A comparative study on Ad-hoc and institutional arbitration

[The author, Akshit Gupta is a second year law student at Bharti Vidyapeeth, New Law College,Pune]

• Definition

Arbitration is a form of Alternative Dispute Resolution (ADR),a way of resolving disputes between two or more parties with sturdy efforts.the mediation is usually done by a third party i.e. a mediator who assists both the parties in reaching a reasonable settlement.

As the name is suggestive,the entire process of institutional arbitration encompasses a complex and well-structured reticulum of strategies that are designed to tackle issues arising in a particular institution,say for example a hospital or educational setting.This approach is usually employed when the issue in question assumes a formidable position within the institution.

It’s counterpart,ad-hoc arbitration works for lesser precise and more or less tailor-made options for arbitration.This method involves mediation based on bespoken as well as incorporation of existing rules of procedure.As stated by Simon Green and I quote, “Quite simply,ad-hoc arbitration is where parties agree upon a form of arbitration that is specific to a particular contract or dispute ,without referring to any arbitral institution”.[1]

• Modern Utilities

Statute – The commercial courts (Pre-institution Mediation and Settlement) Rules , 2018 have been made under Section 21A(2) read with section 12A(1) of the Commercial Courts Acts,2015.[2]

Mechanism – The commercial courts that preside over the judicial matters concerning with institutional mediation are the principal organs that have been set up for faster resolution of “commercial disputes”. In an arbitration case, the parties to a dispute will refer it to one or more persons – known as the ‘arbitrators’ or an ‘arbitral tribune’- by whose decision or award they agree to be bound .

Ad-Hoc arbitration ,however, tend to be quite lax and informal in it’s functions.It is neither administered by any institution, nor by any individual mediator.The parties will have to determine all aspects of of the arbitration themselves.As a matter of fact, ad-hoc mediations tend to be more flexible, faster and more cheaper than institutional mediation.

Institutions – There is no such body to oversee the conduct of Informal mediation as it is entirely subjected to the prudence of the parties in conducting arbitration.The parties alone determine all aspects of the arbitration.

In the case of institutional arbitration ,however, the conduct of the arbitration is regulated by National as well as international agencies . For example- The International Chamber of Commerce (ICC) ,International and Domestic Arbitration Center in India (IDAC) , Indian Institute of Arbitration and Mediation, among others .

Regulatory Authority – The mediation,arbitration and conciliation procedures in India are governed by the Arbitration and Conciliation Act ,1996 and Alternative Dispute Resolution and Mediation Rules, 2002 l ; the latter being a set of statutory guidelines and methods that need to be observed in order to ensure healthy and proper mediation .

Coming over to the topic of how arbitration actually functions or specifically what distinguishes a lawyer from n arbitrator,what are it’s intricacies etc. ; we have a dedicated volume, specifically catering to the needs of fresh mediators in helping them procure training about the said profession. The Supreme Court has , thus, published this manual in order to both graphically and theoretically impart information and training about the mediation process to prospective arbitrators , all the while establishing certain norms and protocols regarding the aforementioned process.

• Enforceability

On a Global level if we talk about, and not just India, the mediation agencies work within the framework structured by the conventions laid down in The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards,1958 (“The New York Convention).Most countries are signatories of the New York Convention. The conventions provide for the enforcement of foreign arbitration decisions.

In India, The mediation is carried out on the behest of the The Code of Civil Procedure , 1908,which inserted Section 89 via an amendment in 2002[3].This section authorizes the Court to convert a civil suit into ‘outside court form of settlement’ in cases where scope is .

• Advantages

Institutional arbitration

1. Formal arbitration provides some pre-written rules and procedures which allow for the arbitration to carried out systematically.
2. It allows for reluctant parties to undertake mediation as a means of dispute resolution.
3. Also allows creation of secretariat or court of arbitration.
4. It, of all things, provides finality of an arbitral award , which cannot be repealed .
   • • Ad-Hoc arbitration

1. It surmounts institutional mediation in terms of cost effectiveness and resolution of smaller claims and less wealthier parties.
2. Informal arbitration allows for parties to make arrangements which best suits their interests and provides flexibility in various areas, including hiring of arbitrators, their fees, amount of claims. Etc.
3. Although informal , ad-hoc arbitration is still bound by some protocols laid down by various national as well as international agencies, the most prominent one of them being United Nations Commission on International Trade Law ( UNICITRAL).

Conclusion and remarks on Alternative Dispute Resolution System en masse -

The commandability of ADR rests on it’s versatility and diversity. While taking into consideration mediation/arbitration, there is a wide variety of subjects that can come under the scope of being mediated and mutually resolved.- family, employment, property, industrial, marriage, the list goes on. However, for once , let me unravel the flipside of mediation for you and show that mediation is not the cure for every circumstance.

The Supreme Court has also provided an “excluded category” where there is no need to refer a matter to the ADR. The term “not needed” does also serve as a connotation for the term “not suitable” in this context. These disputes include-

• Cases involving fraud, fabrication of documents, forgery, impersonation, coercion, etc.
• Claims against minors, mentally challenged and suits for declaration of title against the government
• Cases involving prosecution of criminal offences

Besides prosecution, the Disputes relation to election to public offices

and Suits for grant of probate or letters of administration are also not admissible in a court of mediation.These matters can only be referred to a court of law and treated as formal civil suit only.

FAQ

1. What are the 4 constituents of Alternative Dispute Resolution ? .

A)The 4 constituents of Alternative Dispute Resolution are Arbitration, Mediation , Negotiation and Conciliation.

[1] Excerpt from “Ad-hoc vs Institutional Arbitration – A comparative study on Bahrain model” ,

Article by Simon Green and David Savage.

[2] Condensed from “Mandatory pre-institution Mediation:Commercial Courts”

[3] In Turning Point vs. Turning Point Pvt. Ltd,2018;The Delhi High Court held the view that The Appellant and Respondent should ideally have negotiated their differences by method of mediation and agreed to co-exist.

[4]R.K. Dewan & Co. ,” India : Mediation” (Mondaq, 4 July 2020) < https://www.mondaq.com/india/arbitration-dispute-resolution/735460/mediation>

[5]Avaneesh Satyang and Sohini Mandal , “Mandatory Pre-Institutional Mediation : Commercial Courts” (Mondaq , 4July 2020) <