As per the black law dictionary, the arbitrator is a “private, disinterested person, chosen by the parties to a disputed question, for the purpose of hearing their contention, and giving judgment between them; to whose decision(award) the litigants submit themselves either voluntarily, or, in some cases, compulsorily, by order of a court”.
In this article, we will see how an arbitrator is appointed how it can be objected and what happens when there is a default in their payment/fee.
Under section 11 of the Arbitration and Conciliation Act, 1996(herein referred to as ‘act’) the parties are free to determine the number of arbitrators after forming the agreement but it should be in odd numbers. If parties fail to appoint the arbitrator as per the agreement formed then each party will appoint one arbitrator and those two arbitrators will appoint the 3rd one, who will act as the presiding arbitrator.
Each party must appoint the arbitrator within 30 days of receiving the request from the other party. In case of failure to appoint the arbitrator, the appointment will be made on the request of the Supreme Court or High Court or the institution designated by such court. The Supreme Court or high court or the institution before appointing shall see the qualification, independence, and impartiality of the arbitrator and also seek the disclosure in writing from the arbitrator.
In the case of international commercial arbitration, the Supreme Court or person designated by that court will appoint the arbitrator of a different nationality other than that of both parties. The application to appoint the arbitration under section 11 shall be disposed of by the Supreme Court or High Court or the person designated by the such within 60 days from the service of notice to the other party.
Objection against the appointment—
Under section 12 of the act, when a person is approached for the appointment as arbitrator then he/she shall disclose in writing any circumstances or any direct/indirect relationship in the interest of parties or in the interest of subject matter or any past or present relationship with any of the party in terms of financial, business, professional or any other kind which can create doubt on his/her competence regarding independence and impartiality.
Under sub-section 3 of section 12, the appointment of an arbitrator can be challenged on his independency/ impartiality or whether he didn’t fulfill the qualification of the arbitrator as agreed by the parties in the agreement and if he/she is falling under the grounds mentioned in the 7th schedule of the act he shall be ineligible to appoint as an arbitrator.
Under sub-section 2 of section 13 of the act, the party challenging the appointment shall within 15 days of knowing the reason specified in sub-section 3 of section 12. The proceeding will be continued if the challenge made under section 13 is not successful.
What happens when the fees of the arbitrator are not paid—
As per section 38 of the act, if one of the parties fails to pay its share then the Arbitral Tribunal (herein referred to as ‘tribunal’) can direct the other party to pay the remaining share to the arbitrator. And, if both the parties fail to pay the fee then the tribunal can terminate or suspend the arbitral proceedings.
The act provides the mechanism and eligibility that needs to be followed while appointing the arbitrator but it also provides the relaxes to the parties in dispute to choose their sole or number of arbitrators and make an agreement which may include the fees that will be paid to the arbitrator and the procedure to be followed while appointing the arbitrator.
The main aim of the act is to provide the not interference of the court while appointing the arbitrator but there is a lack in this and the interference of the court is often seen while appointing the arbitrator, in the case of SBP and co. v Patel Engineering Ltd. there was a question on the doctrine of Competence-Competence as the court was trying to dilute the power of the tribunal and to give the power to the court.
Therefore, the amendment of 2015 introduced sub-section 6 of section 11 of the act limited the power of the court and overruled the decision of SBP and co. v. Patel Engineering Ltd in the act and the doctrine of Competence-Competence was reinstated. And, the said decision was upheld in the case of Duro Felguera S.A v. Gangavaram Port Ltd.