Ad hoc arbitration and Institutional arbitration

Arbitration is the process of bringing a business dispute before a disinterested third party for resolution. The third party, an arbitrator, hears the evidence brought by both sides and makes a decision. Sometimes that decision is binding on the parties. To arbitrate a matter is to bring it before an arbitrator.

Arbitration is a form of alternate dispute resolution (ADR), used in place of litigation in the hope of settling a dispute without the cost and time of going to court. Arbitration is often confused with mediation, which is an informal process of bringing in a third party who goes between the disputing parties to help them settle a dispute. The mediation process is not binding on the parties, And the mediator does not hear evidence. At the end of the arbitration process, the arbitrator made the decision which was binding on both parties.

The meaning of arbitration is securing an award on a conflict issued by reference to a third party. Under the process of arbitration, a dispute is submitted to an impartial outsider who makes a decision which is usually binding on both parties. In the process of arbitration, there is hearing and determination of a cause between parties in controversy by a person or persons chosen by the parties or appointed under statutory authority. The purpose of arbitration is adjudication, that is why there is no chance for compromise in awards. In the word of Kurt Brenn, the objective of arbitration is not compromise but adjudicating though parties are at liberty to compromise.

A wise arbitrator will certainly promote such agreement but as a rule there is no place for compromise in the awards. In time of issuing decision, the arbitrator should take in to consideration the fact that the decision must be based upon some sound principle of natural justice, it must be workable, and it must be based upon a ‘split the difference’ approach.

In India, arbitration proceedings are of two types: ad-hoc arbitration and institutional arbitration. The parties have the option to seek recourse to either of them depending on their choice and convenience.

Institutional arbitration is an arbitral proceeding which is conducted under a specialized institution which also takes on the role of administering the arbitration process. Each institution has its own set of rules which provides a framework for the arbitration. It strictly follows a pre decided set of rules with vey less scope of flexibility. This is because customization is not encouraged.

The arbitrators on the panel are selected from an existing list of arbitrators from the various regions of the world and include many different vocations. It has been found in Institutional arbitration that there are lesser chances of the parties having to take recourse to the court as no negotiations take place between the parties. It is an institution which administers the complete arbitration process thus making it time bound and speedy.

Institutional arbitration centers in India are:

1. Indian Council of Arbitration (ICA)

2. International Chamber of Commerce (ICC Council of Arbitration – Kolkata)

3. Federation of Indian Chamber of Commerce & Industry (FICCI)

4. World Intellectual Property Organisation (WIPO)

5. The International Centre for Alternative Dispute Resolution (ICADR)

6. London Court of International Arbitration (LCIA)

7. Delhi International Arbitration Centre (DIAC) – New Delhi

8. Construction Industry Arbitration Council (CIAC)- New Delhi

Ad hoc means ‘when necessary or needed’ or ‘created or done for a particular purpose as necessary’. The ad hoc arbitration is not administered by an institution but the parties refer their dispute to a certain arbitrator who is not subject to institutional arbitrator. In this process the parties determine all aspects of the arbitration by themselves and are only guided by the applicable laws. Since the parties can always negotiate pn the procedure to be followed and customize the rules, it is considered flexible. In terms of arbitrators, the parties have complete freedom to appoint the arbitrators as per the choice. Failure on the part of one or both parties to fully cooperate can result in a lot of time being spent resolving the issues which delays the proceedings or an ultimate recourse to court. Ad hoc arbitration allows the parties to tailor the arbitration process to the specific circumstances of their dispute. A successful ad hoc arbitration often depends on the skill and experience of the attorneys and arbitrators involved.