Settlement of disputes through third party intervention is an aspect of human civilisational evolution. Dispute settlement mechanisms have been devised by human genius as a necessary concomitant of the principle of prohibition of use of force by way of self-help or otherwise in the settlement of disputes. Such third party settlement of disputes is a part of our native genius in India even at gross roots level.

Disputes settlement can take place either through adjudication (Third party Determination of Rights and Duties of Disputant Parties) or through conciliation. While adjudication is often statutory and institutionalised through courts of law etc, conciliation is a private and non-institutional. Adjudication can be either by way of judicial settlement or arbitration. Judicial settlement is settlement of disputes by courts which are established under the law, over whose composition powers and functions, procedures etc the parties have no control.

The court system prevalent in India was devised by the British on the lines of Common Law system or adversorial system. The essential features of the system are (1) Existence of a Dispute, (2) Involvement of Two or More Parties, (3) The Court’s Verdict.

The court system introduced in India by the British, has worked well for many years and more often than not sought to be the only mechanism available for the common man. However, the system has come under considerable strain in the recent times for more than one reason. Finally there is a tremendous increase in litigation - quantitatively and qualitatively.

There is what is called ‘Docket Explosion’. Litigation is not confined now to traditional areas but new fields like Environmental Law, Service Law, Consumer Law, Accidental Claims, Cyber Law etc. have emerged. Thirdly numerical strength of the courts and the judges has not increased proportionately with the growing litigation. Even the existing vacancies remained unfilled for various reasons. Fourthly as in the case of other institutions, there is a fall in the ethical and professional standards of persons who man the judiciary and this has compounded the problem further.

Moreover, the change in the economic and trade policies of the Governments the world over has introduced an entirely new dimension to the issues relating to dispute settlement mechanisms. Liberalisation of economic policies privatisation of industries and globalisation of markets have radically altered the scenario. Sudden growth in National and Inter-national business institutions and their ambit and range have made the traditional court-assisted justice delivery system rather obsolescent. Businessmen and commercial establishments are interested in speedy, inexpensive and amicable settlement of disputes and they are interested basically in going on with their future trade relations even with the parties with whom disputes might arise. They have no time to spend long hours in the chambers of lawyers or in the corridors of courts and long years in the trial of cases and delivery of judgments. It was in the above context, the UNCITRAL evolved a model law on Arbitration and Conciliation, which was in tune with the needs of our time. Under the Model Law parties have the freedom to choose (1) Arbitrators, (2) The Law of the Country, which would be applicable, (3) Venue of Arbitration, (4) Procedures to be followed by the Arbitral Tribunal and (5) the Terms of Reference etc.

This gives greater flexibility to the parties and the disputes will be settled by the law and procedure, which they would like to be governed.

The flexibility is absent in the case of traditional court system, in a way arbitration virtually privatises the justice delivery system.