top of page

Appointment of Arbitrators


Appointment of Arbitrators
Appointment of Arbitrators

Content:-




An arbitration's effectiveness hinges greatly on the arbitrators overseeing it. While the 1996 Arbitration Act draws inspiration from the UNCITRAL Model Law on International Commercial Arbitration, 1985 (Model Law), it diverges significantly from the Model Law in certain aspects, particularly in the constitution and establishment of an arbitral tribunal.



Moreover, the regulations governing these matters have undergone substantial evolution, experiencing significant changes in 2015 and again in 2019 through the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) and the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment).



Importantly, there exist at least three distinct chronological regimes:


(i) the regime under the un-amended Act (the 1996 Regime),


(ii) the regime under the 2015 Amendment (the 2015 Regime), and


(iii) the regime under the 2019 Amendment (the 2019 Regime).



Each of these regimes holds practical relevance.


The 1996 Regime applies to arbitral proceedings and associated court proceedings initiated before the 2015 amendments came into effect, i.e., before 23 October 2015.



The 2015 Regime pertains to arbitral proceedings and related court proceedings occurring between 23 October 2015 and the date on which the 2019 Amendment came into effect. Subsequently, the 2019 Regime will be applicable.

 
 

Number of Arbitrators


Section 10(1) of the 1996 Arbitration Act grants parties the liberty to select the number of arbitrators they desire, with the condition that it not be an even number. However, in MMTC Limited v. Sterlite Industries (India) Ltd., the Supreme Court clarified that the validity of an arbitration agreement is not contingent upon the specified number of arbitrators. 



Thus, an arbitration agreement stipulating an even number of arbitrators would not be deemed invalid on that ground. Similarly, in Narayan Prasad Lohia v. Nikunj Kumar Lohia, the Supreme Court emphasised that Section 10(1) of the Act is not obligatory.



Parties are therefore at liberty to agree on an even number of arbitrators. The court dismissed the argument that permitting arbitration with an even number of arbitrators would contravene Indian public policy, as it would necessitate restarting arbitration in the event of a deadlock between the two arbitrators. 



Instead, it suggested that if two arbitrators reach an impasse, they could appoint a third arbitrator to resolve the issue. This approach would be both time and cost-effective and would uphold party autonomy.



Section 10(2) of the 1996 Arbitration Act specifies that if the parties do not determine the number of arbitrators, the tribunal shall consist of a sole arbitrator. This provision differs from the Model Law, which stipulates that in the absence of a determination by the parties, the tribunal shall comprise three arbitrators.




Nationality of Arbitrators


Section 11(1) of the 1996 Arbitration Act stipulates that unless the parties have agreed otherwise, an arbitrator of any nationality can be appointed. This provision underscores the importance of party autonomy and mirrors the position outlined in the Model Law.



However, Section 11(9) of the Act introduces a caveat regarding the appointment of arbitrators in international commercial arbitration. When a court or arbitral institution is approached to appoint an arbitrator in such cases, the provision states that they "may" appoint an arbitrator of a nationality other than that of the parties.



In Malaysian Airlines Systems Bhd Ltd. v. STIC Travels, the Supreme Court interpreted the use of the word "may" in Section 11(9). It clarified that the provision is not obligatory and does not mandate the appointment of an arbitrator of a different nationality.



Instead, if one party objects to the appointment of an arbitrator belonging to the nationality of the opposing party, the Chief Justice of India (or his nominee) can consider the objection. 



In such cases, the appointing authority may assess whether appointing an arbitrator who is not of either party's nationality would be beneficial. Factors such as the arbitrator's knowledge of applicable law may be taken into consideration in making this determination.

 
 

Qualifications of Arbitrators


Under both the 1996 Regime and the 2015 Regime, no specific qualifications are mandated for arbitrators' appointment.



However, the 2019 Regime introduces qualifications and experience criteria for arbitrators through the Eighth Schedule, inserted by the 2019 Amendment. This Schedule outlines qualifications required for the accreditation of arbitrators across nine categories.



The initial four categories necessitate Indian qualifications: advocates, chartered accountants, cost accountants, or company secretaries, as defined by Indian law governing these professions. 



The remaining categories also seem to require Indian qualifications, except for appointing non-Indians possessing relevant scientific or technical expertise. Most categories demand a minimum of ten years of professional experience. 



Additionally, the Schedule includes general norms applicable to arbitrators, such as familiarity with the Constitution of India.



Criticism has been levelled against the 2019 Amendment for potentially excluding foreign lawyers and young Indian lawyers from arbitrator accreditation. There's ongoing debate about whether these qualifications apply solely to accreditation or also to the actual appointment of arbitrators. It remains to be seen how the 2019 Amendment will be enforced and interpreted by courts.



Procedure for Appointment


Section 11 of the 1996 Arbitration Act grants parties the freedom to establish a procedure for appointing arbitrators, emphasising party autonomy. However, this autonomy is subject to due process considerations, and unilateral appointment of a sole arbitrator by one party is not permitted.



In cases where the parties have not agreed on an appointment procedure or where the agreed procedure fails, Section 11 provides default rules to ensure timely commencement of arbitration, inspired by the Model Law:



i) In arbitrations with three arbitrators, each party appoints one arbitrator, and the two appointed arbitrators then select the presiding arbitrator.



ii) In arbitrations with a sole arbitrator, parties should agree on the appointment.



iii) If the parties haven't specified the number of arbitrators, a sole arbitrator will be appointed, following the procedure outlined in (ii) above.



iv) If default procedures fail, a party may request the relevant court (or arbitral institution) to appoint an arbitrator.



Under the 1996 Regime, the Chief Justice of the concerned High Court handles appointments in domestic arbitrations, while the Chief Justice of India is responsible for international commercial arbitrations. This judicial function cannot be delegated to arbitral institutions, as per this Regime.



The 2015 Regime designates the concerned High Court for domestic arbitrations and the Supreme Court for international commercial arbitrations as appointing authorities. These courts typically establish specialised arbitration benches for such appointments.



The 2019 Amendment revises the appointing authority once again. Under the 2019 Regime, the Supreme Court (for international commercial arbitrations) and the High Court (for domestic arbitrations) are empowered to designate arbitral institutions graded by the Arbitration Council of India to appoint arbitrators.

 
 


1 view0 comments

Comments


bottom of page