Arbitration is a peaceful way to settle business and contract disputes in India without going to court. Among the different types of arbitration, Ad Hoc Arbitration is unique because it gives parties a lot of control and flexibility. In Ad Hoc Arbitration, the people or companies in a dispute manage the process themselves without help from an arbitration organization. In India, this method is very common, making up about 90-95% of all arbitration cases. It’s popular because it lets parties shape the process to fit their needs and is often more affordable. This article explains what Ad Hoc Arbitration is, its legal rules, steps, benefits and challenges. It aims to help lawyers and students understand this important tool for resolving disputes.
Why argue when you can arbitrate? Unlock a global career in dispute resolution with our immersive 6-month Advanced Certification in Alternate Dispute Resolution (ADR), built for litigators, peacemakers, and future legal changemakers. Real cases. Real mentors. Real transformation.
What is Ad Hoc Arbitration?
Ad Hoc Arbitration is a type of arbitration where the parties handle everything themselves, without involving an organization like the International Chamber of Commerce (ICC) or the Delhi International Arbitration Centre (DIAC).
The parties decide key details, such as how many arbitrators to have, who they will be, what rules to follow, and how the process will work. This is different from institutional arbitration, where an organization manages the process using its own rules.
The term “ad hoc” means the arbitration is set up just for that specific dispute. It usually starts with a clause in a contract, like: “Any disputes from this contract will be settled through Ad Hoc Arbitration in India.” Parties can use existing rules, like the UNCITRAL Arbitration Rules, or make their own. This flexibility makes Ad Hoc Arbitration great for unique or complex disputes, or smaller cases where using an organization might cost too much.
In India, Ad Hoc Arbitration is popular because it fits with the culture of letting parties control their disputes and saving money. However, it works best when both sides cooperate. If they don’t, the process can become slow and messy.
Legal Framework Governing Ad Hoc Arbitration in India
Ad Hoc Arbitration in India follows the Arbitration and Conciliation Act, 1996. This law is based on the UNCITRAL Model Law, which sets global standards for arbitration. The Act covers both ad hoc and institutional arbitration without treating them differently. Updates in 2015, 2019, and 2021 have made the process smoother and more in line with international practices.
Section 2(1)(a) of the Act defines arbitration broadly, including Ad Hoc Arbitration, whether managed by an organization or not. Section 11 explains how to appoint arbitrators, which is key for Ad Hoc Arbitration. If parties can’t agree on an arbitrator, they can ask the High Court (for domestic disputes) or the Supreme Court (for international disputes) to choose one. This ensures the process keeps moving even if the parties disagree.
The Act also ensures fairness. Section 12 requires arbitrators to be impartial and disclose any conflicts of interest. Sections 23 to 27 explain how the arbitration should work, letting parties set their own rules or use the Act’s rules if they can’t agree. The final decision, called an arbitral award, must be written clearly and can be enforced like a court order under Section 36. Parties can challenge the award under Section 34, but only for serious reasons, like if it goes against public policy or has major errors.
Recent changes, like the 2019 creation of the Indian Council of Arbitration, have helped Ad Hoc Arbitration by promoting good practices and rating arbitrators. The Act’s rules always apply, even if parties use other guidelines, to keep things consistent.
Get to Know How to draft Arbitration Agreement
Procedure in Ad Hoc Arbitration
Ad Hoc Arbitration is flexible because the parties decide the process. However, they need to stay involved to make it work. The process usually follows these steps.
First, one party starts by sending a notice to the other, mentioning the arbitration clause and suggesting arbitrators or rules. If there’s no prior agreement, the parties discuss these details after the dispute starts.
Next, they choose the arbitrators. They might pick one arbitrator or a group of three, with each side choosing one and those two picking a third. If they can’t agree, a court can step in under Section 11 of the Act.
After the arbitrators are chosen, they work with the parties to set a schedule. The parties submit their claims and defenses under Section 23, then share evidence, hold hearings, and present arguments. The arbitrators have a lot of freedom to run the process fairly, including picking the location, venue, and language.
The process ends with the arbitral award, which must be written, dated, and signed. Unlike institutional arbitration, there’s no organization to check the award, which can make things faster but risks mistakes.
Finally, the award can be enforced like a court order under Section 36. Challenges are rare to keep the process final.
Advantages of Ad Hoc Arbitration
Ad Hoc Arbitration has many benefits like having flexibility, cost-effectiveness, privacy and the parties having control over the procedures. These advantages make Ad Hoc Arbitration a great choice for many in India.
The biggest advantage is flexibility. Parties can choose rules that fit their dispute, like using UNCITRAL rules or adjusting them. This works well for complex or specialized disputes, like those involving government or detailed contracts.
It’s also often cheaper. Since there’s no organization involved, parties avoid high fees, which is helpful for smaller cases. They only pay for things like arbitrators and other direct costs, which can save money.
When parties work together, Ad Hoc Arbitration can be fast and efficient, avoiding delays from institutional processes. It’s also private, keeping sensitive business information out of the public eye.
Finally, parties have control over the process, letting them pick arbitrators who know Indian law or their industry well.
Disadvantages and Challenges in Ad Hoc Arbitration
Ad Hoc Arbitration has some challenges that can make it difficult like facing delays due to disagreements, or unaffordable arbitrator fees, etc. Let’s find out:
The biggest issue is delays. If parties disagree on rules or arbitrators, they may need a court to step in, which can take months. Without an organization’s help, parties must handle things like scheduling hearings or managing documents, which can be hard for those with less experience.
Costs can also grow if disputes over rules or complex cases require extra help, like hiring a secretary. Poorly written awards, without an organization’s review, might cause problems when enforcing them.
In India, where Ad Hoc Arbitration is common, issues like high arbitrator fees have been criticized for slowing the growth of institutional arbitration. Courts getting too involved in appointing arbitrators under Section 11 has also been a problem.
Read about Mediation and Arbitration Lawyers
Difference Between Ad Hoc Arbitration and Institutional Arbitration
Ad Hoc Arbitration gives parties more control, while institutional arbitration offers structure and support. In institutional arbitration, organizations like the Mumbai Centre for International Arbitration manage the process, provide rules, offer arbitrator lists, and review awards. Lets find out more such differences:
Aspect | Ad Hoc Arbitration | Institutional Arbitration |
Control and Autonomy | Gives parties more control over the process, including rules and arbitrator selection. | Offers structure and support, with predefined rules and administrative management by organizations like the Mumbai Centre for International Arbitration. |
Flexibility and Cost | Often cheaper and more flexible, with lower upfront costs and no institutional fees, but can be less reliable if parties don’t cooperate. | More dependable and structured, but costs more due to administrative fees. |
Reliability and Support | Relies on party cooperation; lacks built-in support for logistics, arbitrator lists, or award review, potentially leading to delays or inefficiencies. | Provides reliability through management of the process, arbitrator lists, and review of awards, reducing risks of procedural issues. |
Prevalence in India | Remains more common due to familiarity and lower upfront costs, despite government encouragement for institutional options to ease court workloads. | Encouraged by the government to reduce court burdens, but less prevalent compared to ad hoc. |
Hybrid Approach | Parties can adopt a mix by using institutional rules without full management to balance flexibility and structure. | N/A (though hybrids lean toward institutional frameworks for added support). |
Summary
Ad Hoc Arbitration is a key part of resolving disputes in India, offering a balance of flexibility and efficiency under the Arbitration and Conciliation Act, 1996. It saves costs and gives parties control, but challenges like delays show the need for cooperation and better rules. As India works to build a stronger arbitration system, Ad Hoc Arbitration will keep evolving, possibly borrowing ideas from institutional models. Lawyers need to understand its strengths and weaknesses to guide clients well, helping this method deliver quick and fair solutions in India’s growing economy.
Related Post:
Ad Hoc Arbitration: FAQs
Q1. What does ad hoc mean in arbitration?
Ad hoc arbitration is a process set up for a specific dispute without using a formal institution's rules.
Q2. What is an example of an ad hoc arbitration clause?
"Any dispute shall be resolved by arbitration conducted by three arbitrators chosen by the parties, following UNCITRAL rules."
Q3. What is the advantage of ad hoc arbitration?
It’s often cheaper and more flexible, allowing parties to tailor the process to their needs.
Q4. What does ad hoc mean in court?
In court, ad hoc refers to decisions or actions taken for a specific case, not based on fixed rules.
Q5. Is ad hoc arbitration binding?
Yes, ad hoc arbitration decisions are legally binding and enforceable, like institutional arbitration.
