Selection of Arbitrators

How are arbitrators selected? Do courts play a role?

So far, the courts were involved if parties were unable to agree upon a sole arbitrator or if the
parties appointed arbitrators failed to agree on a third arbitrator (and there was no party
agreed mechanism in place to make the appointment). After the 2019 amendment to the Act,
the courts are left with no role in the aforesaid situations. Instead, the Supreme Court is to
designate an arbitral institution to make appointments in relation to international arbitrations
and likewise, the High Courts are to designate arbitral institutions to make appointments in
relation to domestic arbitrations. The appointments thus are to be made by the designated
institutions (and not by the courts). The Act clarifies that there is no delegation of judicial
power by the Supreme Court or High Courts to the arbitral institutions and hence (any
challenge to an appointment would remain subject to any final order by the courts).

What are the requirements in your jurisdiction as to disclosure of conflicts? Do courts

play a role in challenges and what is the procedure?

Schedule V to the Act lists the kind of relations between an arbitrator and a party / advocate/
subject matter of the dispute, which may give rise to justifiable doubts regarding an
arbitrator’s independence. Schedule VII to the Act lists the kinds of relations between an
arbitrator and a party / advocate/ subject matter of the dispute, which would, notwithstanding
any prior agreement between the parties, disentitle a person from acting as an arbitrator,
unless post arising of disputes, parties expressly waive such conflict. Schedule V and VII
(inserted vide the 2015 Amendment) can be said to be along the lines of the IBA Guidelines
on Conflicts of Interest. An arbitrator can be challenged only if circumstances exist that give
rise to justifiable doubts as to his independence or impartiality or if he does not possess the
qualifications agreed to by the parties. Subject to any agreement, any challenge shall be made
within 15 days of a party becoming aware of the constitution of the tribunal or becoming
aware of the circumstances leading to the challenge. The arbitral tribunal shall decide on the
challenge. The court has no role at that stage and if a challenge is rejected, the arbitral
tribunal shall continue with the proceedings and render its award. It would be open to the
party challenging the arbitrator to take any wrongful rejection of challenge as a ground for
setting aside the award.
Are there limitations on who may serve as an arbitrator? Do arbitrators have ethical
duties? If so, what is their source and generally what are they?

The Act does not prescribe or require any qualification from an arbitrator and it expressly
states that a person of any nationality may be an arbitrator (unless otherwise agreed by the
parties). However, the 2019 amendment has created some confusion by requiring the
designated arbitral institutions (see para V (i) above) to empanel arbitrators having
qualifications as prescribed in the Eighth Schedule thereto. This Schedule inter alia prescribes
that the arbitrator must be an Indian qualified advocate or an Indian qualified Chartered
Accountant or Cost Accountant or Company Secretary etc. Hence the panel of arbitrators
maintained by these institutions (who will perform the default appointment role) necessarily
excludes any foreign arbitrator. This is a totally retrograde step and has given rise to much
criticism. It is believed that the Government is reconsidering this amendment. The law does
not prescribe any code of conduct or ethical duties for arbitrators. Generally, it can be
expected that Common Law standards of ethical duties for judges (or members of judicial
tribunals) would apply equally to arbitrators.

Difference Between the Selection of the Arbitrator in Domestic and International

Arbitration:

Foreign Arbitration:

Choice of arbitrators:

Unlike court proceedings, in which generally parties have no input into the choice of judge
for their case, the parties to an arbitration usually appoint, nominate, or at least have some
input into the selection of the arbitrator(s). Most developed arbitration laws require that all of
the arbitrators be impartial. However, a party can use its choice or input into the selection
process to help ensure that, as far as possible, the tribunal will understand the commercial
context, the relevant issues, and the party’s procedural preferences. The parties may agree
upon certain criteria for the arbitrators, or for the presiding arbitrator, although they should
take care not to narrow the field so far that there are difficulties in identifying potential
candidates. In arbitrations with more than one party on either side, or where other parties
might be joined in to the proceedings, maintaining the parties’ right to choose the arbitrators
(rather than simply delegating the choice to an institution) can be particularly challenging.
For example, if one party has the right to select an arbitrator but two parties on the other side
cannot agree upon a joint selection, the latter could claim that they were not being treated
equally. Careful consideration as to the means of appointing the arbitrators is therefore
required in such multi-party scenarios.

Section 11 Appointment of Arbitrators:

(9) In the case of appointment of sole or third arbitrator in an international commercial

arbitration, 2[the Supreme Court or the person or institution designated by that Court] may
appoint an arbitrator of a nationality other than the nationalities of the parties where the
parties belong to different nationalities.

Cost:

There is no simple answer as to whether arbitration is cheaper than litigation. As legal fees
generally account for the majority of the costs of proceedings (whether arbitration or
litigation), the controlling factors are largely the complexity of the dispute, the way the
proceedings are conducted and their length. In arbitration, parties must pay for the arbitrators,
any administering institution, and the hiring of venues for hearings. On the other hand, there
are no court fees and parties are free to agree to a process tailor-made for their dispute. This
might be, for example, a streamlined, “fast track” procedure (although inflexible and
unrealistic schedules can be problematic). Significantly, parties normally agree that there is
no right of appeal (on the merits) from any award (potentially saving years of further
proceedings). England is unusual in having a limited right of appeal on a point of English
law, but even this is usually excluded in international arbitration agreements. In most
jurisdictions, courts may only review awards for strictly limited reasons, such as alleged
procedural irregularities or jurisdiction issues. International arbitral tribunals are generally
empowered to award the successful party the majority, or at least a measure, of its costs,
although practice varies depending on the applicable rules/law and the composition of the
tribunal.

Domestic Arbitration:

The Arbitration and Conciliation (Amendment) Act, 2015 grants the liberty to the parties to
appoint an arbitrator mutually.
The Act provides that the parties are free to determine the number of arbitrators, provided
that such number shall not be an even number. However, if the parties fail to do so, the
arbitral tribunal shall consist of a sole arbitrator.1
The procedure in relation to appointment of arbitrator(s) is provided under Section 11 of the
Act. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
The aforesaid section also deals with the contingency wherein the parties fail to appoint an
arbitrator mutually. In such a situation, the appointment shall be made, upon request of a
party, by the Supreme Court or any person or institution designated by such Court, in the case
of an International Commercial arbitration or by High Court or any person or institution
designated by such Court, in case of a domestic arbitration.
Before the appointment of arbitrator is made, the concerned Court or the person or institution
designated by such Court is required to seek a disclosure in writing from the prospective
arbitrator in terms of Section 12(1) of the Act and also give due regard to any qualifications
required for the arbitrator by the agreement of the parties and the contents of the disclosure
and other considerations as are likely to secure the appointment of an independent and
impartial arbitrator.
It may be noted that under Section 12(1) of the Act, an obligation has been cast upon the
prospective arbitrator to make an express disclosure on (a) circumstances which are likely to
give rise to justifiable doubts regarding his independence or impartiality; or (b) grounds
which may affect his ability to complete the arbitration within 12 (twelve) months.
The purpose of this provision is to secure the appointment of an unbiased and impartial
arbitrator.
Fifth Schedule to the Act (Annexure-A) contains a list of grounds giving rise to justifiable
doubts as to the independence or impartiality of an arbitrator. The Seventh Schedule
(Annexure-B) lays the grounds which make a person ineligible to be appointed as an
arbitrator.
The Act provides that in an International Commercial Arbitration, an arbitrator of a
nationality other than the nationalities of the parties may be appointed where the parties
belong to different nationalities.
Expeditious disposal of application for appointment of an arbitrator(s) is emphasized by the
Act and an endeavour shall be made to dispose of the matter within a period of sixty days
from the date of service of notice on the opposite party.