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Principle of Neutrality in choosing Arbitration Panel
Introduction: The panel of arbitrators chosen, appointed, formed, maintained, and curated by a party with an interest in the result of the judgment is void-ab-initio, according to the Karnataka High Court. On February 25, 2021, the Karnataka High Court granted JMC ATEPL Joint Venture's petition against Bangalore Metro Rail Corporation Limited (BMRCL), which challenged BMRCL's procedure for appointing arbitrators under the General Conditions of Contract, which called for disputes to be resolved by a panel of three arbitrators. In this case, despite the fact that the Arbitral Tribunal had been established and arbitration procedures had already begun, the Court granted the Petition under Section 11(6) of the Act, based on the modified provisions of the Act and basic principles of neutrality.
Facts: The MC ATEPL Joint Venture won the contract for the building of three metro stations and a viaduct, and BMRCL awarded a Letter of Award (LOA) to them. A project execution agreement dated 28.06.2010 was entered into between the parties in accordance with the LOA.
Due to a delay in the overall project's completion, several issues occurred between the parties, which were referred to arbitration under Clause 17.9 of the General Conditions of Contract. Clause 17.9 outlined the method for appointing arbitrators and resolving disputes by a three-member Arbitral Tribunal. According to the method outlined in the clause, if the claim in question was worth more than $15 million, BMRCL had the authority to appoint a panel of five arbitrators, with each party nominating one arbitrator and the presiding arbitrator being chosen by the two nominated arbitrators.
The Petitioner was dissatisfied with the procedure set forth in the agreement, which gave BMRCL sole authority to maintain, manage, and curate a panel of arbitrators of its choosing. As a result, a petition was filed under Section 11(6) of the Act challenging the procedure and seeking the appointment of independent arbitrators outside of BMRCL's panel of arbitrators.
Main Issues before the court: Is Clause 17.9 of the General Conditions of Contract severable, and if so, can the section of the clause that defines the method for appointing arbitrators to be separated from the rest of the clause and the contract? Is Clause 17.9(a) of the General Conditions of Contract, which governs the procedure for selecting arbitrators from a panel of arbitrators chosen, appointed, made, maintained, and curated by the respondent, lawful and binding on the petitioner?
Decision and Analysis: The court relied on the decision of TRF Ltd's case and Perkins case [1]and noted that "it clearly indicates that because BMRCL and its officials, employees, and others are themselves incapacitated, ineligible, and disqualified to be appointed as arbitrators, the aforementioned portion of Clause 17.9(a) which prescribes the procedure for appointment of arbitrators by conferring powers upon the respondent to choose, make, maintain, and curate a panel of arbitrators is also clearly illegal, invalid, ineffective, and unenforceable."
As a result, "BMRCL and its officials, employees, and others are themselves incapacitated, ineligible, and disqualified to be appointed as arbitrators, having an interest in the outcome of the decisions, thus the entire panel of arbitrators chosen, appointed, made, maintained, and curated by BMRCL is void-ab-initio," the court ruled.
Conclusion
The Court's decision is a step forward in terms of the system for appointing arbitrators under government contracts that gives a party unilateral and exclusive rights to create and administer the panel of arbitrators on their own initiative. While the Supreme Court's judgement in the Perkins Judgment establishes that unilateral appointment of a solitary arbitrator is unconstitutional and illegal in law, the current Judgment applies not only to sole arbitrators but also to panels of arbitrators. It is important to highlight that, in light of the Act's modified provisions, the concepts of neutrality and bias are critical, and the approach chosen in this case strengthens such legal principles.
[1] [(2017) 8 SCC 377].
(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)
- Facts
- Decision and Analysis
- Conclusion
