Effective arbitration: the devil lies in the details

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Pointers on pitfalls to avoid while drafting an arbitration clause by Sumeet Kachwaha and Dharmendra Rautray at Kachwaha & Partners

It needs to be recognized that arbitrations are tricky business. A lot hangs on the arbitration agreement. Here are three suggestions (which are especially useful in the Indian context) to navigate the challenges that parties confront:

Sumeet Kachwaha
Sumeet Kachwaha
  1. Avoid ad hoc arbitrations: This method of conducting arbitrations is considered bad anywhere in the world for a variety of reason. The process lacks transparency and accountability as parties are left to the whims and fancies of the arbitrator in terms of conduct of proceedings, fixing of costs, securing support mechanisms for a fair conduct of the proceedings, etc.

    In India, ad hoc arbitrations are especially difficult as they invite additional court intervention. This is a result of a ruling by a seven-judge bench in SBP & Co v Patel Engineering Ltd & Anr (overruling a five-judge decision in Konkan Railway Corporation Ltd v Rani Construction Pvt Ltd) holding that the court’s power to appoint an arbitrator is judicial, and not administrative, in nature.

  2. As a corollary, the court went on to hold that if its jurisdiction to appoint an arbitrator is invoked (in an ad hoc arbitration, where there is no mechanism to constitute a tribunal when parties disagree) the court, and not the arbitral tribunal, shall decide preliminary issues including whether there is a “live” claim; whether there has been accord and satisfaction; whether the arbitration agreement is “null and void, inoperative or incapable of being performed”; whether the claim is time barred, etc.

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Sumeet Kachwaha is a managing partner at Kachwaha & Partners in New Delhi where Dharmendra Rautray is a member. They can be contacted at skachwaha@kaplegal.com and drautray@kaplegal.com respectively.

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