Recovering Money through Arbitration: From the Clause to the Award

Many commercial contracts send disputes to arbitration, and a claim for money that falls within an arbitration clause cannot ordinarily be brought in a civil court. Arbitration has advantages for a creditor: the tribunal can be chosen, the proceedings are private, and the award is enforceable as a decree. It has costs too, in fees and in the care required to begin it correctly. This note outlines how a money claim moves through arbitration under the Arbitration and Conciliation Act, 1996. It is general information, not advice on a particular dispute.

Is there an arbitration agreement?

Section 7 requires an arbitration agreement to be in writing. It may be a clause in the contract or a separate agreement, and it may be found in an exchange of letters or emails. The clause should be read for its scope (does it cover the claim?), its seat and venue, the number of arbitrators, any institutional rules, and any preconditions such as negotiation or notice. If a party sues in a civil court on a matter covered by the agreement, the other party may apply under Section 8 to have the parties referred to arbitration, and the court will ordinarily do so.

Starting the arbitration

1. Notice invoking arbitration. Under Section 21 the arbitral proceedings begin on the date the respondent receives a request for the dispute to be referred to arbitration. That date matters for limitation, because the Limitation Act applies to arbitration as it applies to suits (Section 43).
2. Appointment of the tribunal. The agreement usually says how. If the parties fail to appoint, an application under Section 11 may be made to the High Court or the Supreme Court, depending on the kind of arbitration, to appoint the arbitrator.
3. Pleadings. The claimant files a statement of claim and the respondent a defence, and a counterclaim may be raised. The claim should set out the contract, the default, the amount and the interest.
4. Evidence and hearing. The tribunal fixes a procedure within the agreement and the Act. Documents carry most of the weight in a money claim.

Time limits for the tribunal

Section 29A requires a domestic award to be made within twelve months from the completion of pleadings, a period that the parties may extend by six months by consent, and which the court may extend further for sufficient cause. Section 29B provides a fast-track procedure, by agreement, with a shorter period. A claimant should plan for these periods, because a tribunal whose mandate has expired may be terminated by the court.

Interim protection

A claimant concerned that the respondent may dispose of assets can apply to a court under Section 9, before, during or after the proceedings and before the award is enforced. Where the application is made before the arbitration has begun, the proceedings must be commenced within ninety days. Once the tribunal is constituted, Section 17 gives the tribunal the power to order interim measures, and the court will ordinarily entertain a Section 9 application only if the remedy before the tribunal is not efficacious.

The award and its enforcement

The tribunal may award interest. Section 31(7) lets it award interest on the sum for the period before the award, and, unless the award provides otherwise, interest on the awarded sum from the date of the award at a rate two per cent higher than the current rate of interest prevailing on the date of the award. A domestic award is enforceable under Section 36 as if it were a decree of the court. An application to set the award aside under Section 34 must be made within three months of receiving it, extendable by up to thirty days if sufficient cause is shown, and since the 2015 amendment the filing of that application does not of itself stay enforcement.

Practical points for a creditor

• Check the clause for a pre-arbitration step, and record that it was taken.
• Keep the notice invoking arbitration, with proof of delivery. It fixes the date proceedings begin.
• Plead the claim in full at the outset, including interest and costs, because amendments later are limited.
• Consider an application under Section 9 early if there is a risk to the assets.
• Budget for the tribunal's fees, which are often shared in the first instance.

Arbitration rewards precision at the start. A clause read carefully and a notice served correctly save more time than any argument made later.