Arbitration and Conciliation Act Section 28 — Rules applicable to substance of dispute

CHAPTER VI — Making of arbitral award and termination of proceedings

Civil

Summary

Sub-section (1) applies when the place of arbitration is in India. Under clause (a) of sub-section (1), if the arbitration is not an international commercial arbitration, the arbitral tribunal must decide the dispute according to the substantive law currently in force in India.

Under clause (b) of sub-section (1), which covers international commercial arbitration, the tribunal must decide the dispute according to the rules of law that the parties have chosen to govern the substance of the dispute. If the parties designate the law or legal system of a particular country, that designation is taken to mean the substantive law of that country, not its conflict of laws rules, unless the parties state otherwise. If the parties have not made any such designation, the tribunal must apply the rules of law it considers appropriate given all the circumstances of the dispute.

Sub-section (2) states that the arbitral tribunal may decide the dispute as ex aequo et bono or as amiable compositeur, meaning according to what is fair and just rather than strict law, only if the parties have expressly authorised it to do so.

Sub-section (3) states that while deciding the dispute and making an award, the arbitral tribunal must, in all cases, take into account the terms of the contract and the trade usages applicable to the transaction.

Official Text

(1) Where the place of arbitration is situate in India,—

(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;

(b) in international commercial arbitration,—

(i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute;

(ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules;

(iii) failing any designation of the law under clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.

(2) The arbitral tribunal shall decide ex aequoet bono or as amiable compositeur only if the parties have expressly authorised it to do so. 1[

(3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.]