TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL

ROLE OF ARBITRATOR IN

SETTLEMENT OF DISPUTES Internship Assignment

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ROLE OF ARBITRATOR IN SETTLEMENT OF DISPUTES

Animesh Kumar

INTRODUCTION

Historically, methods used to settle disputes have ranged from negotiation, to courtroom

litigation, and even to physical combat. The legal needs of countries, multinational

companies, and ordinary people have changed over the last decade. When faced with a

dispute, business people are learning that, whenever possible, it is more advantageous to

reach practical and private agreements than to fight for years and spend huge amounts of

money in courtroom battles. Due to the vast amounts of time and money involved in the trial

process, significant increase in the role of international trade in the economic development of

nations over the last few decades has been accompanied by a considerable increase in the

numbers of commercial disputes as well. The business communities of the earth have

increasingly turned to legal alternatives that are more prompt, private and economical than

the courtroom. Alternative Dispute Resolution (ADR) refers to the wide spectrum of legal

avenues that use means other than trial to settle disputes.

The main ADR alternatives to civil litigation are negotiation, arbitration, conciliation and

mediation. Other, more particular ADR processes available are early neutral evaluation, mini-

trial, summary jury trial, and the judicial settlement conference. Disputing parties use these

ADR methods because they are expeditious, private, and generally much less expensive than

a trial. Settlement of disputes through reference to third party is a part of the volkgiest of

India since times immemorial. The Indian epics and folklore abound with examples of

consensual procedures for the settlement of disputes at the grassroots level. The third party

settlement ethos cannot be imposed from above and they can thrive only in soils and climes

that are conducive to that culture.

Arbitration has a long history in India. In ancient times, people often voluntarily submitted

their disputes to a group of wise men of a community—called the ‗Panchayat’—for a binding

resolution.1 Modern arbitration law in India was created by the Bengal Regulations in 1772,

Student, B.A;LL.B.(H), VII Semester: Amity Law School, Amity University U.P.,Lucknow Campus

1K Ravi Kumar, ‗Alternative Dispute Resolution in Construction Industry‘, International Council of Consultants

(ICC) papers, www.iccindia.org. at p 2. K Ravi Kumar is assistant executive engineer, Salarjung Museum,

Hyderabad.

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during the British rule. The Bengal Regulations provided for reference by a court to

arbitration, with the consent of the parties, in lawsuits for accounts, partnership deeds, and

breach of contract, amongst others.2 Until 1996, the law governing arbitration in India

consisted mainly of three statutes: (i) The Arbitration (Protocol and Convention) Act 1937,

(ii) The Indian Arbitration Act 1940, and (iii) The Foreign Awards (Recognition and

Enforcement) Act 1961.3 The 1940 Act was the general law governing arbitration in India

along the lines of the English Arbitration Act of 1934, and both the 1937 and the 1961 Acts

were designed to enforce foreign arbitral awards (the 1961 Act implemented the New York

Convention of 1958).4

The government enacted The Arbitration and Conciliation Act, 1996 (the 1996 Act) in an

effort to modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of

legislation modelled on the lines of the UNCITRAL Model Law. This Act repealed all the

three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act).5 Its primary purpose

was to encourage arbitration as a cost-effective and quick mechanism for the settlement of

commercial disputes.6 The 1996 Act covers both domestic arbitration and international

commercial arbitration. Since arbitration is founded on the agreement of the parties, it is of

course preferable that the procedure adopted be agreed between the parties and the

arbitrators. But where necessary the arbitrator must decide.

APPOINTMENT OF ARBITRATOR

§11 of the Act deals with the appointment of the Arbitrator and the following provision

should be taken in to consideration.

a. The parties may agree to a procedure of appointment of arbitrator otherwise the

following procedure shall apply:-

i. Arbitrator could be any nationality.

2ibid

3ibid

4The New York Convention of 1958, i.e. the 1958 Convention on the Recognition and Enforcement of Foreign

Arbitral Awards is one of the most widely used conventions for recognition and enforcement of foreign awards.

It sets forth the procedures to be used by all signatories to the Convention. This Convention was first in the

series of major steps taken by the United Nation since its inception, to aid the development of international

commercial arbitration. The Convention became effective on June 7, 1959. 5The 1996 Act, § 85.

6Justice Ashok Bhan in his inaugural speech delivered at the conference on ‗Dispute Prevention and Dispute

Resolution‘ held at Ludhiana, India, October 8, 2005.

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ii. In case of three arbitrators each party appoint its own arbitrator and two

appointed arbitrator appoint the 3rd

arbitrator.

iii. If within 30 days party fail to appoint arbitrator than Chief Justice shall

appoint the arbitrator.

b. Decision of Chief Justice on appointment of arbitrator is final.

c. Chief Justice or Person designated would have due regard to qualification of

arbitrators.

d. Chief Justice can make any scheme, he consider appropriate for appointment.

QUALIFICATIONS OF ARBITRATORS7

In general, the most important qualifications demanded of arbitrators are independence and

impartiality. These characteristics are even required vis-à-vis an appointing party. The reason

is that they enable arbitrators to take decisions free of bias and pressure. However, there are

differences among the standards in the documents examined, even within the same category

of arbitration. For example, although both impartiality and independence are required in all

types of arbitration, they tend to be the only requirements in international commercial

arbitration, while professional qualifications tend to be an additional requirement in

international investment and trade arbitration proceedings.

Another significant difference is in the way the nationality of the arbitrator candidate is

treated. Nationality can be a critical factor in selecting an arbitrator. Its importance derives

from the perception that a national of one of the parties to the dispute could be less than

impartial or independent. In general, the nationality of the arbitrator plays a less relevant part

of the arbitrator selection process in international commercial arbitration than investor-State

and international trade arbitration, but it is not altogether irrelevant. In investor-State and

State-to-State cases, it is an unstated presumption that being a national of a party indicates

partiality or lack of independence or both, since these characteristics are not stated

requirements of arbitral service for these types of arbitration.

The jurisdiction of the arbitral tribunal to record settlement award is not ex officio. It can be

exercised only if required by the parties.8 This Act does not provide for appointment of an

umpire. Therefore, where in the course of arbitral proceedings, the arbitrators fail to achieve

7http://www.cedires.be/index_bestanden/GARCIA%20BOLIVAR_Comparing%20Arbitrator%20Standards%20

of%20Conduct.pdf 8Article 34(1) of the UNCITRAL Arbitration Rules specifically states that the request for recording the

settlement to the tribunal should be made by ‗both parties‘while this section uses the phrase ‗if requested by the

parties‘.

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the majority on a particular with the agreement of the parties prevails, the other arbitrators do

not cease taking further part in the proceedings.

ARBITRATION PROCESS

The process of arbitration can start only if there is a valid Arbitration Agreement between the

parties prior to the emergence of the dispute. As per §7, such an agreement must be in

writing. The contract, regarding which the dispute exists, must either contain an arbitration

clause or must refer to a separate document signed by the parties containing the arbitration

agreement. The existence of an arbitration agreement can also be inferred by written

correspondence such as letters, telex, or telegrams which provide a record of the agreement.

An exchange of statement of claim and defence in which existence of an arbitration

agreement is alleged by one party and not denied by other is also considered as valid written

arbitration agreement.

Any party to the dispute can start the process of appointing arbitrator and if the other party

does not cooperate, the party can approach the office of Chief Justice for appointment of an

arbitrator. There are only two grounds upon which a party can challenge the appointment of

an arbitrator – reasonable doubt in the impartiality of the arbitrator and the lack of proper

qualification of the arbitrator as required by the arbitration agreement. A sole arbitrator or a

panel of arbitrators so appointed constitute the Arbitration Tribunal.

An effective compromise presupposes that both the parties to the dispute are willing abide by

the terms and conditions of the agreement. Otherwise, it not effective because a compromise

cannot be one sided, as both the sides to the disputes should agree for such compromise.9

Except for some interim measures, there is very little scope for judicial intervention in the

arbitration process. The arbitration tribunal has jurisdiction over its own jurisdiction. Thus, if

a party wants to challenge the jurisdiction of the arbitration tribunal, it can do so only before

the tribunal itself. If the tribunal rejects the request, there is little the party can do except to

approach a court after the tribunal makes an award. §34 provide certain grounds upon which

a party can appeal to the principal civil court of original jurisdiction for setting aside the

award.

Once the period for filing an appeal for setting aside an award is over, or if such an appeal is

rejected, the award is binding on the parties and is considered as a decree of the court.

9Malpati Sevasangh v Gujrat State Khandi and Village Industries Board 2004 (2) Arb LR 521 (Guj.)

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PARTIES DESIRE

Arbitration is a creature of contract.10

This means that parties can contract for what they want

and expect from their dispute resolution process. Parties articulate minimal expectations

about the proper role of arbitrators by picking a specific type of dispute resolution

mechanism. This typically happens when parties choose particular institutional rules, under

which arbitrators must exercise their discretion, or subjecting their agreement to national

laws, which articulate standards of appropriate behaviour.11

Such articulation creates a set of

shared understandings and manages party expectations about the appropriate role of decision-

makers.

If parties wish to have a decision-maker who is an expert in a particular industry who

exercises commercial judgment but does not engage in legal analysis, they might avoid

arbitration entirely and instead choose expert determination.12

Likewise, if parties do not

want neutral adjudicators but instead want partisan arbitrators, they might adopt rules that do

not require arbitrator impartiality and independence.13

In other words, parties who want a

commercial decision or partisan decision-making, can and should specifically contract do to

so.

But these processes are not international arbitration as we know it. The modern reality is that

parties do not generally want the open-textured discretion of international arbitration‘s past or

rampant partisanship of decision making.14

Rather, they prefer the outcomes of their disputes

to be warranted by a record and independent legal analysis – and so that they can have a fair

process which justifies the expenditure of significant legal fees on dispute resolution in

pursuit of broader commercial objectives.15

10

Claude R. Thomson & Annie M.K. Finn, Managing an International Arbitration: A Practical Perspective, 60-

JUL. DISP. RESOL. J. 74, 76 (2005) (noting ―arbitration is a creature of contract, [and] it can be customized to

meet the parties needs‖) 11

See Robert M. Kossick, Jr. and Julian Fernandez Neckelmann, Structuring Private Equity Transactions in

Mexico, 6 NAFTA L. & BUS. REV. AM. 105, 154 (2000) (discussing choice of law clauses, arbitration clauses,

and specifying procedures to address dispute resolution) 12

JOHN KENDALL, EXPERT DETERMINATION (2001) 13

Olga K. Byrne, A New Code of Ethics for Commercial Arbitrators: The Neutrality of Party-Appointed

Arbitrators on a Tripartite Panel, 30 FORDHAM URB. L.J. 1815, 1823-32 (2003) (noting the evolution away

from bias towards independent and impartial decision makers and the neutrality historically required in

international commercial arbitration). 14

Catherine A. Rogers, The Vocation of the International Arbitrator, 20 AM. U. INT‘L L. REV. 957, 991 (2005)

[hereinafter Rogers, Vocation]. 15

Delissa A. Ridgway, International Arbitration: The Next Growth Industry, 54-FEB. DISPO. RESOL. J. 50, 50-

51 (1999) (suggesting that international commercial arbitration is a growth industry because of parties‘

perceived fairness in the process and the predictability and certainty of the result).

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§30 is helpful provision in facilitating the peaceful and amicable settlement of disputes. ‗The

use of additional means of disputes resolution (such as conciliation and mediation) in an

arbitration is increasing and therefore provision must be made by any modern arbitration law

to accommodate such practices and to further their goal of an amicable solution of the

dispute.16

ADJUDICATORY FUNCTION17

Adjudicators share certain core features. Adjudication is a decision-making process that:

1. permits party participation by submitting evidence and offering reasoned arguments,

and

2. requires an adjudicator to render a final and binding decision that is

a. supportable based upon the record and

b. the adjudicator‘s independent judgment and legal analysis.

When adjudication is infected with partiality, it is not based upon reasoned application of

applicable legal rules or premised upon the parties‘ proofs – but rather on decision-makers

personal relationships, preconceptions, objectives and interests.18

Now a day while dealing in international arbitration, it requires the objective application of

rules to facts and the exercise of bounded discretion to ensure that the process and final

outcome is warranted.19

Parties to the arbitration choose with the particular culture, legal

background with specific experience in the matter, arbitrators also generally have an

obligation to disclose those matters that would call into question their independence.20

Though humans in their lives are influenced by the various experiences, in arbitration, parties

ask arbitrators to put aside biases – and fairly and impartially exercise their independent

judgment to apply their expertise to the facts on the record and render a decision based upon

the law.

The mandate of arbitrators and judges relates to their jurisdiction and the entities to which

they are responsible. There are subtle differences in the mandate of arbitrators and judges.

16

Peter Binder, International Comercial Arbitration in UNCITRAL Model Law Jurisdictions, 2

Edn,2005,pp243,247,Paras 6-037 and 6-049 17

BLACK‘S LAW DICTIONARY (6th ed. 1990) (referring to adjudication as the ―legal process of resolving a

dispute‖) 18

Rogers, Standards of Conduct, see also Jules L. Coleman & Brian Leiter, Determinacy, Objectivity and

Authority, 142 U. PENN. L. REV. 549, 565 (1993) 19

International Court of Arbitration Rules of Arbitration, effective Jan. 1, 1998, art. 7, at

http://www.iccwbo.org/court/english/arbitration/pdf_documents/rules/rule s_arb_english.pdf [hereinafter ICC

Rules] (requiring arbitrators to be ―independent‖ and sign a statement of independence) 20

UNCITRAL Arbitration Rules

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Judges derive their jurisdiction and authority from the state; whereas arbitrators derive their

jurisdiction from parties. Nevertheless, the state indirectly sanctions arbitration to the extent

national legislation or judicial decisions permit arbitration. These differences are minor and

should not affect an adjudicator‘s capacity and willingness to render impartial decisions.

ADMINISTRATIVE FUNCTION

In the process of making decisions, judges and arbitrators are being increasingly called upon

to manage the process fairly and efficiently. The procedures through which this

administration occurs are certainly different. Judges must adhere to rigid rules of civil

procedure and evidence; whereas, subject to party agreement, arbitrators have discretion to

articulate the applicable procedures. Judges often have a great deal of discretion to engage in

case management; and typically these decisions are only reversed upon a showing of an abuse

of discretion. Arbitrators are held to a similar evaluation; should they fail to abide by the

parties‘ agreement in conducting the proceedings or exceed their discretion, the award can be

set aside or denied enforcement.21

While there are critical distinctions between arbitrators and

judges, the differences are not so broad as to prevent arbitrators from evaluating the merits in

a neutral manner and managing the process impartially.

THE 176th

LAW COMMISSION OF INDIA REPORT

The Report stated that in several cases, Indian parties have been deprived of a right to seek

prompt-interim relief under §9 of the Act from the Court before the commencement of

arbitration proceedings and after the award, in international arbitration awards, or after the

passing of such awards where the seat of arbitration is outside India because §2(2) confines

Part I of the Act to arbitrations in India.

The Report further stated that, in fact all countries which have adopted the UNCITRAL

Model Law, apply Articles 8, 9, 35 and 36 of the Model Law to international arbitration

where the seat of arbitration is outside that country. This was not noticed when the 1996 Act

was passed.

The commission after reiterating the exception provided to Article 8, 9, 35 and 36 in cases of

place of arbitration being outside the country stated that, this aspect somehow escaped

21

Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T

2517, 330 U.N.T.S. 38, art. V(2), available at http://www.uncitral.org/english/texts/arbitration/NY-conv.htm

[hereinafter New York Convention] (establishing the grounds for refusing enforcement of arbitratal awards)

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attention, when §2(2) was drafted in the 1996 Act. That section confined Part I (including §§

8, 9, 35 and 36) only to arbitrations where the place of arbitration is in India.

The commission the recommended that, there has been an absolute unanimity that this

deficiency in §2 (2) has to be immediately remedied by making §9 (and other provisions like

§§8, 35 and 36) applicable to international arbitrations where the place of arbitration is

outside India or where the place of arbitration is not specified in the arbitration agreement.

The Commission concluded that, the legal position is as follows. Whether the arbitration is

international in nature or is a purely domestic arbitration between Indian nationals, where

Part I applies, the place of arbitration must be in India and there is no question of the parties

or the institution to which they have referred the issue of the place of arbitration under §2(6),

taking a decision that the place of arbitration will be outside India.

The above mentioned Report of Law Commission of India makes it clear that Part I of the

Act is applicable to arbitrations held in India and not outside India.

Bhatia International v Bulk Trading22

Barely 6 months after Law Commission of India submitted its 176th Report in September

2001 a 3 judge bench of SC in 2002 in Bhatia International v Bulk Trading, laid down that:

In cases of international commercial arbitrations held out of India provisions of Part I would

apply unless the parties by agreement express or implied, exclude all or any of its provisions.

Reasons for Non-Applicability of Part I to Arbitration Being Held Outside India23

It is submitted with respect that the above decision that Part I of the Act applies also to

arbitration taking place outside India, cannot be accepted as correct. In the first place, sub-§

(2) of §2 of the Act clearly provides that Part I shall apply where place of arbitration is in

India.

The fact that, Part I of the Act extends to Jammu & Kashmir only, in so far relates to

international commercial arbitration, does not go to show that Part I is applicable to

arbitrations taking place outside India.

Sub-§ (5) of §2 of the Act no doubt provides that Part I shall apply to all arbitrations and to

all proceedings relating thereto; which only means that Part I shall apply whether arbitration

22

(2002)4 SCC 105 23

http://legalservicesindia.com/article/print.php?art_id=1075

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is commercial or non commercial, ad-hoc or institutional, consensual or statutory, domestic

or international; but it does not go on further to state that Part I shall apply to where the place

of arbitration taking place anywhere, whether in India or not. The provision of sub-§5 is

controlled and governed by sub-§2 stating that Part I shall apply where the place of

arbitration is in India.

It is submitted that the words of sub-§2 of §2 are so plain, unambiguous and positive that the

interpretation placed by the bench attracts criticism of its being a piece of judicial legislation.

When a positive statement is made, it is not necessary to further make a negative statement or

to add the word ―only‖.

Taking example from the existing legislations in India:

In constitution of India if Article 19 states that:

Article 19 (1) All citizens shall have the right -

a) to freedom of speech and expression;

b) to assemble peaceably and without arms;

c) to form associations or unions;

d) to move freely throughout the territory of India;

e) to reside and settle in any part of the territory of India; 1[and]

g) to practise any profession, or to carry on any occupation, trade or business.

Going by interpretation given by Supreme Court [SC] to sub-§2 of §2, since it does not

specifically state that it is a right available only to citizens of India, so it is available even to

non citizens or to foreigners.

Going further since it does not specifically lay down that the state should not impose fetters

on the fundamental right of freedom, so the state can go ahead and impose any kind of

restriction on these fundamental rights.

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CONCLUSION

The success of arbitration in the years to come resides, to some extent, in the conduct of

arbitrators. The more independent and impartial arbitrators are, the more trustworthy

arbitration will be.

This applies to all forms of arbitration, whether commercial, trade-related or investment

arbitration. The nature of trade and investment arbitration, the arbitral bodies that administer

them are likely to demand strict standards of arbitrator conduct.

The reason disclosure of conflicts of interest, even interests that might give rise to an

apprehension of bias, is required. Recent cases show that the failure to disclose conflicts can

form the basis for a challenge to the appointment and open the door to a motion to set aside

the award. However, deciding whether an interest or relationship could give rise to an

apprehension of bias is a difficult issue for every arbitrator.

In arbitration involving sovereign States and governmental entities, the need for a clearly

unbiased panel is paramount. For this reason, the nationality of the arbitrator, if the same as a

party is enough to disqualify the arbitrator from service because of, it is presumed lack of

independence.

The difficulty is in not removing qualified arbitrators from the pool by overly onerous

disclosure requirements. Even so, it seems better to err on the side of over-disclosure to

maintain the integrity of these highly effective forms of arbitration.

The body involved i.e. parties, arbitrators and institutions should appreciate the respect to be

gained by engaging in independent decision-making. They should therefore articulate clearly

what conduct is expected of international arbitrators and provide incentives to avoid

inappropriate conduct. In this way, we can further arbitration‘s ultimate justice-promoting

objectives and promote the integrity of a dispute resolution mechanism with critical

international implications.

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AUTHOR’S PROFILE:

Name: Animesh Kumar

Course: B.A;LL.B.(Hons.)

Year/Semester of Course: VII Semester

Institution/College: Amity Law School

University: Amity University U.P; Lucknow Campus

E-Mail: adv.animeshkumar@gmail.com

Contact: +91-9336853484; 8896112144