Evolution of Arbitration In India & Australia

Pre-Independence

Arbitration has a significant history in India that dates to ancient era. The “Brihadaranyaka Upanishad” was one of the very first accords to incorporate arbitration under Hindu law. Sage Yajnavalkya describes 3 different types of common court: ‘Puga’ (local courts), ‘Srenis’ (those involved within the same trade or activity), and ‘Kulas’ (representatives involved with both the social concerns of a certain society), and all these three mechanisms have been together referred to as Panchayats, the earliest arbitral proceedings tribunals in India and there members were called as Panchas who now are referred to as arbitrators. Such widely known courts thrived in India until the arrival of the British.  These common tribunals only heard civil cases and had no authority to hear criminal ones. They made a decision that was legally binding on both parties. The recording of this arbitration is proceeding during this period finds mention in Privy council decision.

The Modern Arbitration Law in India was developed by the Bengal Regulation Act of 1772 for the effective settlement of conflicts between parties with a tribunal. Thereafter, the same was promulgated to other presidency towns namely Bombay and Madras through Bombay Regulations Act of 1799 and Madras Regulation Act of 1802. The Bengal regulation 1781 provided that the judge do recommend without compulsion upon the parties to submit to arbitration. The Bengal Regulation of 1787, 1793 and 1795 introduced some procedural changes by empowering the court to refer suit to arbitration with the consent of parties and further authorizing the court to promote reference of cases not exceeding more than Rs 200 for dispute relating to debts, partnership accounts and breach of contract. The Bengal Regulation of 1802, 1814 and 1833 made diverse procedural changes like Regulation VII of 1827 provided for settlement of civil disputes.

During the British period, the initial Bengal Regulations did not try to abolish the system of panchayats. The Bengal Regulation of 1781 had a interesting provision to the effect that no award of any arbitrator or arbitrators shall be set aside, except upon full proof, made by the oath of two credible witnesses, that the arbitrators had been guilty of gross corruption or partiality, in the cause in which they had made their award.

On July 1, 1899, India passed its first Arbitration Act modeled upon the English Arbitration Act of 1889, solely relevant to the presidential capitals of Bombay, Calcutta, and Madras. All identities of the arbitrators had to be specified with in accord, and indeed the arbitrators could also be a sitting judge at the time (Nusserwanjee Pestonjee and Ors. v. Meer Mynoodeen Khan Wullud Meer Sudroodeen Khan Bahadoor (1855) 6 MIA 134). As observed by the Privy Council in Nusserwanjee Pestonjee judgment, wherever jurisdiction is given to a court by an Act of Parliament and such jurisdiction is only given upon certain specified terms contained in that Act it is a universal principle that these terms must be complied with, to create and raise the jurisdiction for if they be not complied with the jurisdiction does not arise.  The Indian Arbitration Act of 1889 seemed overly complicated as ruled by the judiciary in Dinkarrai Lakshmiprasad vs. Yeshwantrai Hariprasad AIR 1930 Bom 98, and this was followed by1940 Act.

The 1940 Act pertained to the entire country including Pakistan, Baluchistan. There were numerous disagreements in various areas whenever it arrived at execution. This Act made a distinction between an attempt to set aside a judgment and a finding that the judgment is null and void.[1] The observation regarding the 1940 Act made by the judiciary themselves is reflected in words of Hon’ble Justice D A Desai in the case Guru Nanak Foundation v. Rattan Singh

“The way in which the proceedings under the 1940 Act are conducted and without an exception challenged in the Courts, has made lawyers laugh and legal philosophers weep.”

The Law commission in India in its report dated 9th November,1978 suggested extensive amendments in the Arbitration Act of 1940.

Post-Independence

Following independence, the Arbitration and Conciliation Act 1996 was introduced, which was modelled on 1985 UNCITRAL (United Nations Commission on International Trade Law).

The intent of the Act which was to:

a) amend and streamline the regulations for both local and international business arbitration.
b) Outline the legislation governing conciliation
c) Foreign arbitral proceedings must be enforced
d) To provide for a fair and effective arbitration mechanism
e) Aims to reduce the courts’ supervisory role in the arbitral procedure.
f) All of this enables an Arbitral Tribunal to use mediation, conciliation, and some other dispute resolution techniques throughout the arbitral proceedings.
g) Reduce the grounds upon which an arbitrator verdict might be contested in court.

The Law Commission of India prepared a report on the experience of the 1996 Act and suggested several amendments. The Arbitration and Conciliation (Amendment) Bill, 2003 was the first attempt to amend the said Act. But this Bill was later withdrawn from the Parliament since various concerns were raised about the same. Later, a committee was set up under the Chairmanship of Hon’ble Justice A P Shah (Retd.) to study the 1996 Act and propose amendments to the same. Based on these recommendations of this Committee, the Indian government has introduced the Arbitration and Conciliation (Amendment) Act, 2015 and amended certain provisions of the 1996 Act. In 2015, and again in 2019, the Government of India revised the Arbitration and Conciliation Act, 1996. And further round has taken place in 2020 which aimed at resolving the issues voiced by impacted parties following the passage of both the Arbitration and Conciliation (Amendment) Act, 2019.

History of Arbitration in Australia

Arbitration has a long history in Australia, dating back to the early colonial period. It has evolved over time and has been shaped by a number of legal and economic developments. In the early colonial period, arbitration was used primarily as a means of resolving disputes between merchants and traders particularly in the trade union movement. The first recorded arbitration in Australia took place in 1788, when Governor Phillip established a panel of arbitrators to resolve a dispute between two merchants in Sydney. In the 19th century, arbitration became more widely used as a means of resolving disputes in a variety of sectors, including construction, transportation, and manufacturing. The first formal arbitration legislation in Australia was enacted in Victoria in 1873, followed by legislation in other states and territories in the following decades. In the 20th century, arbitration continued to grow in popularity as an approach to resolving conflicts, notably in international trade. The United Nations Commission on International Trade Law (UNCITRAL) was established in 1966, and Australia became a member in 1974.

Australia is a Model Law country with a bifurcated arbitration regime. Separate statutes regulate international and domestic arbitration. The Commonwealth of Australia is a federation, with six States and two Territories, where each State and Territory represents a separate jurisdiction. Domestic arbitration is governed by the Commercial Arbitration Acts (“CAA”) of each State and Territory. As a further part of arbitration reform in Australia, all States and Territories adopted a uniform statute for domestic arbitration based on the UNCITRAL Model Law on International Commercial Arbitration (“UNCITRAL Model Law”). This resulted in a fairly uniform, harmonious and modern regime governing both international and domestic arbitrations in Australia.

International arbitration in Australia is governed by the International Arbitration Act 1974 (Cth)(“IAA”) as amended in 2010, 2015 and 2018. The legal and institutional framework related to arbitration in Australia has been significantly amended over the past decade as part of a wide-reaching arbitration reform aimed at promoting Australia as an attractive regional seat for international arbitration.

International arbitration is governed by the International Arbitration Act, 1974 (Cth). Domestic Arbitration is governed by a series of Commercial Arbitration Acts in each State or Territory. These Commercial Arbitration Acts in each state and territory are substantially the same and are known as the Uniform Arbitration Acts. New South Wales was the first state to introduce the new Uniform Arbitration Act in 2010 and the Australian Capital Territory was the last state to adopt the Uniform Arbitration Act in 2017.

However both the International Arbitration Act and the Uniform Arbitration Acts follow the UNCITRAL Model Law very closely. The International Arbitration Act simply adopts the Model Law. The Uniform Arbitration Acts set out the terms of the Model Law, using the same numbering system that international arbitration practitioners will be familiar with (including all of sections between Section 17 and Section 17J). Where the Uniform Commercial Arbitration Acts add additional provisions, they do so at convenient places using the system of inserting clauses with a letter suffix, so as not to disturb the Model Law numbering system. For instance provisions providing for freedom for representation allowing anyone to represent parties in arbitration have been inserted as Section 24A immediately after the Model Law provision dealing with hearings.

In 2010, the Commercial Arbitration Act was introduced, providing a modern and effective framework for the resolution of domestic commercial disputes through arbitration. Each state and territory also has its own arbitration legislation, which may apply to non-commercial disputes or disputes that fall outside the scope of the federal legislation.

In recent times, there has been a rising realization in Australia of the value of arbitration as a method of settling conflicts. This has led to the development of various arbitration institutions and centres, such as the Australian Centre for International Commercial Arbitration (ACICA), which provide a range of services to support the arbitration process in Australia. Overall, the evolution of arbitration in Australia has been marked by a number of key developments, including the introduction of various laws and regulations to provide a modern and effective legal framework for the resolution of disputes through arbitration, and the growth of arbitration institutions and centres to support the arbitration process.

The Present

Presently Arbitration is a widely used and accepted means of dispute resolution in Australia. It is a private, voluntary process in wherein the disputing parties decide to have their disagreement addressed by a third party rather than a court. Arbitration can be performed in person or remotely, relying on the parties’ and arbitrator’s preferences. It is typically a faster and more cost-effective means of resolving disputes than litigation, and the decisions of arbitrators are generally final and binding on the parties. There are a number of organizations in Australia that provide support and assistance to parties engaging in arbitration, including the Australian Centre for International Commercial Arbitration (ACICA), the Australian Institute of International Affairs (AIIA), and the International Chamber of Commerce (ICC). These organizations may provide arbitrators, administer arbitration proceedings, and provide guidance and assistance to parties. [Saha and Co. v. Ishar Singh Kripal Singh and Co., 1955 SCC OnLine Cal 262] Overall, arbitration is a well-established and widely used means of dispute resolution in Australia, Is therefore anticipated to play a critical role in resolving disputes in the country over time.

According to the 2021 International Arbitration Survey conducted by the School of International Arbitration at Queen Mary University of London and White and Case LLP, the top-five most preferred seats for arbitration were London(54%), Singapore(54%), Hong Kong (50%), Paris(35%) and Geneva(13%). Notably, New York and Beijing closely followed. Evidently, arbitration has evolved over the years as an ideal tool for fast resolution of disputes saving the parties from technical court procedures and also assisting the court by reducing some burden. The arbitration system in India has been in existence for over 100 years now. It has evolved from a system of “courts of arbitration” to a “forum of dispute resolution”.  In India, the settlement of disputes outside the court system was in existence since the Vedic period and later the Panchayat was entrusted with the duty of dispute resolution which occurred within the jurisdiction of the village. The current arbitration law has its foundation in various periods and is drafted in compliance with the UNCITRAL Model Law on International Commercial Arbitration to have uniformity of Arbitration procedure at the global level. Though it can be said that arbitration is still in a development phase, the recent amendments of 2019 and 2021 took leap-bound steps to inculcate practices that would encourage transparency, independence, and impartiality of the arbitration proceedings, thereby preventing unnecessary intervention of the courts and ensuring speedy and time bound disposal of the cases. Although both India and Australia is not in top five list of arbitration hub but in contrast, Australia has been using the system of “international arbitration” for a much shorter period and continues to develop as an arbitration hub due to supportive environment for arbitral awards. The first formal arbitration case was decided in Australia in 1873. Australia is a Model Law country with a bifurcated arbitration regime and separate statutes that regulate international and domestic arbitration, both of these statutes follow the UNCITRAL Model Law very closely.