Do you know of General condition no. 13 of Standard Fire and Special Perils Policy,
which primarily is a mechanism of dispute resolution. You might also be interested in knowing more
about this Council of which – Advocates, Businessmen, Engineers, Chartered
Accountants, Executives, Foreign Nationals, Retired Judges, Maritime Experts
all act for disposing the disputes.
Insurance is primarily a contract, a contract
where upon payment of premium, the Insurers agree to indemnify loss or damage
arising out of specified perils. It is a contract reduced properly in writing –
still there can be difference of opinion, variance of interpretations and
disputes. In any commercial transaction,
the traders undertaking such business transactions sure would have only good
intentions of carrying out their trade deals, which will ensure profit. Still
there would arise disputes during performance of contracts; disputes on small
to larger issues – much to annoyance of all the parties concerned. Unresolved
disputes not only upset smooth continuance but also involve litigation at
costs, time and efforts. Everyone would like to have such dispute areas
narrowed thinner and have a mechanism for faster and efficient resolution.
Businessmen would devote time and attention
at the time of drafting their contracts precisely, but not everything can be
thought of and reduced in writing. First
there should exist a written contract clearly defining the scope, nature and
expenses sharing as also performance obligations including the timing of
them. The contract should be
comprehensive enough covering all important points, contingencies in clear and unambiguous
terms. When one encounters a dispute one
might find that the standard format has nothing to state on that specific issue
! – worser would be the case of traders who do not execute any formal contract
but carry on their business dealings by using order and acceptance forms.
General condition no. 13 of Standard Fire
Policy is – ‘arbitration clause’, which is present in most insurance contracts.
Arbitration, a form of alternative dispute
resolution, is a legal technique for the resolution of disputes outside the
courts, where the parties to a dispute refer it to one or more persons. It is a resolution technique in which a third
party reviews the evidence in the case and imposes a decision that is legally
binding for both sides and enforceable. Arbitration is often used for the resolution
of commercial disputes, particularly in the context of international commercial
transactions. The use of arbitration is also frequently employed in consumer
and employment matters, where arbitration may be mandated by the terms of
employment or commercial contracts.
An arbitration clause is a commonly used
clause in a contract that requires the parties to resolve their disputes
through a process of arbitration. The
clause may not incorporate a specific
jurisdiction, but sure would bind the
parties to a type of resolution outside of the courts, and is therefore
considered a kind of forum selection clause.
The clear advantage of arbitration would the
speedy disposal, lesser legal technicalities and formalities, flexibility and
lower costs. However this form of
settlement would suffer for want of power of Arbitrator to issue summons,
examine witnesses, taking evidence etc.,
There is the inherent risk of a biased opinion also.
In India, an Act to consolidate and amend the law relating to
domestic arbitration, international commercial arbitration and enforcement
of foreign arbitral awards as also to
define the law relating to conciliation and for matters connected therewith or
incidental thereto – came into being in Aug 1996 and is known as “The
Arbitration and Conciliation Act, 1996’.
There is also the Indian Council of
Arbitration, which can bring end to business disputes methodically, which
otherwise can be costly, time-consuming.
Indian Council of Arbitration has been providing users of arbitration
with an unrivaled array of time-tested services that include ICA Arbitration,
ICA Conciliation and ICA Maritime, as well as education and training programs. The broad spectrum of people listed in the
first para of this post are the persons who are arbitrators under the ICA . The ICA
was established in 1965. ICA has signed
cooperation agreements with 40 major arbitral centres around the world. India is a Signatory to the New York convention.
-- here is how the ‘Arbitration clause’ in
Standard Fire &Special Perils Policy is worded :
- In the event of liability having been admitted for a
claim under this Policy but dispute or difference exists as to the amount
to be paid the parties shall agree to obtain and abide by the decision of
an arbitrator.
Said arbitrator shall be
appointed in writing and shall solely be required to decide the amount to be
paid under the Policy. No difference or
dispute shall be referable to arbitration if the Company has disputed or not
accepted liability under the Policy.
If agreement on a single arbitrator
cannot be reached within 30 days of arbitration being invoked the parties must
refer to a team of 3 arbitrators. This
team will be consist of two arbitrators
appointed separately by the Insured and the Company and one other appointed by the two aforementioned
selected arbitrators and arbitration shall be conducted under and in accordance
with the provisions of the Arbitration and Conciliation Act 1996.
It is clearly agreed and understood
that no difference or dispute shall be referable to arbitration as hereinbefore
provided, if the Company has disputed or not accepted liability under or in
respect of this Policy.
It is hereby expressly
stipulated and declared that is shall be a condition precedent to any right of
action or suit upon this Policy that the award by such arbitrator / arbitrators
of the amount of the loss or damage shall be first obtained.
By incorporating this clause, the Insurers makes it binding on the parties to the Insurance contract to resort to arbitration and not approach Court of law for resolution of disputes, which fall within the ambit of arbitration clause - which is dispute or difference as to the quantum to be paid. Even where the contract [Insurance or otherwise] does not provide specifically for, still the parties can resort to arbitration, but that will have to be by mutual consent.
Would post further on an interestingApex Court on
arbitration soon……………. Look forward to
your views on this article – either as comments here or e-mail me : samvijib17@gmail.com
with caption – ‘something on fundamental aspects of arbitration’.
Would post further on an interesting
With regards – S.
Sampathkumar
A nice article.Useful for dispute redressal for Insurance matters.
ReplyDeleteAlready , there was an Act viz., Indian Arbitration Act(I have forgotten the year,probably 1888 or so) which was substituted with this new one with improvements.
All the best.