ROLE OF ARBITRATORS

Gunjan Madaan- A final year law student, BALLB (H) at KR MANGALAM UNIVERSITY has authored this article interning virtually at LeDroit India.

Abstract-

Arbitration is an official, voluntary dispute resolution process in which parties decide to present their disagreement to a neutral third party (an arbitrator) for a binding decision, thereby providing a faster, cheaper, and less complex alternative to litigation. Arbitration is a way of settling disputes outside of the traditional court system in which the parties agree that their case will be heard and determined by one or more arbitrators rather than a judge or jury. 

An arbitrator is an important figure in alternative dispute resolution because they operate as a neutral third party to resolve disagreements outside of regular judicial systems. Their major role is to resolve disputes in a fair, unbiased, and efficient manner by analysing evidence, interpreting contractual or legal rules, and rendering binding or non-binding rulings.  Arbitrators must have good analytical, legal, and communication abilities in order to conduct fair hearings and issue well-reasoned decisions. They adhere to established arbitration procedures, maintain procedural fairness, and remain unaffected by external influences. Their function varies depending on the arbitration agreement, applicable laws, and institutional rules that govern the proceedings.

Keywords– 

1. Arbitration
2. Arbitral awards
3. Neutral third party 
4. Impartiality 
5. Binding or non-binding decision
6. Decision-making
7. Resolving disputes

Introduction- 

An arbitrator is a neutral third party who settles disputes between two or more parties outside of the courts. Their role is to evaluate both sides, examine evidence, and make a binding or non-binding decision based on the arguments and any applicable laws or contractual agreements. Arbitrators play an important role in alternative dispute resolution (ADR) by holding fair and unbiased hearings, analysing evidence, and issuing conclusions known as arbitral awards. Arbitration is widely utilized in business, labour, construction, and international disputes, providing a faster, more secretive, and cost-effective alternative to litigation. 

Arbitrators can be appointed by mutual agreement of the parties in dispute, through arbitration organizations, or under contractual stipulations. They must be knowledgeable about relevant legislation, industry practices, and conflict resolution approaches. Their responsibilities include interpreting contracts, using legal principles, and ensuring procedural fairness while being independent and objective. 

Arbitration might be binding or non-binding, depending on the agreement reached between the parties. In binding arbitration, the arbitrator’s judgment is final and legally enforceable, and it is frequently recognized internationally through treaties such as the New York Convention. Arbitrators help decrease the pressure on judicial systems while fostering speedy and peaceful conflict resolution. Their decisions help to maintain commercial connections and ensure legal compliance across diverse industries.

Appointment of an Arbitrator- (Section 10 & 11)

Section- 10: – Number of Arbitrators- 

Arbitrator is a professional who helps the parties in disputes to arrive at the final harmonious agreement or settlement. Section 10 of this act provides that parties have the power to decide the number of arbitrators, but such members should not be in even numbers. 

Failing the determination referred to sub-section (1), the arbitral tribunal shall consist of a sole arbitrator. 

Section- 11: – Appointment of Arbitrators- 

Section 11 of Arbitration and Conciliation Act, 1996 deals with the provision of appointment of arbitrators is an arbitration settlement. 

1. The nationality of an arbitrator is not essential unless the parties otherwise agreed upon it. 
2. The parties can also form an agreement on procedure for appointing arbitrators. 
3. In case of failure to reach an agreement on procedure of appointment, clause (3) prescribes following procedure for appointing three arbitrators: – 

1. Each party appoints an arbitrator.
2. The two arbitrators jointly appoint the third arbitrator, who acts as a presiding arbitrator. 

4. Supreme Court and High Court have power to designate arbitral institutions. 
5. Clause 4 states that when the procedure mentioned in clause 3 is applied, there are two conditions, which are-

1. Each party must appoint an arbitrator within 30 days of receiving request from other party to do so.
2. The two arbitrators must reach an agreement on appointing the third arbitrator within 30 days from the date of appointment. 

In case of failure of either of two condition the appointment shall be made by arbitration institution designated by Supreme court and High Court upon the application or request of party. 

6. Clause 5 provides that in case of failure to reach an agreement on procedure of appointment, parties must agree on appointing a sole arbitrator within 30 days of receipt of request. 

If there is no appointment within 30 days, then the appointment shall be made by arbitration institution designated by Supreme Court and High court upon the application or request of party. 

7. Clause 6 states that where an agreement on appointment procedure has been made by parties, if, 

1. A party fails to act as a prescribed by procedure,
2. The parties or appointed arbitrators fail to reach an agreement as prescribed by procedure,
3. The person or institution entrusted with a function by procedure fails to perform it, then parties may perform the alternative steps provided by agreement, if any, 

8. Designated by Supreme court or High Court shall not be treated as delegation of judicial power. 
9. When the decision is given by arbitral institution, it should be done while considering as following factors-

1. Qualifications required for an arbitrator as per the agreement of parties.
2. Contents of disclosure and other considerations for appointing an independent and impartial arbitrator. 

10. In cases where the parties belong to multiple nationals and there is need to appoint a sole arbitrator or third arbitrator, the arbitral institution designated by Supreme court or High Court may appoint an arbitrator of nationality other than nationalities of parties. 
11. If there has been more than one request or application made to several arbitral institution during application of any of provisions; arbitral institution receiving the first request alone will be competent.
12. In matters concerning international commercial arbitration, only arbitral institution of Supreme court gets involved and not those of High court. 
13. An application or request for appointment of arbitrators shall be disposed of soon by arbitral institution. It shall be disposed off within 30 days from the date of service of notice on opposite party. 
14. When there is an involvement of High Court, it is always the High court within whose local limits the principal civil court of district id situated. 
15. The arbitral institution shall determine the fee and manner of its payment to arbitral tribunal after considering the rates prescribed in Fourth schedule of act. 

Role of an Arbitrator- 

1. Conducting the arbitration process- One of the key responsibilities of an arbitrator is to oversee and manage the arbitration process. This includes establishing procedural norms and schedules, specifying the scope of the arbitration, and ensuring that all parties are given an equal opportunity to submit their case. They also ensure that the process is consistent with arbitration laws or agreements between the parties.
2. Ensuring the procedural fairness- An arbitrator’s responsibility is to ensure procedural fairness by presiding over the procedure in an impartial manner. They foster an equitable atmosphere by letting both parties to present their cases, evidence, and arguments free of bias or prejudice. The arbitrator guarantees that all participants receive equitable treatment while following to the norms of due process, natural justice, and transparency.
3. Maintaining confidentiality- As a neutral third party, an arbitrator guarantees that all parties present safeguard the sensitive information they provide and refrain from providing it to unauthorized individuals. This confidentiality fosters confidence, enabling all parties to openly share their problems, and promotes a fair and efficient conclusion. An arbitrator tries to protect the integrity of the arbitration procedure by following to strict confidentiality requirements.
4. Issuing of award – The arbitrator has the authority to issue an arbitration award within 12 months after the conclusion of the proceedings. If the parties mutually determine or agree, the time frame for passing the award may be extended to a maximum of six months. 
5. Making a decision- After examining every component, the arbitrator issues a decision, which is typically legally binding, meaning the parties must adhere with it. They issue an arbitral award, which is usually final and legally enforceable, equivalent to a court verdict.
6. Neutrality and Impartiality- The neutrality and impartiality of an arbitrator are essential for establishing a fair and just arbitration procedure. The arbitrator cannot favour any party, regardless of their background, financial situation, or legal representation. Arbitrators must not have any personal, financial, or professional connections with any party that could influence their decision. All parties must be given an equal opportunity to present their position, respond to arguments, and produce evidence.
7. Facilitating Negotiation- An arbitrator can play a key role in promoting negotiation between opposing parties, even though their primary function is to render a binding decision. Before making a decision, an arbitrator could motivate parties to consider choices for settlement. They can help you establish an agreement and propose alternatives. The arbitrator guarantees that conversations remain courteous, effective, and focused on resolving the disagreement. They establish a structured framework for 

discussions, ensuring that all parties have an equal say in the dispute

8. Reviewing evidence and Arguments– Arbitrators analyse documents, witness testimony, opinions from experts, and any other relevant information submitted by the parties. They determine the admissibility and relevance of the evidence. Both parties must be given a fair chance to put forward their points of view and supporting evidence. Arbitrators ensures that no party is unfairly prohibited from submitting relevant materials.
9. Applying relevant laws and rules- Arbitrators examine the terms and conditions of contracts or agreement that are central to the dispute. They decide how contractual agreements should be implemented based on the parties’ intentions and relevant legal standards. They identify and apply applicable national or international laws controlling the dispute, based on the arbitration agreement.
   This could involve contract law, business law, labour law, or international trade restrictions.
10. Power to proceed to ex-parte- If a party failed to show compliance with the provisions of the act, the arbitrator has the authority to proceed ex parte, which means in favor of one party, in an arbitration action. Section 25 of the Act deals with the party’s failure to submit the statement of claims and defences.
11. To determine the time, date and place of arbitration- According to sections 20 and 21 of the Arbitration and Conciliation Act of 1996, the parties to the arbitration are free to designate the day and place for arbitration, which will be chosen by the mutual consent of the parties. If they are unable to designate a location for the arbitration, the arbitrator must do so. 

Principles to be followed by and Arbitrator- 

In accordance with the notion of natural justice: –

Natural justice principles serve as the foundation for arbitral proceedings, giving them legitimacy and precedence as an unbiased, equitable, and just method of resolving disputes. Natural justice principles are important at every stage, from selecting an arbitrator for arbitral procedures to treating parties fairly.
The ‘Jus Natural’ in Roman law served as the model for the natural justice idea. In its simplest form, the natural justice principle means that reasonable and well-reasoned decision-making processes are followed when it comes to an issue in question. It only states that the rights of citizens must be protected from irregularities, arbitrariness, and injustice, and that justice must be equitable, just, fair, and impartial.

In essence, natural justice comprises of three rules.

1. The primary one is the “HEARING RULE”, which provides that every person or party affected by the panel of expert members’ decision should be given a fair opportunity to present his point of view and defend himself.
2. Second, the “BIAS RULE” expresses the general principle that an expert panel should be free of bias when making decisions. The decision should be made in a free and fair manner that upholds the rule of natural justice.
3. And thirdly, “REASONED DECISION” which states that order, decision or judgement of the court given by the presiding authorities with a valid and reasonable ground.

Rules of Natural Justice: – 

• NEMO JUDEX IN CAUSA SUA
• AUDI ALTERAM PARTEM
• REASONED DECISION

Nemo Judex In Causa Sua- 

“No one should be a judge in his own case” since it leads to biases. Bias indicates an act that leads to unjust action whether in a conscious or unconscious phase regarding the party or a specific case. Therefore, the necessity of this rule is to make the judge impartial, and judgement based on evidence recorded as per the case.

Audi Alteram Partem- 

It simply includes 3 Latin words basically means that no person can be condemned or punished by the court having a fair opportunity of being heard. the literal meaning of this rule is that both the parties should be given a fair chance to present themselves with their relevant points and a fair trial should be conducted.

Components- 

• Issuance of notice
• Right to present cases and evidence
• Right to cross examination
• Right of legal representatives

Reasoned Decision- 

Basically, it relies on three reasons: –

1. The aggrieved party can demonstrate before the appellate and revisional courts what caused the authority to reject it.
2. It is a satisfactory part for the party against which the decision is taken.
3. The obligation to record reasons serves as a barrier against arbitrary action by judicial power vested in the administrative authority.

Case laws- 

Shri Ram Ram Niranjan vs. Union of India AIR 2001-

The contract for arbitration required both parties to choose their respective arbitrators.
The other side postponed nominating its arbitrator. Thereupon,
The opposing party’s nominee-arbitrator quickly began conducting the arbitration process without waiting for the other party.
He continued ex parte on the same date, recording witness statements and hearing arguments. 

The arbitrator’s proceedings violated natural justice standards, leading to the award being set aside.

Anup tech Equipments Private Ltd. vs M/S. Ganpati Co-Op. Housing Society, 1999

In this case, the court ruled that if an arbitrator is chosen and does not meet the standards or possesses the qualifications agreed upon by the parties at the time of the arbitration agreement, his appointment is unlawful ab initio. In fact, any order issued by the arbitrator would be deemed revoked. 

Conclusion-

Arbitrators play a critical role in settling disputes in a quick, fair, and impartial manner. As an impartial third party, an arbitrator guarantees that disputes are resolved using legal principles, contractual agreements, and equitable considerations, resulting in an organized and enforceable conclusion outside of regular judicial systems. Their rulings help to preserve commercial connections, preserve justice, and alleviate the pressure on court institutions. Finally, an arbitrator plays an important role in building faith in alternative dispute resolution systems by assuring fairness and promoting quick and cost-effective conflict settlement.

References- 

• Indeed- https://in.indeed.com/career-advice/finding-a-job/roles-of-an-arbitrator
• I Pleaders Blog- https://blog.ipleaders.in/powers-and-functions-of-an-arbitrator-under-arbitration-and-conciliation-act-1996/
• Shri Ram Ram Niranjan vs. Union of India AIR 2001- https://lc2.du.ac.in/DATA/Role%20of%20Arbitrator.pdf
• Anup tech Equipments Private Ltd. vs M/S. Ganpati Co-Op. Housing Society, 1999- https://indiankanoon.org/doc/1805967/