Commercial Arbitration

Role of Commercial Arbitration in Profitable and Smooth Conduct of Business

When different traders undertake business transactions, they certainly have good Intentions to cany out their trade deals faithfully and smoothly to earn a well- deserved profit. However, It is matter of common experience that Inspite of best efforts, disputes do arise during performance of business contracts and they arise for various reasons. Unresolved disputes tend to upset the smooth performance and successful completion of business contracts and may, therefore, render an otherwise profitable transaction Into a probable loss. Therefore It Is necessary for carrying on business transactions smoothly and profitably that the area of disputes during performance of contracts Is narrowed down and provision Is made for amicable and quick settlement of disputes that may still arise.

Drafting of Commercial Contracts

To achieve the above purpose businessmen must devote proper attention at the time of drafting their business contracts, by Including comprehensive and precise terms and conditions on all Important aspects of the trade deal In the contract. Firstly, the contract should be drawn up In writing. In the absence of a written contract the nature and extent of the rights and duties of the parties to the trade deal will have to be gathered from circumstantial evidence or legal Implications, which may give rise to a number of uncertainties and differences of opinion or disputes between the parties, during the performance of the contract. Secondly, the contract should be comprehensive and precise. I.e. It should cover all important points and contingencies In clear and unambiguous terms. And last but not least, it must contain an arbitration clause.

Standard Contract Form

In drafting of business contracts, the parties can also get useful guidance from model or standard contract forms drawn up by experienced commercial/ arbitration organisations. Standard contract forms generally contain all important points relating to a particular line of trade or important conditions required in all commercial contracts generally as the case may be. Standard contract forms can provide useful help In drawing up of business contracts and make the job quite easy and simple.

Some traders do not execute any formal contract but carry on their business dealings by using order and acceptance forms. In such cases either the contract conditions Including the arbitration clause may be printed on the order or acceptance form itself or they may be drawn up In a separate sheet and Incorporated In the order or acceptance form. However, the contract conditions should be prominently printed, as far as possible, before the signatures of the other party on the order or acceptance form, to remove any doubt about their Incorporation In the contract.

The ICA provides information and assistance towards formulation of standard forms with necessary terms and conditions which would reduce the chances for occurence of disputes during performance of the contracts to the minimum.


Arbitration Agreement

As explained above, it Is very necessary and useful to make use of arbitration In commercial dealings. It Is very simple and can be arranged In the following ways:

An arbitration clause may be Inserted in the contract itself, clearly providing for settlement of any disputes arising under the contract In future, by arbitration, or
If no arbitration clause could be Included in the contract for any reason, an arbitration agreement may be entered into later at any stage before or after a dispute has arisen under the contract.

The former method of Including an arbitration clause In the contract itself Is more expedient than entering Into an arbitration agreement after a dispute arises.
Advantages of Arbitration

Court proceedings do not offer a satisfactory method for settlement of commercial disputes as It involves Inevitable delays, costs and technicalities. On the other hand arbitration provides an economic, expeditious and informal remedy for settlement of commercial disputes. Proceedings in Courts also Involve notoriety and expose the Internal and private affairs of the parties to public. Arbitration proceedings are conducted in privacy and the awards are kept confidential. The arbitrator is usually an expert In the subject matters of the dispute. The dates for arbitration meetings are fixed with the convenience of all concerned. Therefore, arbitration is the most suitable way for settlement of commercial disputes and It must Invariably be used by businessmen In their commercial dealings.

Institutional Arbitration

Arbitration may be arranged by the parties themselves on ad-hoc basis or It may be conducted according to the rules of an arbitral institution. Arbitration under the Rules of procedure of an arbitral Institution provides several advantages and helps In quicker disposal of cases. The professional experience and expertise avail- able with an arbitral institution facilitates economic and expeditious conduct of arbitrations and adds to the certainly and finality of the proceedings. The Indian Council of Arbitration (ICA) being a specialized arbitration Institution provides arbitration facilities for all types of domestic and International commercial disputes. The parties are, therefore, advised to use the Institutional arbitration facilities under the auspices of ICA or some other organisation, chamber of commerce. Export Promotion Council, trade association, etc. providing arbitration facilities in the sphere of their commercial activity.

Action to be taken by the Trade

As explained above. It is highly desirable and necessary for profitable and smooth conduct of business transactions that precise and comprehensive contract conditions Including an arbitration clause are incorporated In commercial contracts. Indian traders are advised In their own Interest to persuade their Indian and foreign counter-parts to agree for abitratlon as far as possible, under the auspices of the ICA, being a specialised arbitration body In India, or otherwise In appropriate cases.

Important chambers of commerce, trade associations, export promotion councils, etc. have recommended the use of the ICA arbitration clause in all commercial contracts. The Expert Committee on Indian Council of Arbitration appointed by the Ministry of Commerce, Government of India has also recommended in their report ( January 1983) that Increasing use of the Council's arbitration services should be made by the trade, particularly the Public Sector undertakings and exporters for profitable and smooth conduct of their business dealings. Similarly the Abid Hussain Committee on Trade Policies appointed by the Government of India has recommended In Its Report (December 1984) for compulsory inclusion of an arbitration clause In all export contracts.

The arbitration clause recommended by the ICA for Inclusion In all contracts with Indian and foreign parties is given on page 3.