The Rules Applicable to the Substance

In one line

Section 28 tells the tribunal which law to apply to the merits, distinguishing a domestic arbitration, where Indian substantive law is compulsory, from an international commercial arbitration, where the parties choose; and section 29 says how a panel decides.

Section 28(1): where the place of arbitration is in India

(a) In an arbitration OTHER THAN an international commercial arbitration, the tribunal SHALL DECIDE THE DISPUTE IN ACCORDANCE WITH THE SUBSTANTIVE LAW FOR THE TIME BEING IN FORCE IN INDIA.

There is no choice. Two Indian parties arbitrating in India cannot agree that English law shall govern the substance of their dispute, and an award that applies a foreign law in such a case is open to challenge as being in conflict with the public policy of India or, since 2015, as patently illegal.

(b) In an INTERNATIONAL COMMERCIAL arbitration:

(i) the tribunal shall decide in accordance with THE RULES OF LAW DESIGNATED BY THE PARTIES as applicable to the substance of the dispute;

(ii) any designation 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 by the parties, the tribunal SHALL APPLY THE RULES OF LAW IT CONSIDERS TO BE APPROPRIATE GIVEN ALL THE CIRCUMSTANCES surrounding the dispute.

Sub-clause (ii) excludes RENVOI. A choice of French law means French contract law, not French private international law, so the tribunal is not sent back to some third system.

And note the phrase "RULES OF LAW" rather than "law", which is wider: it lets the parties choose a non-national body of rules, such as the UNIDROIT Principles, and not merely the law of a State.

Section 28(2): equity

The arbitral tribunal shall decide EX AEQUO ET BONO or as AMIABLE COMPOSITEUR ONLY IF THE PARTIES HAVE EXPRESSLY AUTHORISED IT TO DO SO.

The two expressions mean deciding according to what is fair and good, and acting as a friendly conciliator free from strict rules of law. The default is that a tribunal decides according to LAW; equity is available only on the parties' express authority, and an implied authority will not do.

This is also why section 2(6) carves section 28 out: where Part I leaves the parties free to determine an issue they may authorise an institution to determine it, EXCEPT under section 28, because the choice of the governing law is too fundamental to delegate.

Section 28(3): the contract and trade usages

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.