Impartiality in the process of challenge to an Arbitrator: The way forward

Anwesha Pandey and Srijita Jana1

Introduction

The right to challenge an arbitrator is an essential part of an arbitral proceeding. The main
objective of the system of challenging an arbitrator is to ensure that the parties are entitled to
their right of having a fair and unbiased arbitral tribunal. However, the Arbitration and
Conciliation Act, 1996 contains an inherent drawback with regard to impartiality and
independence of an arbitrator i.e. an arbitrator who has been already challenged has to decide
his own challenge. The recent amendments to the Arbitration and Conciliation Act(2015 and
2018) although have made major changes to remove certain defects in the 1996 Act, the
problem of bias in the system of an arbitrator deciding his own challenge has not been
mitigated. With the objective to reduce the burden on the Courts and to make the process of
appointment of arbitrators quicker and hassle-free, in accordance to the doctrine of
Competence as provided for under Section 16 of the Act, the Amendment Act, 2018 proposes
appointment of arbitrators by designated arbitral institutions. But this Act provides no
mechanism to incorporate impartiality and independence in the system of challenge to an
arbitrator as provided in the arbitral institutions across the world. Thus the need of the hour is
to take a cue from the international arbitral institutions which provide for a transparent and
impartial process of challenge to an arbitrator and incorporate it in the current regime of
India.

Unbiased authority to decide the challenge to an arbitrator

Section 13 of the Arbitration and Conciliation Act provides that unless the arbitrator
challenged under sub-section (2) of Section 13, withdraws from his office or the other party
agrees to the challenge, the arbitral tribunal shall itself decide on the challenge. The chances
of withdrawal of the challenged arbitrator himself under Section 13(3) is highly improbable.
Thus an arbitrator who is not willing to withdraw, will himself decide the challenge imputed
against him by the parties. This provision violates the core principles of natural justice which
require that (a) no man should be a judge in his own cause. Especially when the arbitration
tribunal consists of a sole arbitrator, the chances of biasness are more likely.

1 Students, Semester V, National University of Study And Research in Law, Ranchi.

Although, the parties have the recourse to set aside the arbitral award passed under section (4)
of Section 13 of the Arbitration and Conciliation Act, this option under Section 34 is available
only after the award has been passed . Thus the party who challenged the arbitrator to get him
removed, at a much earlier stage has to go through the entire process of the arbitration
proceeding wherein the challenged arbitrator will make an award, consuming more time
and efforts of the parties .
Section 14 of the Arbitration and Conciliation Act, which is concerned with the termination
of the arbitrator’s mandate can also not be invoked to address this issue of biasness of the
arbitrator since it is a settled law that once an arbitral tribunal has decided on the challenge, it
would not be open to the Court to decide and consider that the mandate of the arbitrator under
Sec.14.
This issue of bias in the Arbitration and Conciliation Act, 1996 continues to persist till today.
The 2018 Amendment Act brought about revolutionary changes in the arbitration sector in
India like creation of an Arbitration Promotion Council of India (APCI) to lay down
professional guidelines for progression of the jurisprudence of arbitration law and practices in
India, the appointment of arbitrators by designated arbitral institutions, confidentiality in
arbitral institutions etc. But the grave issue of bias in the process of challenge to an arbitrator
remains unsolved till now.
Though India is on the trajectory of shifting to institutional arbitration, the recently
introduced Bill provides no mechanism on deciding on the challenge to the arbitrator in an
unbiased manner as explicitly drawn out in the arbitration rules of prestigious arbitral
institutions across the world.
The arbitration rules of quite a few prestigious arbitral institutions in the world provide for
complaints against a biased arbitrator to be decided by an institutional board sitting in
supervision over the arbitral tribunal. The International Centre for Settlement of Investment
Disputes (ICSID) rules provide that if the challenge is directed against one arbitrator in an
institutional arbitral tribunal consisting of three arbitrators, the other two arbitrators will
decide on the challenge. And if they cannot agree to it, the Chairman shall decide on the
same. Even in cases where the challenge is directed against a sole arbitrator or against the
majority of the arbitral tribunal, the decision shall be given by the Chairman, providing
effective checks on bias in decision making of challenge to an arbitrator.2

2 The International Centre for Settlement of Investment Disputes, Rule 9(4) (1966).
The United Nation Commission on International Trade Law (UNCITRAL) Model Law on
Commercial Arbitration similarly provides that if an arbitrator is challenged, other arbitrators
except the challenged arbitrator shall first decide on the challenge3.

The London Court Of International Arbitration (LCIA) Court may revoke any arbitrator’s
appointment upon its own initiative, at the written request of all other members of the Arbitral
Tribunal or upon a written challenge by any party if: (i) that arbitrator gives written notice to
the LCIA Court of his or her intent to resign as arbitrator, to be copied to all parties and all
other members of the Arbitral Tribunal (if any); (ii) that arbitrator falls seriously ill, refuses or
becomes unable or unfit to act; or (iii) circumstances exist that give rise to justifiable doubts
as to that arbitrator’s impartiality or independence. 4. The LCIA is an institution constituted
solely to settle arbitration disputes. Thus the impartiality in challenge to arbitrators is
curtailed in the LCIA mechanism, because a separate institution is deciding the challenge
unlike the challenged arbitrator himself. Likewise, the American Arbitration Association
(AAA) an administrative body in U.S assists the parties in the appointment of arbitrators,
deciding the challenge of an arbitrator, setting hearings, conducting cases etc. Upon objection
by the parties or on its own initiative, the AAA shall decide upon the disqualification of an
arbitrator and such a decision shall be conclusive.5

Thus in most of the international arbitral institutions, there is a mechanism to ensure that bias
in challenge to an arbitrator is removed. The Arbitration and Conciliation Act, 1996 as well
the recently introduced 2018 amendment Act provides no remedy in this regard as an
arbitrator can decide his own case and come to a conclusion regarding his own removal.

Suggestions

Through the recent Arbitration and Conciliation Act, 2018 has tried to revolutionalise the
system of appointment of arbitrators by arbitral institutions in a transparent and systematic
manner, but the problem of bias in challenge to an arbitrator is not addressed by the Act. The
authors thereby suggest the following remedies:
 In case the challenge is directed against a sole arbitrator, the Chairperson of the
arbitral institution or a separate panel should decide the matter.
 If case the challenge is directed against an arbitrator of a three member panel, the
other two arbitrators of the panel shall decide the cause of the challenged arbitrator.

3 The United Nation Commission on International Trade Law, Rule 13(4)(1976)

4 The London Court Of International Arbitration Court , Rule 10.1 (1883)
5 American Arbitration Association, Rule 18, 1986.
  In case the challenge is directed against two arbitrators in a three member panel the
Chairman of the arbitral institution shall provide a decision on the challenge.
The Amendment Act of 2018 addressed many important issues concerning arbitration in India
but the grave issue concerning the impartiality of challenge to an arbitrator was left
unresolved. If the suggested changes are incorporated in the Arbitration and Conciliation Act,
it will ensure the impartiality and independence of an arbitrator which is the core principle of
arbitration mechanism.