Author: Mukta Priya, College: Gitam University
Introduction
The appointment of arbitrators in an arbitration settlement is covered under Section 11 of the Arbitration and Conciliation Act, 1996. It outlines several options for how parties to a dispute can choose to designate arbitrators. By deciding on a process for appointment, the parties may select the arbitrators themselves under Section 11. The methods outlined in Section 11 may be used by the parties to nominate arbitrators if they cannot do so themselves. The provision has undergone numerous revisions over time, with amendments in 2015 and 2019 significantly diminishing the judiciary’s role in arbitration.
Arbitration definition
A disagreement between two parties is heard and decided by a third party without the involvement of a court using one of the Alternative disagreement Resolution (ADR) processes known as arbitration. It enables parties to seek a speedy resolution of issues in a way that is comparable to litigation. Contrary to litigation, it occurs outside of court, and the judgment is final and cannot be appealed. It leads to the pronouncement of an award, which is comparable to a court order. The Arbitration and Conciliation Act, of 1996 governs matters involving arbitration.
The 2015 Arbitration and Conciliation Act, Section 11.
The following are the main characteristics of this section:
- Both parties must agree on the process for choosing arbitrators before it can be implemented.
- The nomination of a third arbitrator (the presiding arbitrator), who shall be chosen by the two arbitrators of the case, is also required as part of the arbitration procedure. There must be two arbitrators appointed—one from each party.
- The person being appointed or nominated as an arbitrator to the case must be competent and eligible to function in that position, failing which, said the procedure of law would also render the appointment of an individual as an arbitrator ineffective.
- In the absence of a provision to the contrary in the parties’ agreement, the presiding arbitrator may decide how the arbitration will proceed if there is ever a disagreement between the other two arbitrators.
Section 11 gives the judiciary, the authority to intervene in disputes where parties fail to uphold their end of the bargain or fail to name arbitrators within the allotted thirty-day period.
The court may step in and appoint a single arbitrator to preside over the case if there is a disagreement on the appointment of an arbitrator or if there is a dispute between the parties.
Grounds and challenges for arguing against the appointment of an Arbitrator in India
Any arbitration must be based on the independence, impartiality, and competency of the arbitrator. These elements are necessary to guarantee the fairness of the arbitral award made by the tribunal. If it is determined that the arbitrator acted unlawfully or had a conflict of interest, the decision rendered by the arbitral tribunal may be set aside. Therefore, the parties are permitted to challenge the appointment of an arbitrator even after the start of the arbitral proceedings, provided that the party cannot decipher such issues after conducting due diligence during the appointment. Under Section 12 of the Arbitration and Conciliation Act, 1996, the nomination of an arbitrator may be contested in the Indian setting.
Section 12 of the Arbitration and Conciliation Act, of 1996 tries to guarantee the arbitrators’ independence and impartiality. It stipulates that certain factors, which could cast doubt on the arbitrator’s independence and impartiality, must be declared by the arbitrator at the time of appointment. It enables the parties to contest the arbitrator’s appointment if any circumstances raise legitimate concerns about his independence or impartiality or if he does not meet the criteria established by the parties. The Section further stipulates that a person would be regarded ineligible for appointment as an arbitrator if the dispute’s subject matter or the nature of the arbitrator’s relationship with the parties falls within one of the categories listed in the Seventh Schedule.
Grounds for challenge
1. Absence of impartiality as well as independence
The independence of an arbitrator relates to the idea that the arbitrator shouldn’t have any kind of connection, either direct or indirect, to any of the disputing parties.
An arbitrator’s impartiality is defined as their lack of vested personal interests in the resolution of the case. Losing faith in the arbitration process might result from an arbiter who lacks independence and impartiality. This may result in challenges to the legitimacy of any awards rendered by the arbitrator as well as a loss of trust on the part of the parties in the fairness and integrity of the arbitration process.
When parties choose to arbitrate their issues, they anticipate that the arbitral tribunal will be neutral, unbiased, free from the political interests of the parties, and unfavorable to either party. The parties would never consent to arbitration in the first place unless they had faith that the arbitration system in question would take all reasonable steps to ensure the independence and impartiality of the arbitral tribunal, as Stephan Bond had correctly said.
The independence of the decision-maker is fundamental in the exercise of judicial power and is also a necessary feature of an arbitrator. The arbitrator must be impartial and independent for the arbitral tribunal’s decision to be fair.
2. Appointment on a unilateral basis
When one party to a dispute appoints an arbitrator without the other party’s knowledge or assent, this is known as a unilateral appointment of an arbitrator. This is typically permitted by the arbitration rules that the parties have agreed upon, or in the absence of an agreement, by the applicable law or institutional regulations.
However, a unilateral appointment can give the impression that the arbitrator is biased or unneutral, favoring the party making the decision. In situations where the unilateral selection of an arbitrator is permitted, the parties must make sure the arbitrator appointed is unbiased and independent and that the arbitration procedure is carried out fairly and effectively.
3. Against the requirements
The qualifications and experience of the arbitrators are typically left up to the parties under arbitration agreements. The parties are free to contest the arbitrator’s appointment in cases where the arbitrator may lack the credentials and experience specified in the agreement. The parties would have been presumed to have waived the objection in cases where the parties did not protest the arbitrator’s appointment during the proceedings.
If the challenge to the appointment of an arbitrator, based on the fact that he/she does not have the credentials and experience required in the agreement, is successful, the arbitration procedures or the arbitral award would be declared to be unlawful since the arbitrator would lack jurisdiction.
Waiver of non-eligibility
When a party who would otherwise be unable to participate in arbitration due to a legal or procedural requirement is permitted to do so by a waiver of that condition, the term “waiver of ineligibility in arbitration” is used.
A person might not be qualified to serve as an arbitrator due to the Act’s Seventh Schedule’s rules. However, if the parties expressly waive any objections to such an appointment after the dispute has arisen, they may agree to select such a person as the arbitrator under Section 12(5).
The parties can choose an arbitrator even if there is a legitimate concern about their independence and impartiality since party autonomy is a key component of arbitration proceedings. The parties would not be allowed to assert a claim of bias to later contest the decision under Section 34 in circumstances where they have the freedom to agree to nominate an arbitrator who is ineligible under Schedule 7.
Solution for a biased or prejudiced arbitrator
Parties would first need to follow the steps outlined in Sections 12 and 13 of the Act if they wanted to challenge the arbitrator. If the party is unsuccessful, the party may appeal the arbitrator’s appointment to the Court after the award has been made. On the other hand, even before the award is made, the party may seek the Court to contest the arbitrator’s appointment under Section 14 of the Act if it feels it can summarily demonstrate the arbitrator’s bias.
Conclusion
In conclusion, the appointment of arbitrators in India is a critical aspect of the arbitration process. The Arbitration and Conciliation Act, of 1996 outlines the process for appointing arbitrators, and parties have the flexibility to choose their preferred method. However, safeguards exist to ensure the arbitrator’s impartiality and independence throughout the proceedings.
About the Author
