TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL

ROLE OF ARBITRATOR IN SETTLEMENT OF DISPUTES

Internship Assignment

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, minitrial, 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 communitycalled the Panchayatfor 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 K 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.

2 3

ibid ibid 4 The 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. 5 The 1996 Act, 85. 6 Justice 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--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
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http://www.cedires.be/index_bestanden/GARCIA%20BOLIVAR_Comparing%20Arbitrator%20Standards%20 of%20Conduct.pdf 8 Article 34(1) of the UNCITRAL Arbitration Rules specifically states that the request for recording the settlement to the tribunal should be made by both partieswhile 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.
9

Malpati 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 decisionmakers. 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 arbitrations 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

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Claude R. Thomson & Annie M.K. Finn, Managing an International Arbitration: A Practical Perspective, 60JUL. 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. INTL L. REV. 957, 991 (2005) [hereinafter Rogers, Vocation]. 15 Delissa A. Ridgway, International Arbitration: The Next Growth Industry, 54-FEB. DISPO. RESOL. J. 50, 5051 (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 adjudicators 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.
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Peter Binder, International Comercial Arbitration in UNCITRAL Model Law Jurisdictions, 2 Edn,2005,pp243,247,Paras 6-037 and 6-049 17 BLACKS 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 adjudicators 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

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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 23

(2002)4 SCC 105 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 arbitrations ultimate justice-promoting objectives and promote the integrity of a dispute resolution mechanism with critical international implications.

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AUTHORS 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

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