UNCITRAL Model Law on International Commercial Arbitration and its impact on India

Introduction

The World has been interacting at various levels which hassled to partnerships among states, countries, and various businesses across the globe and these increased numbers of partnerships and businesses have also led to disputes among the partners, as the institutions that were present for dispute resolution could not provide stability and effective mechanism for dispute resolution on the international platform. This led to the formation of arbitration, as a form of ADR (alternate dispute resolution) to solve the dispute and disparities among the states and countries. Concerning this situation, United Nations Commission on International Trade Law (UNCITRAL) adopted the Model Law on International Commercial Arbitration on 21st June, 1985.

Explaining the UNCITRAL Model Law

UNCITRAL is one of the essential bodies of the United Nations created by the United Nations General Assembly for the purpose of free trade in the international sphere.

UNCITRAL model law was developed to solve the dispute between the two parties, these parties can be of any nature; whether national or international nature. The model law has been developed to help states and countries to establish their domestic law and advance arbitration law with respect to the needs of current international arbitral procedure. This model law was developed to bring new law into working by transcending the national laws; usually, parties don’t accept other laws as they don’t trust each other as it is a natural thing to understand and therefore UNCITRAL model acts as a bridge and provides them with a common law on which they can rely toand solve their disputes mutually.

The Model Law consists of eight chapters and thirty-six articles and is intended to be accepted by other nations into their national laws or adapted into their national laws of arbitration based on the ideas of this model law.

Salient Features of Model Law

The Model law reflects the makeup of an arbitral tribunal as well as an arbitral award’s enforceability clause. It would be implemented in a State if the seat of arbitration is within that state’s territory and the arbitral ruling had worldwide enforcement. On the other hand, the concept of ‘party autonomy’ declares that the parties in a dispute are free to determine the laws that will govern the arbitration process. We can say that one of the reasons model law got acclaimed in a short span of time is due to the concept of ‘Party Autonomy’, this allows the parties the right to select everything, including the laws, arbitrators, and consequently the intended outcomes; the awards.

It limits the court’s role in the arbitration process, enabling judicial involvement only in the appointment of arbitrators, the challenge and termination of an arbitrator, the jurisdiction of an arbitral tribunal, and the setting aside of an arbitral ruling. It also allows for court assistance in recording evidence recognizing arbitration agreements and enforcing arbitration rulings.

Addressing the arbitral tribunals, it specifies the number, appointment, and procedure of the arbitration, so protecting the tribunal’s independence and the parties’ will.

It outlines the number, appointment, and process of the arbitral tribunals, so guaranteeing the tribunal’s autonomy and the parties’ will.

It emphasizes the importance of the arbitration provision or agreement that must be included if disputing parties select arbitration to resolve their disagreement. The Model Law also indicates the subject matter of the provision and recognizes it even through the judiciary.

Difference between Model Law and Arbitration Rules

The UNCITRAL Arbitration Standards (Rules) establish a comprehensive set of procedural rules that require parties to agree on the conduct of arbitral proceedings resulting from their business interactions. It also includes regulations for multiple-party arbitration, joinder, liability, arbitral processes, and procedures for arbitral tribunals to designate experts. It intends to improve the efficiency of arbitration proceedings by including rules for the reasonableness of charges and a review system. One of the most important aspects of the Rules is that it is decided by the parties on how to control the conduct of arbitration and resolve the dispute.

The Model Law, on the other hand, provides a collection of patterns that national governments might use as part of their domestic arbitration laws. Simply put, the Model Law is aimed at states, whereas the Arbitration Rules are aimed at future (or current) disputants.

Development and Growth of Arbitration in India

Arbitration is now the default setting for resolving business disputes in India. Initially, international parties were hesitant to submit to Indian court jurisdiction due to the Indian legal system’s endemic delays and perceived meddling, but, it wasn’t long before that the Indian parties saw the benefits of a simpler and faster manner of settling their disputes.

The said term‘Arbitration’ is not new for India. The Arbitration Act, 1899 (based on the English Arbitration Act, 1899) was the first formulation of Indian arbitration law. Following that, the law governing arbitration was fragmented across various enactments, including the Indian Arbitration Act, 1940 (which dealt with domestic arbitration), the Arbitration (Protocol) and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961 (which both dealt with the recognition and enforcement of foreign awards under the Geneva Protocol & Convention and the New York Convention, respectively).

The Arbitration & Conciliation Act of 1996 (the “Act”), modelled after the UNCITRAL Model Law on International Commercial Arbitration, unified Indian arbitration law, eliminating all three previous legislations. The Act went into effect at the time of India’s economic liberalization and projected globalization, and it was supposed to provide a boost to a speedy and cost-effective method of alternative conflict resolution through arbitration. It was promoted as revising Indian arbitration legislation to make it more sensitive to current needs, and while limiting court interference, it anticipated cooperation between the judicial and arbitral processes. The Arbitration and Conciliation(Amendment) Act, 2015, amended the 1996 Act with effect from October 23, 2015.

Features of Arbitration and Conciliation Act, 1996

Though most of the features of this act are consistent with the model law but here are some of the salient features of this act:

  • This act is applicable to both national and international arbitral proceedings and it has the same definition clause that is provided in the Model law.
  • It requires the presence of an arbitration agreement between the parties prior to the initiation of arbitration proceedings. It specifies the precise provision for the arbitration agreement as well as the courts’ interference with the arbitration agreement if the tribunal is not functioning properly.
  • It describes the composition and jurisdiction of arbitral tribunals in a manner comparable to the Model Law. It gives tribunals the authority to rule in their jurisdiction and allows them to make final awards with little involvement from the courts.
  • It contains regulations on the conduct of arbitral procedures that are similar to the Model Law in terms of arbitrators’ freedom and the parties’ will.
  •  It specifies the procedures for announcing the award, enforcing the award, and putting aside or challenging the award. It is necessary because it authorizes the court to intervene only in particular circumstances, as specified in Section 34(2) of the Act.

Relation of UNCITRAL Model Law in India

The 2015 amendment of Arbitration and Conciliation Act, 1996 is in line with the Model law which was amended in 2006. Section 9 of the Act has been modified from Article 9 of the Model Law, which discusses arbitration agreements and court-ordered interim measures.

 The Model Law states that a party may seek an interim measure of protection from a court during the arbitral procedures. However, the Indian Act goes beyond Article 9 by allowing a party to ask the courts to proceed further even after the arbitral judgement has been enforced. Section 9 of the Act provides for interim remedies by the court, which cannot be used after the establishment of an arbitral tribunal in foreign-seated arbitrations if the parties have a timely recourse. This was included under Section 9(3) of the Act by the Arbitration and Conciliation (Amendment) Act of 2015, and it is laudable.

Important Case Laws

The Supreme Court of India interpreted the term “commercial” to encompass all “commercial relationships” in support of family, cultural, social, economic, or political links in the case of R.M. Investments and Trading Co. v. Boeing Co. (1994). In this instance, the court determined that the contract for a consultant service fall within the definition of ‘commercial,’ and so the arbitration clause in the contract should be enforced. The Model Law contains no established meaning of the term “commercial,” hence it is open to interpretation and evolves with each judicial decision.

Article 9 of the Model Law is addressed to the courts of a specific State rather than the parties, and it defines the notion of temporary measures of protection that may be sought from the courts. The Delhi High Court remarked in the case of Max India Ltd. v. General Binding Corporation (2009) that the parties agreed to take the arbitration in Singapore and follow the processes as per the Singaporean Court for the subordinate matter of the agreement. As a result, they have limited the jurisdiction of Indian courts to provide the party an interim measure of protection in relation to a foreign arbitration.

Conclusion

The Model Law contains crucial provisions for reducing obstacles in the international arbitration process by establishing uniformity in arbitration procedural and substantive standards. In addition to this, the latest developments in India regarding arbitration are laudable and recent rulings by the Indian judiciary in this regard are also appreciable. These judicial decisions indicate that courts in India are becoming pro-arbitration.

Given the rising importance of arbitration in resolving international disputes between international and national parties, arbitral tribunals should be able to provide temporary measures of protection. However, the amended Model Law (2006) was not explicit, yet the intention of Indian legislation in this area is commendable.

Author

  • Ayush Image 1

    Ayush Singh is a 2nd-year law student pursuing a B.A.LLB (Hons) from the Institute of Law, Nirma University, and he has a keen interest in criminal and corporate law.

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