This article is written by Abhyuday Agarwal, COO, iPleaders, with substantial inputs from Arjun Natarajan, a commercial lawyer.
Being an arbitrator can be very rewarding, in every way possible.
The idea of conducting arbitrations in swanky hotel conference rooms and charging parties a handsome remuneration is very tempting. Your career is definitely secured if you can get into that position.
However, till date, in India, ad hoc arbitration is the most often used method, that is, parties do not specify an arbitral institution such as International Chamber of Commerce or Singapore International Arbitration Centre, etc. Hence, when a contract goes into dispute, it is usually retired judges of High Courts and Supreme Courts who are appointed as arbitrators when a party invokes an arbitration clause and files a Section 11 application under Arbitration and Conciliation Act, 1996 for appointment of arbitrators.
The question now is – apart from retired judges, can others (especially lawyers) be appointed as arbitrators? If yes, how?
Insights from the Arbitration and Conciliation Act
Legally, it is possible, as there are no pre-qualifications for appointment of an arbitrator under the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator, but only disqualifications in the Fifth and Seventh schedule based on which an arbitrator’s appointment can be challenged on the basis of facts impacting his or her independence or impartiality, or grounds for ineligibility to act as an arbitrator.
However, there is something interesting here. One of the grounds specified in the Fifth Schedule (inserted through the 2015 amendment) states as follows:
The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.
Commercially, there was a practice prevalent amongst large companies which had frequent arbitrations to appoint ‘stock arbitrators’, that is they would appoint the same retired High Court or Supreme Court judge for all arbitrations (subject to their availability). Hence, earlier the opportunity was largely restricted to retired judges or a few specific insiders usually with gray hair.
However, through this insertion in 2015, opportunity for people who are not retired judges to act as arbitrators has opened up and expanded significantly, as parties cannot appoint the same arbitrators repeatedly beyond twice in three years, either for themselves or even their subsidiaries. In India, large companies such as Tata and Reliance have more than 200 subsidiaries. The section will apply and exclude an arbitrator from being appointed in any of the group companies more than twice, so you can imagine the huge impact this has.
This has taken effect only in 2015, so this part of the ecosystem is still evolving, and there is an opportunity for you to consider jumping into this area.
An Arbitration Council of India, a regulatory body is expected to be set up as a statutory regulatory body to govern recognition, qualification, and disciplinary issues related to arbitrators and arbitration institutes. This will also be a game-changer, providing more opportunities to new comers.
Apart from retired judges, who is most likely to be appointed as an arbitrator?
Some disputes require the experience and finesse of a retired judge, but all disputes do not require that. Expertise of a subject area (e.g. power sector) is relevant but in matters which are of a smaller scale, apart from retired judges, the following categories of people are most likely to be appointed as arbitrators:
- Senior advocates – Appointing a senior advocate is the immediate next choice if for some reason a retired judge is unavailable or his or her fees unaffordable.
- Well recognised young lawyers who have some experience in that subject area – If the dispute is not very complicated and you are known by other professionals to be highly skilled and known for your professional integrity, you may be referred for appointment as an arbitrator from time to time, for disputes where the stakes are not extremely high or where the points of law involved are not extremely complex.
- Technical experts (may be non lawyers or non-practising lawyers) – This refers to people who have a technical experience of working in the field and understand how to pass an award – there is a need for such arbitrators but the ecosystem for their training is missing. Many lawyers consider this to be the missing link in ensuring that arbitration reaches its full potential and to improve the overall state of contract enforcement and ease of doing business in India.
The following criteria are relevant to determine who gets appointed as an arbitrator:
- How contested are the points of law which are involved in the dispute?
- What are the stakes that are involved? If thousands of crores are involved parties will want to appoint a retired Supreme Court judge and not a lawyer with 10 – 15 years experience. On the other hand, in a matter involving 10-20 lakhs claim or even in a 2 crore dispute if there is no significant contested point of contract law and is a straight case, parties can opt for a young lawyer.
What are the skills necessary to be appointed as an arbitrator?
Fundamentally, a lawyer who has worked experience in litigation, on civil, commercial and contractual matters and representing parties in arbitrations, and someone who has an idea of both trial and appellate court work (with more focus on trial court work), is ideally suited to be appointed as an arbitrator.
The purpose of trial court experience is that arbitration actually involves an ‘original side’ dispute, which comes to an arbitrator instead of a civil court. Hence, the initial phases involve a trial process. Although the Civil Procedure Code and Evidence Act do not apply, the broad procedures followed are the same. The arbitrator may specifically relax technical rigour in a few situations, but you will have stages for evidence, proving of documents, examination in chief and cross-examination.
For example, if parties say they want to provide notarized photocopies because the original is not easily obtainable, the arbitrator may relax the requirement to provide an original. Similarly, certain rules in Civil Procedure Code may not apply. For example, in a trial, fraud (in a contract) must be specifically pleaded, but in an arbitration even if it is not pleaded with clarity but it becomes clear during the evidence stage, the arbitrator can take a decision on it.
Preponement of a hearing is possible (with consent of both parties) if parties submit their documents early. In examination in chief, the arbitrator may allow / disallow questions and go beyond Evidence Act.
Incidentally, these aspects about how to submit evidence in arbitration are not taught in typical arbitration courses, so we made it a point to include it in the Executive Certificate Course in Arbitration: Strategy, Procedure and Drafting, to give a thorough and complete perspective of the arbitration process.
Further, apart from principles of evidence, Limitation Act, Specific Relief Act and law of damages apply, and a trial court experience indicates that you have certain expertise around these areas.
Similarly the requirement of having experience of appellate court work is important because while writing an award, the arbitrator needs to be cautious about the possibility of a challenge under Section 34 (application to set aside award) or Section 37 (orders against which appeals can be filed). Somebody who has drafted, filed and argued appeals will have an idea of the grounds on which these are possible. While a Section 34 challenge is much more restricted than a statutory appeal, Section 37 is not like that. Further, appellate court work experience is also the nearest or most relatable experience that someone can have. Of course, working as an arbitration lawyer (that is, experience representing a party in arbitrations over the years) counts in this regard.
How does one get to be on the panel of an arbitral institution?
In India, we have many arbitral institutions but they do not have sufficient work or are not known for their reputation. As an exception, Mumbai Centre for International Arbitration (MCIA) is fast gaining in reputation. Some arbitral institutions conduct different kinds of trainings and conferences and sometimes provide you certification to act as an arbitrator (and even empanel you), but that is not sufficient to inspire a party’s trust to work on an arbitration. You need to do this the long and sustainable way, as the skills involved in functioning effectively as an arbitrator require you to have some experience.
In short, there is absence of serious effective work on this front. Of course, if you are interested in setting up one, this may be a game with a 10-15 year horizon to take up. In fact, the 2018 Amendment Bill contains provisions to set up an authority to regulate arbitral institutions.
Why or how is someone approached for appointment as an arbitrator?
Owing to the vast restrictions in the Fifth Schedule against someone who has served as a counsel, is associated with a law firm or provided a legal opinion to the firm from being appointed as an arbitrator, a party has to look outside its ambit of lawyers who have provided services or who are personally known to the founders or the staff.
They may instruct their CFOs or law firms to find out lawyers vis-a-vis whom these restrictions are not applicable – but this means that the person they approach to be an arbitrator is not going to be known to them.
Most lawyers therefore get arbitration work through references. You need to build a reputation with people for great competence and skills, professional integrity and client service. Professional integrity is particularly important here, because from time to time you will get someone who asks you to take care of their or their client’s interest, and as an arbitrator you cannot do so. While it may be tempting to say yes so that you do not lose the mandate, it may be wiser in the long run to decline so that you maintain a reputation of impartiality and any party trusts your fairness and is secure about approaching you.
If you do this, a party which asks you to take care of its interest (and you decline to be appointed arbitrator based on that request) will in future be confident about having you as an arbitrator even when your name is suggested by another party, because they know you to be fair.
How that creates an aura is that you don’t take sides for him, so if you are arbitrating when he is a party and appointed by another party also then they will trust.
Does it conflict with your litigation or arbitration (lawyer’s) practice? Is it worthwhile for a budding litigator to build a reputation as an arbitrator?
Being appointed as an arbitrator is complementary to your practice. An expert who provided very relevant inputs on this article said, “If you want to grow flowers, you will not sow flowers. You will plant a sapling or sow a seed which grows and bears flowers, fruits, etc. later.” Hence, It may not make sense to make a conscious effort to only get work exclusively as an arbitrator, but to perform a variety of legal work in the beginning at least.
What is the career path for young lawyers in future want to be appointed as an arbitrators and how can you start?
In India, being a full-time arbitrator is not a career option or profession in India currently for lawyers. Only retired stalwarts, retired secretary level government officials and judges have such opportunities.
Still, if you build a career in dispute resolution in general – that is to be an arbitration lawyer and a litigator, then the opportunity is available to you. You will need to continue to running your legal practice on the side, or working in a law firm.
This is just like you cannot directly get recruited in RAW in India – you have to arrive there from some other ancillary experience such as civil services, CBI or army.
In this regard, you need to know that most dispute resolution firms or counsels who do arbitration work actually take up a mix of litigation and arbitration matters, but there are some law firms which exclusively or mostly do arbitration work only, such as Aarna Law, led by Shreyas Jayasimha, Arista Chambers of Promod Nair or A.K. Law Chambers of Anirudh Krishnan. There are other firms too. If you join one of these firms you will be working as an arbitration counsel regularly.
If you want to be an arbitrator in the long term, joining one of these firms is a good idea, as your experience will be focussed around arbitration.
One of the ways you can start your work in this regard is to study arbitration through Lawsikho’s Executive Certificate Course in Arbitration: Strategy, Procedure and Drafting, prepared after obtaining insights from several practising arbitration lawyers and taught by an arbitration lawyer. The course provides you online learning materials, hard copies of study materials, weekly classroom in virtual environment and simulated exercises of real-life work, that give you an accurate idea of what it is like to work as an arbitration lawyer. It can heighten your effectiveness as an arbitration lawyer.
If you are a law student, these skills will be very useful in securing internships, performing well in them or cracking interviews for jobs with a lawyer who does arbitration work, at a dispute resolution practice of a law firm or in an arbitration law firm.