What is the difference between Domestic Arbitration and International Arbitration

How does Domestic Arbitration and International Arbitration differ

Broad difference between Domestic Arbitration and International Arbitration can be understood under following heads -

1. Definition - 
‘Domestic Arbitration’ means an arbitration relating to a dispute arising out of legal relationship whether contractual or not, where none of the parties is:
i) An in individual who is a nationality of, or habitually resident in, any country other than India; or
ii) A body corporate which is incorporated in any country other than India; or
iii) An association or a body of individuals whose central management and control is exercised in any country other than India; or
iv) The Government of a foreign country.

This definition is as per Arbitration and Conciliation (Amendment) Bill, 2003.

'International Arbitration' means Arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is:

    a) An individual who is a national of, or habitually resident in or any country other than India
    b) A corporate body which is incorporated in any country other than India
    c) A company or an association or a body of individuals whose central management and control is exercised in any country other than India
    d) The government of foreign country.

This is contained in Clause(f) of sub-section (1) of section 2 of the  Arbitration and Conciliation Act,1996.

2. More than One Law applicable in International Arbitration

'Domestic Arbitration' is India is governed by Arbitration and Conciliation Act,1996. The Arbitration and Conciliation Act,1996 applies to arbitrations which are held in India between Indian nationals and to international commercial arbitrations whether held in India or out of India. Part 1 of the Act covers all kinds of international commercial arbitrations.

In International arbitration the law applicable may be the Indian Law or a foreign law, depending on the terms of contract in this regard and the rules of conflict of laws.

In international Arbitration it is not unusual if more than one law apply. 

• the law governing the substantive bilateral contract
• the law governing the Arbitration procedure or seat of Arbitration
• the law governing the Arbitration agreement/clause
• the law of the Country/State where the award will be enforced.

3. Procedure followed - 

'Domestic Arbitration' is governed by procedure as provided in Arbitration and Conciliation Act,1996 with basic inputs from Code of Civil Procedure, 1908.

Some Institutional Arbitration Centres like IDRC have their own in-house Procedures available in public domain at Indian Dispute Resolution Centre Domestic Arbitration Rules, 2019. 

'International Arbitration' can take place in India in accordance with the same procedure as domestic arbitration. Arbitration becomes ‘international’ when at least one of the parties involved is resident or domiciled outside India or the subject matter of the dispute is abroad.

4. Custom procedure - 

'Domestic Arbitration' is generally governed by procedure as provided in Arbitration and Conciliation Act,1996 with basic inputs from Code of Civil Procedure, 1908. However Parties can customise the procedure by amalgamating the peculiar need and procedures codified by individual Arbitration Institutions.

'International Arbitration' can take place in India in accordance with the same procedure as domestic arbitration. While parties can customise the procedure by adopting the whole or part of Procedure Code adopted by leading International Arbitration Institutions viz, ICC, LCIA, SIAC etc.

5. Choice of Decision Maker -

'Domestic Arbitration' generally gives option to Parties to mutually agree to appoint any Ad-hoc Arbitrator or go for a Tribunal of Three Members where each Party choose one Arbitrator and the in turn choose the Third who becomes the presiding Arbitrator. Also Parties are at liberty to assign the case to an Institution like IDRC which has its in-house Panel of Arbitrators. Here either the Institution itself appoints the Arbitrator as per the nature of the Dispute or Parties can agree over a name mutually out of the Panel.

In 'International Arbitration' this is especially useful when the subject matter of the dispute is highly technical: arbitrators with an appropriate degree of expertise (for example, quantity surveying expertise, in the case of a construction dispute, or expertise in commercial property law, in the case of a real estate dispute) can be chosen. With this the choice can get enlarged greatly as availability can increase in International arena.

6. Efficiency -

'Domestic Arbitration' has the capacity to give decisions in a time bound manner. However till late delays in delivery of Award by Ad-hoc Arbitrators has led to erosion of confidence in the capability of Arbitration as a method, to deliver timely justice. This issue was addressed by inclusion of Section 29A in Arbitration and Conciliation Act, 1996 since 30.08.2019.

'International Arbitration' is often faster than Domestic version or litigation in court. Time is always looked upon as essence as the financial stakes on the International Arbitration is so huge that any amount of avoidable delay can lead to ripple effect on losses. Most International Arbitration Institutes have strict timelines and costs can be imposed on parties causing delay. 

7. Emergency Arbitrations under Domestic Arbitration and International Arbitration

'Domestic Arbitration' Law in India do not contain any provision for Emergency Arbitration. Whenever any Party is in need to seek urgent relief the are permitted to approach the Courts under Section 9 of Arbitration and Conciliation Act, 1996. In case it is a pending Arbitration matter urgent relief can be sought by invoking Section 17 of Arbitration and Conciliation Act, 1996. However lately Delhi High Court gave recognition to an Interim Award passed by an Emergency Arbitration of Singapore in Amazon.com vs Future Coupons Pvt. Ltd, 2021 Latest Caselaw 907 Del which was upheld by Hon'ble Supreme Court for the purpose of its Execution in India in Amazon.Com NV Investment Holdings LLC v. Future Retail Limited & ors, 2021 Latest Caselaw 312 SC.

Supreme Court's this decision in Amazon v. Future is being looked upon as an important precedent strengthening the party autonomy in India. In so far as this decision gives legitimacy to an emergency awards made under the rules of an arbitral institution by treating it on par with an interim order made by an arbitral tribunal seated in India it paves the way for an emergency arbitration award in an India-seated arbitration to be enforced by Indian courts in the same way as if it were a decree of an Judicial forum in Indian.

Under 'International Arbitration' Emergency arbitration is looked upon as a mechanism which allows a disputing party to apply for urgent interim relief before a regular Arbitration Tribunal has been formally constituted. 

Several arbitral institutions have adopted specific rules for emergency arbitration in the field of international commercial arbitration, - see e.g. Indian Dispute Resolution Centre Domestic Arbitration Rules, 2019, the ICC Rules (2017 and 2021), the LCIA Rules (2014 and 2020), and the HKIAC Rules (2018) the spread of such mechanism to the field of investment arbitration remains quite confidential to date. For instance, neither the ICSID Arbitration Rules, nor the UNCITRAL Arbitration Rules contain provisions for the appointment of an emergency arbitrator.

8. Language barriers -

'Domestic Arbitration' Law in India primarily carries Arbitral proceedings in English. Although under the Law there is no bar on the language but in so far as Hon'ble Supreme Court and all the High Courts functions only in English language, carrying out of proceedings in any other language would entail additional Translation Costs. Article 343 Constitution of India: Official language of the Union.

Under 'International Arbitration' since the dispute resolution is for the parties of different language, culture, languages, legal rules under one common procedure which is a binding on the disputed parties. Here no legal formalities such as courtrooms are conducted so, the people are getting easy access to justice without any form of lengthy procedures in a Language which both sides agree to.