Arbitration law and its implications within Industries

By Pamkhuila Shaiza on November 4, 2015

Arbitration is understood as the institution where a third party decides disputes and also exercise jurisdiction between two parties. The fundamental role of an arbitrator is expected to remain impartial and also to make its decision binding over the other parties in dispute [1]. Richard C. Reuben defined arbitration as a “less formal means of dispute resolution, undertaken largely outside the sphere of public law, in which two or more parties authorize a neutral third party (or panel) to decide their dispute” [2]. Over the years, arbitration has been preferred over traditional litigation proceedings, since the former turns out to be less expensive, more approachable, more flexible in timing, possess simpler rules and offers faster resolution. On top of this, arbitration allows the entire procedure to be completed without the intervention of lawyers or other representations. All civil disputes are liable to be referred to arbitration tribunal and disputes can be settled therewith [3]. Since its institution in 1958, the New York Convention of 1958 has been considered as the most statute more powerful in enforcing arbitration awards in arbitral cases [4]. The New York Convention is known for its applicability to domestic as well as international arbitration agreements, which allows itself to be interpreted by different signatory countries. Many other laws concerning commercial, construction, etc. have been passed by various international organizations and conventions, which have made arbitration system an effective alternative for settling cases.

Impact of arbitration across construction and information technology (IT) industries

Most of the time in construction arbitration case disputes arise from contracts, plans of construction and land ownership and other technicalities (Stephenson, 2003). In order to avoid such problems, constructor should have proper knowledge of construction industry. The arbitrator whom the parties appointed should also be well informed on how construction industry works. In construction arbitration disputes, generally those who are involved in the dispute are often the owner, designers, contractors and several other subcontractors. Construction arbitration is unlike others therefore does not necessarily involve two parties but multiple parties. Usually construction parties in dispute have no desire for publicity so most of the time, construction arbitration proceedings are not opened to public or press unlike other court cases. The recognition of the importance of arbitration in construction industry can be attested through setting up of institutions like ‘The Society of Construction Arbitrators’ based in London. The Society’s advanced rules – Construction Industry Model Arbitration Rules (CIMAR) engaged in bringing about achieving common approach to arbitration in construction industry across UK (“The Society of Construction Arbitrators,” 2015; Tolson, 2014). In a country like India, there is an established institutional system for arbitration concerning construction case which is known as the Construction Industry Arbitration Council (CIAC) (CIAC, 2015). This CIAC is dedicated towards facilitating an alternative dispute resolution for international and domestic distribution and for promoting Indian construction industry to practice institutional arbitration.

Arbitration cases in other industries

It can be stated here that the Information Technology(IT) is seen as the reason why rapid growth of globalization happened and how such globalization have led to the rise in arbitration cases. Arbitration disputes and cases in the IT industry have mainly been seen over Intellectual Property Rights. Information Technology is complicated in its own way and disputes related to IPR in IT is complex. Intellectual property right disputes mainly revolve around patents, copyrights, and trademarks among others (Gopalsamy, 2009). Although intellectual property right related arbitration is gaining rapid ground, there is no International institutionalized arbitration system and laws to deal with the issues at the moment. In addition to intellectual property rights, IT industries also have arbitration disputes involving selling and financing high-tech business; manufacturing; distributing, acquiring, etc. (Bender, 2011).

Role of arbitration in commercial growth

As stated, growth in IT has resulted into rapid rise in globalization and this rise has resulted into growth of commercial activities. Naturally, the growth in commercial activities has been followed by rise in disputes and heavy inflow of arbitration cases. It is understood that “commercial arbitration can provide means through which property rights can be protected, contracts enforced and commercial disputes resolved outside of the judicial system” (Arner, 2007, p. 103). Commercial arbitration has become one of the most formalized forms of arbitration with many acts and institution backing the system (Bagheri, 2000; Lynch, 2003). Since the beginning of 20th century, the importance of commercial arbitration was recognized many other arbitral institutions and laws have been set up in international conventions. The first of its kind was the New York Convention of 1958 which created its epitome in shaping modern international commercial arbitration. In fact, the enforcement of the foreign Arbitral Award by the New York Convention is one of the few examples where the transnational commercial law instrument has remained successful [5]. The New York Convention has therefore been considered the most important international treaty related to the international commercial arbitration. In 1965, the International Centre for Settlement of Investment Disputes (ICSID) was introduced to unify signatory national arbitration laws (ICSID, 1965). This ICSID is responsible for providing facilities on arbitration for signatory countries and foreign investors by dealing with numerous commercial arbitrations that are taking place at a rapid rate.

Given the nature of change in trade policies and practices, the UNCITRAL Model Law was passed in 1985, and the ICC Arbitration Rules was also passed in 1998. The UNCITRAL Model Law tries to harmonize ‘in effect’ the arbitration laws of all the signatory countries. It has become the undisputed international standard for any party seeking justice or even jurisdictions seeking to develop commercial arbitration. On the other hand, the International Chamber of Commerce (ICC) through its ICC Arbitration Rules tries to settle arbitral cases, and usher in better international trade and co-operation. The ICC passed the rules owing to rapid development of increasing importance of arbitration in both domestic and international platforms.

Arbitration as a fundamental tool to resolve disputes

Arbitration as an alternate dispute resolution has been constantly heightened owing to the explosion of globalization and increasing opportunities. The more developed and complex the world institutions and industries become, the more disputes they emanate in their trade making. Such rise in disputes has not only made cases to pile up but the lengthy litigation procedure with the traditional settings of going through the court procedure has proven to become too burdensome for every people, industry, or organization. The ultimate resort in this case is the making of arbitration tribunal system as the fundamental tool in settling disputes and cases and recognition and enforcement of awards accordingly.


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[1] (Bansal & Bhardwaj, 2009; Poudret & Besson, 2007).

[2] Rc Reuben, ‘Public Justice: Toward a State Action Theory of Alternative Dispute Resolution’ (1997) 85 California L Rev 580.

[3] (Bansal & Bhardwaj, 2009).

[4] (Jenkins & Stebbings, 2006; Lew, Μίστελης, & Kröll, 2003).

[5] (Jenkins & Stebbings, 2006; Kronke, 2010; Lew et al., 2003).