So today we are going to talk about the appointment of arbitrators in an International commercial arbitration. In any kind of Arbitration with its seat in India, parties are free to agree on a procedure for appointing the arbitrator according to Section 11 of the arbitration and conciliation act 1996. However, if there is absence of any kind of agreement on the procedure for the appointment of arbitrator or arbitrators then each party will appoint one arbitrator and the two appointed arbitrators will appoint the third arbitrator who will act as the presiding arbitrator of the Tribunal.
If one of the parties do not appoint an arbitrator within 30 days or if 2 appointed arbitrators fail to appoint third arbitrator in 30 days then the party can request the supreme court in case of the international commercial arbitration or relevant High Court in case of a domestic arbitration to appoint an arbitrator.
It is to be noted that in case an application for appointment of an arbitrator has been filed in the court, the court can enquire only about the existence of an arbitration agreement. The question of arbitrability of the dispute would be decided by the Tribunal and not the courts. The Court should dispose of the application for appointment of the arbitrator within 60 days and this will be treated as an administrative decision.
Another important thing which has to be noted here is that unless the agreement is sufficiently stamped, the court cannot appoint an arbitrator.
The limitation period for filing an application under Section 11 for the appointment would be 3 years from the failure to appoint the arbitrator and the court have the power to refuse to make the reference to arbitration where claims are ex-facie time barred as provided in Section 8 of the Act.
Challenging the appointment of Arbitrator:
We all know and understand that independence and impartiality of an arbitrator are indispensable for any arbitration proceeding. So, if there are such circumstances present which might lead the parties to challenge the independence and impartiality of the Appointed arbitrator, those circumstances need to be disclosed beforehand to the parties.
So, what these circumstances can be?
One, where the circumstances give rise to justifiable doubts as to arbitrator’s impartiality and independence and,
Two, where they do not posses the qualifications agreed upon by the parties.
The Non-disclosure of these circumstances can lead to serious consequences for the arbitrator, including termination of his/her mandate and even if he or she has not been assigned work or given remuneration by the concerned party.
The challenge to the appointment on the basis of grounds mentioned in the fifth schedule has to be decided by the arbitrator themselves. So, if he does not accept the challenge then the proceedings can continue and the arbitrator can make the arbitral award.
So, what should parties do in such circumstance?
In this situation, the party challenging the arbitrator can make an application for setting aside the resultant arbitral award in accordance to Section 34 of the Act. If the court agrees to the challenge the arbitral award can be set aside. Therefore, even if the arbitrator does not accept the challenge to his appointment, the other party cannot stall further arbitration proceedings by rushing to the court.
Now, we have to keep few things in mind like:
If the arbitrator has passed an award in an earlier arbitration between the same parties about the same dispute, this does not mean that there are justifiable grounds for challenging his impartiality under Clause 16, 5th Schedule.
The appointment of a former employees of parties are not precluded from being appointed as arbitrators. Also, proposed arbitrators being government employees/ex-government employees was not sufficient in itself to make them ineligible to act as arbitrators, especially since they were ex-employees of public bodies not related to the party.
Since we talked about challenging the appointment of the arbitrator, we should also talk about Challenging the jurisdiction of the tribunal. Under Section 16 of the Act, an arbitral tribunal has the competence to rule on its own jurisdiction, which includes ruling on any objections with respect to the existence or validity of the arbitration agreement. The doctrine of ‘competence-competence’ confers jurisdiction on the Arbitrators to decide challenges to the arbitration clause itself. Therefore, where the arbitral tribunal was constituted by the parties without judicial intervention, the arbitral tribunal could determine all jurisdictional issues by exercising its powers of competence-competence under this Section.
Question of the Week:
When does the mandate of an arbitrator expires?
As held by various Supreme Court Judgements, the mandate of the arbitrator expires in case an award is not delivered within the time limit stipulated by the parties in the arbitration agreement. This will help a party to ensure a time-bound arbitration process while entering into a contract and in compelling the arbitrator to deliver his award within stipulated timelines.
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