History of Arbitration
Arbitration flourished in India in the late 18th century. The Indian Arbitration Act of 1899[1], applicable only to the three presidential cities of Madras, Bombay, and Calcutta, first established arbitration as a legally recognized form of dispute resolution in India. It did not apply to all of India. As such, Section 89[2] and Schedule II of the Code of Civil Procedure of 1908[3] further codified and extended the arbitration rules to these areas. Justice D.A. Guru Expressed the anxiety of the Indian courts and the invalid application of his 1940 Act in his Nanak Foundation v. Rattan Singh[4] case.
Desai briefly said: Never-ending, lengthy, complex, and costly litigation has forced legal professionals to seek alternative forums that are less formal, more effective, and expeditious. Resolving disputes and avoiding procedural difficulties resulted in the Arbitration Act of 1940[5]. The way proceedings are conducted under the law and always impugned in court has made lawyers laugh and legal philosophers weep.[6] ”
What is Ad Hoc arbitration?
When the parties do not choose an institution to manipulate the arbitration, this is known as ad hoc arbitration. This gives the parties more flexibility and freedom, but less support to conduct the arbitration as they see fit[7]. Ad hoc arbitration may boost the convenience for parties to choose their own course of action, but are numerous options constantly a good thing? While certain parties may find it a great advantage to choose to deviate from the regulations of a respected organization, there are also dangers in doing so. And why it is sometimes used in place of institutional means.
Ad hoc arbitration is a method of resolving disputes through arbitration that is not administered by a specialized arbitral institution but rather is organized and conducted by the parties themselves or their appointed arbitrators. Ad hoc arbitration allows parties greater control over the arbitration, including the selection of the arbitrator, the rules governing the proceedings, and the conduct of the arbitration itself. This allows flexibility and customization of the process to meet their needs.
Ad hoc arbitration is often used in disputes where the parties are experienced in the arbitration process and have a clear understanding of the procedures involved. It can also be a cost-effective option, as the parties are only responsible for paying the arbitrator’s fees and expenses, rather than any administrative fees charged by an institution. While ad hoc arbitration can provide greater control and flexibility, it also has some potential drawbacks, including a lack of administrative support and rules, which can lead to delays or confusion in the process. Moreover, ad hoc arbitration can be less predictable than institutional arbitration because there are no established procedures or guidelines governing the process.
Ad hoc Arbitration in comparison to Institutional arbitration
A contract between the parties that contains an arbitration clause and names an institution as the arbitrator may be used to invoke the jurisdiction of these institutional arbitrations. To conduct arbitrations, these institutions have created norms and practices. The parties may select, suggest, and appoint an arbitrator from a list of qualified arbitrators maintained by these agencies.
Ad hoc arbitration and institutional arbitration are two different methods of resolving disputes through arbitration, with some significant differences in terms of procedure, cost, and efficiency. Here are some of the key differences:
Administration: One of the key differences between ad hoc and institutional arbitration is that institutional arbitration is administered by a specialized arbitral institution that provides administrative support and rules for the arbitration process. In ad hoc arbitration, the parties themselves or their appointed arbitrators organize and conduct the proceedings.
Rules and procedures: In institutional arbitration, the institution provides a set of rules and procedures that govern the arbitration process, including rules on evidence, time limits, and the appointment of arbitrators. In ad hoc arbitration, the parties may agree on their own rules and procedures, which can lead to more flexibility but may also result in less predictability and consistency.
Cost: Institutional arbitration can be more extravagant than ad hoc arbitration because the parties must pay the institution’s departmental fees. In ad hoc arbitration, costs are usually defined as the arbitrator’s fees and expenses.
Expertise: Institutional arbitration allows parties to have access to professional arbitrators and the abutment of their staff. This is especially useful in complex disputes that require specific expertise. In ad hoc arbitration, parties may need to rely on their knowledge and resources to find a suitable arbitrator.
Flexibility: Ad hoc arbitration can be more flexible than institutional arbitration because parties can design their procedures to meet the specific needs of their dispute.
Should Ad Hoc arbitration be banned in India?
However, it is important to note that ad hoc arbitration is a legitimate and recognized method of resolving disputes through arbitration. Ad hoc arbitration allows parties greater flexibility in arbitration, including the selection of arbitrators and rules of procedure. be able to manage.
While institutional arbitration has certain advantages, such as administrative support and expertise, competence, ad hoc arbitration can be an inexpensive and efficient option, especially for smaller or less complex disputes. The Arbitration and Conciliation Act, 1996[8], which governs arbitration in India, recognizes both institutional and ad hoc arbitration and provides a framework for the conduct of both types of arbitration. The Act also allows parties to choose the method of arbitration that best suits their needs and preferences. Ultimately, the decision on whether to use ad hoc arbitration or institutional arbitration should be based on the specific needs and circumstances of the parties involved in the dispute.
Conclusion
Ad hoc arbitration refers to arbitration proceedings that are not administered by a specialized arbitral institution, but rather are organized and conducted by the parties themselves or their appointed arbitrators. Institutional arbitration, on the other hand, involves the use of a specialized arbitral institution that provides administrative support and rules for the arbitration process.[9]In India, the Arbitration and Conciliation Act, 1996, which was amended in 2015[10], provides a comprehensive framework for both ad hoc and institutional arbitration. The Act allows parties to choose the method of arbitration that best suits their needs and preferences.
While institutional arbitration has gained traction in India due to the support it provides, ad hoc arbitration still holds value for certain types of disputes, particularly for disputes between smaller parties, where the cost and complexity of institutional arbitration may not be feasible or practical.
Author(s) Name: Vidhi Saxena (Amity University, Noida)
Reference(s):
[1] ACT No. IX OF 1899, Indian Arbitration Act, passed by the parliament, 1899.
[2] Code of Civil Procedure, 1908, § 89, passed by the parliament of India.
[3] Code of Civil Procedure, 1908, Schedule II, passed by the legislative council of India, 1908.
[4] Nanak Foundation v. Rattan Singh, (1981), 4 SCC 634.
[5] Ibid
[6] Rajpreet kaur, “History and establishment of Arbitration Act in India”, Legal Service India, <https://www.legalserviceindia.com/legal/article-9040-history-and-development-of-arbitration-law-in-india.html> accessed on 23 February 2023.
[7] <https://www.carlsonssolicitors.com/news/2021/9/1/what-is-ad-hoc-arbitration-and-why-is-it-used> accessed on 23 February 2023.
[8] Act no. 226 of 1996, The Arbitration and Conciliation Act, 1996, passed by the Parliament of India.
[9] < https://www.lexisnexis.co.uk/legal/guidance/ad-hoc-arbitration-an-introduction-to-the-key-features-of-ad-hoc-arbitration> accessed on 23rd February 2023.
[10] The Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”).
