Settlement in Arbitration 

This Article has been written by Ms. Sejal Dhakad, 1^st year BBA LLB Student at Indian Institute of Management Rohtak. 

Introduction 

The Arbitration & Conciliation Act 1996 regulates arbitration as a method of resolving disputes. The arbitral tribunal that will settle the parties’ disputes may be chosen by the parties to the arbitration agreement or by the court. The Arbitration & Conciliation Act, 1996’s Parts I and II provisions apply to the arbitration processes. The arbitral tribunal will issue the arbitral award, which will be legally enforceable before the court and binding on both parties.

Arbitration is a successful alternative to litigation. By mutual agreement, it is the forum where parties opt to resolve their problems outside of a court of law. The development of arbitration was driven by the need to relieve the court of law of some of its burdens and to give the parties quick relief. 

In contrast to the judicial system, arbitration is a powerful arena that offers quick relief. In contrast to courts, where parties to a disagreement may have to wait years depending on how difficult their case is, arbitration cases are resolved within a year. The autonomy afforded by arbitration and used by the parties to control the direction of the proceedings is another reason why arbitration is favoured by the parties. 

Settlement in Arbitration Agreement 

Settlement agreements are enforceable contracts between two or more parties that aim to settle differences peacefully. The parties may draught a settlement agreement on their own or with the assistance of official processes like mediation. The parties to an ongoing arbitration may decide to forego a straightforward settlement agreement in favour of a consent award. The parties’ request for the tribunal to enter the arbitral award was used to resolve the dispute decision with agreed-upon terms is known as a consent award. This strategy is better because it gives the arbitration a clear and discernible outcome that is approved by the arbitral tribunal.

Settlement can be proposed by any party at any moment during litigation and is typically a more affordable option than going to trial. Another option is mediation, in which the parties can negotiate a settlement on their own but usually with the assistance of a mediator, who is an impartial third party. No solution must be accepted by both parties. As a result, there is no longer a need for a costly and time-consuming legal system. 

The definition of settlement agreements in the context of international arbitration is ambiguous. They can be thought of as legally binding agreements between two or more parties that aim to settle disagreements in a way that is agreeable to both sides. The parties themselves may negotiate settlement agreements, or official processes like mediation may help. 

Consent Awards 

The parties to an ongoing arbitration may decide to forego a straightforward settlement agreement in favour of a consent award. The parties’ request for the tribunal to enter the agreement was resolved through an arbitration decision with agreed-upon terms known as a consent award. This strategy is preferable because, in accordance with the New York Convention, consent awards might be enforceable as arbitral awards. Simple settlement agreements, on the other hand, would mandate that parties continue in accordance with local contract law and file a lawsuit for breach of contract in the event that the settlement agreement was not followed. Consent awards are also preferred because they give the arbitration a specific, observable outcome that is approved by the authority of the arbitral tribunal. 

Tribunals, however, have the option to reject approving a consent award settlement. Unless the settlement agreement is the result of fraud or violates the law, this is rarely the case in actuality.

The ICSID and UNCITRAL Arbitration Rules both allow parties to resolve a dispute prior to the issuance of the arbitral judgement. In such circumstances, parties may ask the tribunal to halt the litigation and document the settlement as an arbitral award. 

Advantages of the Arbitration Settlement  

• Fair procedure: In arbitration, the arbitrators are typically chosen or appointed by both parties. In contrast to litigation, where the parties have no control over the judge or jury selection, this ensures that disputes will be resolved by a fair and impartial third party.
• Timely procedure: The fundamental tenets of natural justice are used to establish the arbitration rules that govern most arbitration hearings. They are not complicated in the same way as procedural laws required in conventional court cases when the legal disagreement drags on for years. The less formal and more flexible arbitration rules ensure that the parties’ disputes are settled quickly. 
• Cost-effective procedure: Generally, all parties pay the arbitrators’ fees equally, as stipulated in the arbitration agreement. Since arbitration is a quicker and more efficient procedure, conflicts are resolved more rapidly with less legal counsel, which saves both parties a load of money.
• Confidential investigations: Whenever the disagreement progresses to the trial stage in front of a jury or judge, the parties involved are typically unwilling to air their dirty laundry in front of the entire world. This issue is resolved out of court through arbitration held in secret sessions with strict confidentiality. 
• Definitive and enforceable: The arbitral awards made by the arbitral tribunal are conclusive and enforceable in nature, exactly like a judgement of a civil court. They are binding on both parties. Arbitral awards can only be contested in court on a very narrow set of conditions, as specified by domestic law. 
• Procedures are straightforward:  Which encourages the opposing parties to reach an amicable settlement quickly. 
• Reduces the workload of the courts: The majority of courts worldwide are overworked. One of the best methods to reduce the load on the courts and free them up for more urgent matters that unquestionably call for court action is through arbitration. 

Arbitration procedures are governed by procedural norms that apply to each stage of the arbitration process. Typically, the parties are allowed to adopt the rules in full, in part, or to mutually amend them to meet their unique needs. 

A formal arbitration agreement between the parties states that, in the event of a disagreement, each party agrees to submit to arbitration. The 1996 Arbitration and Conciliation Act establishes a definition of it in Section 2(1)(b). This clause defines an arbitration agreement as a contract referred to in section 7. And according to Section 7(1), an arbitration agreement is any agreement between the parties, whether or not by contract, to arbitrate all or specific disputes that have occurred or may arise between them regarding a specific legal relationship.

Conclusion 

The settlement in arbitration has become of utmost importance since it prevents any form of violence or hostilities. Peace and Friendly relation between parties are ensured by resolving such disagreements. A specialized process, such as arbitration or negotiation, aids in the resolution of the conflict and imposes a legally enforceable decision on the parties.

This Article talks about the What is Arbitration & Conciliation Act 1996 as the method of Alternative Dispute resolution and Settlement in Arbitration Agreements, Consent Awards last advantages of arbitration. 

Nowadays, it is undeniable that India has made great strides in recognizing, promoting, and settlement putting other alternative dispute resolution (ADR) techniques into practice. The dedication of the Indian government to turning India become a hub for arbitration and other ADR mechanisms is demonstrated by the several revisions and amendments made to the 1996 Arbitration and Conciliation Act to meet the demands of the constantly changing international business community. India, though, still has a ways to go before it is the preferred country by international commercial organizations for the simplicity of arbitrating business disputes and using other ADR techniques. 

References 

• https://indiankanoon.org/doc/308340/ 
• https://jusmundi.com/en/document/publication/en-settlement-agreement
• https://legal.thomsonreuters.com/blog/arbitration-vs-litigation-the-differences/
• https://www.cataneselaw.com/civil/settlement-vs-mediation-vs-arbitration-understanding-difference/

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