What is arbitration and its types?

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Updated: 04-04-2024

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Commercial disputes, especially in cross-border commercial contracts are often settled through the arbitration. For example, in countries such as the United States of America, arbitration is very popular for consumer and also employment disputes. In such cases, the employment or business contracts will have an arbitration provision and also a waiver of class actions. Consensual arbitration, especially commercial arbitration in particular, should be distinguished from the consumer and employment compulsorily agreed upon.

Jurisdiction-based Arbitrations Types

In arbitration, in the field of law, a dispute is referred to an arbitral tribunal instead of an ordinary civil court or any other institution. After the arbitral tribunal rules on a dispute, since both parties have no appeal right when the ruling is rendered to them.

Compared to the conventional approach of a judicial proceeding, which normally occurs in the court and must go through much formality leaving one or both parties drained financially. The use of an arbitration process saves the parties much more precious time by avoiding a court case.

· Domestic Arbitration: Indian arbitration is the type of arbitration in India when a dispute has to be resolved under this country’s substantive law, and both parties are residents here. While there is no explicit definition of the term "domestic arbitration" under The Arbitration and Conciliation Act, of 1996. However, as a reasonable interpretation between Sections 2(2) and (7), it seems that domestic arbitrations are those where the parties submit themselves to Indian jurisdiction; where all proceedings have necessarily been within India according to the applicable standard

· International Arbitration: International arbitration is considered as arbitration that can occur within or outside India and consists of elements concerning the parties or the dispute that are foreign. Based on the facts, circumstances of a case as well as the agreement between parties, Indian or any foreign law will be applicable. The definition of international arbitration is met if the subject matter in dispute falls outside India, or any one party has established a domicile beyond Indian borders.

· Arbitration of International Commercial Matters: International Commercial arbitration can be described as "the substitution of a smoldering question with many burning ones" and according to Nani Palkhiwala, international commercial arbitration is like a 1987 Honda it will get you there but much faster, efficient and uses less fuel. As per Indian law, international arbitration is considered commercial even when it involves conflicts stemming from legal relations irrespective of the latter being contractual.

Types of arbitrations based on procedure and rules:

· Institutional arbitration: Institutional arbitration is the type of Arbitration that takes place through an arbitral institution. The parties can specify in the arbitration agreement that cases will be adjudicated according to the provisions of a selected arbitral authority. Either the governing body of an institution may appoint one or more arbitrators from a pre-selected panel, or these may also be provided by both disputants but only from that selection.

· Ad-hoc arbitration: In case the parties mutually decide to work with arbiters and avoid the need for a court, such arbitration is referred to as ad hoc. Domestic, international, or overseas arbitration is all possible. According to Russell on Arbitration, the term “ad hoc” refers to two distinct meanings: either an agreement to refer a current conflict to the arbitration, or in the event of not choosing an arbiter institution for overseeing the procedure or at least protocols of proceedings. This second interpretation is more common in international arbitration. Ad Hoc arbitration refers to a state where the rules of an arbitral institution must not be applied.

· Fast-track arbitration: Other arbitration procedures can take up a lot of time, so this procedure works as an effective way to save both time and money. Some of the time-bound procedures under the Arbitration and Conciliation Act are expedited arbitrations. This approach has been designed to preserve simplicity which was the primary reason why such arbitration existed in the first place by eliminating all time-consuming procedures.

You can contact an arbitration law firm for cases related to arbitration in law. If you are looking for arbitration lawyers in Delhi, consider the Sharks of Law. The Sharks of Law is an educational blog that answers legal questions while promoting critical thinking. If you have any legal concerns, please feel free to contact our professional advocates.

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