Arbitration Vs Litigation: There are two well recognized methods for settlement of disputes i.e. litigation and arbitration. Litigation is not suitable for settlement of trade disputes as it is beset with inordinate delays high costs and uncertainty of the final decision. The basic limitations of litigation are:
1. Court process is proverbially slow, time consuming and formalistic. It easily takes a few years for settlement of a dispute in a court of law.
2. Avoidable necessity of expert witnesses and other evidence. A judge, however expert or eminent in the field of law, cannot be expected and is not well versed in the practices, procedures and customs of various lines of trade particularly the international trade. When a commercial dispute is tried in a court of law, the trade practices and procedures have to be proved before the court by expert witnesses having knowledge and experience of such matters.
3. Inconvenience to the parties: The time and date of hearings in a court of law are not exactly convenient or suitable to the litigants. Some times one has to wait from morning till evening before his case is called; may be only to learn that the case is adjourned.
The basic advantages of arbitration are:
1. Quickness: Arbitration is much quicker than litigation. It can be completed as quickly as the parties want it, depending on the circumstances and the nature of the particular case. Under the Arbitration Act, the arbitrators have to make the award within four months from the date of entering on the reference. Usually an arbitration case may be settled between four months to one year.
2. In expensiveness: The costs and expenses in arbitration are also much less than in litigation. Apart from the arbitration fees which usually is round 2 percent of the claim value or less in institutional arbitration, the other incidental expenses are rather moderate and low:
3. Promotes goodwill: Arbitration is a process of goodwill and it helps promote friendly trade relations between the parties. The arbitrator is a person chosen by the parties themselves on the basis of their faith and confidence to him.
4. Sound and cogent decision: In arbitration it is possible to choose a person having knowledge and experience in the particular line of trade to which the dispute relates, thereby avoiding the necessity of expert witnesses for educating the judges or for proving trade customs and practices.
5. Privacy: Arbitration proceedings are not open to public and arbitrators’ decisions are not published in law reports like the court decisions. Therefore, arbitration preserves the privacy and trade secrets of the parties.
In the case of international transactions arbitration becomes international when at least one of the parties involved is resident or domiciled outside India or the subject matter of the dispute is abroad. The law applicable to an arbitration proceeding may be the Indian law or a foreign law, depending on the terms of the contract and the rules of conflict of laws.
In the case of international transactions arbitration can take place ether in the exporter’s or importer’s country. It is, therefore necessary to have a legal system for the recognition and enforcement or arbitral award given in another country. The International New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1957 has been ratified by 109 countries which recognize and enforce arbitral awards given in the countries which are signatories to this Convention.
Procedure for Enforcement in India: Any person interested in foreign award may apply in writing to any court having jurisdiction over the subject matter of the award praying that the award be filed in the court. The application shall be numbered and registered in the court as a suit between applicant as plaintiff and the other parties as defendants. The court shall direct notice to be given to the parties requiring them to showcause why the award should not be filed. There upon the court on being satisfied that the foreign award is enforceable under the Act shall pronounce judgment according to award. Upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except insofar as the decree is in excess of or not in accordance with the award.