Subhashish Kumar Sahu, BBA LLB Student, KIIT School of Law
In the rising advent of legal disputes among parties, in order to relieve the burden of judiciary and the amount of congestion of cases in courts, the world is now shifting towards a much easier, faster, effective and binding process which is the ADR Mechanism. The Alternate Dispute Resolution offers a wide range of options for the conflicting parties to opt various approaches to settle a dispute amicably. Out of the various options of Arbitration, Mediation and Conciliation, the Arbitration still remains a more elected route taken by the parties who have much at stake and want to get the issue resolved quickly so as to save both the parties from the long exhaustive judicial process. This is chosen as Arbitration in itself is a process whereby parties, mutually deciding upon settling the dispute in such a manner which is binding to both the parties necessarily through arbitral rewards without the fear of whether part would agree to such settlement. But even the process is a much amicable, feasible, evolving one, it might not always be economical or cost-effective.
Arbitration, therefore is a non-judicial process rather a legal technique for resolving the disputes among the parties to a neutral, odd number of Arbitrator/s who pronounces a binding decision termed as awards in favor of respective parties. Now, Arbitrator here, is a person in singularity or in an arbitration board who plays a role as merely of a private judge of a private court, granting a private judgement in form of a reward. Hence, it pertains to the private law, thereby excluding offences against public from its ambit. The process of Arbitration is categorized in two ways with regard to arbitrators, one being institutional arbitration and the other being an ad hoc arbitration. The former process involves in a procedure, whereby in case of any dispute arouses, parties would be administered by an arbitral institution, may it be ICA, ICC, FICCI, ICADR, WIPO or LCIA whereby they will be stipulated to some rules and procedures set up by those institutions to conduct arbitration among parties. However, the latter process involves a much simpler process in which parties opt to choose and arrange arbitration by themselves without the intervention of any of those institutes. Here, the procedures are laid down by the tribunal. The parties are at the discretion of selecting arbitrator/s and if they fail to appoint, it is made by the state high court. Our topic today here is the Ad Hoc mode of Arbitration; how can it be implemented by parties to suit to the best of their advantage and face no hinderance in this procedure to resolve their disputes more efficiently. As it is rightly said “The very essence of arbitration is that the parties choose their own method of resolving disputes”, by Justice Krishna Iyer, Supreme Court of India.
Ad hoc arbitration has nowadays become seemingly more fascinating and widely chosen by the parties. All the major international investment, trade and commerce related disputes are resolved via this means. Even in Indian context, it is the most preferred mode for alternative dispute resolution, both by the individual parties and the state. But the advantages it possesses also brings it down to some critical disadvantages that the parties might face as a consequence. As, this mode of settlement involves no control by any arbitration institution which makes it free, also exposes it to lack of a standardization of procedure. This procedure with the gift of offering higher party autonomy also possesses the grater risk on sole reliance of parties for their dispute settlement. So, in order to comprehend and get past these criticalities, the parties might adopt some techniques that is the main discussion of the blog.
Since the birth of arbitration, ad hoc mode of arbitration is mostly an undiscovered aspect which is only framed in a particular way. As, the ad hoc arbitration involves parties choosing arbitrators and segregating from the complex rules of the institutions, parties can craft it in a way that caters to their needs and interests as well as be in a professional manner which remains the primary reason for choosing institutional arbitration over ad hoc arbitration. It can also be made to meet some specific criteria in order to enhance the process for a binding settlement. The advantages that an ad hoc arbitration brings along with it is the key to overcome such challenges that parties might face during the settlement. One of the biggest benefits to the parties is Customization, the parties may customize the agreement according to themselves. In this manner, the parties can draft it in a way combining all the best practices from the institutions which provides it a leverage over institutional arbitration as well as suffices for the disadvantage of lack of standard procedures. Even Gary Born in his book on international arbitration: law and practice says that “In arbitration, party autonomy is paramount — but autonomy without structure is an illusion.” Hence, there must be a proper structure that is to be followed by parties that offers to certain standardisation.
The parties can approach this DIY mode for including all the best institutional practices or it can go with the UNCITRAL mode which is a model law that creates certain standards that inspire many nation states to integrate the model into domestic arbitration rules. This was recognised by the 246th Law Commission of India and is derived from the UNCITRAL model law on International commercial arbitration. The UNCITRAL model offers certain clear, adequate and comprehensive rules to facilitate the process of dispute settlement. So, this adds up to cover up the loophole of ad hoc arbitration. Further, there is UNOAP which is a document to assist arbitral tribunal in matters of organising arbitration proceedings.
The selection of arbitrators can also be highly challenging in this mode of arbitration, but the parties may adhere to the highly skilled persons as per the subject matter experts along with having a checklist of criteria to meet the need of the parties and professionally settle the dispute. With the rise of technology, parties can also implement some tech-savvy measures such as cloud based virtual case management, integration of AI and smart contracts, enabling blockchain verified evidence verifications. The arbitral rewards can also be categorically divided into various checkpoints where rewards might be granted after completion on segments of dispute which provides greater satisfaction to the parties. The various other advantages that ad hoc holds are it offers flexibility to parties, has no administrative fees associated, offering a higher level of confidentiality over institutional, maintaining sovereignty over the process including customisation of clauses avoiding rules along with a quicker resolution.
The Ad hoc arbitration has also been a proven mode of ADR success in the Indian landscape as many big parties have resolved their disputes amicably, cost-effectively and in a timely manner. In the case of Reliance Infra Pvt Ltd v National Highway Authority of India, Reliance was awarded with 100 billion rupees in the form of arbitral award in 2008 containing the clause in their agreement. Similarly, 20 billion rupees were awarded in the case of Hindustan Construction Company vs Union of India to the petitioner for a metro construction dispute.
Lord Mustill, a former law lord and arbitration scholar has his famous saying as “Arbitration is a product of the parties’ agreement —their freedom, their flexibility, and sometimes, their folly.” Hence, the ad hoc mode of arbitration is to be deemed as the best mode of dispute settlement in this regard and the flexibility it possesses can be utilised in various ways as discussed in this blog to cover all the aspects and provide the best results.
