ARBITRATION

CONCEPT OF ARBITRATION
• ARBITRATION IS A MEANS OF SECURING AN
AWARD/DECISION ON A CONFLICT ISSUE BY A THIRD
PARTY ACCEPTABLE TO ALL . IT IS A PROCESS, IN WHICH A
DISPUTE IS SUBMITTIED TO AN IMPARTIAL OUTSIDER
WHO MAKES A DECISION WHICH IS USUALLY BINDING ON
BOTH PARTIES.

• IT IS A PROCESS WHERE THERE IS A HEARING AND A

DETERMINATION OF A CAUSE BETWEEN PARTIES IN
CONTROVERSY BY A PERSON OR PERSONS CHOSEN BY
THEM OR APPOINTED UNDER A STATUTORY PROVISION.

• THE PARTIES SUBMIT THEIR DISPUTES/ISSUES AND ARE

BOUND BY THE AWARD OF AN ARBITRATOR IN RELATION
TO THE MATTER WHICH IS IN DISPUTE BETWEEN THEM.
 BASICS OF ARBITRATION
• ARBITRATOR ENFORCES HIS OWN POINT OF VIEW ON THE
CONTENDING PARTIES AND OPINIONS OF THE
PARTICIPANTS ARE NOT GIVEN ANY PREDOMINANCE.

• ARBITRATION IS A JUDICIAL PROCESS

• THE AWARD OF THE ABBITRATOR IS BINDING AND RESTS

ON EQUITY AND JUSTICE, THERE IS NO SCOPE OF
COMPROMISE.

• ARBITRATION IS BEST SUITED FOR SETTLEMEN OF

CONTRATUAL RIGHTS.
• MEDIATION IS SUITED FOR THE ADJUSTMENT OF
DISPUTES OVER INTERESTS.
 DISPUTES

DISPUTE BETWEEN OWNER AND CONTRACTOR:

•PAYMENT ISSUE
•BILL CLEARANCE ISSUE
•DISPUTE OVER CONTRACT
 DISPUTES

DISPUTE BETWEEN OWNER AND ARCHITECT :

•LACK OF SUPERVISION
•PAYMENT AND FEE ISSUE
•PROFESSIONAL SERVICES ISSUE
•DELAY IN PROJECT COMPELTION
 DISPUTES
DISPUTE BETWEEN ARCHITECT AND CONTRACTOR :

•QUALITY ISSUE
•ORDER OF CONSTRUCTION
•CONSTRUCTION DEFECTS
•RETIFICATION OF DEFECTS
•LACK OF EXPERT SUPERVISORS
•CLEARANCE OF BILLS
 TYPES OF ARBITRATION
• VOLUNTARY ARBITRATION:
• IMPLIES THAT THE TWO CONTENDING PARTIES UNABLE TO COMPROSE
THEIR DIFFERENCES BY THEMSELVES OR WITH THE HELP OF THE
MEDIATOR OR CONCILIATOR, AGREE TO SUBMIT THE CONFLICT OR
DISPUTE TO AN IMPARTIAL AUTHORITY WHOSE DECISION THAY ARE
READY TO ACCEPT.
• IN OTHER WORDS, UNDER VOLUMTARY ARBITRATION, THE PARTIES TO
THE DISPUTE CAN AND DO THEMSELVES REFER TO VOLUNTARILY ANY
DISPUTE TO ARBITRATION BEFORE IT IS REFRRED TO ADJUDICATION.
(COURT SYSTEM)

ESSENTIALS OF VOLUNTARY ARBITRATION:

• THE VOLUNTARY SUBMISSION OF DISPUTE TO AN ARBITRATOR.
• THE SUBSEQUENT ATTENDANCE OF WITHNESSES AND INVESTIGATIONS.
• THE ENFORCEMENT OF AN AWARD MAY NOT BE NECESSARY AND
BINDING BECAUSE THERE IS NO COMPULSION. BUT GENERALLY THE
ACCEPTANCE OF ARBITRATION IMPLIES THE ACCEPTANCE.
 RESOLVING THE DISPUTES:
• BY APPOINTING A PROJECT ARCHITECT:

HE ACTS AS AN ARBITRATOR.
HE OBTAINS FULL VIEWS OF ALL PARTIES BEFORE
MAKING A JUDGEMENT.
IF ALL PARTIES AGREE WITH THE DECISION OF THE
PROJECT ARCHITECT, THIS IS THE MOST
ECONOMICAL WAY TO END CONTROVERSY.
NORMALLY NO TIME FRAME IS SET, HOWEVER 30
DAYS ARE THE TIME LIMIT FOR THIS TYPE OF
DISPUTE RESOLUTION.
 RESOLVING THE DISPUTES:
• BY MEDIATION AND CONCILIATION:

IN THIS SCENERIO, THE PARTIES DO NOT AGREE WITH THE

ARCHITECTS DECISION AND THE MATTER IS REFERRED TO
MEDIATION.

MEDIATION IS ANOTHER POSSIBILITY OR PROCEDURE WHICH IS

MUTUALLY ACCEPTABLE. IN THIS PROCESS, A MEDIATOR WHO IS
ACCEPTABLE TO ALL PARTIES, WHO HAS NO INTERESTS AND IS
IMPARTIAL, MEETS ALL PARTIES- TOGETHER AND SEPARATE AND
ASSISTS THEM IN THEIR NEGOTIATIONS.

MEDIATOR DOES NOT IMPOSE ANY DECISION ON THE PARTIES AND

ONLY ASSISTS THEM TO REACH THEIR VOLUNTARY
RESOLUTION.
 RESOLVING THE DISPUTES:
• BY ARBITRATION:

WHEN A DISPUTE CAN NOT BE SETTLED BY PROJECT

ARCHITECT AND BY MEDIATION, IT WILL BE SUBJECT TO
ARBITRATION.

IT IS A METHOD OF RESOLVING A DISPUTE BY THIRD PARTY.

NORMALLY 30 DAYS OF TIME IS GIVEN FOR THIS PROCESS.

THE DECISION OF ARBITRATORS IS FINAL AND BINDING

LEGALLY.
 VOLUNTARY ARBITRATION
• VOLUNTARY ARBITRATION: IMPLIES THAT THE TWO CONTENDING
PARTIES UNABLE TO COMPOSE THEIR DIFFERENCES BY THEMSELVES OR
WITH THE HELP OF THE MEDIATOR OR CONCILIATOR, AGREE TO SUBIT
THE CONFLICT OR DISPUTE TO AN IMPARTIAL AUTHORITY WHOSE
DECISION THAY ARE READY TO ACCEPT.
• IN OTHER WORDS, UNDER VOLUMTARY ARBITRATION, THE PARTIES TO
THE DISPUTE CAN AND DO THEMSELVES REFER TO VOLUNTARILY ANY
DISPUTE TO ARBITRATION BEFORE IT IS REFRRED TO ADJUDICATION.
ESSENTIALS OF VOLUNTARY ARBITRATION:
• THE VOLUNTARY SUBMISSION OF DISPUTE TO AN ARBITRATOR.
• THE SUBSEQUENT ATTENDANCE OF WITHNESSES AND INVESTIGATIONS.
• THE ENFORCEMENT OF AN AWARD MAY NOT BE NECESSARY AND
BINDING BECAUSE THERE IS NO COMPULSION. BUT GENERALLY THE
ACCEPTANCE OF ARBITRATION IMPLIES THE ACCEPTANCE.
 COMPULSORY ARBITRATION
• COMPULSORY ARBITRATION IS THE ONE WHERE THE
PARTIES ARE REQUIRED TO ACCEPT ARBITRATION
WITHOUT ANY WILLINGNESS ON THEIR PART. WHEN ONE
OF THE PARTIES TO AN INDUSTRIAL DISPUTE FEELS
AGGRIEVED BY AN ACT OF THE OTHER, IT MAY APPLY TO
THE APPROPRIATE GOVERNMENT TO REFER THE DISPUTE
TO AN ADJUDICATION MACHINERY.
• SUCH REFERENCE OF A DISPUTE IS KNOWN COMPULSORY
OR INVOLUNTARY REFERENCE, BECAUSE REFERENCE IN
SUCH CIRCUMSTANCES DOES NOT DEPEND ON TE SWEET
WILL OF BOTH THE CONTENDING PARTIES OR ANY PARTY
TO THE DISPUTE. IT IS ENTIRELY THE DISCRETION OF THE
APPROPRIATE GOVERNMENT
•
ARBITRATION:
METHOD OF RESOLVING DISPUTES OUTSIDE OF COURT SYSTEM.
• THIS IS A SYSTEM WHERE ONE DISINTERESTED PERSON OR A PANEL OF THREE
DISINTERESTED PERSONS HEAR ARGUMENTS OF ALL PARTIES AND MAKE A DECISION.
• UNLIKE LITIGATION, ARBITRATION IS PRIVATE AND CONFIDENTIAL AND THE AWARDS
ARE NOT PUBLISHED.
• IT IS AN OLD ESTABLISHED PRACTICE WHICH IS VISIBLE IN EVERY CIVILIZED SOCIETY.
• ARBITRATION AGREEMENT IS A WRITTEN CONTRACT IN WHICH TWO OR MORE
PARTIES AGREE TO SETTLE THE DISPUTE OUTSIDE OF COURT SYSTEM.
• ARBITRATION TERMS AND CONDITIONS ARE NORMALLY ADDED TO THE CONTRACT
AGREEMENTS IN THE BEGINNING OF THE WORKS.
• THE ARBITRATION AND CONCILATION ACT 1996 IS AN ACT THAT REGULATES DOMESTIC
ARBITRATION IN INDIA.
• BINDING ARBITRATION INVOLVES THE SUBMISSION OF DISPUTE TO A NEUTRAL PARTY
WHO HEARS THE CASE AND MAKES A DECISION.
• IN BINDED ARBITRATION, AN APPEAL LATER ON IS NOT POSSIBLE. THAT IS WHY, IT IS
MENTIONED IN THE CIVIL CONTRACTS THAT THE DECISION OF ARBITRATOR SHALL BE
BINDING.
• ARBITRATION TAKES PLACE JUST LIKE A JUDGE AND JURY, WHERE ARBITRATOR OR
ARBITRATORS ARE THE JUDGES.
• MANY TIMES, THE GROUNDS FOR APPEALING THE ARBITRATION DECISION ARE NOT
AVAILABLE AT ALL.
• AT THE TIME OF SIGNING OF THE CONTRACT, IF A CONTRACTOR SIGNS A CLAUSE OF A
BINDING ARBITRATION, HE GIVES UP HIS RIGHT TO GO TO COURT AT ALL TIMES.
 DIFFERENCE BETWEEN ARBITRATION
AND COURT SYSTEM:
• INFORMAL/FORMAL:
ARBITRATION IS AN INFORMAL PROCESS OF RESOLVING DISPUTES, WHEREAS
LITIGATION IS A FORMAL PROCESS.
• EXPENSIVE:
ARBITRATION IS VERY ECONOMICAL, WHEREAS THE LEGAL PROCESS IS VERY COSTLY.
• TIME CONSUMING:
ARBITRATION IS DONE WITHIN STIPULATED TIME FRAME, WHEREAS THE LEGAL
PROCESS HAS NO END TO IT.
• CONFIDENTIAL-PRIVATE/PUBLIC MATTER:
ARBITRATION REMAINS CONFIDENTIAL END TO END AND THE AWARD IS NOT
PUBLISHED, WHEREAS THE COURT SYSTEM IS A PUBLIC MATTER AND IS
PUBLISHED.
• APPEAL:
BINDING ARBITRATIONS LEAVE NO ROOM FOR ANY FUTURE APPEALS WHEREAS THE
LEGAL SYSTEM IS RIDDLED WITH ENDLESS APPEALS.
• SPECIALIZED EXPERTS:
IN ARBITRATION, SPECIALIZED EXPERTS CAN BE BROUGHT TO LOOK INTO THE
MATER WHEREAS IN COURT SYSTEM, THE CASE CAN END UP WITH A USUAL
JUDGE.
 ARBITRATION TRIBUNAL
• ARBITRATION TRIBUNAL IS A PANEL OF ONE OR
MORE ADJUDICATORS TO RESOLVE THE DISPUTE
BY WAY OF ARBITRATION.
• IT CONSISTS OF A SOLE ARBITRATOR
OR
TWO/MORE ARBITRATORS WHICH MIGHT
INCLUDE A CHAIRMAN OR UMPIRE.
• IDEAL COMPOSITION OF AN ARBITRATION
TRIBUNAL SHOULD INCLUDE ONE
VALUER, PERTICULARLY IN CASES WHERE
QUESTIONS ARISE OF ASSESTS OR DAMAGES OF
VALUATION.
 ARBITRATION FEE STRUCTURE:
• THE FEE OF THE ARBITRATOR AND OTHER EXPENSES SHALL BE BORNE
EQUALLY BY ALL PARTIES INVOLVED, UNLESS THE SOLE ARBITRATOR
DIRECTS OTHERWISE.

• THE LUMPSUM FEE FOR THE ARBITRATOR SHALL BE RS 40,000 PLUS

OTHER EXPENSES.

• IF THE ARBITRATOR COMPLETES HIS WORK WITHIN STIPULATED PERIOD,

HE/SHE SHALL BE PROVIDED WITH RS. 10,000 AS BONUS.

• REASONABLE EXPENSES FOR SECRETARY AND STENOGRAPHER SHALL BE

COMPENSATED.

• FEES SHALL BE PAYABLE AS 25 PERCENT IN ADVANCE, 25 PERCENT ON

COMPLETION OF DOCUMENTATION, 25 PERCENT ON FILING OF
ARGUMENTS AND BALANCE ON AT THE TIME OF AWARD.
 ARBITRATION AWARD:

• IT REFERS TO THE DECISION MADE BY THE

ARBITRATOR IN ARBITRATION PROCEEDINGS.

• IT IS SIMILAR TO A JUDGEMENT OF A COURT

OF LAW.
 ARBITRATION PROCEEDINGS:
• FILING OR INETIATION OF ARBITRATION:
AN ARBITRATION CASE BEGINS WHEN ONE PARTY SUBMITS FOR A DEMAND OF
ARBITRATION TO COA AFTER EXHASTING ALL OTHER ALTERNATES.
THE OTHER PARTY IS NOTIFIED OF THIS AND A DEADLINE IS SET FOR RESONSE.
• ARBITRATOR SELECTION:
THE COA WORKS WITH THE PARTIES INVOLVED AND TRIES TO WORK OUT THE
ARBITRATION BASED UPON THE CRETERIA DEMANDED BY THE PARTIES.
• PRELIMINARY HEARING:
THE ARBITRATOR CONDUCTS A PRELIMINARY HEARING WITH THE PARTIES TO DISCUSS THE
ISSUE OF THE CASE AND PROCEDURAL MATTERS SUCH AS WITNESSES, DOCUMENTS,
AGREEMENTS AND ALL OTHER MATERIALS WHICH ARE IMPORTANT.
• INFORMATION EXCHANGE AND PREPARATION:
PARTIES THEN PREPARE FOR PRESENTATION AND EXCHANGE OF INFORMATION.
• HEARING:
AT THIS STAGE FOCUSED HEARING STARTS AND PARTIES PROVIDE TESTIMONY, WITNESSES
AND CERTAIN RECORDS AS NECESSERY. (NORMALLY ONLY ONE HEARING IS DONE
UNLESS THE CASE IS COMPLEX).
• POST HEARING SUBMISSION:
AFTER HEARING , BOTH PARTIES MAY SUBMIT MORE INFORMATION PERTAINING TO THEIR
CASES TO STRENGTHEN THEIR CASES.
• AWARD:
FINALLY THE ARBITRATOR CLOSES THE RECORD ON THE CASE AND ISSUES THE DECISION
INCLUDING THE AWARD.
 ADVANTAGES OF ARBITRATION
• DECISION IS MADE BY EXPERTS
• SPEED
• LOWER COSTS
• FLEXIBLE
• CONFIDENTIAL
• LESS FORMAL THAN COURT
• PRESERVATION OF PERSONAL RELATIONS
 DISADVANTAGES OF ARBITRATION:
• LIMITED RESOURCES.
• LACK OF TRANSPARENCY
• PARTIES PAY FOR THE
ARBITRATOR
• LIMITED RIGHTS OF APPEAL