In India, commercial disputes are usually subjected to arbitration rather than moving the courts of law. That is the case when both the parties to a legal dispute are individuals, associations, or companies located in India. The confusion arises when one of the parties to dispute are citizens of, or located/ registered in a foreign country. Matters in court are not only restricted to proving the case but there are a lot of legal formalities that need to be taken care of unlike alternative dispute resolution. Whether it is domestic or international business transactions, discrepancy and legal disputes are obvious. Then how does commercial arbitration in India take place when foreign parties are involved? More importantly, which country’s laws are followed in such cases?
International commercial arbitration cases in India are governed by either Indian laws or foreign laws based on the facts of the matter and agreement among parties concerned. The Arbitration and Conciliation Act, 1996 has special provisions for dealing with commercial disputes having international aspects. The idea of bringing these laws was not only the introduction of arbitration rules in India but also clarity regarding international disputes to be resolved through arbitration.
The section 2 (1)(f) of the Arbitration and Conciliation Act, 1996 provides the international commercial arbitration definition - India. The main ingredients of international commercial arbitration section are:
With the above definition of commercial arbitration having foreign connection to one of the parties, things get a bit confusing. In simple words, if one party is a company registered in India having a commercial contract with another incorporated in another country, it can be said to be the subject of international commercial arbitration as per the above definition.
Gaining clarity with the above definition brings in another round of doubts as the question arises:
The reasons are solutions available in the Arbitration Act regarding commercial arbitration in India with parties having foreign connection:
While dealing with the legal disputes in arbitration in India, the arbitration lawyers are well aware of the laws applicable to a dispute. Thus, resolving such disputes is not much of a tough nut to crack. But when there is an international dispute, the first task is to decide the laws which need to be employed for dealing with the commercial legal issue. Given below are the rules laid in Arbitration and Conciliation Act, 1996 regarding applicable laws:
The following rules need to be followed by parties if the seat of international commercial arbitration is India:
Hence, it can so far be understood that international commercial arbitration is the convenient way out for resolving several disputes arising in commerce on a day-to-day basis. Had there been no law empowering resolution of international disputes arising in business, globalization would be a myth. The international lawyers in India are dutiful to support the smooth run of international commercial arbitration cases in India. Cross-border disputes should be resolved with due diligence, especially when they are related to trade and commerce. For, such cases lay the ground for ease of business in a particular country since trade is not limited to buying and selling but resolving the legal disputes that arise during such transactions.