Types of Arbitration

Introduction

Arbitration has emerged as one of the most preferred mechanisms for resolving commercial disputes. However, arbitration is not a one-size-fits-all process. Parties can choose between different models depending on the nature of their dispute, the costs they can bear, and the level of institutional support they require.

Broadly, arbitration can be classified into:

1. Institutional Arbitration vs. Ad Hoc Arbitration

2. Domestic Arbitration vs. International Arbitration

Understanding these categories is crucial for businesses, governments, and individuals engaging in arbitration agreements.

Institutional Arbitration

Definition

Institutional arbitration refers to arbitration administered by a specialized arbitral institution that provides procedural rules, appoints arbitrators (if required), and manages the conduct of proceedings.¹

Examples of Institutions

• International:

  • ICC (International Chamber of Commerce), Paris.

  • LCIA (London Court of International Arbitration), UK.

  • SIAC (Singapore International Arbitration Centre), Singapore.

  • HKIAC (Hong Kong International Arbitration Centre), Hong Kong.

    
    

• India:

  • MCIA (Mumbai Centre for International Arbitration).

  • ICA (Indian Council of Arbitration).

Advantages

• Structured rules and administrative support.

• Panel of experienced arbitrators.

• Higher credibility and recognition of awards.

• Time-bound processes in many institutions (e.g., SIAC requires awards within 6 months).

Disadvantages

• Higher costs due to institutional fees.

• Less flexibility — parties must follow institutional rules.

Illustration

In a joint venture dispute between a German company and an Indian firm, the parties may submit to ICC arbitration. The ICC will appoint arbitrators (if parties fail to agree), monitor timelines, and ensure the award complies with ICC Rules.

Ad Hoc Arbitration

Definition

Ad hoc arbitration is conducted without institutional involvement, where the parties and arbitrators determine the rules and procedures.²

Features

• Governed by Arbitration and Conciliation Act, 1996 in India, or UNCITRAL Arbitration Rules, 1976 internationally.

• Flexibility in procedure and costs.

Advantages

• Cost-effective compared to institutional arbitration.

• Greater party autonomy in setting timelines and rules.

• Best suited for simple, less complex disputes.

Disadvantages

• Lack of administrative support may cause delays.

• If parties fail to cooperate, proceedings may stall.

• Enforcement challenges may arise in international contexts.

Illustration

In a construction contract between two Indian firms, parties may agree to resolve disputes through ad hoc arbitration under the Arbitration and Conciliation Act, 1996, appointing arbitrators directly.

Domestic Arbitration

Definition

Domestic arbitration refers to disputes where all parties are from the same country, and proceedings are governed by the domestic arbitration law of that jurisdiction.³

Indian Context

• Governed by the Arbitration and Conciliation Act, 1996.

• Courts may intervene for appointment of arbitrators (Section 11), interim relief (Section 9), and enforcement of awards.⁴

Case Example

ONGC Ltd. v. Saw Pipes Ltd. (2003)⁵ — The Indian Supreme Court expanded grounds for setting aside awards, demonstrating domestic arbitration’s close ties to judicial oversight.

International Arbitration

Definition

International arbitration involves parties from different jurisdictions or disputes with a foreign element (such as performance in another country, foreign law as governing law, or foreign seat of arbitration).⁶

Governing Frameworks

• UNCITRAL Model Law on International Commercial Arbitration (1985, amended 2006).

• New York Convention, 1958 (enforceability of foreign awards in 170+ countries).

• India: Part II of the Arbitration and Conciliation Act, 1996 governs enforcement of foreign awards.

Case Example

Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012)⁷ — clarified that Part I of the 1996 Act does not apply to foreign-seated arbitrations, strengthening India’s pro-arbitration stance.

Advantages

• Neutral forum for cross-border disputes.

• Recognition and enforcement worldwide.

• Arbitrators with international expertise.

Challenges

• Higher costs.

• Jurisdictional complexities.

• Risk of conflicting legal standards.

Comparative Table

Type	Administered by	Scope	Advantages	Disadvantages
Institutional	Arbitral Institution (ICC, SIAC, MCIA)	Domestic & International	Administrative support, structured rules	Expensive, less flexible
Ad Hoc	Parties & Arbitrators themselves	Domestic & International	Flexible, cheaper	Risk of delay, lack of enforcement clarity
Domestic	National law (e.g., Arbitration and Conciliation Act, 1996 in India)	Within one jurisdiction	Faster, less costly	More judicial interference
International	UNCITRAL, institutional rules, treaties	Cross-border disputes	Neutral, globally enforceable	Expensive, complex

Conclusion

The choice between institutional and ad hoc arbitration, domestic and international arbitration depends on the nature, scale, and scope of disputes. In high-stakes, cross-border disputes, institutional international arbitration is often preferred due to its credibility and enforceability. On the other hand, ad hoc domestic arbitration remains effective for simpler disputes where parties value cost-efficiency and flexibility.

Understanding these distinctions allows businesses and individuals to draft better arbitration clauses and choose the right path when disputes arise.

References

1. Gary Born, International Commercial Arbitration (2nd ed., Kluwer Law International, 2014).

2. UNCITRAL Arbitration Rules, 1976 (revised 2010).

3. Arbitration and Conciliation Act, 1996 (India), Part I.

4. Arbitration and Conciliation Act, 1996, Sections 9 and 11.

5. ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705.

6. UNCITRAL Model Law on International Commercial Arbitration, 1985, Article 1(3).

7. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552.