This article has been written by Ms. Anchita Niranjan Chavan, a 3rd year BLS LLB student at Oriental College of Law, Navi Mumbai.
INTRODUCTION-
Arbitration is a form of alternative dispute resolution (ADR) that resolves disputes outside the judiciary courts. The dispute will be decided by one or more persons (the ‘arbitrators’, ‘arbiters’ or ‘arbitral tribunal‘), which renders the ‘arbitration award‘. An arbitration decision or award is legally binding on both sides and enforceable in the courts, unless all parties stipulate that the arbitration process and decision are non-binding. The Legislative Council of India passed the Indian Arbitration Act in 1899. This act was India’s first comprehensive piece of law dealing with arbitration. It was only valid in presidential towns like Calcutta, Bombay, and Madras, though. This legislation expanded the scope of arbitration by defining “submission” as “a written agreement to submit current and future disagreements to arbitration, whether or not an arbitrator is designated therein.” Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. In the past few decades, arbitration has become a mainstay in resolving legal disputes.
An arbitrator is an impartial person or group that is given the power by disputing parties to resolve their dispute compare mediator. An arbitrator plays the role of a neutral person, who makes decisions on a dispute based on evidence presented by the parties. The decision the arbitrator makes is not always legally binding, but if it is, individuals and/or businesses are not able to go to court later if they do not agree with the outcome.
An arbitrator may decide the dispute on his or her own (sole arbitrator) or as part of a panel of (usually) three arbitrators. In the case of a three-person arbitral tribunal, most often each party nominates an arbitrator and the two party-appointed arbitrators choose a third arbitrator to chair the tribunal. Appointments can also be made by arbitral institutions or appointing authorities where a party fails to nominate or if the parties have so agreed.
IDEAL NUMBER OF ARBITRATORS IN AN ARBITRATION-
Parties should agree on the number of arbitrators on a Tribunal and the method of their appointment. If they cannot agree, ICSID’s default mechanism will apply (Article 37 of the ICSID Convention and Arbitration Rules 2 and 3).
As a first step in the appointment process, the parties should refer to the contract, treaty or law containing the consent to ICSID arbitration. This instrument may set forth a prior agreement between the parties on the number of arbitrators and/or the method of their appointment. A Tribunal must always consist of a sole arbitrator or any uneven number of arbitrators. The parties are otherwise free to adopt any workable method of appointment that suits their needs, including provisions on time limits and special procedures. The parties do not need to appoint arbitrators from the ICSID Panel of Arbitrators.
The most common agreements for three-member Tribunals are:
- Each party appoints one co-arbitrator, and the parties attempt to agree on the third arbitrator, the President of the Tribunal. If the parties fail to agree, the Secretary-General (or the Chairman of the Administrative Council) of ICSID appoints the President.
- Each party appoints one co-arbitrator, and the co-arbitrators attempt to agree on the third arbitrator, the President of the Tribunal. If the co-arbitrators fail to agree, the Secretary-General (or the Chairman of the Administrative Council) of ICSID appoints the President.
If no agreement on the number of arbitrators and the method of their appointment is reached within 60 days after registration of the request for arbitration, either party may request the application of the default formula under Article 37(2)(b) of the ICSID Convention. The formula provides that:
- The Tribunal consists of three arbitrators.
- Each party appoints one co-arbitrator.
- The parties attempt to agree on the third arbitrator, the President of the Tribunal.
Failing an agreement between the parties, the seat may be determined by the arbitral tribunal or the administering arbitral institution, in accordance with and subject to the arbitration rules chosen by the parties.
If there is any disagreement between the arbitrators, there is no award and the jurisdiction of the presiding arbitrator can be invoked. In the absence of any contrary provision in the arbitration agreement, the presiding arbitrator can adjudicate the whole case if the arbitrators disagree on any particular point, as been held in Probodh v. Union of India.
The tribunal may consist of a sole arbitrator, or there may be more arbitrators but the number of arbitrators can never be even number under the Arbitration & Conciliation Act, 1996.
In the absence of the parties agreement, the number of arbitrators will be determined by the appointing authority and/or the arbitral institution. Whether it is always a wise decision to specify the number of arbitrators in an arbitration clause is debatable.
Appointment of third arbitrator by the court in case of disagreement between two arbitrators-
In ICICI Ltd. v. East Coast Boat Builders & Engineers Ltd., two arbitrators were appointed by respective parties, but they did not agree on the name of the third arbitrator. The petitioner made an application for appointment of the third arbitrator by the court under s.11 of the Act. The court accepted the prayer and appointed the third arbitrator.
The default position under the UNCITRAL Rules 2013 is that three arbitrators will be appointed if the parties have not previously agreed on the number of arbitrators. In principle, however, the parties may agree on a tribunal being composed of any number of members (including a sole arbitrator or an even number of members)
CASE LAWS-
In Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss S. Gem Mfg. Co. Ltd. It has been held that no retired High Court Judge can be appointed as an arbitrator by the court when the arbitration clause states categorically that the difference/dispute shall be referred to an arbitrator by the Chairman and Managing Director of IPDL who is the appellant in this case.
In National Aluminium Co.Ltd v. Metalimpex Ltd.
A Bangladeshi company failed to nominate its arbitrator in terms of the arbitration agreement on an application under S.11 of the Arbitration and Conciliation Act, 1996, the Chief Justice of India nominated an arbitrator to act on behalf of the Bangladeshi company.
In BBR (India) Pvt. Ltd. Vs. S.P. Singla Constructions
The appointment of a new arbitrator who holds the arbitration proceedings at a different location would not change the jurisdictional ‘seat’ already fixed by the earlier or first arbitrator.
CONCLUSION-
In cases where the default formula applies, Arbitration Rule 3 sets forth the process by which the parties appoint the members of the Tribunal. The arbitrator should be chosen carefully because of his special knowledge of the subject matter which is in dispute. He must give attention to the facts in dispute placed before him and his decision should be practical and impartial and in the best interest of justice, good conscience, and equity. If the contract is high value, specify three arbitrators in the arbitration clause: the resulting extra time and expense will normally be worthwhile. If the contract is low value, a sole arbitrator may be best but weigh up the importance to you of saving time and cost, against having a say in who the arbitrator will be. If it is not clear how valuable a future dispute will be, do not specify the number of arbitrators. The appointing authority will then decide.
REFERENCES-
- https://uk.practicallaw.thomsonreuters.com/
- https://study.com/
- https://jusmundi.com/
- https://www.americanbar.org/
- https://www.indiacode.nic.in/
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