Arbitration is a mode of settling disputes relating to commercial transactions without referring the disputes to a civil Court. In India, arbitration proceedings are governed by Arbitration & Conciliation Act of 1996.
In order to refer any dispute to arbitration, parties must agree in writing to refer the matter to arbitration. Without any agreement in writing. arbitration process cannot be commenced.
Parties may also agree the language of arbitration and place of arbitration. Place of arbitration can be any place, including a place outside India.
Once any agreement is signed with arbitration clause, parties are precluded from approaching civil court for settling any disputes.
Arbitration is contract specific and general arbitration cannot be agreed.
In case of international commercial transactions, parties can also choose the arbitration as per International Chamber of Commerce Rules or United Nations Commission on International Trade Law (UNCITRAL) guidelines.
An order passed by arbitrator (called award) can be challenged in the High Court, however on very limited grounds.
Including arbitration clause in agreement is advised in contracts involving technical matters, requiring special knowledge or skill in the relevant subject.