A Study of Supplementary Proceedings in Arbitration

Arryan Mohanty

Published on: March 7, 2022, at 13:35 IST

Introduction

We frequently hear a slew of concerns from Petitioners or Plaintiffs in specific cases. The legal fees were excessively costly, the case was settled after several sessions, or the judgement did not offer them with an adequate remedy.

However, since the introduction of ‘Alternative Conflict Resolution’, we have seen a dramatic reduction in such complaints. Arbitration has become increasingly popular in commercial negotiations and disputes.

Increased Overseas Trade has led in an increase in cross-border disputes, necessitating the development of a more effective method of dispute settlement. Arbitration has arisen as a means of preserving business partnerships and resolving disputes amicably.

Alternative Dispute Resolution, often known as Suitable or Amicable Dispute Resolution, is a method of resolving disputes between parties outside of the courtroom. While courts decide the outcome of a lawsuit, Alternative Dispute Resolution (ADR) settles the conflict effectively, efficiently, and pleasantly.

Arbitration is a popular type of Alternative Dispute Resolution. It is frequently utilized in commercial conflicts. Arbitration can be requested by parties that have included an arbitration clause in their contract.

One key difference between Arbitration and Mediation is that one of the parties cannot withdraw unilaterally from arbitration. To ensure that no party gains an unfair advantage, the parties can choose the venue, the language in which the procedures are conducted, and the applicable law.

Several authors have claimed that the first Arbitrator, King Solomon, adopted a system similar to today’s while resolving a disagreement that arose when two women protested that they were the mothers of a baby boy.

Another powerful figure, Philip the Second, had utilized arbitration to settle a territorial dispute in 337 BC. The term ‘Compromissum’ was used in Roman law to describe a method of resolving disputes that involved the parties reaching an agreement.

As a result, we can see that there have been a lot of cases of arbitration that occurred in the ancient age and served as a forerunner to the laws that exist today.

Stages of Arbitration

The stages of arbitration or the arbitration procedure are as follows:

• Arbitration Clause: A contract or clause that states that if a dispute emerges between the parties, the dispute will be resolved through arbitration.
• Arbitration Notice: If a dispute arises and a party chooses to pursue it through arbitration, the party against whom the default has been committed will send an arbitration notice, which will initiate the arbitration process between the parties.
• Appointment of Arbitrators: After receiving notification from the other party, both parties will appoint arbitrators according to the arbitration agreement or arbitration clause.
• Statement of Claim: The writing of a statement of claim is the next step in an arbitration procedure in India. The dispute between the parties, the events that led to the conflict, and the compensation sought from the defaulting party are all included in the statement of claim. The opposite party might respond to the statement of claim with a statement of counterclaim. Top arbitration lawyers can help you with your statement of claim, reply to the statement of claim, or counterclaim.
• Hearing of Parties: Parties will be heard by the arbitral tribunal, as well as their evidence.
• Award: The arbitral tribunal will make a decision after hearing both sides. The tribunal’s ruling is known as an ‘Award,’ and it is binding on the parties. The High Court, on the other hand, can hear an appeal against the arbitral award.
• Award Execution: After the tribunal has approved the award, it must be carried out. With the assistance of a qualified arbitration lawyer, the party who has been awarded must file for execution or enforcement of the award.

Supplementary Proceedings

Applicability

These Supplementary Rules for Class Arbitrations (“Supplementary Rules”) apply to any dispute arising out of an agreement that provides for arbitration under any of the American Arbitration Association’s (“AAA”) rules where a party submits a dispute to Arbitration on behalf of or against a class or purported class, and shall supplement any other applicable AAA rules.

When a court refers a case filed as a class action to the AAA for administration, or when a party to a current AAA arbitration makes new claims on behalf of or against a class or claimed class, these Supplementary Rules apply.

In the event of a conflict between these Supplementary Regulations and other AAA rules applicable to the dispute, the Supplementary Rules will take precedence.

The arbitrator shall have the authority to determine any conflict between the Parties’ Agreement and these Supplementary Rules, and shall endeavor to avoid harm to the interests of absent members of a class or putative class in doing so.

When a court has addressed and settled a subject that would normally be handled by an arbitrator under these Supplementary Rules by order, the arbitrator must follow that order.

Arbitration Roster and Number of Arbitrators

At least one Arbitrator must be selected from the AAA’s National Pool of Class Arbitration arbitrators in each arbitration conducted under these Supplementary Rules.

If the parties cannot agree on the number of arbitrators to be appointed, the dispute will be decided by a single arbitrator unless the AAA, in its sole discretion, orders the appointment of those three arbitrators. The term “arbitrator” is used in these Supplementary Rules to refer to one or more arbitrators.

Construction of the Arbitration Clause

The Arbitrator shall determine, as a threshold matter, whether the applicable Arbitration Agreement authorizes the Arbitration to proceed on behalf of or against a class in a reasoned, partly final award on the construction of the arbitration clause (the “Clause Construction Award”).

Following the issuance of the Clause Construction Award, the Arbitrator shall suspend all proceedings for at least 30 days to allow any party to petition a court of Competent Jurisdiction to confirm or vacate the Clause Construction Award.

The Arbitrator may proceed with the Arbitration on the basis stated in the Clause Construction Award if all parties inform the Arbitrator in writing during the stay period that they do not intend to seek judicial review of the Clause Construction Award, or if the requisite time period has passed without any party informing the arbitrator that it has done so.

If a party notifies the arbitrator within the time limit that it has sought Judicial Review, the Arbitrator may stay further proceedings, or parts of them, until the Arbitrator receives notification of the court’s decision.

The arbitrator shall not consider the existence of these Supplementary Rules, or any other AAA rules, in construing the applicable Arbitration Provision as a consideration either in favor of or against allowing the arbitration to continue on a class basis.

Class Certification

Prerequisites to a Class Arbitration

If the Arbitrator is satisfied that the Arbitration Clause allows the Arbitration to proceed as a Class Arbitration, as provided in Rule 3, or if a Court has ordered an Arbitrator to determine whether a Class Arbitration can be maintained, the Arbitrator shall decide whether the Arbitration should proceed as a Class Arbitration.

The Arbitrator must take into account the criteria outlined in this Rule 4 as well as any Legislation or Agreement between the parties that the Arbitrator deems applicable to the Arbitration.

The Arbitrator must decide whether one or more members of a class may act as representative parties in the Arbitration on behalf of all members of the class mentioned.

Only if all of the following circumstances are met, would the Arbitrator allow a representative to do so:

• There are questions of law or fact that are common to the class;
• The representative parties’ claims or defenses are typical of the class’s claims or defenses;
• The class is so large that joining separate Arbitration on behalf of all members is impracticable;
• The class’s interests will be fairly and adequately protected by the representative parties;
• The class’s interests will be fairly and adequately protected by the counsel chosen to represent the class;
• Each class member has signed an agreement containing an Arbitration clause that is substantially similar to that signed by the class representative(s) and each of the other class members.

Class Arbitration Maintainable

If the prerequisites of subdivision (a) are met, and the Arbitrator also finds that the questions of law or fact common to the Class Members predominate over any questions affecting only individual members, and that a Class Arbitration is superior to other available methods for the fair and efficient adjudication of the controversy, the arbitration may be maintained as a class arbitration.

The scope and nature of any other proceedings concerning the controversy already commenced by or against members of the class; the desirability or undesirability of concentrating the determination of the claims in a single arbitral forum; and the difficulties likely to be encountered in the management of the claims are all matters relevant to the findings.

Class Determination Award

The Arbitrator’s decision on whether to proceed with a Class Arbitration shall be spelled forth in a reasoned, partly final ruling (the “Class Determination Award”) that addresses each of the issues set forth in Rule 4. A Class Determination Award certifying a class arbitration must define the class, name the class representative(s) and counsel, and include the class claims, issues, and defenses.

A copy of the proposed Notice of Class Determination (see Rule 6) must be attached to the award, with the anticipated manner of delivery of the Notice to the class members specified.

When and how members of the class may be excluded from the Class Arbitration will be stated in the Class Determination Award. If an Arbitrator determines that allowing class members to request exclusion is improper due to some unusual condition, such as the requirement to settle claims seeking injunctive relief or claims to a limited fund, the Class Determination Award must explain why.

The Arbitrator shall stay all proceedings following the issuance of the Class Determination Award for a period of at least 30 days to permit any party to move a court of competent jurisdiction to confirm or to vacate the Class Determination Award.

Once all parties inform the arbitrator in writing during the period of the stay that they do not intend to seek judicial review of the Class Determination Award, or once the requisite time period expires without any party having informed the arbitrator that it has done so, the arbitrator may proceed with the arbitration on the basis stated in the Class Determination Award.

If any party informs the Arbitrator within the period provided that it has sought judicial review, the Arbitrator may stay further proceedings, or some part of them, until the Arbitrator is informed of the ruling of the court.

Following the issuance of the Class Determination Award, the arbitrator shall suspend all proceedings for at least 30 days to allow any party to petition a court of competent jurisdiction to confirm or vacate the Class Determination Award.

The Arbitrator may proceed with the Arbitration on the basis stated in the Class Determination Award if all parties inform the Arbitrator in writing during the stay period that they do not intend to seek judicial review of the Class Determination Award, or if the requisite time period has passed without any party informing the Arbitrator that it has done so.

If a party notifies the Arbitrator within the time limit that it has sought judicial review, the Arbitrator may stay further proceedings, or parts of them, until the Arbitrator receives notification of the court’s decision. Before a final award is issued, the arbitrator may edit or amend a Class Determination Award.

Notice of Class Determination

Following the expiration of the stay following the Class Determination Award, the Arbitrator in any Arbitration administered under these Supplementary Rules shall determine that class members be given the best notice practical under the circumstances (the “Notice of Class Determination”). All members who can be identified with reasonable effort will receive a Notice of Class Determination.

The Notice of Class Determination must concisely and clearly state in plain, easily understood language:

1. The nature of the action; the certified class definition; the class claims, issues, or defenses; that a class member may appear through counsel if desired, and that any class member may attend the hearings; that the Arbitrator will exclude from the class any member who requests exclusion, specifying when and how members may elect to be excluded;
2. A class judgment’s binding impact on its members;
3. The Arbitrator’s name and biographical information, as well as the identity and biographical information of the class representative(s) and class counsel who have been approved by the Arbitrator to represent the class; and how and to whom a class member may communicate about the Class Arbitration, including information about the AAA Class Arbitration Docket.

Final Award

In a Class Arbitration, the ultimate ruling on the merits, whether favorable or unfavorable to the class, must be reasoned and must identify the class with detail.

The final award must include identify or describe individuals who received the Rule 6 notification, those who the arbitrator determines to be members of the class, and those who have chosen to opt out of the class.

Settlement, Voluntary Dismissal, or Compromise

The Arbitrator must approve any settlement, voluntary dismissal, or compromise of the claims, problems, or defenses in an arbitration filed as a Class Arbitration. The Arbitrator must order that all class members who would be bound by a proposed settlement, voluntary dismissal, or compromise be given adequate notice.

Only after a hearing and a determination that the settlement, voluntary dismissal, or compromise is fair, reasonable, and adequate may the arbitrator sanction a settlement, voluntary dismissal, or compromise that would bind class members.

Any agreement made in connection with the proposed settlement, voluntary dismissal, or compromise must be submitted to the Arbitrator by the parties seeking approval of the settlement, voluntary dismissal, or compromise under this Rule.

Individual class members who had an earlier opportunity to request exclusion but did not do so may have a second opportunity to do so if the arbitrator refuses to approve the settlement unless they are given a fresh opportunity to do so.

A proposed settlement, voluntary dismissal, or compromise that requires approval under this Rule may be objected to by any class member. Only the arbitrator has the authority to withdraw such an objection.

Any agreement made in connection with the proposed settlement, voluntary dismissal, or compromise must be submitted to the arbitrator by the party’s seeking approval of the settlement, voluntary dismissal, or compromise under this Rule.

Individual class members who had an earlier opportunity to request exclusion but did not do so may have a second opportunity to do so if the arbitrator refuses to approve the settlement unless they are given a fresh opportunity to do so.

A proposed settlement, voluntary dismissal, or compromise that requires approval under this Rule may be objected to by any class member. Only the arbitrator has the authority to withdraw such an objection.

Confidentiality; Class Arbitration Docket

In class Arbitration, the presumption of privacy and confidentiality in arbitration procedures does not apply.

All Class Arbitration proceedings and filings are open to the public, unless the arbitrator decides otherwise in exceptional circumstances. Class members and their individual counsel, if any, will not be excluded from the arbitration hearings.

Supplementary Proceedings in India

In India, the Arbitration procedure is used to resolve a business disagreement. The key law governing Arbitration in India is the Arbitration and Conciliation Act of 1996. The Act specifies the method for Arbitration proceedings in India as well as the procedures involved in Arbitration.

The act is divided into four sections:

• Part I sets out general provisions on domestic arbitration.
• Part II addresses the enforcement of foreign awards (Chapter 1 deals with New York Convention awards and Chapter II with awards under the 1927 Geneva Convention).
• Part III deals with conciliation and
• Part IV sets out certain supplementary provisions. Parts I and II are the most significant and are based on the UNCITRAL Model Law and the New York Convention respectively.

Arbitration in India is controlled by Indian Arbitration Legislation, which stipulates that in order to use arbitration as a dispute resolution method, the contesting parties must execute an agreement to that effect.

The parties have the option of signing a separate Arbitration agreement or include an Arbitration clause in the main contract between them. The Arbitration agreement or clause should clearly state that the dispute will be resolved exclusively through arbitration.

It should also define the number of Arbitrators to be appointed and how they will be appointed. In India, Arbitrators are only to be appointed in odd numbers. In India, an Arbitrator must be an unbiased, independent third person who settles conflicts between disputants in a fair and impartial manner.

The Arbitration and Conciliation Act was adopted to consolidate, define, and alter the legislation in respect to domestic arbitration, international commercial arbitration, and the enforcement of foreign Arbitral awards. It is based on the UNCITRAL Model Law.

Indian courts are becoming increasingly pro-arbitration and enforcing legitimate arbitration agreements. The Arbitration and Conciliation Act’s declaration of aims and reasons also recognises the idea of court non-intervention in the arbitration procedure.

However, if the Indian courts determine that there is no legitimate agreement or that the issue is not Arbitrable, they will refuse to enforce the arbitration agreement. The number of arbitrators is up to the parties to decide, as long as it is not an even number.

The most crucial phase in the Arbitration procedure is the Appointment of the Arbiter. The tribunal will consist of one Arbitrator if the parties do not specify the number of Arbitrators.

If the parties cannot agree on a mechanism for choosing a three-member tribunal, each party shall appoint one Arbitrator, with the presiding Arbitrator being chosen by the two party-appointed Arbitrators.

If a party fails to appoint an Arbitrator within the time limit, the other party may file an application with the Supreme Court or the High Court to have the Arbitrator appointed.

The Indian Arbitration and Conciliation Act has no particular instructions on how the parties should communicate with the tribunal. All substantial messages are written in practice.

The language(s) to be used in the arbitration procedure can be agreed upon by the parties. In the absence of an agreement, the tribunal has the authority to decide on the language(s).

The Arbitration and Conciliation Act does not require the panel to agree unanimously. Unless the parties agree otherwise, the tribunal’s decisions are determined by a majority of its members. The presiding Arbitrator may be authorized to decide procedural questions if the parties and the tribunal agree.

A dissenting arbitrator can produce a separate opinion if there is a disagreement, but the Arbitration and Conciliation Act does not specify the format of such a dissenting opinion.

In India, the Arbitration process does not follow the rules outlined in the Civil Procedure Code, and the Arbitrator is not required to follow the protocols outlined in the Civil Procedure Code, 1908. In India, however, an Arbitrator has the following powers:

1. To give out awards
2. Obtaining assistance
3. To make a decision on its jurisdiction
4. To enact temporary relief
5. Procedures to be determined
6. Deciding on the proceedings’ official language
7. To assign a specialist
8. To enlist the help of the court in gathering evidence
9. To put an end to the proceedings
10. Interest and deposits will be imposed.

Aside from the aforementioned authorities, the Arbitrator has additionally granted some civil court powers under the Civil Procedure Code:

1. To take the oath of all parties and witnesses that appear before him;
2. To state a special case for the court’s opinion on any legal subject, or to state the award in the form of a special case for the court’s opinion;
3. To make the award conditional or, in the alternative, to make the prize unconditional;
4. To fix any clerical mistake or error resulting from an unintentional slip or omission in an award;
5. To administer any interrogatories issued by any party

Except to the extent specifically prohibited by the Arbitration and Conciliation Act, the Limitation Act 1963 applies to all proceedings under the Arbitration and Conciliation Act, just as it does to proceedings in Indian courts.

Any Arbitration proceedings filed after the statute of limitations has expired (three years from the date the cause of action originated) will be prohibited. Domestic arbitration hearings can be intervened in by local courts. This includes the ability to issue interim orders as well as the ability to select arbitrators.

Conclusion

Arbitration has proven to be an efficient forum for resolving misunderstandings between parties and reaching an amicable agreement that benefits both sides. A number of revisions and amendments have been made to the Act.

It has grown in many ways and continues to adapt to the changing needs of the general population. Citizens must be well-informed about alternative dispute resolution methods and their benefits.

Many people are cheated financially and do not receive appropriate compensation through litigation. It can be thought of as a break from the pending cases, and it is free of any bias or advantage offered to one party.

Edited by: Tanvee Jain, Publisher, Law Insider

References

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