Alternative Dispute Resolution include various outside of the court (which means besides litigation) settlement options such as Mediation, Arbitration, and Conciliation amongst others.
Difference between Seat and Venue of Arbitration-
Seat and Venue of Arbitration are important terms mentioned in the arbitration clauses of various contracts. Seat of Arbitration determines which courts shall have the jurisdiction over the functioning of the arbitration. If a party wants to challenge the arbitral award, he will to do the same in the courts that have jurisdiction. On the other hand, Venue of Arbitration is merely a place (physical) where the arbitral proceeding, such as hearings and negotiations will be conducted. This venue is often decided on the basis of convenience of both the parties.
The Seat of the Arbitration is of prime importance. The parties to the contract should at all times try to mention the Seat of the Arbitration. The Seat of the Arbitration once decided and confirmed by the parties cannot be later changed. The Venue of Arbitration can be changed even after mentioning the same in the clause. This the reason why a Seat and Venue cannot be used interchangeably.
The Seat of Arbitration is usually selected on the basis of how procedural friendly and contract friendly the Country is. The process of enforcing the award and challenging the award is also to be looked at. This means that countries that are a part of various international treaties are more likely to be chosen as the Seat.
Challenging of an Arbitral Award-
The arbitral awards pronounced by the way of arbitration proceedings are enforceable in the court of law. This can also be challenged in the courts on certain grounds. However, before hearing all the contentions of a party challenging the arbitral award, the court will determine whether or not it is the proper forum to hear any challenges with respect to the enforcement of the award. It is usually determined by first checking whether the courts have the seat of arbitration. The court which has the seat of the arbitration has the power to hear any of the challenges to the arbitral award.
The Law Governing the Arbitration-
Alike Seat of Arbitration, the law governing the arbitration is also of importance. When the law governing the arbitration agreement is not provided, there are three stages which can enquire into it (Sul America Case)-
1. Express choice
2. Implied choice
3. The system of law with which the arbitration agreement has the closest and realest connection with.
Express choice would basically mean that the it is specifically mentioned in the contract that the arbitration clause or the arbitration agreement is to be governed by the laws of a particular country. Implied choice on the other hand would mean that even though it is not per se mentioned for that particular arbitration clause or arbitration agreement, but in toto the governing law can be determined.
The third point mentioned above with respect to the system of law with which the arbitration has the closest and realest connection with would basically mean that the law of a country from where either the parties belong, or where the proceedings of arbitration are held (Venue), or at the place where the performance of the contract happened.
Conclusion-
There are various mistakes made while drafting arbitration agreements or clauses in contracts. These mistakes can have some serious repercussions like making the entire process extremely troublesome. In order to have a clear and settled agreement, there should be certain terms expressly mentioned such as the Seat of Arbitration, the Venue of Arbitration, the Law Governing the Arbitration Agreement, the Language, etc.
Also read- Arbitration and Mediation: Similarities and Differences
Also read- THE ART OF SUCCEEDING IN CORPORATE CAREER: LESSONS FROM THE CORPORATE WORLD
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