THE IMPORTANCE OF SELECTING AN ARBITRATION LOCATION
Author: Ayushi Yadav, IV year of B.B.L.,LL.B from The Northcap University.
Co-author: Hardik Dhingra, IV year of B.B.L.,LL.B from The Northcap University.
Every arbitration procedure takes the seat of arbitration into account. The seat relates not only to the location of an institution, but additionally to where hearings will be held or where the appropriate number of arbitrators may be found. Some of the seats described in this article are broadly equivalent to those seen in countries such as India, Singapore, London, Paris, and Hong Kong. Singapore and London are popular choices for seats.
What is a Seat of Arbitration
The "situs" of arbitration, or the place of the arbitration, is referred to as a seat of arbitration. The arbitration seat determines the contractual or procedural law that governs the dispute resolution procedures, as well as which tribunal or courts would have supervisory jurisdiction over the arbitration proceedings. To help you understand, consider the following example.
The seat of an arbitration procedure is in New Delhi. As a result, the arbitration shall be governed by the Arbitration and Conciliation Act of 1996. Any application contesting an arbitrator's verdict or ruling must be filed with the Delhi High Court.
The seat is more vital in international arbitrations since it acts as a curial law indicator as well as a supervisory jurisdiction. In Enercon (India) Limited v. Enercon GmBH, the Supreme Court stated, "Once the seat of arbitration has been fixed in India, it would be the nature of exclusive jurisdiction to exercise supervisory powers over the arbitration."
The term "seat" is not defined under the 1996 Arbitration and Conciliation Act or the 1940 Arbitration Act. Although Section 20 of the Arbitration and Conciliation Act of 1996 defines 'Place of Arbitration,' both seat and venue can be used interchangeably. The seat of arbitration and the location of arbitration are commonly confused. As previously indicated, the seat of arbitration determines the law that governs the arbitration, whereas the venue simply identifies the geographical location where the arbitration occurs and has no influence on the governing law of arbitration. If the arbitration is held in India, the regulations governing it may be based in London. As a result, India is the "venue" of arbitration, and London is the "seat" of arbitration.
Significance of Choosing a Seat
Choosing an arbitration seat is crucial in order to decrease the number of issues that have emerged between the parties about the arbitration agreement. Because the seat establishes the laws of arbitration, it is important to choose a nation where the seat of arbitration is situated, and the arbitration must be pleasant and efficient. Choosing the inappropriate seat of arbitration can create considerable delays in the arbitration process, raising the risk of parallel court processes and allowing the ruling to be appealed. The awards can subsequently be challenged in local courts, which may or may not be trustworthy. Many arbitration seats, including those in Paris, London, Singapore, Geneva, and Hong Kong, are viewed as secure. These seats are thought to be arbitration-friendly. Certain countries, such as China, limit the number of arbitration seats available.
Length of the Proceedings
The basic purpose of arbitration is to promptly and efficiently resolve disputes between the parties. It also seeks to limit the number of hearings held in the case. To avoid or accelerate the procedure, the parties must agree on the site of the arbitration. Arbitration proceedings in India take an unusual amount of time due to a backlog of cases, and the court nearly interferes with the process. Pam Developers Pvt Ltd v. State of West Bengal arbitration commenced in 1995 and lasted 21 years until an award was made.
In general, the parties involved in a dispute desire to keep pertinent information confidential. Arbitration maintains confidentiality while resolving matters peacefully. As a result, the parties are hesitant to go to court since the Court publishes the ruling in the journal, disclosing the intricacies of the proceedings, and the parties do not have the option of remaining anonymous.
In this case, it is crucial for a party to choose an arbitration seat from among a few countries that guarantee confidentiality throughout the procedure. Nonetheless, the concept of confidentiality in an arbitration proceeding is problematic. Section 42A of the Arbitration and Conciliation (Amendment) Act, 2019, requires parties, arbitral institutions, and arbitrators to maintain confidentiality during the arbitration process. Unless the parties agree otherwise, if the seat of arbitration is in Hong Kong, Singapore, or London, the parties are bound by a duty of confidentiality. The parties in Paris and New York, however, are not subject to this condition unless they agree otherwise. As a result, parties must seek a seat in Paris if they wish to maintain anonymity.
Every country's arbitration statute states that the decisions are final and binding. However, most laws provide the setting aside or remanding of an arbitral decision back to the panel. Courts can use these rulings when they have a compelling concern about the legality and constitutionality of an award or when they have reasons for passing it. The seat of arbitration must be chosen since the primary purpose of arbitration is to resolve the case as quickly as feasible. Remanding an award from the tribunal takes a long time, and setting aside an award and resuming arbitration takes much longer. As a result, the seat of the arbitration should be chosen in such a way that the entire procedure of remanding or setting aside a ruling takes as little time as feasible.
London, for example, is faster than India, which takes roughly a year and three months. In comparison, London takes 3 months and 28 days. As a result, London's seat is preferred above India's seat.
Choice of Substantive Law
This means that the parties are free to choose the governing law of the arbitration. The parties can customize the arbitration proceedings to their own needs and wishes. In the case of ad hoc arbitration, the parties may agree on the arbitrators, the site of the arbitration, and the law of the matter under which the dispute will be decided. When it comes to determining which substantive law would apply to the arbitration, the laws of India and Singapore follow comparable procedures. Both statutes allow the parties to reach an agreement on the substantive law required for dispute resolution. The parties in London, on the other hand, have a distinct edge. On the premise that both parties agree, the parties or tribunals are entitled to expound on any issues that may rule the dispute to be decided. As a result, London becomes a more enticing option.
Constitution of the Tribunal
The location of the arbitration is also essential in determining the composition of the arbitral tribunal. It is one of the factors that institutions examine when appointing a single arbitrator or tribunal. The background and nationality of the lone arbitrator or tribunal may have an impact on how the arbitration procedure is conducted.
The choice of the seat of arbitration is crucial due to the location. The seat will be the default place for hearings, which is relatively handy. Certain seats are picked more frequently in the context of transactions in specific places. In the South American context, for example, New York is a common venue for arbitration. While London and Paris are the most typical places for African and Middle Eastern contracts.
In an arbitration, the parties must choose a seat where judicial interference is limited and where the courts follow an arbitrational approach. Other factors are considered by the parties when deciding the place of arbitration, but the criteria discussed below are seen to be the most important.