Arbitration in common parlance, understood as the submission of a dispute to an unbiased third person designated by the parties to controversy, who agree in advance about the procedure to be followed to conduct the arbitration proceeding and also to comply with the award. One of the most prominent features of the arbitration is the party autonomy. The parties by consent, agree to refer their disputes (current or future) to a neutral body for adjudication. The parties also have the freedom to agree on the procedure on arbitration within the law.

In India right from the beginning whether it was Alternative Dispute Resolution in the form of The Bengal Regulation I of 1772 and also Regulation 1780 provided for reference of dispute by the parties in relation to dispute to arbitration by way of recommendation to the parties, the Arbitration Act, 1899 which was based on English Arbitration Act, 1899, Schedule II of the Code of Civil Procedure, 1908 by which law of arbitrator were extended to other parts of British India and the Arbitration Act 1940. The party autonomy was always kept at higher pedestal and was given due importance. Later on the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) enacted on the basis of Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985 provides for speedy disposal of cases relating to arbitration with least Court intervention which also recognizes the party autonomy.

The law of arbitration is premised on the fundamental principle of the freedom of parties to contractually devise mechanism for resolution of their dispute. It allows the parties to select the law governing the contract and/or the jurisdiction of the dispute that should be referred to. This is based on the fundamental of the principle of party autonomy which evolved through the ages resulting in a globally accepted doctrine of the choice of law. Even the Act recognizes the principle of party autonomy and states that subject to the provisions of law the parties are free to agree on the procedure to be followed by the Arbitral Tribunal

The source of party autonomy can be drawn from Part-1 of the Act. Part-1 of the Act provides that in determining the rules of law applicable to the substance of the dispute, 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.

The party autonomy provided under Part-1 of the Act can be gathered from the provisions of Section 7, 8, 10, 11, 13, 19 and 21 of the Act. The aforesaid provisions of the Act provide freedom to the party to agree upon the terms of the Arbitration Agreement, reference, number of Arbitrators, procedure for the appointment of the Arbitrator, procedure for challenging the appointment of the Arbitrator, determination of rules to conduct the arbitral proceeding and time for commencement of the arbitral proceeding. Section 20 of the Act further provides that the parties are free to agree on the place of arbitration. Section 22 provides or the party to agree upon the language to be used in the arbitral proceeding. Section 23, 24and 25 further provides for the parties to agree upon the time to complete the pleading and procedure for hearing. Section 26 provides for expert appointment by agreement.

In the case of Bhatia International Vs. Bulk Trading S.A. reported as (2002) 4 SCC 105 the Hon’ble Supreme Court held that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsory apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply.

That despite the various measures provided under the Act and various judgments by the different High Courts and Hon’ble Supreme Courts giving due weightage to the party autonomy, lot of hurdle are coming on the way of the party autonomy.

The Hon’ble Bombay High Court in the case of M/s. Addhar Mercantile Pvt. Ltd. v. Shree Jagdamba Agrico Exports Pvt. Ltd. reported as (2015) SCC Online Bom 7752 held that domestic parties cannot have a foreign seated arbitration under the law as that would be derogation from the Indian law as had been stated in TDM Infrastructure v UE Development reported as (2008) 14 SCC 271. The said ratio of Hon’ble Bombay High Court is patently erroneous and contrary to the law laid down by the Hon’ble Supreme Court in the case of Bharat Aluminium Company Vs. Kaiser Aluminium Technical Service reported as (2012) 9 SCC 552 and Reliance Industries Ltd. Vs. UOI reported as (2014) 7 SCC 603 wherein it was settled by the Hon’ble Supreme Court when the partiesby an agreement chose a place outside India, the law governing the arbitration proceeding would be the law of such country unless provided otherwise.

That two Indian parties can choose a foreign seat as the same would not construed as against the public policy or in contravention to Section 23 read with Section 28 of the Contract Act was turned down by the Supreme Court in Atlas Exports Industries Vs. Kotak & Co. reported as (1999) 7 SCC 61.

Hon’ble Madhya Pradesh High Court in the case of Sasan Power Ltd. Vs. North American Coal Corp. India (P) Ltd. reported as 2015 SCC Online 7417 held that two Indian parties were free to arbitrate in a place outside India and an award rendered pursuant thereto would be a foreign award falling under Part-II of the Act. The Hon’ble Supreme Court also endorsed aforesaid view in the case of Sasan Power Ltd. Vs. North American Cola Corpn. (India) reported as 2016 (10) SCC 813 . On 14th November, 2017 the Hon’ble Delhi High Court in the case of GMR Energy Limited Vs. Doosan Power Systems India – CS (COMM.) 447/2017 discussed all the relevants case law and of the view that two indian parties are free to choose the seat of arbitration outside India and arbitration commenced thereupon fall under Part II of the Act.

The Act and the law laid down by the various High Courts and the Hon’ble Supreme Court of India firmly uphold that the party autonomy as the pulse of the arbitration proceeding. The law do not restrict the autonomy of the parties and leave the parties to determine for themselves by their free will about the applicability of the law rather than impose on them.