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How to Choose an Arbitrator in India: A Practical Guide for Domestic and International Arbitration
Arbitration is a popular and effective method of resolving commercial disputes, especially in the context of international transactions. Arbitration offers the parties the freedom to choose their arbitrators, who are expected to be independent, impartial, and competent to decide the matters in dispute. However, the process of selecting and appointing arbitrators is not always straightforward and may pose various challenges and opportunities for the parties involved.
Process of Arbitrator Selection in India
In India, the process of arbitrator selection is governed by the Arbitration and Conciliation Act, 1996 (the Act), which is based on the UNCITRAL Model Law on International Commercial Arbitration. The Act provides that the parties are free to determine the number and qualifications of arbitrators, as well as the procedure for their appointment, subject to certain limitations. For instance, the number of arbitrators shall not be an even number,[1] and a person of any nationality may be an arbitrator unless otherwise agreed by the parties.[2]
If the parties fail to agree on the arbitrator(s) or the procedure for their appointment, the Act provides for a default mechanism depending on whether the arbitration is domestic or international. In domestic arbitration, where both parties are Indian nationals or entities, Section 11(6) states that the appointment shall be made by the High Court or any person or institution designated by it, upon request of a party. In Union Of India vs M/S Uttar Pradesh State Bridge Corporation Ltd, (2015) 2 SCC 52, the Supreme Court held that if there is no specific provision in an arbitration agreement for the appointment of an arbitrator by an institution or a person other than the court, then only court can appoint an arbitrator under Section 11(6) of the Act. In international commercial arbitration, where at least one party is a foreign national or entity, Section 11(9) provides that the appointment shall be made by the Supreme Court or any person or institution designated by it, upon request of a party.
In Voestalpine Schienen Gmbh vs Delhi Metro Rail Corporation Ltd, (2017) 4 SCC 665, the Supreme Court held that when an arbitration agreement provides for a panel or list of arbitrators to be chosen from by both parties, then such panel must be broad-based and diverse enough to include persons from different categories and backgrounds.
The Act also specifies certain criteria for selecting and appointing arbitrators, such as:
- The arbitrator shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his or her independence or impartiality or affect his or her ability to complete the arbitration within 12 months.[3]
- The Fifth Schedule to the Act contains a list of grounds that may give rise to such doubts, such as having a direct or indirect interest in the outcome of the dispute, having a past or present relationship with any of the parties or their counsel, having expressed an opinion on the merits of the dispute, etc.
- The Seventh Schedule to the Act contains a list of grounds that make a person ineligible to be appointed as an arbitrator, such as being an employee, consultant, advisor or lawyer of any of the parties, having been convicted of an offence involving moral turpitude or economic offence, etc. In TRF Limited vs Energo Engineering Projects Limited, (2017) 8 SCC 377, the Supreme Court held that an ineligible person to be appointed as an arbitrator under Section 12(5) read with the Seventh Schedule of the Act cannot nominate another person as an arbitrator either.
- Section 11(8) and Section 11(10) The court or the person or institution designated by it shall give due regard to any qualifications required for the arbitrator by the agreement of the parties, and to other considerations such as securing the appointment of an independent and impartial arbitrator.
Challenges in Arbitrator Selection in India
The process of arbitrator selection in India may face various challenges, such as:
- Delay and cost: The involvement of courts in appointing arbitrators may cause delay and increase costs for the parties, especially if there are multiple levels of appeals or challenges against such appointments. Moreover, some courts may have a backlog of cases or lack adequate infrastructure or expertise to deal with arbitration matters efficiently.
- Lack of diversity: The pool of arbitrators in India may not reflect sufficient diversity in terms of gender, nationality, ethnicity, age, professional background, etc. This may affect the quality and legitimacy of arbitration proceedings and awards, as well as limit the choice and satisfaction of the parties.
- Bias and conflict of interest: The arbitrators selected or appointed may not be independent and impartial from the parties or their counsel or may have undisclosed interests or relationships that may affect their judgment or conduct. This may undermine the fairness and integrity of arbitration proceedings and awards, as well as expose them to challenges or enforcement difficulties.
- Lack of competence: The arbitrators selected or appointed may not have adequate knowledge and expertise in the subject matter of dispute, or may not have sufficient experience and skills in conducting arbitration proceedings. This may affect their ability to resolve complex and technical issues effectively and efficiently.
Opportunities in Arbitrator Selection in India
The process of arbitrator selection in India may also offer various opportunities for improvement and innovation, such as:
- Institutional arbitration: The parties may opt for institutional arbitration instead of ad hoc arbitration, where they can avail of the services and facilities provided by reputable arbitration institutions that have established rules and procedures for selecting and appointing arbitrators. Such institutions may also have panels or lists of qualified and experienced arbitrators from diverse backgrounds and disciplines that can cater to different types of disputes.
- Online platforms: The parties may use online platforms or databases that facilitate finding and selecting arbitrators based on various criteria such as availability, location, language, fees, ratings, reviews, etc. Such platforms may also provide features such as online communication, document exchange, payment, etc. that can enhance the efficiency and convenience of the process.
- Arbitrator training and accreditation: The arbitrators may undergo training and accreditation programs that can enhance their knowledge and skills in arbitration law and practice and update them on the latest developments and trends in the field. Such programs may also help them to adhere to high standards of ethics and professionalism, and to comply with the disclosure and eligibility requirements under the Act.
- Arbitrator diversity initiatives: The arbitrators, the parties, the counsel, the courts, the institutions, and other stakeholders may participate in initiatives that promote and encourage diversity in arbitration, such as mentoring, networking, awareness raising, research, etc. Such initiatives may help to increase the representation and participation of women, minorities, young professionals, etc. in arbitration, as well as to foster a culture of inclusion and respect.
Conclusion
The process of arbitrator selection in India is an important and challenging aspect of arbitration that can have a significant impact on the outcome and quality of dispute resolution. The parties have a considerable degree of autonomy and flexibility in choosing their arbitrators, subject to the provisions and safeguards under the Act. However, they may also face various difficulties and risks in finding and appointing suitable arbitrators who meet their expectations and needs. Therefore, they should exercise due diligence and care in selecting their arbitrators, and explore the various opportunities and options available to them that can improve and enhance the process.
[1] Arbitration and Conciliation Act 1996, Section 10
[2] Op Cit, Section 11(1)
[3] Op Cit, Section 12(1)
- The arbitrator selection process in India is governed by the Arbitration and Conciliation Act, 1996 and its amendments.
- The parties can choose their arbitrators by mutual consent, or by following the procedure prescribed in the arbitration agreement or the Act.
- The parties may choose an arbitrator of any nationality, unless otherwise agreed. In an international commercial arbitration, an arbitrator of a nationality other than the nationalities of the parties
