Some men change their party for the sake of their principles; others their principles for the sake of their party – Winston Churchill
In current times, resolving disputes through alternative mechanisms is becoming more prevalent as community demands speedy disposal of justice. Arbitral proceedings are now increasingly recognized as a fast and effective remedy for resolution of disputes, where parties agree to submit their disputes to arbitration based on the expressed conditions agreed upon by the parties. In this article, we have shown as to how an arbitration proceeding is driven by autonomy of the parties to an arbitration agreement.
The roots of the word Arbitration lie in the principle of 'party autonomy'. The word means to have 'freedom to opt' or 'parties at will'; and the jurisprudence of arbitration has long embraced this concept. This principle is the guiding grundnorm for arbitration laws across various jurisdictions. Parties have absolute freedom to determine the conditions by which the arbitration agreement will be governed. Furthermore, the parties will be free to choose inter alia the place of arbitration, laws to govern the substance of the dispute and laws to govern the procedure of the arbitration based on mutual agreement between the parties.
It is significant to highlight that Article 19 of the UNCITRAL Model Law embodies the principle of 'party autonomy' by stipulating that parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. The Arbitration and Conciliation Act, 1996 (the Act) provides specific provisions stipulated under Section 2(6), making it clear that parties are free to authorize any person, including an institution, to determine the issue between the parties. Section 2(8) provides the parties, liberty to choose the rules and regulations. Furthermore, as per Section 19(2) the parties can agree on the procedure to be followed by an arbitral tribunal.
DEVELOPMENT OF PARTY AUTONOMY AS GRUNDNORM OF ARBITRATION
"Unless otherwise agreed by the parties"
A well-established principle of party autonomy is that parties are free to choose any of the conditions in the arbitration agreement to resolve their disputes irrespective of any place, law, rules, and procedures to follow. It is regarded as the "brooding and guiding spirit" of arbitration.1 The legal position is such that the parties to an arbitration have the autonomy to decide not only on the procedural law, but also the substantive law.2 Arbitration agreement is the core element which reflects the autonomy of the parties3, including appointment and organization of arbitral tribunal4, deciding the place of arbitration5 and so on. To fully establish the principle of party autonomy, the following issues must be addressed which are discussed in detail herein below:
1. AGREEMENT OF PARTIES FOR FOREIGN SEAT OF ARBITRATION
Earlier, there was an eclipse on this principle of party autonomy in India because Indian courts had ruled that if both parties are Indians, then arbitration will occur in India.6
However, in 2008 there was a shift in favor of autonomy of the parties when the question before the apex court arose as to whether arbitration between two subsidiaries of Malaysian companies in India would be an international commercial arbitration or domestic arbitration7. The court in the said case held that the arbitration in such case will be treated as domestic, as per Section 28 of the Arbitration and Conciliation Act, and thus the arbitration is validly conducted in India. This decision, however, was dissented from being followed, under the misconception that Indian parties cannot contract out of Indian Law8.
Thereafter in 2017, a three-judge bench of the hon'ble apex court in Centrotrade Minerals and Metal v. Hindustan Copper9, re-emphasized upon the principle of party autonomy in arbitration. The court held that the 'party-autonomy' is virtually the backbone that permits parties to adopt the foreign seat as the proper arbitration law. In arbitration, the decks have been cleared to give effect to party autonomy by widely accepting it as a guiding spirit.
Furthermore, in Bharat Aluminum Co. v. Kaiser Aluminum Technical Services10, it was held that party autonomy being the indispensable and directing element of arbitration, arbitrators are permitted to elect to apply three specific laws to their entire agreement: (1) appropriate law of agreement, (2) appropriate law of the arbitration agreement, and (3) appropriate law of the conduct of arbitration, which is in lawful speech known as "curial law". Besides determining procedural law, the arbitration agreement can mandate the choice of substantive law as well.
Further, in PASL Wind Solution v. GE Power Conversion11, the Supreme Court upheld the principle of party autonomy and held that two Indian parties could choose foreign seats of arbitration irrespective of the fact that both parties are Indian. Moreover, the foreign award passed by the arbitrator will be enforceable under part II of the Act.
2. EMERGENCY AWARD - INTERIM RELIEF
In the recent case of Amazon Investment Holdings LLC v. Future Retail Limited & Ors.12, the hon'ble Supreme Court recognized the validity of an emergency award made in India under Section 17 of the Arbitration and Conciliation Act 1996. As per agreement between parties, the Rules of Singapore International Arbitration Center (SIAC) were to govern the arbitration proceedings, while the seat of arbitration was in India. The Amazon group sought an emergency award from SIAC. The emergency award so granted was put to enforcement before the single-judge bench of the Delhi High Court which approved and ordered enforcement of the emergency award. A stay of execution was obtained later by the Future Group, in appeal to the division bench. Nevertheless, Amazon approached the Supreme Court, which decided in favor of Amazon Group, based on the following reasoning:
- According to Section 17(1) of the Act, an emergency arbitrator's award is enforceable in court under Section 17(2), and an emergency arbitrator's award is an order under that section.
- A request to implement an emergency arbitrator's award made under Section 17(2) of the Arbitration Act would not be appealable under the Arbitration Act.
The Supreme Court's decision in Amazon v. Future marks the beginning of a significant trend in Indian arbitration that puts party autonomy at the forefront. Pertinently, the choice of parties would enable an emergency arbitration award made in an arbitration seated in India to be enforced by Indian courts like that of a court decree. Additionally, the parties can anticipate that the enforcement process should be less arduous and more solid because such an emergency award would be conclusive and non-appealable. This decision is a welcome development since it aligns the Indian arbitration industry with the global standards with respect to recognition of emergency awards and their enforcement.
Arbitration is generally perceived as a process governed by party autonomy. One of the fundamental reasons for the preference of arbitration over traditional litigation as the preferred method of resolving commercial disputes among parties these days is the party autonomy. Each party is able to tailor and characterize an arbitration component that best meets their needs. Instruments should adhere to the law and general approach. When courts determine that such an instrument does not violate the law's guidelines, they should permit the parties to continue in their preferred procedure with the least interference possible. Full party autonomy is provided by the Arbitration Act including the right for emergency arbitrators to deliver interim orders, which are described as "awards" in Sections 10 to 13, 16, 17, 21, 23, 27, 29A, and 30 of the Arbitration Act. Also, the question of jurisdiction will be mostly settled on the basis of the principle of party autonomy since one law might not be the same in another country and vice versa.
1. Bharat Aluminum Co. v. Kaiser Aluminum Technical Services, (2016) 4 SCC 126.
3. Section 7 to 9 of the Arbitration and Conciliation Act, 1996.
4. Section 10 to 15 of the Arbitration and Conciliation Act, 1996.
5. Section 20 of the Arbitration and Conciliation Act, 1996.
6. Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105.
7. TDM infrastructure v. UE development India, (2008) 14 SCC 271.
8. Addhar Mercantile v. Shree Jagdamba Agrico Exports, 2015 SCC OnLine Bom 7752; Sasan Power v. North American Coal, 2015 SCC OnLine MP 7417
9. (2017) 2 SCC 228.
10. (2016) 4 SCC 126.
11. 2021 SCC OnLine SC 331.
12. 2021 SCC OnLine SC 557.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.