Arbitration stands out as the most effective technique to get started in the proper direction. International commercial arbitration is a popular technique of resolving disputes. It deals with conflicts originating from cross-national economic agreements, and it lets the parties to avoid having to go through their own national courts. This essay establishes a context in which the confidentiality of arbitration norms is questioned, as well as discussing the evolution and virtues of international arbitration. The article then goes on to explain the many treaties and conventions that govern international commercial arbitration, which aids in comprehending its governance. Later in the article, the regulations of international business arbitration are discussed, as well as their benefits and drawbacks. When it comes to trade and business disputes, international commercial arbitration has long been the preferred option. Because a huge number of money is involved in any business, no firm or organisation will take the risk of approaching the court and being involved in the lengthy legal system.

INTERNATIONAL COMMERCIAL ARBITRATION IN RELATION TO INDIA:

Arbitration law in India is governed by the Arbitration and Conciliation Act of 1996. ^[1] The 1996 Act is based on the Model Law of the United Nations Commission on International Trade Law. In general, the 1996 Act is divided into two parts: part I and part II. Part I of the 1996 Act governs domestic arbitrations, whereas Part II governs foreign business arbitrations. According to Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, an international commercial arbitration is one in which at least one of the parties is a foreign national and the dispute arises out of legal relationships, whether contractual or not, that are considered commercial under Indian law. ^[2]—

• A person who is a citizen of, or whose habitual residency is in, a nation other than India, or a company formed in that country.
• A foreign country’s government is a corporation, an organisation of persons, or a group of people whose primary management and control is exercised outside of India.

In the case of TDM Infrastructure Pvt. Ltd case ^[3], Despite having foreign control, the Supreme Court decided the scope of this clause, holding that “a corporation created in India may acquire Indian nationality only for the purpose of the Act.” Sir Michael John describes the essence of the theory of ‘transnational arbitration’ in his well-known book. According to him, the institution of international commercial arbitration is a separate legal entity from all national courts and legal systems. One of the main purposes of transnational movement is to break the links between the arbitral procedure and the courts of the country where the arbitration takes place. ^[4]

TREATIES AND CONVENTIONS REGARDING ARBITRATION

1. Geneva Protocol on Arbitration Clauses 1923: Regardless of which Contracting State the parties subject to the jurisdiction of have agreed to submit to arbitration all or any differences that may arise in connection with the contract, all of the Contracting States recognize the validity of an agreement relating to existing or future differences between parties in the Geneva Protocol. To guarantee that everyone benefits from this concept, each Contracting State may limit the above-mentioned obligation of its citizens to contracts that are recognized as commercial under its laws. [5]

• Geneva Convention on the Execution of Foreign Arbitral Awards 1927: An arbitral award made in furtherance of a contract (hereinafter referred to as “a submission to arbitration”) covered by the Protocol on Arbitration Clauses, opened at Geneva on September 24, 1923, shall be known as binding and enforceable in the territories of any High Contracting Party to which the present Convention applies. However, there are some additional requirements that must be completed in order for this recognition or enforcement to be granted. Arbitral awards are not covered by the Protocol on Arbitration Clauses. Unless otherwise specified, such description does not apply to colonies, protectorates, or territories under the suzerainty or mandate of any High Contracting Party.

• Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) 1958: The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards attempts to set common legislative criteria for the recognition of arbitration agreements and judicial recognition, which are classified as “foreign” under its laws due to certain factors. The Convention’s main goal is to ensure that arbitral awards and non-domestic arbitral awards (whether international or not) are not discriminated against, which requires the parties to ensure that international and non-domestic arbitral awards are recognized and enforced in their jurisdiction in the same way that domestic awards are. Another aspect of the Convention is that it requires courts to refuse entrance to parties who have violated their agreement to refer a dispute to an arbitral tribunal. The scope of application of the Convention is the recognition and enforcement of international arbitral awards (arbitral awards made in the territory of another State). [6]

• Recommendation regarding Interpretation of Article II (2) and Article VII (1) of the New York Convention 2006: On July 7th, 2006, UNCITRAL adopted the Recommendation. The statute was developed to account for the rising acceptability of electronic commerce and electronic commerce-friendly judicial rulings, as well as the implementation of domestic legislation and legal decisions that favor electronic commerce over the New York Convention.

• European Convention on International Commercial Arbitration (Geneva Convention) 1961: Arbitration agreements concluded for the aim of deciding disputes resulting from international trade between physical or legal persons who have, when concluding the agreement, their habitual place of residence or their seat in separate Contracting States.

• Agreement relating on Application of the European Convention on International Commercial Arbitration (Paris Agreement) 1962: The member nations of the Council of Europe must sign this agreement. It is necessary to ratify or adopt the agreement. Ratification or acceptance has occurred when the documents of ratification or acceptance are submitted with the Secretary-General of the Council of Europe.

• Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (Washington or ICSID Convention) 1965: The Convention on the Settlement of Investment Disputes between States and Nationals of Other States was signed in Washington on March 18, 1965, and it ended the Settlement of Investment Disputes between States and Nationals of Other States. Within the World Bank Group, the International Centre for Settlement of Investment Disputes (ICSID) was founded. The Center’s principal purpose is to resolve conflicts between two parties, usually a state and a foreign investor, through mediation and arbitration. States and foreign investors can use the ICSID arbitration and conciliation process to pursue their arguments in a fair and systematic manner within an international framework. [7]

• Convention Providing a Uniform Law on Arbitration (Strasbourg Convention) 1966: Each Contracting Party commits to incorporate the provisions of the universal legislation stated in Annex I to this Convention into its national legislation within six months of the date of entry into force of this Convention in respect of that country. Every Contracting Party has the ability to supplement the uniform law in its country’s legislation with measures aimed at controlling situations for which no solutions are available, as long as those provisions do not conflict with the standard law.

• Convention on the Settlement by Arbitration of Civil Law Disputes resulting from Relations of Economic and Scientific Technical Cooperation (Moscow Convention) 1972: The current Moscow Convention limits the jurisdiction of courts of law to contractual and other civil law disputes arising from cooperation between economic organizations but excludes contractual and other civil law disputes arising from economic and scientific-technical cooperation between the parties to the convention.

1. Inter- American Convention on International Commercial Arbitration (Panama Convention) 1975: The Panama Convention on International Commercial Arbitration and the Inter-American Convention on International Commercial Arbitration, both signed in Panama on January 30, 1975, are the most important international arbitration accords in the Americas. Following the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 12, 1958, and the Inter-American Convention on Extraterritorial Validity of Foreign Judgements and Arbitral Awards, which was signed in Montevideo on May 8, 1979, there were a number of additional conventions.

1. UNCITRAL Arbitration Rules 1976: UNCITRAL developed the UNCITRAL Arbitration Procedures on April 28, 1976, and they provide a complete set of procedural rules on which parties might agree to conduct arbitral proceedings originating from their economic relationship. These rules are frequently applied in both ad hoc and administered arbitrations. The Rules include every aspect of the arbitration process, including a sample arbitration contract, procedural rules for the appointment of arbitrators and the conduct of arbitration proceedings, and rules for the form, effect, and interpretation of verdicts. [8]
2. A manual is included with the UNCITRAL Model Law on International Commercial Conciliation, which explains how to draught and implement the law. UNCITRAL drafted the Model Law, which was adopted on June 24, 2002.
3. The Model Law establishes uniform criteria for conciliation, allowing everyone to use it more frequently and with greater predictability and assurance.
4. The Model Law addresses the procedural aspects of conciliation, such as the selection of conciliators, the commencement and termination of conciliation, the conduct of the conciliation, communications between the conciliator and other parties, the confidentiality and admissibility of evidence in other proceedings, as well as post-conciliation issues, such as the conciliator serving as an arbitrator, to reduce the risk of litigation resulting from a lack of statutory provisions. [9]

REGULATION OF INTERNATIONAL ARBITRATION

International business arbitration will be supported by a variety of legal systems, including:

1. The first is the arbitration agreement.
2. International and national laws, particularly the national law of the arbitration venue or the law of the jurisdiction where the award is to be recognized and enforced. The legitimacy of an award, for example, may be determined by the procedural law of the place of residency.
3. International treaties and arbitration procedural rules of practice over the world. Although it is critical to acknowledge the impact of national legal principles on international arbitration, this significance should no longer be overstated. Since the arbitration system is governed by a number of distinct legal systems, such as the New York Convention and the International Court of Justice (ICC) Rules of Procedure (AAA).

TREATIES:

1. The GENEVA PROTOCOL on Arbitration Clauses of 1923 and The GENEVA CONVENTION for the Execution of Foreign Arbitral Awards of 1927– They were the first multilateral texts in the realm of arbitration, the protocol and convention were historic documents. The Geneva Protocol provided for the recognition of arbitration agreements whether ex ante or ex post.

The Geneva Convention recognized and enforced awards issued by jurisdictions of the parties to the Convention in conformity with the Geneva Protocol. It was primarily concerned with the recognition and enforcement of prizes in other countries. Both the Geneva Protocol and the Geneva Convention were “quite successful, although not without flaws.”

2. The NEW YORK convention of 1958– The Geneva Treaty and Protocol were reformatted and improved with the introduction of this convention. Why is it that this is the most important treaty in the field of international commercial arbitration? As a result of this treaty, international commercial arbitration has become one of the most widely used systems for resolving international economic disputes.

The most crucial purpose of NYC is to ensure that arbitral rulings are universally recognized and enforced. The convention now has over 140 States Parties because of its popularity. The convention has been positive in general, although there have been some challenges and problems. For example, under the NYC, there is no definition of arbitration; the written requirement of the arbitration agreement is overly strict; and the enforcement of interim orders is not adequately addressed.

ADVANTAGES AND DISADVANTAGE OF INTERNATIONAL COMMERCIAL ARBITRATION:

Although bringing a matter before a national court of law is the traditional method of resolving disputes, arbitration has grown in popularity as a means of resolving international commercial disputes over the last several decades. The question arises as to why parties prefer arbitration versus going to a recognized national court and why arbitration has become a popular means of settling international economic disputes. [10] Regardless matter how popular international commercial arbitration has become as a means of settling international economic disputes, it has both reinforced and failed in many ways.

• A Directly Enforceable Decision: An arbitral tribunal’s final decision, which is a binding decision rather than a recommendation, is both nationally and internationally directly enforceable. In this regard, the arbitral tribunal’s decision differs from that of a national court of law.
• Arbitration Process Flexibility: There are no set rules that must be followed in an arbitration process. International commercial arbitration gives the parties a lot of leeway in deciding on the rules of procedure and schedules, as well as the technical experts who are most suited to their particular dispute.
• Public Process: International commercial arbitration is essentially a private process, in which the press and public are not entitled to be present as opposed to proceedings before national courts and the confidentiality of arbitral proceedings is often seen as one of the important advantages of arbitration.
• Expenses and Time-Consuming: International commercial arbitration is a costly process for the parties as they must pay the fees and expenses of the arbitrators. Basically, it may be important to pay the administrative fees and expenses of an arbitral institution. Such expenses will be increased if there is more than one member of the jury or where the arbitral body is concerned. In addition to arbitration fees, the cost of hiring rooms for meetings and hearings may be incurred instead of using the public facilities of the courts of law.

CONCLUSION

In the long run, the growing gap between the general public and the courts could have significant consequences for all those involved in the administration of justice. Applying a fresh approach that incorporates alternative dispute resolution procedures will go a long way toward resolving the current stumbling block on the road of justice. This will almost probably result in a reduction in the number of pending cases in the courts.

If India is to advance in the sphere of international commercial arbitration, the law enacted by Parliament and the interpretation provided by the Supreme Court must be same. If that does not happen, India’s cross-border investments (FDI) will continue to decline, with countries all over the world questioning our international integrity, resulting in India “fine-tuning” rather than “musical-chairing” with its “interpretative skills” in admiration of the rules enacted to arbitrarily promote what best suits its national bodies.

---

[1] UNITED NATION COMMISSION ON INTERNATIONAL TRADE LAW.

[2] <http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/06-54671_Ebook.pdf&gt;

[3] TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd 2008(2) UJ SC0721.

[4] Sir Michael John, Transnational Arbitration in English Law, 133, CURRENT LEGAL PROBLEMS, 1984

[5] Ranbir Krishan, “An Overview of the Arbitration and Conciliation Act”, 21(3) J. Int’l Arb. 265 (2004).

[6] Nishith Desai Associates, International Commercial Arbitration, Law and Recent Developments (Nishith Desai Associates, Delhi, May 2019).

[7] Mark Mangan, Lucy Reed et. al., A Guide to the SIAC Arbitration Rules16 (Oxford University Press, United Kingdom, 1^st edn. 2014).

[8] Ileana Smeureanu, Confidentiality in International Commercial Arbitration (Wolters Kluwer Law and Business, United States of America 2012).

[9] V.A. Mohta and Anoop Mohta, Arbitration, Conciliation and Mediation (Manupatra, Noida, 2nd edn., 2008).

[10] Casella, 1996.

---

Author: Suvansh Majumdar

---