Who Can Become An Arbitrator?

Introduction

Arbitration forms an alternate dispute resolution mechanism, wherein a dispute is resolved without filing a lawsuit in a court of law with an exchange in information between the parties to the dispute, including witness accounts and pieces of evidence; consequently, the arbitrator makes a final, legally binding decision, which cannot be challenged in a court of law; additionally, the arbitrator can be either a lawyer or a non-lawyer (retired judge/ person with extensive experience in the subject matter of the dispute).[1] Arbitration upholds the confidentiality of the parties to the dispute since they are not mandated to testify in public in a court of law as a matter of public record; additionally, the said parties can mutually decide on an arbitrator based on its technical knowledge and experience to arbitrate a dispute in an efficient and cost-effective method.[2] The process of arbitration in a private setting is highly flexible because the guiding modalities of the arbitration are open to negotiation by the parties to the dispute in their arbitration agreement, wherein the arbitrator oversees the presentation of pieces of evidence (either human or documentary) while issuing a written decision (with or without an award).[3] One of championing aspects of arbitration is its creative nature over traditional litigation in a court of law, wherein the relief to the aggrieved party is not restricted to only punitive and pecuniary damages akin to criminal and civil cases respectively.[4] Another advantage of arbitration is its consensual nature, wherein arbitration takes place if and only if the two parties to the dispute have consented to the same in their arbitration agreement to choose an arbitrary of their choice to conduct a neutral arbitration in applicable law, venue, language, etcetera.[5] Parties to a dispute can opt for one of two types of arbitrations:[6]

1. Adhoc Arbitration: The arbitration is not conducted by a specialized institution, which allows the parties to the dispute to avoid the additional administrative charges of a specialized institution, making it less expensive, flexible and time-efficient. The lack of an institution puts greater responsibility on the arbitrator to effectively manage the arbitration while garnering cooperation from all the parties.
2. Institutional Arbitration: The arbitration is conducted by a specialized arbitration institution, wherein the institution administers the arbitration with its own set of rules at the hands of its own form of administrative machinery.[7] Dubai International Arbitration Centre (DIAC), The Permanent Court of Arbitration, India, International Chamber of Commerce, India, are a part of a  network of approximately 1,200 arbitration institutions around the globe.[8] Either two parties to a contract or two parties to a dispute may have an arbitration clause that enlists a particular arbitration institution to administer the arbitration, wherein the designated institution refers the dispute to a panel, which may or may not belong to the institution;[9] however, approaching an arbitration institution offers the following merits: a) The prestige and reputation of an institution allow the arbitration process to start in a timely manner since a majority of the parties readily accept the pre-established rules and codes of the institution owing to the reputation of the institution in dealing with arbitration, b) An arbitration institution has trained and able staff to administer the arbitration in terms of the know-how of the procedural rules of the arbitration as against ad hoc arbitration where the arbitrator is burdened with fulfilling the aforementioned administrative tasks and duties with greater effort; the assistance of qualified arbitrators makes the whole process efficient, c) Ad hoc arbitration can be delayed due to the disputes between the parties regarding the rules of arbitration; however, the fixed framing of arbitration framework eliminates any scope for dispute since the same has been framed keeping all the eventualities in mind by the skilled arbitrators, d) Apart from a higher level of quality, institutional arbitration ensures the adherence of the due process of law by the said arbitrators by placing supervisory modalities to supervision the arbitration process. The stability and uniformity of the United Nations Commission on International Trade Law, 1966, was incorporated in India with the statutory provision of Arbitration and Conciliation Act, 1996 while being a party to the New York Arbitration Convention, 1958 (Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958) to uphold and enforce arbitral awards given by any court of law in any country of the world.[10] Section 89 of the Code of Civil Procedure, 1908, enlists arbitration as one of the alternate dispute resolution mechanisms, wherein ad hoc arbitration is more popular than institutional arbitration in India.[11] In December 2016, the Government of India constituted a committee under the leadership of Justice (Retd.) B. N. Srikrishna to review and suggest measures to reform the situation of institutional arbitration in India, wherein the Union Parliament passed the New Delhi International Arbitration Centre Act, 2019 on July 26, 2019, to give life to the recommendations of the committee to establish an independent and autonomous centre for institutional arbitration in India on not only the domestic but also the international front.[12] The NDIAC performs the following functions under the aegis of Section 15 of the NDIAC Act, 2019:[13] a) Conduct effective, efficient, cost-effective arbitration on a domestic and international level, b) Promote research and studies in the field of alternate dispute resolution, c) Undertake the diffusion of knowledge via teaching about the rules of procedure of alternate dispute resolution at the academic and professional level, d) Impart relevant training in arbitration to anyone actively interested in the said field, and e) Cooperate with societies and organizations (at the national and international level) for the promotion of arbitration along with other alternate dispute resolution mechanisms. It is worth noting that Section 28 of the act requires the NDIAC to establish a Chamber of Arbitration for the empanelling of arbitrators while scrutinizing the applications for admission in the panel of reputed permanent panel of arbitrators (Sub-Section 1) consisting of experienced arbitration practitioners with a wide experience in the area of alternate dispute resolution at national and international level (Sub-Section 2), wherein the NDIAC shall outline the regulations and criteria for admission to the panel of arbitrators (Sub-Section 3).

Who can be an Arbitrator?

It is worth noting that the Indian legislation does not outline any specific qualifications for arbitrators, wherein any individual of sound mind and of any nationality can be appointed as an arbitrator (including the inclusion of the individual to the panel of an arbitration institution) based on the knowledge, experience, integrity of the individual from various professions, provided the individual is of suitable age.[14] Section 11, Sub-Section 3 illustrates a situation where each party to the dispute appoints an arbitrator of their choice, wherein the two arbitrators appoint a third arbitrator within thirty days from the receipt to do so from the other party (Sub-Section 4, Clause A), which shall act as the presiding arbitrator within thirty days from the date of appointment (Clause B). If an arbitrator has not been affixed at the end of the term, then the party can request the respective court of law to appoint an arbitrator on their behalf. In situations where there is a sole arbitrator and if the parties to the dispute fail to agree on the sole arbitrator within thirty days from receipt of a request by one party from the other party to so agree with the appointment, then the former party can approach the respective court of law to appoint the arbitrator (Sub-Section 5). It is worth understanding that the appointment of an arbitrator by a court of law (either the High Court or the Supreme Court of India, including any judicial institution designated by the said court) does not extend the judicial authority from the said court of law to the appointed arbitrator under Sub-Section 6B and the said decision of appointment is final without any scope for appealing against the decision (Sub-Section 7); additionally, the prospective appointee shall provide disclosure in writing under Sub-Section 8 about the following: a) Existence of either direct or indirect (either in present or in past) relationship in any parties to the dispute, b) Existence of relation to the subject matter of the dispute in any kind (financial, professional, business, etcetera, such that the relation casts reasonable doubt about the independence and impartiality of the said arbitrator. It is worth noting that Section 12, Sub-Section 1, Clause B mandates the prospective appointee to disclose any information that is likely to affect its ability to devote sufficient time to the arbitration process so as to complete the entire arbitration process within a period of 12 months. It is worth noting that the qualifications of the arbitrator are decided by the parties to the dispute.

In the case of situations where the arbitration is an international commercial arbitration requiring either a sole arbitrator or a third arbitrator (in case of each party to the dispute choosing an arbitrator of their choice), the Supreme Court of India (including any authority designated by the Supreme Court) can appoint an arbitrator of a nationality different from the nationalities of the parties to the dispute (Section 11, Sub-Section 9).

Although the qualifications required for one to become an arbitrator is inadequately listed in the Arbitration and Conciliation Act, 1996, the grounds for challenging the appointment of the said arbitrator is listed under the Fifth and Seventh Schedule of the act, wherein the former illustrates grounds for removal of an arbitrator if its independence and impartiality are questioned under reasonable justifications while the latter elucidates the grounds for removal of an arbitrator if its relationship with either the parties to the dispute or the counsel to the parties to the dispute is sufficient to alter its independence and impartiality.[15]

The following grounds are reasonable justifications to cast a doubt on the independence and impartiality of the arbitrator (X) to the arbitration process between two parties (Y and Z, hereafter referred to as “party” to denote either Y or Z) to the dispute (it is worth noting that the party includes the affiliates to the party):

1. X has a business relationship with the party (including employment, consultant, advisory, etcetera) in either the past or the present.
2. X either represents or actively advises the party.
3. X is a lawyer of the same legal institution that is representing the party.
4. X is a manager/ director/ any part of the management, which has a controlling influence on the affiliate to the party, provided the said affiliate is directly involved in the subject matter of the dispute.
5. X’s legal institution had been associated with the dispute in the past even if X was not directly involved in the dispute in the past.
6. X’s legal institution has a commercial relationship with the party.
7. X has a close familial relationship with the party and if the party is a company, then X should not have a close familial relationship with the persons in managerial positions of a controlling status in the aforementioned company.
8. A close family member of X has a significant commercial/ financial relationship with the party, with or without financial interest in the outcome of the arbitration.
9. X is a legal representative of the party to the dispute.
10. X has a significant financial interest in the party.
11. X has a significant financial interest in the outcome of the arbitration.
12. X has provided legal advice (including an expert opinion) on the present dispute to the party.
13. X has had previous involvement in the dispute.
14. X privately holds the shares, either directly or indirectly, in the party.
15. The outcome of the arbitration may be dependent on a third party for the party, wherein either X or a close family member of X (including X’s spouse, child, parent, life partner) is barred from having a close relationship with the said third party.
16. X has within the last three years served as a counsel for the party, including situations where X has either advised or provided consultation to the party in the past, provided X has no active relationship with the party in the present.
17. X has been a counsel against the party within the last three years in an unrelated matter.
18. X has been appointed as an arbitrator to the party on two or more occasions of dispute (whether related or unrelated to each other).
19. X’s law firm has represented the party in an unrelated matter within the last three years, either with or without the involvement of X.
20. X either currently serves or had served within the last three years as an arbitrator in another arbitration case on a related subject matter to the current dispute involving the party.
21. X and the arbitrator from the other party cannot belong to the same law firm.
22. X has been affiliated with the other arbitrator (including the counsel of the party) in the same arbitration within the last three years.
23. X’s law firm has a lawyer who is an arbitrator in another dispute involving the same party to the arbitration dispute arbitrated by X.
24. A close family member of X is either a partner or an employee of the law firm representing the party to the dispute.
25. A law firm (including a singular counsel) appoints X more than three times within the last three years for arbitration.
26. X’s law firm is current acting against the legal and non-legal interests of the party.
27. X has had a professional relationship with the party within the last three years in a professional capacity, including being a former employee of the party.
28. X holds a position in the arbitration institution with appointing authority  over the dispute.
29. X is a manager/ director/ part of the management (including any position of a similar controlling influence) of the affiliate of the party, provided the affiliate is not directly involved in the subject matter in the current dispute.

It is worth noting that the appointment of an arbitrator and the procedure for arbitration largely depends on the subject matter of the arbitration, wherein specialized arbitration like maritime arbitration could required specialized arbitrators who are experts in the respective field (including retired judges), wherein the same arbitrator can be appointed for different disputes of the specialized subject matter with the requisite changes in the rules of arbitration; such that an arbitrator could be a senior advocate, a young lawyer with extensive expertise and skill in the subject matter of the dispute with professional integrity, non-practising lawyers/ advocates who possess the technical knowledge of the dispute (with the knowledge of conducting an arbitration) with the adequate training in conducting an arbitration; additionally, the size of the prospective award of arbitration determines the party’s choice of an arbitrator.[16]

It is worth noting that a lawyer/ advocate can become an arbitrator in consonance with its legal practice, wherein the profession of being a full-time arbitrator is unavailable in India due to the limited progress made in the field; such that one can be a litigator/ corporate lawyer along with being an arbitrator (a litigator can be associated with dispute resolution firms).[17]

In a nutshell, the parties to the dispute can decide on an arbitrator on their own consent of any nationality, qualifications, provided the person comes with the professional integrity to conduct the arbitration with extensive knowledge, experience and skill in the subject matter of the dispute.[18]

Conclusion

Arbitration forms as one of the alternate dispute resolution mechanisms highlighted within Section 89 of the Code of Civil Procedure, 1908, wherein the process involves the appointment of an independent and impartial arbitrator to oversee the resolution of the dispute by listening to the parties, reading their pieces of evidence, checking the documentary proofs in a timely, cost-effective and efficient fashion; such that the award and decision of the arbitrator at the close of the arbitration is legally binding on all parties to the dispute with no option of appealing the said decision in the court of law. The merits of arbitration have gained momentum in India as a technique to resolve disputes without appearing in a court of law in adherence to the Arbitration and Conciliation Act, 1996, such that the merits require arbitrators who are experts in the subject matter of the dispute with extensive and expansive legal and technical knowledge about the said subject matter; additionally, an arbitrator not only needs the skill of arbitration but also needs to do so with professional integrity.

The act does not mention any specific qualifications for the appointment of the arbitrator; however, Schedule Five and Seven of the act illustrates situations where an arbitrator may be disqualified (when its independence and impartiality is reasonably questioned under justifiable grounds); hence, apart from the aforementioned traits of a prospective arbitrator, it needs to fulfil the criteria under the two schedules to be appointed as an arbitrator to the dispute. An arbitrator need not have a particular qualification, rather it must have a set of skills and qualities to be an arbitrator as discussed within the scope of the article.

References

1. Jane Haskins, What is an Arbitration Agreement? LEGALZOOM (Sep. 22, 2020), https://www.legalzoom.com/articles/what-is-an-arbitration-agreement.
2. Id.
3. Katie Shonk, What is an Arbitration Agreement? HARVARD LAW SCHOOL: PROGRAM ON NEGOTIATION (May. 24, 2021), https://www.pon.harvard.edu/daily/conflict-resolution/what-is-an-arbitration-agreement.
4. Id.
5. What is Arbitration? WIPO. (n.d.), https://www.wipo.int/amc/en/arbitration/what-is-arb.html (last visited Aug. 13, 2021).
6. What is arbitration? ADGM Arbitration Centre. (n.d.), https://www.adgmac.com/arbitration/what-is-arbitration (last visited Aug. 13, 2021).
7. Institutional vs. ‘ad hoc’ arbitration, PINSENT MASONS. (Aug. 12, 2011), https://www.pinsentmasons.com/out-law/guides/institutional-vs-ad-hoc-arbitration.
8. Id.
9. Pramit Bhattacharya, Institutional Arbitration in India, IPLEADERS (May 23, 2016), https://blog.ipleaders.in/institutional-arbitration-india.
10. JYOTSANA UPLAVDIYA, AD HOC AND INSTITUTIONAL ARBITRATION 8 (Latest Laws ed., 2018), https://www.latestlaws.com/wp-content/uploads/2018/09/Ad-Hoc-and-Institutional-Arbitration-By-Jyotsana-Uplavdiya.pdf.
11. Id, at 9.
12. Venancio D’Costa & Astha Ojha, Institutional Vis-a-vis Ad-hoc Arbitrations in India, MONDAQ (June 24, 2020), https://www.mondaq.com/india/arbitration-dispute-resolution/957706/institutional-vis-a-vis-ad-hoc-arbitrations-in-india.
13. Id.
14. 4.1 Arbitrator – Qualifications and Capacities, ICA INDIA. (n.d.), https://www.icaindia.co.in/ icanet/ rules/commercialarbitration/arbitration&conciliation/chapter1d.htm (last visited Aug. 16, 2021).
15. Arjun Natarajan, Is it possible to become an arbitrator even if you are not a retired judge? IPLEADERS (Nov. 12, 2018), https://blog.ipleaders.in/possible-become-arbitrator-even-not-retired-judge.
16. Id.
17. Id.
18. Abhishek Kumar, Selection and Appointment of Arbitrators in India, S&P (Jun. 21, 2017), https://singhania.in/blog/selection-and-appointment-of-arbitrators-in-india.