Commercial Arbitration

Arbitration is a private dispute resolution mechanism where the parties agree to have their dispute decided by one or more arbitrators rather than a court. The key differences from litigation are confidentiality (arbitration proceedings are private), flexibility (the parties can choose the arbitrator, the rules, and the seat), finality (arbitral awards are subject to limited grounds of challenge, unlike court judgments which can be appealed), and enforceability (awards under the Arbitration and Conciliation Act, 1996 are enforceable as court decrees, and international awards are enforceable under the New York Convention). Arbitration is generally preferred for commercial disputes, particularly those involving complex technical or financial issues, cross-border elements, or a need for confidentiality.

The process begins with the arbitration agreement, which is usually a clause in the underlying contract. You issue a notice of arbitration to the other party, invoking the arbitration clause and identifying the dispute. If the clause specifies institutional arbitration (such as under the DIAC, ICC, SIAC, or LCIA rules), you file a request for arbitration with the institution. If it is ad hoc arbitration, the parties appoint the arbitrator(s) as per the agreed procedure. If the parties cannot agree on an arbitrator, either party can apply to the court or the designated appointing authority for appointment under Section 11 of the Arbitration and Conciliation Act. Once the tribunal is constituted, it sets the procedural timetable.

The Arbitration and Conciliation Act prescribes that the arbitral tribunal should make its award within 12 months of the completion of pleadings. This can be extended by 6 months by consent of the parties. Beyond that, an extension requires court approval. In practice, timelines vary significantly depending on the complexity of the dispute, the number of parties, the efficiency of the tribunal, and whether interlocutory applications or jurisdictional challenges arise. Institutional arbitration (under DIAC, ICC, or SIAC rules) tends to be more structured and time-bound than ad hoc arbitration. Simple commercial disputes can be resolved in 6 to 12 months. Complex multi-party matters may take longer.

Yes, but on very limited grounds. Under Section 34 of the Arbitration and Conciliation Act, a domestic award can be set aside if there was an invalidity in the arbitration agreement, the party was not given proper notice, the award deals with matters beyond the scope of the arbitration, the composition of the tribunal was improper, or the award conflicts with the public policy of India (which includes fraud, corruption, and violation of fundamental policy of Indian law). Courts are generally reluctant to interfere with the merits of an arbitral award. The challenge must be filed within three months of receiving the award (extendable by 30 days). We advise on both defending and challenging awards.

Only if both parties agree to arbitrate after the dispute arises. Arbitration requires the consent of both parties, either through a clause in the contract or a subsequent agreement to arbitrate. If there is no arbitration clause and the other party does not agree to arbitrate, you must pursue the dispute through the courts. This is why getting the dispute resolution clause right at the contracting stage matters. We advise on drafting arbitration clauses that are enforceable, including the choice of seat, governing law, number of arbitrators, and institutional or ad hoc designation.