Appointment of Arbitrators: Ensuring Fairness in Arbitration

The success of any arbitration proceeding depends heavily on one thing – who decides the dispute. An arbitrator who is biased, unqualified, or compromised can undermine the entire process. That is why the appointment of arbitrators under the Arbitration and Conciliation Act, 1996 is treated as one of the most critical steps in arbitration. Over the years, India’s arbitration framework has gone through major changes – especially through the 2015 and 2019 amendments – to make this process more transparent, efficient, and free from judicial delays. Let’s break down how arbitrators are appointed in India, what safeguards exist, and why these rules matter for fair dispute resolution.

What does Section 11 of the Arbitration and Conciliation Act say? 🔗

Section 11 is the backbone provision governing how arbitrators are appointed. It lays out a structured framework that balances two goals: giving parties the freedom to choose their own arbitrators, and providing a fallback mechanism when they cannot agree.

The provision starts with a broad principle – a person of any nationality may serve as an arbitrator, unless the parties have agreed otherwise. This reflects India’s alignment with the UNCITRAL Model Law and opens the door for international arbitrators in cross-border disputes.

Parties are free to agree on a procedure for appointing arbitrators. This is rooted in the principle of party autonomy, which is foundational to arbitration law. The Supreme Court emphasised this in IBI Consultancy India Pvt. Ltd. v. DSC Ltd. (2018), holding that parties are free to decide the number of arbitrators (provided it is an odd number) along with the appointment procedure.

The default procedure when parties cannot agree 🔗

If the parties fail to agree on a procedure, Section 11(3) provides a default mechanism. In an arbitration with three arbitrators, each party appoints one arbitrator, and those two appointed arbitrators then select a third who acts as the presiding arbitrator. For a sole arbitrator, if the parties cannot agree on who it should be within 30 days of a request from one party, the matter is referred to the court or a designated arbitral institution.

These 30-day windows are designed to prevent stalling. If a party fails to appoint an arbitrator within 30 days of receiving a request, or the two appointed arbitrators cannot agree on a third within 30 days, the appointment is made by a designated arbitral institution on application by either party.

The role of courts: from direct appointment to institutional designation 🔗

Before 2015, when parties could not agree, the Chief Justice of the High Court (for domestic arbitrations) or the Chief Justice of India (for international commercial arbitrations) directly appointed arbitrators. This led to significant delays, as courts were already overburdened.

The 2015 amendment: limiting judicial inquiry 🔗

The 2015 amendment introduced Section 11(6A), which restricted the scope of court examination in appointment applications to only determining whether a valid arbitration agreement exists – nothing more. This was a major shift. Earlier, following the Supreme Court’s ruling in SBP & Co. v. Patel Engineering (2005), courts were conducting broader inquiries – examining jurisdiction, the validity of the agreement, whether a live claim existed, and whether the claim was time-barred. This broader scrutiny caused significant delays in constituting arbitral tribunals.

The 2015 amendment also introduced a 60-day deadline for courts to dispose of appointment applications, reinforcing the need for speed. The underlying principle was clear: let the arbitral tribunal handle substantive disputes under the Kompetenz-Kompetenz doctrine enshrined in Section 16 of the Act, which empowers tribunals to rule on their own jurisdiction.

The 2019 amendment: institutionalising arbitration 🔗

The 2019 amendment took this further by shifting the appointment function away from courts altogether. It introduced Section 11(3A), which empowers the Supreme Court and High Courts to designate graded arbitral institutions to handle arbitrator appointments. The idea was straightforward – instead of judges personally selecting arbitrators in each case, accredited institutions would manage this process more efficiently.

Under this framework, for international commercial arbitration, the arbitral institution designated by the Supreme Court makes the appointment. For domestic arbitration, the institution designated by the concerned High Court handles it. Where no graded arbitral institution is available in a High Court’s jurisdiction, the Chief Justice of that High Court may maintain a panel of arbitrators to perform the institution’s functions.

The 2019 amendment also reduced the disposal timeline for appointment applications from 60 days to 30 days from the date of service of notice on the opposite party, further tightening timelines.

The Arbitration Council of India (ACI) 🔗

A key component of the 2019 amendment was the proposed establishment of the Arbitration Council of India (ACI). This independent body was envisioned to grade arbitral institutions, accredit arbitrators, and promote alternative dispute resolution mechanisms across India.

The ACI was to be chaired by a Judge of the Supreme Court or High Court, or an eminent person with expertise in arbitration. Its responsibilities included framing policies for grading institutions based on infrastructure, quality of arbitrators, and compliance with timelines. It would also maintain a depository of arbitral awards made both in India and abroad.

However, it is important to note that the provisions relating to the ACI have not yet been notified. This means that the institutional appointment framework envisioned by the 2019 amendment is not yet fully operational. As a result, the Supreme Court continues to hear Section 11 applications directly for international commercial arbitrations. The 2024 Draft Amendment Bill has proposed changes to this framework, including replacing the grading mechanism with a recognition-based model and broadening the definition of “arbitral institution.”

Ensuring impartiality: Section 12 and the disclosure regime 🔗

Appointing an arbitrator is not just about filling a seat – it is about ensuring the person appointed can decide the dispute without bias. This is where Section 12 of the Act becomes crucial.

Mandatory disclosure obligations 🔗

Section 12(1) requires that any person approached for possible appointment as an arbitrator must disclose in writing any circumstances that may raise justifiable doubts about their independence or impartiality. This includes past or present relationships with the parties, financial interests in the outcome, professional connections with the counsel, or any factor that might affect their ability to deliver a timely award.

This disclosure duty is continuous – it applies not just at the time of appointment but throughout the entire arbitration proceeding. If new circumstances arise that could affect the arbitrator’s neutrality, they must be disclosed immediately.

The Fifth and Seventh Schedules 🔗

The 2015 amendment introduced the Fifth Schedule and the Seventh Schedule to give concrete shape to the concepts of independence and impartiality. The Fifth Schedule lists specific circumstances that may give rise to justifiable doubts – for example, if an arbitrator has a current business relationship with one of the parties or has previously advised one of them on the dispute.

The Seventh Schedule goes a step further. It lists categories of relationships that automatically disqualify a person from serving as an arbitrator. Under Section 12(5), any person whose relationship with the parties, counsel, or subject matter falls under the Seventh Schedule is ineligible to be appointed – regardless of any prior agreement to the contrary. This is a mandatory provision with a non-obstante clause, meaning it overrides contractual terms.

There is one exception: parties may waive this disqualification by an express written agreement, but only after the dispute has arisen. Pre-dispute waivers are not valid.

Challenging an arbitrator’s appointment 🔗

If a party believes the arbitrator is biased or lacks independence, they can challenge the appointment under Section 13 of the Act. The parties can agree on a procedure for such challenges. If no procedure is agreed upon, the arbitral tribunal itself decides the challenge. If the tribunal rejects the challenge, the arbitration continues – but the dissatisfied party retains the right to contest the final award under Section 34.

Landmark judicial developments 🔗

Indian courts have played a significant role in shaping the law around arbitrator appointments. Here are some key developments:

SBP & Co. v. Patel Engineering (2005): A seven-judge bench of the Supreme Court held that the power exercised by the Chief Justice under Section 11 is judicial, not administrative. This meant that such orders could be appealed under Article 136 of the Constitution. However, the broader scope of judicial inquiry introduced by this decision also caused delays in appointments.

Duro Felguera v. Gangavaram Port Ltd.: The Supreme Court acknowledged the intent behind the 2015 amendment’s Section 11(6A) and held that courts should only examine whether an arbitration agreement exists between the parties – not delve into the merits of the dispute.

TRF Ltd. v. Energo Engineering Projects Ltd.: The Supreme Court addressed situations where the person designated to appoint an arbitrator is themselves ineligible under Section 12(5). The Court held that if the appointing authority is disqualified, they cannot nominate someone else as arbitrator either. This ruling was further reinforced in Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019).

SBI General Insurance Co. Ltd. v. Krish Spinning: This recent decision further restricted the scope of court inquiry under Section 11(6A), reaffirming the legislative intent of minimal judicial intervention and party autonomy in the arbitral process.

Qualifications and standards for arbitrators 🔗

The 2019 amendment also introduced the Eighth Schedule, which outlines qualifications, experience, and norms for accreditation of arbitrators. While these norms are aimed at professionalising the arbitration ecosystem in India, they have been subject to debate. Critics have pointed out that overly rigid qualification criteria could exclude experienced foreign arbitrators and make India less attractive as a seat for international arbitration.

The Eighth Schedule norms were to be enforced through ACI accreditation. However, since the ACI-related provisions remain unnotified, these accreditation standards are not yet in force. The 2024 Draft Bill has proposed modifications to this framework as well, moving towards a more flexible recognition-based approach.

Fee determination for arbitrators 🔗

The issue of arbitrator fees has also been addressed legislatively. Under Section 11(14), the arbitral institution determines the fees of the arbitral tribunal, subject to rates specified in the Fourth Schedule of the Act. This applies to domestic arbitrations where parties have not agreed on fees as per institutional rules. International commercial arbitrations are exempt from this fee cap.

This provision was introduced to bring predictability and prevent excessive fee demands, which had been a concern in ad-hoc arbitrations. Standardising fee structures makes arbitration more accessible and transparent for all parties involved.

Challenges and the road ahead 🔗

Despite significant reforms, the arbitrator appointment process in India still faces challenges. The non-notification of key 2019 provisions – particularly those relating to the ACI and institutional designation – has created a gap between the law on paper and its implementation. Courts continue to handle appointment applications, and judicial backlogs can still cause delays.

There are also concerns about the government’s involvement in the ACI’s functioning, given that the state is a party in a large number of arbitration proceedings. Ensuring genuine independence of the ACI from executive influence is critical if India wants to position itself as a credible global arbitration hub.

The ongoing reform efforts, including the 2024 Draft Amendment Bill, suggest that India is moving in the right direction – towards institutionalised, professionally managed arbitrations with clear standards for arbitrator selection and conduct. But the pace of implementation will determine whether these reforms achieve their intended goals.

What do you think? Given that several key provisions of the 2019 amendment remain unnotified years after being passed, do you think India’s arbitration framework can truly achieve the efficiency and institutional strength it aspires to? And in disputes involving the government as a party, how can we ensure that arbitrator appointments remain genuinely independent?

References

1. https://www.indiacode.nic.in/show-data?actid=AC_CEN_3_46_00004_199626_1517807323919&orderno=11
2. https://theidrc.com/content/adr-faqs/what-is-section-11-of-arbitration-and-conciliation-act
3. https://blog.ipleaders.in/section-11-of-arbitration-and-conciliation-act-1996/
4. https://prsindia.org/billtrack/the-arbitration-and-conciliation-amendment-bill-2019
5. https://legalaffairs.gov.in/sites/default/files/arbitration-and-conciliation(amendment)-act-2019.pdf
6. https://www.whitecase.com/insight-alert/keeping-times-government-india-proposes-new-arbitration-law-reforms
7. https://thelegalschool.in/blog/section-12-arbitration-and-conciliation-act
8. https://bhattandjoshiassociates.com/arbitrator-ineligibility-under-section-125-of-the-arbitration-and-conciliation-act-1996-legal-framework-and-judicial-interpretation/
9. https://www.lexology.com/library/detail.aspx?g=bf7ed6a6-493a-4f51-bff5-faa5126b6754
10. https://thelegalschool.in/blog/section-11-arbitration-act
11. https://www.amsshardul.com/insight/arbitration-and-conciliation-amendment-act-2019-key-amendments/