Libertatem Magazine

Arbitration: An Alternate to Litigation

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[mks_dropcap style=”letter” size=”52″ bg_color=”#ffffff” txt_color=”#81d742″]A[/mks_dropcap]re there any alternative modes available if we think in terms of changing the administration of Justice? I can recall the famous quote stated by Lord Devlin: “The main field of Justice is not litigation but non- litigation.” The Arbitration laws first emanated with the legislation of Arbitration (Protocol and Convention) Act, 1937, The Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961 which were replaced by The Arbitration and Conciliation Act, 1996. The fact that the Supreme Court have time and again emphasized the need of out-of-court settlement can been seen in the judgments in Trustees of the port of Madras v. Engineering Constructions Corporation Ltd and in M/s. Guru Nanak Foundation v. M/s. Rattam Singh and Sons.  Moreover, business transactions has in recent time been able to push forward crossing more and more national boundaries involving more individuals, corporations as well as different governments. This can be said to be obtaining due to factors such as technological development, international treaties targeted at promoting business across boundaries, and especially more alternative ways of settling disputes associated with such businesses other than the traditional litigation. Parties in international business transactions can settle any arising dispute either by litigation, arbitration and other alternative ways of dispute settlement; this will only depend on the choice of the contracting parties in such business. Litigation has been associated with several demerits and trends. One of these trends of using litigation in settling disputes in international business transaction is the huge expenses involve in it. Alternatively, parties are trying to avoid such cost by choosing arbitration which seems to be cheaper and less expensive. In many parts of India, rapid development has meant increased caseloads for already overburdened courts, further leading to notoriously slow adjudication of commercial disputes (nearly 30 million cases pending). As a result, alternative dispute resolution mechanisms, including arbitration, have become more crucial for businesses operating in India as well as those doing businesses with Indian firms. This article highlights that there is an alternative to litigation i.e. Arbitration which is soon becoming a viable option to litigation in India.


Arbitration at the present day and age being driven by a private agreement has helped develop the idea of ‘people’s law for people’s service. A good starting point would be to know why arbitration as a dispute resolution has gained a lot of popularity in recent times and what are the statistics related to that upward trajectory of popularity. A study conducted by Price Waterhouse and Coopers in 2013, where they interviewed counsels of various legal establishments and corporate entities of government sector, private, non-profit sector and others came to the conclusion that nearly 83% of establishments having a dispute resolution policy would tend to have arbitration clause in their contracts and by doing so they didn’t submit their disputes to the judiciary for disposal. This to an extent proves that arbitration typically known as an ‘Alternate’ form of resolution of dispute is now a mainstream form of dispute resolution as so far as commercial disputes are concerned. If the scenario with regard to the economic trend is taken into account for arbitration, then it can be termed as a businessman’s method of resolving disputes.

Arbitration is basically a private system of dispute resolution. The jurisdiction of arbitration tribunal doesn’t emanate from statute such as civil procedure code or criminal procedure code or the constitution of India. It traces its jurisdiction to a simple agreement between two private parties. A simple act of consent between two parties in writing that forms an agreement can give rise to an arbitration tribunal to resolve related disputes. One can say that it is a non-national system of dispute resolution as the dispute resolution forum can also be at an international level like the ICC in Paris or any other international arbitral institution.

The general impression is that arbitration scores big over litigation when it comes to time and cost saving factors, preserving social relationships to a better extent, if not reducing then at least keeping the backlog rate of courts at par and it being a formal and swift method for resolution of disputes as compared to courts. But these are not the only advantages that give arbitration a superior stage. One of the foremost advantages of availing arbitration as a means of dispute resolution is the choice of a decision maker or the arbitrator. Keeping in mind the three prime must have traits in an arbitrator and also for the arbitrator by the parties that is neutrality, trust and respect and dignity, arbitration provides a platform to appoint an arbitrator having great technical expertise or knowledge of business practice with regard to the specific area of interest of the parties. Moreover almost all of the prime arbitration proceedings give utmost prominence to privacy which is in general a big stumble block in litigation proceedings as the information which is provided as evidence or otherwise may be sensitive and should not be debated upon in a public forum. Arbitration proceedings provide minimum publicity and the arbitral awards are subject to limited review. In other words arbitration is a method of convenience where remedy of finality is awarded.


Quoting the father of the nation Mahatma Gandhi said “I had learnt the true practice of law. I had learnt to find out the better side of human nature and to enter men’s heart. I realized that the true function of a lawyer is to unite the parties involved in a dispute. The lesson was so indelibly burnt into me that the large part of my time during the twenty years of my practice as a lawyer was occupied in bringing about private compromises of hundreds of cases. I lost nothing, there by not even money and certainly not my soul”. This passage can be deduced to understand the concern that the great leader thought of at that point of time regarding the fact that lawyers while representing their parties become confrontational and enmity takes over which can rather be resolved by settling the matter through alternative dispute mechanisms like arbitration. Mahatma Gandhi during his first brief as a lawyer in South Africa dealt with arbitration.

Therefore, arbitration one can say is like an art form wherein one needs to have skill and experience to quickly provide justice in a strong manner as compared to the litigation system. The role of lawyers, justices and others involved in the system plays an integral role in sustaining arbitration as an alternative to litigation.

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