Venue of Arbitration

3.1 Venue of Arbitration

1. In domestic arbitration, the place of arbitration does not pose any problem. It can be anywhere in India according to the agreement of the parties. If arbitration is under the rules of an institution, it is generally conducted at the place where the institution is located, subject to agreement to the contrary.




2. In international arbitrations, parties generally specify the place of arbitration in their arbitration agreement. If it is not so specified, Indian parties usually make use of, as far as possible, a joint arbitration clause, which deals, inter-alia, with the determination of the place of arbitration. Such clauses are recommended for adoption by arbitral organisations which provide international arbitration facilities and which have entered into arbitration service agreements with their counterparts in other countries. In arbitration service agreements concluded by arbitral institutions in different countries, the place of arbitration usually specified is the country where the respondent resides.
   
   Under certain other agreements, the party demanding arbitration approaches its national institution with its demand for arbitration. That institution notifies both the parties asking them to give their choices of venue. The matter is then considered by a Committee consisting of three members, one each nominated by organizations of the countries to which the parties belong and the third person selected by the two members. The third person is generally the Chairman of the Committee. The majority decision of the Committee on the venue will be final and binding on the parties. The Indian Council of Arbitration has entered into arbitral service agreements with arbitral institutions in more than twenty five countries.

Section 20(1) gives freedom to the parties to agree on the place of arbitration. Failing any such agreement, the place of arbitration will be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. See Section 20(2).

The Arbitral Tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or parties or for inspection of documents, goods or other property [under Section 20(3)].

The place where the arbitration is conducted within India does not have any impact on the applicable law because that issue will be determined in accordance with section 28 of the new law, which is summarised in para 3.3 below :

The Arbitration Act, 1940, did not have an express provision as to procedure. Generally, subject to those provisions of the Act which were mandatory, the parties could, by agreement, specify the arbitral procedure.

1. The arbitral tribunal is not bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872 [Section 19(1) of the new Act].

2. Subject to the provisions of the law, parties have freedom to agree as regards the procedure to be followed by the arbitral tribunal [section 19(2)].

3. In the absence of such agreement, the arbitral tribunal can follow such procedure as it considers appropriate [sections 19(3)].

4. The power of the arbitral tribunal mentioned above includes power to determine the admissibility, relevance, materiality and weight of any evidence.

In an arbitration with a foreign party, questions of the substantive law applicable to the contract may also arise. The law applicable to the substance of the contract or the merits of the dispute in such cases will be that which has been agreed to by the parties. It may be Indian law or any other law. If the parties have not agreed on a particular law, the arbitrator will decide the applicable law. But while so doing, he must go by the rules of the Conflict of Laws. According to the general understanding, the law of the place with which the contract has the closest connection will be the substantive law applicable to the contract.

Section 28 of the new law provides for the rules applicable to substance of disputes in domestic and international commercial arbitrations.

Where the place of arbitration is in India, the following principles apply to domestic and international commercial arbitrations respectively [Section 2(1)(f) of the new law defines international commercial arbitration].



1. In domestic arbitration, the arbitral tribunal shall decide the dispute in accordance with the substantive law for the time being in force in India.




2. In international commercial arbitration, the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute. Any designation by the parties of the law or legal system of a given country will be construed (unless otherwise expressed) as directly referring to the substantive law of that country and not to its conflict of laws rules. Further, failing any designation of the law by the parties, the arbitral tribunal in international commercial arbitration has to apply the rules of law which it considers appropriate, taking into account the circumstances surrounding the dispute. [See Section 28(1)(a) and (b) respectively]. A tribunal’s decision should take into account not merely the appropriate law and the terms of the contract but also the usages of the trade applicable to the transaction [section 28(3)].


The arbitral tribunal may decide ex aequo et bono or as amiable compositeur is on consideration of justice and fairness and not strict law alone, only if the parties expressly authorise it to do so [Section 28(2)].