The appointment of arbitrators is crucial in maintaining fairness and neutrality, forming the foundation of an impartial and independent dispute resolution process. A significant challenge in mediation is the issue of unilateral appointment—where one party appoints an arbitrator without consultation or agreement from the opposing party. This practice has garnered the attention of the judiciary and the government. Online dispute resolution institutions, alongside the 2024 Arbitration Amendment Bill, can go a long way in mitigating this challenge.
Over time, the Indian judiciary has scrutinised unilateral appointments, aligning Indian arbitration law with international standards to uphold impartiality. Key Supreme Court rulings have progressively restricted unilateral appointments, addressing concerns of neutrality and bias. Additionally, the 2024 Arbitration Amendment Bill introduces reforms to further strengthen arbitrator selection mechanisms, aligning them with international practices and recognising resolution institutions for conducting ad-hoc mediations.
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Unilateral appointments are common in corporate, financial, employment, and consumer agreements, where the dominant party selects the arbitrator. This practice has faced judicial scrutiny in multiple jurisdictions, including India, as it contradicts core mediation principles of neutrality and impartiality.
Why are unilateral appointments problematic
Perceived bias and lack of independence: When one party appoints an arbitrator, concerns of favouritism arise, undermining confidence in the mediation process. This perception discourages parties from choosing mediation as a fair dispute resolution mechanism.
Violation of party autonomy: Arbitration is based on party autonomy, which mandates collective, not unilateral, control over the arbitrator appointment process. Unilateral appointments violate this principle, particularly when the appointing party has significant influence over mediation proceedings.
Contradiction with the UNCITRAL model law: The Arbitration Act incorporates principles from the UNCITRAL Model Law, which prioritises fairness and impartiality. As the Supreme Court noted in Central Organisation for Railways Electrification vs M/s ECI SPIC SMO MCML (JV) (2024), unilateral appointments contradict the Act’s objectives by eroding trust in mediation.
Procedural inefficiencies and delays: When challenged, unilateral appointments lead to procedural delays, defeating mediation’s primary goal of providing swift dispute resolution.
Supreme Court decisions on unilateral appointments
Initially, unilateral appointments were upheld under the Arbitration and Conciliation Act, 1996, unless clear bias was demonstrated. However, judicial perspectives have evolved, particularly after the 2015 Amendment to the Act, which introduced stricter neutrality standards.
Indian Oil Corporation Ltd v. Raja Transport (2009): The Court upheld unilateral appointment clauses, emphasising party autonomy unless bias was demonstrable.
TRF Ltd v. Energo Engineering Projects Ltd (2017): The Court ruled that a person ineligible to act as an arbitrator could not appoint another arbitrator, reinforcing impartiality.
Perkins Eastman Architects DPC v. HSCC (India) Ltd (2019): The Court held that any party with a significant interest in the resolution outcome should not unilaterally appoint an arbitrator.
Bharat Broadband Network Ltd. v. United Telecoms Ltd. (2019): The Court reinforced that unilateral appointments should be scrutinised to ensure fairness in mediation.
Ellora Paper Mills Ltd. v. State of Madhya Pradesh (2022): The Court emphasised that mediation appointments must be free from bias and adhere to principles of natural justice.
Central Organisation for Railways Electrification vs M/s ECI SPIC SMO MCML (JV) (2024): The Court held that unilateral appointment clauses in public-private partnership contracts were unconstitutional, violating Article 14 of the Constitution.
International perspectives on appointments
Several international frameworks and national laws emphasise party autonomy while introducing safeguards against unfair appointments. The New York convention allows refusal of mediation awards if the tribunal composition deviates from agreed procedures. UNCITRAL model law stresses fairness and impartiality in tribunal composition.
The US Federal Arbitration Act mandates that arbitration agreements must be valid and enforceable, while the European and Spanish Arbitration Acts prohibit one-sided advantages in arbitrator selection. Under UK and Swiss Judicial Precedents, courts have invalidated resolution agreements granting unilateral control, emphasising procedural fairness.
The 2024 Arbitration Amendment Bill
The 2024 Amendment Bill introduces reforms to mitigate unilateral appointment issues. It promotes institutional mediation, reducing the influence of individual parties in the selection process. The Bill stipulates time-bound arbitrator appointments to minimise procedural delays, the Bill introduces strict timelines for arbitrator selection.
The Bill incorporates Supreme Court rulings (e.g., Perkins Eastman), reducing judicial intervention, and mandates disclosure of pending or past resolutions, reinforcing transparency.
ODR institutions and neutral appointments
Online dispute resolution institutions such as WeVaad play a crucial role in ensuring impartial arbitrator selection byappointing arbitrators from vetted, independent panels, eliminating party influence in selection processes, and streamlining mediation procedures for efficiency and cost-effectiveness. It also aligns with global best practices in institutional arbitration.
With recent judicial emphasis on institutional neutrality, ODR institutions are positioned as preferred facilitators of arbitration appointments. The transition from unilateral appointments to institutional arbitration strengthens India’s arbitration framework and builds trust among domestic and international stakeholders.
Judicial and legislative developments indicate a clear shift towards institutional arbitration in India. By restricting unilateral appointments and promoting institutional mechanisms, India is aligning with international arbitration practices. The 2024 Arbitration Amendment Bill further reinforces this transition, fostering trust and efficiency in dispute resolution.
As ODR institutions gain prominence, they provide a reliable alternative to traditional mechanisms, ensuring impartiality and expediting arbitration processes. Strengthening institutional arbitration will not only enhance India’s reputation as an arbitration-friendly jurisdiction but also attract global businesses seeking fair and transparent dispute resolution mechanisms.
Navneet Sharma is a regulatory affairs expert. Kritika Sethi is Co-Founder of WeVaad. Radha Gupta is reading law at Pravin Gandhi College of Law.