Arbitration Agreement • Arbitration is the reference of a dispute to a neutral (third) person (s) chosen by the parties to the dispute who agree in advance to abide by the arbitrator decision. • Contracts for works usually incorporate the provision of settlement of claims by Arbitration. A clause in a contract agreement for this purpose is called the Arbitration agreement.
Arbitration Agreement • Without this clause or a separate agreement on Arbitration between the parties, the legal remedy for any party is through court only. • Arbitration decision is known as Award.
Essentials of Arbitration Agreement • There must be a valid and binding agreement. • The agreement must be in writing. • The agreement must be to refer as difference or dispute to arbitration. • The difference/dispute may be present or future. • The name of arbitrator may or may not be mentioned in the agreement.
Essentials of Arbitration Agreement • Law applicable: Arbitration and Conciliation Act 1996 (supersedes Arbitration Act 1940). • Clause can differ from project to project although advisable to standardise. • Some construction contracts in road sector usually incorporate Arbitration sequel to Dispute Review Board (DRB) recommendation not acceptable to parties.
Check List For Arbitration Clause • Applicable Act, Rules, etc. • Conditions Precedent (amicable settlement, conciliation, DRB, etc.) • Number of arbitrators. • Method of selection/nomination, qualifications of arbitrators.
Check List for Arbitration Clause • Appointment of arbitrators in the vacancies created. • Scope of reference, limitation, if any. • Place of hearing and meetings, arrangements • Language • Jurisdiction of courts (place) • Award
CODE OF ETHICS FOR ARBITRATOR(American Arbitration Association) Cannon-1:Should uphold the integrity and fairness of the arbitration process. Cannon-2:Should disclose any interest or relationship likely to affect impartiality or which might create an appearance of partiality or bias.
CODE OF ETHICS FOR ARBITRATOR(American Arbitration Association) Cannon-3: Should avoid impropriety or the appearance of impropriety in communicating with the parties. Cannon-4: Should conduct the proceedings fairly and diligently. Cannon-5: Should make his decisions in a just, independent and deliberate manner. Cannon-6: Should be faithful to the relationship of trust and confidentiality inherent in that office.
CODE OF ETHICS FOR ARBITRATOR(Indian Council of Arbitration) • Should not himself seek or advertise for his appointment. • Should not consider himself as an advocate of the party appointing him and should act as a judge. • Should not either misconduct himself or the proceedings.
CODE OF ETHICS FOR ARBITRATOR(Indian Council of Arbitration) • Should not accept any gift or favour from the parties of the proceedings or third persons connected with such parties. • Should charge reasonable fees for arbitration proceedings, as per norms set by courts/institutions. • Should behave during proceedings in such a way that there is not apprehension to either party about his dishonesty or bias or partiality.
Expectations From Arbitrator • Call for particulars, take evidence • Call for material documents • Fix hearing dates and give notice there of • Grant adjournment • Give notice for ex-party hearings
Expectations From Arbitrator • Maintain notes of hearing • Fix time for payments by the parties • Be familiar with various applicable Acts • Not to exceed his jurisdiction • Follow principles of natural justice
CourtMeans ….. • The Principal Civil Court of Original jurisdiction in the district and includes High Court where it has jurisdiction in exercise of it’s ordinary original civil jurisdiction.
SECTION 5- • No judicial authority shall intervene except where so provided.
Section 9-A party may apply to court for interim measures • Before the commencement of arbitration proceedings, or • During the arbitral proceedings, or • After making of award, but before it is enforced in accordance with Section 36.
SECTION 10-NUMBER OF ARBITRATORS: • If agreement is silent on the number of arbitrators, then the, arbitrator shall be by sole arbitrator.
Section 11-APPOINTMENT OF ARBITRATOR: If the parties have agreed for a specific procedure, then the court can not interfere if the parties act in accordance with the agreed procedure. If any party defaults in following the procedure, court can interfere. In view of this, whenever an arbitration request is received, NTPC must act diligently.
SECTION 12-GROUNDS OF CHALLENGE: Very limited grounds for challenge of appointment of arbitrator. May be challenged only if- • Circumstances exist that gives rise to justifiable doubts as to his independence or impartiality. • Be does not posses the qualification agreed to by the parties.
SECTION 13-CHALLENGE PROCEDURE: • Appointment of arbitrator has to be challenged by sending a written communication to the arbitral tribunal within 15 days of becoming aware of the grounds of challenge. • If the arbitrator challenged does not withdraw, tribunal shall continue the proceedings and make award.
SECTION 21-COMMENCEMENT OF ARBITRAL PROCEEDINGS: • Under otherwise agreed, the arbitral proceedings in respect of a dispute commence on the date on which a request for referring the dispute to arbitration is received by the respondent. • This aspect is important with reference to sec.85 and also for determination if a dispute is barred by limitation.
Section 28-RULES APPLICABLE TO SUBSTANCE OF DISPUTE: Domestic arbitration shall be decided in accordance with the substantial law for the time being force in India. • In International Commercial Arbitration, the dispute shall be decided in accordance with the law designated by the parties. • If no law is designated tribunal shall apply which it considers appropriate.
SECTION 31- FORM AND CONTENTS OF AWARD • Award has to be in writing and signed by the arbitrator or majority of the tribunal, where there are more than one arbitrator. • A copy of award shall be delivered to each party.
SECTION 33-CORRECTION AND INTERPRETATION OF AWARD: • Within 30 days of making the award, tribunal on the request of a Party may rectify the error or give an interpretation of a specific point or part of the award.
SECTION 34-SETTING ASIDE ARBITRAL AWARD: Limited grounds for setting aside of award • If a party was under some in capacity. • If arbitration agreement is not valid. • If adequate notice of appointment of arbitrator or the arbitral proceedings was not given. • If a party was unable to present his case. • Arbitral tribunal deals with dispute not contemplated by or not falling with the terms of submission to arbitration. Application for setting aside of award has to be filed within 3 months.
SECTION 36-ENFORCEMENT: An award may be enforced as a decree. No need to covert it into a decree as was the position under the arbitration act, 1940.
SECTION 42-JURISDICTION: Where in respect of an arbitration agreement any application has been made in a court, that court alone will have jurisdiction over the arbitration proceedings and all subsequent applications.
SECTION 44-FOREIGN AWARD MEANS: Arbitration award relating to difference arising out of legal relationships, whether contractual or not, considered commercial under laws of India, pursuant to an arbitration agreement of which convention set forth in the first schedule, AND In one of such territories declared by Central Govt. as territories to which the said convention applies.
SECTION 16-ARBITRAL TRIBUNAL TO RULE ON ITS JURISDICTION: • Arbitral tribunal may rule on its’ own jurisdiction including existence or validity of the arbitration agreement. • Plea that tribunal has no jurisdiction has to be raised before submission of statement of defence. • Party aggrieved by the decision of the tribunal will have to go through the arbitration proceedings and challenge the award in accordance with Sec.34.
Possible Areas Of Pitfalls In Construction Contracts • The contract agreement poorly drafted • Insufficient investigations • Poor design • Unrealistic specifications • Mistakes in drawings • Weak subcontractors