It is a well-known fact that different sectors and fields have different sets of terms that the general public might need clarification on. If we have a look at the law sector, in particular, it comprises myriads of different words that are enough to perplex you. One of the most critical terms in law and justice is arbitration. Are you familiar with the meaning of arbitration? Well, if not, you don’t have to worry, as we will discuss it in detail.
As we are discussing arbitration, let us begin understanding its simple meaning. Well, it is a method of resolving conflicts outside the courts, simultaneously saving time and resources.
You must remember that both parties must agree to appoint an arbitrator to resolve a dispute. The arbitrator then gives a judgment that is legally enforced.
In simple words, arbitration is a legal process that encourages the consensual resolution of conflicts between two or more parties by selecting a neutral third party. And the judgment of the arbitrator is obligatory on the disputing parties.
Many of you may wonder why arbitration is needed when we already have a traditional justice system. Well, we live in a world witnessing liberalization, development, and globalization of international business ties.
The need for a method to offer swift justice is significant in such a world. And this method provides a flexible, sensible, advantageous, and speedy way of resolving disputes without subjecting the parties to the traditional dispensation of justice’s stringent, resource-intensive, and time-consuming process.
Due to the costs and delays associated with traditional court procedures, arbitration became more popular in business. You must remember that its goal is to resolve disputes swiftly and inexpensively.
Whenever the contesting parties consent to the arbitral proceedings, it usually starts. This agreement may have been established before the dispute began through a provision in the contract requiring any issue to be resolved through arbitration and not litigation.
It’s true that in today’s fast-paced society, arbitration is a valuable method for hastening the resolution of conflicts. But you must remember that there are types and categories of disputes that are not arbitrable.
- Criminal offenses
- Insolvency and winding up proceedings
- Guardianship matters
- Antitrust/ competition laws
- Bribery/Corruption Laws
- Eviction proceedings
- Such issues such as probate and succession certificate
- Patents, trademarks, copyright
The FAA, or Federal Arbitration Act, is the law that governs arbitration in the United States. Most states have simplified their laws to conform to the FAA, even though certain conditions may occasionally have rules that contradict them.
The following prerequisites must be satisfied for arbitration to be legal:
- The procedure must be accepted by all disputing parties.
- The procedure should be supported by legal tribunals.
Many businesses, including producers, credit card firms, and other companies, now give standard contracts to all their clients or customers that include a mandatory arbitration clause, making arbitration a regular business practice.
International Commercial Arbitration is defined by Section 2(1)(f) of the Arbitration and Conciliation Act 1996. It says that it’s an arbitration that’s concerned with disputes that arise out of legal relationships, irrespective of them being contractual or not, considered to be commercial law in force in India, in which one of the parties is-
- A person who is a citizen or long-term resident of a nation other than India.
- A corporate entity that was incorporated outside of India.
- A business, group of people, or organization whose primary control and management are exerted in a nation other than India.
- The administration of a foreign nation.
International business arbitration is a method for resolving disagreements resulting from contracts with a global scope.
An arbitration that frequently replaces litigation in which the parties mutually determine the terms to do away with their respective countries’ laws or rules of the process.
An arbitration to settle international conflicts without having to file a lawsuit in a national court, skipping the drawn-out and complex legal processes of federal courts
Arbitration is considered international, following UNCITRAL’s definition in Article 1(3), when:
i) The parties to the arbitration clause had offices in various states at the time the agreement was signed.
ii) Outside of the State in which the parties have their workplaces, one of the following places exists:
- If specified in or in accordance with the arbitration contract, the arbitration will occur outside the state where the parties’ principal place of business is.
- Any location where a significant portion of the commercial relationship’s duties must be fulfilled or the dispute’s main issues are most directly related.
iii) The topic of the arbitration clause, which spans multiple nations, has been expressly agreed upon by the parties.
All in all, arbitration is one of those processes that have made things easier for people. It has provided numerous benefits and made the process of getting justice much quicker and easier. We hope this helps you understand everything related to this topic.