The Debate Over Stopping Arbitration: A Look at Anti-Arbitration Injunctions

Imagine you and a friend agree to settle any disagreements through mediation instead of going to court. Now, what if right before the mediation, your friend tries to stop the process altogether? This is similar to what happens with an Anti-Arbitration Injunction (AAI).

In the world of contracts, businesses sometimes agree to settle disputes through arbitration, which is like a private trial with an independent person making the decisions. An AAI is a court order that tries to stop this arbitration process before it even starts or while it’s ongoing.

There are two main arguments for and against AAIs:

Against AAIs:

In India, the Payment of Wages Act governs salary payments, primarily focusing on low-wage blue-collar workers. As of September 11, 2012, the wage ceiling under this act increased to an average of INR 18,000 per month. However, even if you’re not covered by this act, other legal remedies exist.

• Upsets the agreement: They argue that allowing AAIs goes against the initial agreement to settle disputes through arbitration.
• More court involvement: They believe AAIs increase unnecessary involvement from regular courts, which can be slower and more expensive.
• Unfair advantage: They worry that unscrupulous parties might use AAIs to delay or avoid arbitration altogether.

For AAIs:

• Saves time and money: They argue that AAIs can help avoid unnecessary arbitration if, for example, the agreement itself is invalid.
• Prevents unfairness: They believe AAIs can stop arbitration in situations where it would be unfair, like if there are serious allegations of fraud.

The Law’s Balancing Act:

The law tries to balance these arguments. In India, there’s no clear rule on AAIs. Some court decisions say courts can’t grant them, while others say they can in specific situations, like when the agreement is clearly invalid.

Kompetenz-Kompetenz:

The concept of Kompetenz-Kompetenz is important here. It’s a legal principle that generally gives the arbitral tribunal (the people deciding the dispute) the power to decide its own jurisdiction, including the validity of the arbitration agreement itself. This principle supports the idea that parties should generally be bound by their initial agreement to arbitrate.

Finding a Solution:

It’s important for courts to clarify the rules on AAIs. The main idea is to respect the initial agreement to settle disputes through arbitration and the principle of Kompetenz-Kompetenz. However, there should be exceptions for situations where arbitration would be unfair or a waste of time. Ultimately, the goal is to find a solution that is fair, efficient, and avoids unnecessary delays or costs for both parties involved.

Recent Developments:

Recently, the Delhi High Court issued an anti-arbitration injunction (AAI) with respect to arbitration proceedings before the Permanent Court of Arbitration, The Hague, in the case of Techfab International Private Limited v. Midima Holdings Limited citing the lack of party consent as a bar to the jurisdiction of the arbitral institution. This case highlights the ongoing debate and potential challenges surrounding AAIs, demonstrating that they remain a subject of controversy.

Arbitral tribunals are like private judges who settle disagreements between parties.

Explanation:

Arbitral tribunals: Replaced with private judges for better understanding.
Adjudicating disputes: Replaced with settle disagreements for simpler language.

If you need advice on any aspect of this process – particularly where high value assets are at stake – talk to one of our experienced Arbitration and Conciliation lawyers today. To learn more, feel free to reach out to us via email, chat or directly Book an Appointment.