Arbitration is mode of resolving the dispute between parties outside of court. It is a private adjudication system and the decisions from such disputes under arbitration are final and binding in national courts.
The parties to the suit decide whether to go for arbitration and whether the type would be international arbitration or ad-hoc arbitration. Parties also have the freedom to choose rules, place and language of arbitration.
The freedom of choosing jurisdiction is to prevent conflict and biasness with respect to the same or in other words to prevent “home court advantage” as this ADR system believes in Audi Alterum Partum.
These features which allow the parties to choose arbitrators knowledgeable in the field of dispute attract most cases in international Commercial Arbitration.
DEFINING CHARACTERISTICS OF ARBITRATION AGREEMENT
Consent is a major feature under arbitration as only after the consent of both the parties the arbitrator is granted the power to decide the dispute and also it limits its power to the extent that he can only give decision within the scope of agreement between parties. “Submission agreement” is an agreement between parties where they put a clause for future disputes and decide to go for arbitration in such case. If in case, no such future clause has been mentioned parties can still go for arbitration after the dispute has arisen by entering into an agreement.
- Non-Governmental Decision-Maker selected by or for the parties
Another main characteristic is the freedom to parties to choose their own arbitrators or if in case of absence of any agreement with respect to the same, the parties can choose an arbitral institution which then on their behalf would choose arbitrators for the dispute resolution.
In case, the parties decide to present the dispute in a national court, then, the arbitration doesn’t extend to forum selection agreements.
Arbitrators when compared with judges tells one that they are private citizens and do not come under the purview of any governmental authority. Unlike judges who decide a case keeping in mind public policy, the arbitrators only decide the case for the betterment of the parties and they are very thoughtful and considerate in their interactions. Arbitrators are specialized in certain technical skills such as that of architecture or engineering etc.
- Final and Binding award
The last but not the least feature of arbitration is the final and binding award which means that the decisions given by arbitrators are in a final manner and are only allowed to be challenged in National courts on limited grounds.
Arbitration differs from negotiation, where the parties are free to accept or reject the decision and arbitration is not just a mere recommendation. Only when there is a defect in the procedure of conducting the arbitration can the parties appeal in some jurisdictions against the judgment.
After the judgment by the arbitrator has been given, the winning party if in case the losing party refuses to comply with the judgment can have the award recognized and enforced by the court where the losing party has its assets.
An award granted by the arbitrator in a case has same effect as any judgment would have in a trial jurisdiction.
FORUM SELECTION CLAUSES AND NATIONAL COURTS
In international disputes parties’ contracts often contain “choice of court” or “forum selection” covenants which state mainly that such and such dispute would be resolved in such and such specified court.
Also, an arbitration agreement is not a forum selection clause and vice versa as the resolution of dispute under the forum selection clause takes place by litigation in a national court. In arbitration procedure, the case is decided by a private arbitrator chosen by or for the parties.