What’s in a name? Revisiting the Indian arbitrator dilemma

In recent times, arbitration has been subject to growing scepticism. Many stakeholders are re-evaluating its viability as a commercial dispute resolution mechanism in India, with some opting to either amend their standard dispute resolution clauses in favour of mediation or reverting to traditional litigation.

Eminent practitioners and judges alike, while discussing the arbitration question in India, have largely attributed this shift to the lack of competent and experienced arbitrators.

One of the primary advantages of arbitration is that parties have the right to appoint their own judges. This exercise of party autonomy has often been termed to be critical to the success of the arbitral process. The well-known expression, “an arbitration is only as good as its arbitrator” captures this idea perfectly. Unlike litigation, which has a multi-tier appellate mechanism, arbitration offers parties a single bite at the cherry, making the appointment of the arbitral tribunal all the more critical.

Despite legislative efforts to institutionalise arbitral appointments, ad-hoc arbitration remains the norm in India. In cases where arbitration agreements are silent on an appointment procedure, parties are constrained to approach courts for the constitution of the tribunal. This court-led process, however, is often impaired by procedural delays, excessive judicial scrutiny and deficiencies in the quality of appointments.

These systemic shortcomings raise important questions about the role of courts in the appointment process. In this piece, we explore the legal and practical limitations of court-led appointments and consider whether there is a need to re-visualise these appointments under the existing statutory framework. We also reflect on whether these shortcomings highlight broader deficiencies in India’s arbitration landscape. To this end, we propose targeted reforms to strengthen the appointment mechanism and enhance the credibility and efficiency of arbitration in India.

In July 2024, the Supreme Court, in SBI General Insurance examined the scope of judicial intervention under Section 11(6) of the Arbitration and Conciliation Act (ACA), 1996. The Supreme Court reaffirmed that the powers exercised by a referral court at the appointment stage are administrative in nature. Therefore, as the law currently stands, when parties are unable to agree on the appointment of an arbitrator and approach a court under Section 11 ACA, the referral court’s role is confined to verifying the existence of an arbitration agreement and facilitating the appointment of an arbitrator.

However, such interpretation runs the risk of conflating two distinct functions within the same power. First, the determination of the existence of an arbitration agreement and, second, the nomination of a proposed arbitrator. While determining the existence of an arbitration agreement may be administrative in nature, nominating an arbitrator involves a degree of subjective assessment of the tribunal’s ability to adjudicate upon the dispute at hand. By treating both these functions as administrative, courts have effectively reduced the nomination process to a rubber-stamp exercise, undermining the very purpose of a tailored arbitral process. 

This issue is further compounded in practice. Courts often default to nominating arbitrators from a limited pool of the ‘big names’, typically comprising retired judges and senior advocates. Frequently, these appointments are made with minimal deliberation or effort to assess the quality of the arbitrator and as a matter of convenience, even resort to nominating familiar candidates who happen to be in the presence of court at the time.

This gives rise to three key concerns:

a. First, the nature of such appointments deprives counsel of a meaningful opportunity to deliberate upon or object to the selection of the proposed arbitrator;

b. Second, the courts’ inclination to resort to the high-profile names rarely accounts for the suitability of the nominee for the proposed arbitration. 

Notably, the ACA, similar to other foreign legislation, does not require courts to qualitatively assess the appointment in a strict sense. Section 11(8) ACA requires courts to have due regard to the qualifications of the arbitrator provided under the arbitration agreement, and any other conditions to ensure their independence and impartiality. However, these considerations may still fall short of what the arbitration demands in substance. Thus, an arbitrator who is independent and impartial, could yet remain unsuitable for the purposes of the dispute; and 

c. Third, in terms of enforceability of the arbitral award, poor appointments directly impact the quality of the award, making it susceptible to successful set-aside actions. When awards are not reasoned or are unintelligible, courts tend to remand matters back to the tribunal for reconsideration, or order de novo arbitration, all of which compromise the time-sensitive nature of arbitration. 

Arbitrators must possess a varied set of qualities tailored to the nature and complexity of each dispute. An effective arbitral tribunal is required to uphold principles of due process and judicial fairness, respect the contours of arbitral jurisdiction and, often, bring domain-specific expertise to the table. Therefore, tribunal selection must be a practical decision, and not one of familiarity or convenience.

Lord Hacking, a pioneer of English arbitration law, aptly stated:

“In choosing the arbitrator the crucial test should go to the quality of the arbitral candidate as a good arbitrator. The starting point, therefore, should be to match the proposed arbitrator to the proposed arbitration.”

Appointing authorities, whether courts or arbitral institutions, should thus adopt a ‘suitability test’ – a qualitative assessment of whether the proposed arbitrator possesses the requisite compatibility to the proposed arbitration. This evaluation would not entail a merits review of the dispute, but rather an assessment of the proposed arbitrators’ ability to handle the dispute in an efficient and decisive manner. 

What would the ‘suitability test’ look like? 

Leading arbitral institutions have already recognised this  approach in the context of arbitral appointments. For example, the London Court of International Arbitration (LCIA) Rules provide for a suitability requirement, which empowers the institution to appoint or refuse the appointment of an arbitrator if justifiable doubts exist as to his suitability. In exercising this discretion, LCIA typically considers various factors, including the legal complexity of the dispute, the nature of relief sought and the value of claims involved. Similarly, the International Commercial Court (ICC) Rules provide for appointment of a suitable candidate, if parties are unable to come to an agreement or request the institution to do so.

If Indian courts were to adopt similar suitability criteria, it could be implemented via a centralised database of suitable arbitrators. Courts could create and maintain a centralised repository containing the names of all enrolled candidates, capturing details such as the number of arbitration conducted, the nature and monetary value of such disputes, the average duration to conclude proceedings, records of challenges to arbitral awards and the outcomes of these challenges. Following a preliminary evaluation based on the database, the courts could shortlist three or four candidates whose profiles are aligned with the requirements of the dispute. The parties would then be given a short timeframe in which to accept or reject the suggested appointments. This consultative process would preserve the principle of party autonomy while boosting user confidence in the appointment process.

International best practices have increasingly shifted towards institutional arbitration, primarily to streamline the appointment of arbitrators and reduce court involvement. The UNCITRAL Model Law, which forms the basis of the ACA, allows the enacting states to permit courts or "any other authority competent to perform" the function of appointment. For instance, Singapore International Arbitration Centre (SIAC) is the default appointing authority for arbitrators under the International Arbitration Act, 1994. Similarly, under the Arbitration Ordinance 2011, the Hong Kong International Arbitration Centre (HKIAC) is designated as the appointing authority for arbitrators where the parties are unable to come to an agreement on such appointment.

In 2017, the Srikrishna Committee, which was constituted to review the institutionalisation of arbitration in India, recommended the adoption of these models to minimise delays and judicial overreach. 

India’s efforts to institutionalise the appointment process have been marked by inconsistency. Section 11(6B), introduced vide the 2015 amendment to the ACA, clarified that designating a person or institution would not constitute a delegation of judicial power by the courts. This was intended to promote institutional arbitration while preserving judicial authority. The 2019 amendment proposed further strengthening this shift by fully institutionalising arbitral appointments. However, the judicial oscillation regarding the nature of the power exercised by referral courts undermined India’s ability to completely transition into the institutionalised model. Consequently, the court’s power to delegate under Section 11(6B) was narrowly interpreted, excluding the power to determine the existence of the arbitration agreement. In effect, this did very little to minimise court intervention and overreach. 

Given the emerging judicial consensus on this issue,  Section 11(6B) ACA must be read expansively to permit courts to delegate both functions - the determination of the existence of an  arbitration agreement and the nomination of arbitrators - to designated arbitral institutions. Adopting this interpretation would uphold the spirit of the provision and lay the foundation for India to progressively transition toward a fully institutionalised model.

The central concern is that the prevailing statutory framework, and its interpretation as a purely administrative function, has undermined the importance of a competent tribunal in the arbitral process. A reconsideration of Section 11 ACA to include a quality threshold within the statutory framework is necessary. The ACA strives to offer disputing parties with a credible alternative to litigation, one that culminates in finality and bindingness. When appointments are made casually or without proper evaluation, the result is often a breakdown in this promise. The repercussions of these poor appointments, ranging from delays to unenforceability, are too significant to ignore.

This systemic issue contributes to a broader erosion of trust in arbitration. For arbitration to remain a credible alternative to litigation, the integrity and capability of its decision-makers must be prioritised. Strengthening the appointment process is essential to enhance the quality of arbitral awards, improve enforcement outcomes and uphold the efficiency that arbitration promises. Finally, there is an urgent need to democratise the arbitration space in India. Expanding the pool of qualified arbitrators beyond a limited set of familiar names will foster inclusivity and contribute meaningfully to the long-term credibility of the Indian arbitration landscape.

Athman Khilji is an Advocate practicing in the Madras High Court.

Navami Krishnamurthy is a Research Fellow (Founder's Office) at Vidhi.