Types Of Arbitration

Arbitration has become an inseparable part of the legal system; it's a choice for those complex cases that are lengthy and costly to run for a long period in court. We've often heard of cases that take a long time to resolve disputes between parties, or even the final results are dissatisfactory.  This is where the rise of arbitration comes in, as a solution to resolve issues quickly. As the world is running faster, there's a need for fast and effective ways to resolve conflicts. 

However, many people don't know how arbitration can be a better alternative to court for complex cases. In this article, we will understand everything about arbitration, its types, the role of arbitration, and how it settles the cases. Let's dive in!

What Is Arbitration?

Arbitration is an alternative way to resolve complex discounts outside the traditional court. In arbitration, parties involved have one or more neutral arbitrators (judges) to list both side's cases and make a final decision to resolve the conflict faster. Arbitration is preferred because it is faster, more flexible, and private as compared to the traditional court system, which takes longer time, is costly, and leads to dissatisfied results. From personal to commercial, all kinds of matters can be handled in arbitration, and conflicts can be resolved faster.

Role Of Arbitration In Present Day Legal Framework 

Arbitration is now playing a major role in today's legal system because it's a faster, more effective, and cheaper way to settle complex cases quickly compared to running these cases in a traditional court system. Arbitration has become so popular, especially for handling commercial contracts. This helps avoid legal battles in different countries and courts and makes the process of resolving the case quicker and smoother.

Role Of Arbitrators 

Arbitrators act as judges who will make decisions after listing from both parties. Unlike judges in courts, arbitrations are chosen for their expertise in the specific area related to the dispute. This means an area specialist acts as a judge to listen to both parties and make final decisions. This helps them to make more informed decisions and ensure both parties agree on the final judgment. It makes the arbitration process more quick and effective. The specialized knowledge of arbitrators (judges) in areas ensures the process is neutral and fair.

Types Of Arbitration

Here are common types of arbitrations:

1. Domestic Arbitration

Domestic arbitration occurs when both parties are involved in a dispute located in India, and then it's counted as domestic arbitration. As both parties are within the country, Indian laws will be applied, making the process much faster.

2. International Arbitration

When one party is from a different country (outside India), even then, Indian laws are applied, but some international elements will be involved. It ensures fair treatment and avoids bias for any party.

3. International Commercial Arbitration

It is similar to international arbitration but mainly focuses on business-related disputes. If one party is Indian and the other is from another country, they often decide which country's law to use. And if there's no agreement, then Indian laws may apply. This type of arbitration is used especially for business deals like mergers or investments.

4. Institutional Arbitration

In this type of arbitration, the parties agree to let an institution like a chamber of commerce handle the arbitration case. The institution picks the arbitrator (judge) to manage the entire process and ensure the case is more organized and easier.

5. Ad-Hoc Arbitration

When the parties agree to handle the arbitration without the help of the institution, it becomes Ad-Hoc arbitration. In such cases, the parties decide everything, like who will be the arbitrator, what rules to follow, etc. This offers more flexibility, but it may take a long time to resolve if one of the parties can't agree on details.

6. Fast Track Arbitration

Fast-track arbitration is a quick version of arbitration. As per the law (Section 29B of the Arbitration and Conciliation Act, 1996), it allows disputes to be resolved faster and mostly through written documents instead of long hearings. Especially in business deals, when time is critical.

7. Statutory Arbitration

Some laws make arbitration the only way to settle, and statutory arbitration is suitable for such cases as the Electricity Act or the Railway Act, which require arbitration when there’s a dispute. 

8. Contractual Arbitration

Many contracts have a clause that says if a dispute arises, it will be settled through arbitration instead of court. This type of arbitration is counted for such cases. As the contract sets the rules for arbitration, this is commonly used for business agreements, construction, and employment contracts.

9. Foreign Arbitration

When one party is from India and agrees to use the laws of another country for arbitration, then it's called foreign arbitration. Even if arbitration happens in India, foreign laws will be applied.

Advantages Of Arbitration In India

Here are some key advantages of arbitration in India:

1. Mutual Consent of Both Parties: Arbitration is used when both parties agree and are on board with the process.

2. Unbiased Procedure: The arbitration is fair because both sides can choose the location, language, and laws to ensure it's fair procedure.

3. Cost-effective: Arbitration is less expensive than going to a traditional court and has become affordable.

4. Freedom to Choose Arbitrator: Parties have the freedom to select their arbitrator or agree to have one by choice by a specialized organization.

5. Confidential Procedure: Everything discussed in the arbitration is kept private, protecting sensitive information from being publicly shared.

Disadvantages Of Arbitration In India

Here are some key disadvantages of arbitration in India:

1. Limited Appeal: Once a decision is made in arbitration, it's considered a final decision, and both parties should agree. So, there are limited options for challenging the outcome. 

2. Cost: While arbitration can be cheaper than court, hiring an experienced arbitrator can still be expensive. If the arbitration isn't binding, then parties may end up in court.

3. Unpredictable: The decision made in arbitration can be uncertain, and the process doesn't follow strict court rules.

4. Unfairness: If a contract includes a mandatory arbitration clause, one party might feel forced into arbitration and have no option to go to court.

5. Lack of Transparency: Arbitration hearings are private, which means there's no public oversight, which leads to biased decisions.

Conclusion

Arbitration is faster, cost-effective, and a better alternative to traditional court procedures. From domestic and international to contractual cases, all cases can be handled in arbitration procedures. We hope this article helps you understand everything about arbitration and the types of arbitration that handle cases. Understanding these types of arbitration ensures such cases can be handled in arbitration and that parties have better options to resolve conflicts faster.

About The Author:

Adv. Rajeev Kumar Ranjan, practicing since 2002, is a renowned legal expert in Arbitration, Mediation, Corporate, Banking, Civil, Criminal, and Intellectual Property Law, along with Foreign Investment, Mergers & Acquisitions. He advises a diverse clientele, including corporations, PSUs, and the Union of India. As founder of Ranjan & Company, Advocates & Legal Consultants, and International Law Firm LLP, he brings over 22 years of experience across the Supreme Court of India, High Courts, tribunals, and forums. With offices in Delhi, Mumbai, Patna, and Kolkata, his firms provide specialized legal solutions. Adv. Ranjan is also Government Counsel in the Supreme Court and has earned numerous national and international awards for his expertise and dedication to clients.