes. 'ADR' refers to the
process, other than judicial determination, in which an impartial person assists those in a dispute to resolve the issues
between them. The most commonly known dispute resolution methods are: Arbitration. Conciliation, Mediation &
Negotiation.
Advantages of ADR
• Dispute resolution through ADR mechanism is generally faster and less expensive. The disputants, rather than being
run by lawyers, judges, and the state base it on more direct participation. In most ADR processes, the disputants
outline the process they will use and define the substance of the agreements. This type of involvement is believed to
increase people's satisfaction with the outcomes, as well as their compliance with the agreements reached.
• Most ADR processes are based on an integrative approach. They are more cooperative and less competitive than
adversarial court-based methods like litigation. For this reason, ADR tends to generate less ill will between parties.
• In fact, participating in an ADR process will often ultimately improve, rather than worsen, the relationship between
the disputing parties. This is a key advantage in situations where the parties must continue to interact after the
settlement is reached.
Disadvantages of ADR
• Critics of ADR mechanism have concerns about the legitimacy of ADR outcomes, charging that ADR provides
"second-class justice."
• Some critics believe that ADR encourages compromise. Compromise can be a good way to settle some disputes, but
it is not appropriate for others. In serious justice conflicts and cases of intolerable moral difference, compromise is
simply not an option because the issues mean too much to the disputants.
• ADR settlements are private and are not in the public record or exposed to public scrutiny. This could be a cause for
concern in some cases.
MEDIATION - ARBITRATION - LITIGATION: A COMPARATIVE NOTE
• Arbitration and mediation are similar in that they are alternatives to litigation, or are sometimes used in
conjunction with litigation to attempt to avoid litigating a dispute to its conclusion. Both arbitration and mediation
employ a neutral third party. Both can be binding; however, it is customary to employ mediation as a non-binding
procedure and arbitration as a binding procedure.
• Arbitrators generally act similar to a judge and make decisions about evidence and give written opinions,
which can be binding or non-binding. Although arbitration is sometimes conducted with one arbitrator, the most
common procedure is for each side to select an arbitrator and those two arbitrators select a third arbitrator. The
dispute is then presented to the three arbitrators chosen, with majority of the arbitrators rendering a written
decision.
• Mediation, on the other hand, is generally conducted before a single mediator who does not judge the
case but helps to facilitate a discussion and eventual resolution of the dispute. Mediation enjoys a great success
rate partly because the parties are brought together in a neutral environment where they can freely and
confidentially present their position in front of a neutral third party who then attempts to limit the issues and put
them in perspective. Participants often feel much better after having an opportunity to get things "off their chest",
and also benefit from hearing the other party's point of view, because as they say, "there are always two sides to a
story."
• Arbitration offers definite advantages, compared to litigation. Arbitration is very informal whereas the
court procedures are formal, rigid and fixed. One of the main advantages of arbitration is that depending upon the
nature of the dispute; a tribunal can be selected without the intervention of expert lawyers, thus saving time and
money.
• In conclusion, the use of mediation is an attempt by society to get back to the old traditional ways of resolving
disputes, where people attempt to resolve their differences between themselves rather than relying on the judicial
system. Mediation is highly effective, and while it has been under-utilized for quite some time, it has now become
a permanent part of the litigation landscape. The uses of pre-litigation mediation will no doubt become
commonplace.
TYPES OF ARBITRATION: Domestic Arbitration, International Arbitration, Ad hoc Arbitration, Institutional
Arbitration,
Statutory Arbitration, Expedited Arbitration, Hybrid Arbitrations, Flip-flop Arbitration.are different types of arbitrtion
DEFINITION OF ARBITRATION
As per Section 2(1) (a) of the Act, "arbitration" means any arbitration whether or not administered by the permanent
ALTERNATIVE DISPUTE RESOLUTION / BUSINESS LAW / MBA / GROUP F
arbitral institution.
As per Section 2(1) (f) of the Act, "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 where at
least one of the parties is -
• an individual who is a national of, or habitually resident in, any country other than India; or
• a body corporate which is incorporated in any country other than India; or
• a company or an association or a body of individuals whose central management and control is exercised in any
country other than India; the Government of a foreign country.
ARBITRATION AGREEMENT
Arbitration agreement has been defined in Section 7 of the Arbitration and Conciliation Act, 1996 as an agreement by the
parties (two disputants) to submit to arbitration all or certain of the disputes which have arisen or which may arise in future
between them with regard to a defined legal relationship, whether contractual or not. The nature of such an agreement
would be voluntary and, however, it does not matter whether such dispute is a present one or pertaining to a future dispute.
However it is expected that an arbitration agreement is to be made with specific clauses, but no particular form of
arbitration agreement is prescribed under the Act. Thus, an arbitration agreement may be:
• in the form of an arbitration clause in a contract, or
• in the form of a separate agreement.
The terms of an arbitration agreement, which must be very clear and specific, may be, in the form of clauses and expression
used in an arbitration agreement: such as "arbitrator", "arbitration" and "arbitral tribunal" should be incorporated or be
definitive. (Section 7(2-5)).
Arbitration Clauses
The parties to a contract may either enter into a separate arbitration agreement or may agree upon an arbitration clause, in
the main contract/agreement itself. Generally, the latter course is adopted by most of the parties. Arbitration clause in an
agreement between the parties and is the starting point for an arbitration. An arbitration agreement may be contained in the
document evidencing the legal relationship or in the form of a separate agreement. The agreement to submit a matter to
the decision of a person will amount to an arbitration agreement when the parties so submitting intend, that a third person
should decide it after hearing them and considering the evidence led and submitted by them. No particular form is
necessary for an agreement to constitute an arbitration agreement. It is sufficient that the terms are reduced in writing. Such
an agreement need not be a formal document. However, it is necessary to establish that the parties had an intention to resort
to arbitration for the settlement of their disputes. Every arbitration agreement must be liberally constructed so as to give
effect to the intention of the parties.
Arbitration Agreement - Not necessarily to be signed by Both the Parties
Section 2 (a) of the Arbitration and Conciliation Act, 1996 provides that an agreement in writing means that the terms of
an agreement should be expressed in writing and the agreement should be such that it binds both the parties and that the
actual signatures of both the parties on the arbitration agreement are not essential.
As per Section 7(4) of the Arbitration and Conciliation Act, 1996 a document, namely an arbitration agreement should be
signed by the parties. However, after the plain reading of Section 7(4) (b) to (c), it is clear that it is not necessary that both
the parties should in all cases sign the arbitration agreement between the parties. It is not a condition of an effective
arbitration agreement that it must be incorporated in a formal agreement executed by both the parties thereto, nor is it
required to be signed by the parties. A document signed by one party and accepted by the other is enough for the purpose
of forming an agreement.
Stamp Duty on Arbitration Agreement
A stamp duty is chargeable on an agreement to refer a dispute to arbitration under Article 5(c) of Chapter I of the Indian
Stamp Act, 1899 as an agreement or memorandum of agreement not otherwise provided for. The duty was originally eight
annas or one rupee which has been raised by the State Acts. Therefore while entering into an agreement it is necessary to
check the prevailing rates in the concerned State.
Appointment of Arbitrator
Under Section 11(2) the parties can set out the procedure for appointment of arbitrators, in their agreement. Failing
agreement, under Section 11(4) in the case of sole arbitrator if a party does not appoint him after notice, the appoint;
should be made upon request by a party, by the Chief Justice of the High Com by any person or institution designated by
him. Similar procedure is provided when there are three arbitrators (Section 11(3) and 11(5)). Certain other details relating
to appointment of arbitrators are set out in clauses 11(5) to 11(12).
Termination of Agreement
To terminate the arbitration agreement, there must be an agreement to that effect. A valid agreement to terminate an
arbitration agreement prevents either party from commencing fresh arbitration proceedings on the same issues. Subsection
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(2) (a) of Section 32 of the Act contains the provision that if the claimant withdraws his claim and the respondent does not
object to that, the arbitral tribunal shall c termination of the arbitral proceedings because the parties, by a tacit agreement
have terminated the arbitration agreement. Moreover, under Subsection (2) (b) of Section 32 of the Act the parties, by
agreement, may terminate the arbitration agreement and consequently the arbitral tribunal shall order the termination of
the arbitration proceedings.
Legal Attributes of the Arbitration Agreement
• Agreement: The arbitration can be only by an agreement in writing between the parties. Arbitration can be by a
sole arbitrator or by three or more persons. But if it is not by a sole arbitrator, it shall be by an uneven number of
members, such as three, five, seven etc. Arbitrators can be named in the agreement itself or nominated in
accordance with the provisions of the contract after the disputes have arisen.
• Legal Validity: An arbitration agreement as mentioned above, being an agreement, must be legally valid in
accordance with Section 10 of the Contract Act. The said section reads thus: "All the agreements are contracts, if
they are made by the free consent of parties competent to contract, for a lawful consideration and a lawful object,
and are not expressly declared to be void."
• Evincing Interest to Refer Disputes: The arbitration agreement must have an agreement to refer the dispute to
arbitration. An agreement is not a mental state but an act and as an act it is a matter of inference from the contract.
The parties are to be judged not by what is in their mind but what they have said, written or done behind all forms of
contracts, wherein no doubt lies behind the basic idea of assent. Assent, again involves the question of intention
which again, is not purely subjective but objective.
• Law and Place Applicable: In the case of international arbitration, the arbitration clause should provide the place
of arbitration and substantive law applicable to the contract. When they are not provided in the clause, the parties to
the contract may agree to a place of arbitration failing which it shall be decided by the arbitrator(s).
Court-Annexed Arbitration
Section 8 of the Act, imposes a mandatory duty on the judicial authority to refer the parties to arbitration in respect of
which action is brought in a matter which is the subject matter of an arbitration agreement, provided such references are
sought before filing the written statement and at appropriate stages'. The most important aspect of Section 8 is, it does not
postulate the request by the party for staying legal proceedings but contemplates the referring of the parties to arbitration.
Conciliation
"Conciliation" means bringing the opposing parties or individuals into an undisputed territory of harmony. The conciliator
may have an advisory role on the content of the dispute or the outcome of its resolution, but not a determinative role.
The conciliator may:
• advise or determine the process of conciliation whereby resolution is attempted,
• make suggestions for terms of settlement,
• give expert advice on likely settlement terms, and
• actively encourage the participants to reach an agreement.