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2019 Amendments: Ambiguity regarding the appointment of foreign arbitrator in Indian seated arbitration
The Arbitration & Conciliation( Amendment) Act, 2019 was introduced recently. The aim of the legislature for enacting the 2019 Amendments was to make India a global hub for arbitration by bringing in changes in the law for faster resolution of commercial disputes.
The 2019 Amendments have introduced Section 43J to the Act. Schedule 8, which was introduced in Section 43J, lays down the qualification of an arbitrator including that no person would be appointed as an arbitrator unless such person is inter alia an advocate within the meaning of the Advocate Act 1961 with 10 years work experience. Section 24 of the Advocates Act, 1961, also specifies that only citizens of India can be registered as advocates under the Act.
While the introduction of minimum qualifications and eligibility requirements for arbitrators may be well-intended, the provisions in the Eighth Schedule create confusion. Most strikingly, it is apparent that the Eighth Schedule in its present form has excluded the parties’ choice of appointing foreign individuals as arbitrators in India-seated arbitrations.
Legislative position
Subject to certain formal requirements, parties are not restricted to agree on a procedure for appointing the arbitrator. The arbitration agreement may require parties to mutually select a sole arbitrator or a three-member tribunal, where each party will appoint one arbitrator and the two appointed arbitrators appointing the third and presiding arbitrator. Parties can also make an application under Section 11 of the Act to the High Court or Supreme Court if the arbitrator is not appointed as per the above methods.
Section 11(1) expressly states that a person of any nationality may be appointed as an arbitrator unless the parties agree otherwise. Therefore, the Act expressly contemplates the choice of parties while appointing the arbitrator. Section 11(1) remains unchanged even after the 2019 amendments.
Further, the amended Section 11(9) states that ‘in the case of appointment of a sole or third arbitrator in international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of any nationality other than the nationalities of the parties where the parties belong to different nationalities’.
Some orders before the 2019 Amendment
- In Reliance Industries Ltd. & Ors v Union of India (2014), the Supreme Court clarified various issues relating to the appointment of foreign arbitrators, while discussing the question with regard to the appointment of the third arbitrator, when the parties had not reached a consensus on the appointment. The court dug deep into the question that whether the nationality of the arbitrator should be different from that of the parties to the dispute, so as to ensure his neutrality in the matter.
- Also, in the case of Bar Council v. A.K. Balaji (2018), the Supreme Court held that foreign lawyers do not have an absolute right in conducting arbitrations in India. But this does not ban them in cases where rules of institutional arbitration are applicable.
- The Court further quoted from the works of Redfern & Hunter and Gary Born to explain the importance of the sole or the third arbitrator is from a country different from that of the parties to the arbitration.
Conclusion
The impact of the 2019 Amendments on the arbitration landscape is controversial. Although there are instances confirming that parties can appoint foreign nationals as arbitrators, the 2019 Amendments have barred their appointment in India-seated arbitrations. Contrary to its intentions, therefore, the 2019 Amendments have arguably decreased India’s chances of becoming a preferred spot for arbitration.
It would be advisable for the appropriate authorities to revisit the Eighth Schedule to constructively clarify regarding this issue. It would be interesting to see, therefore, if the Central Government amends the Act to include foreign lawyers and other nationals to be eligible for being appointed as arbitrators in India-seated arbitrations.
- Cause of confusion
- Legislative position
- Orders before amendment
