Appointment of arbitrator in case of ica

In the field of international commercial arbitration, it is a generally accepted practice that the parties may appoint arbitrators. For example, when the dispute is submitted to a three-member arbitral tribunal, typically each party appoints one arbitrator and the two party-appointed arbitrators appoint a presiding arbitrator.  This Article addresses the following questions: (a) what may be the underlying rationale of this practice?; (b) what problems or concerns does it raise in your opinion?; (c) what may be possible solutions or remedies?

Dispute is exigent to societal interaction. It has been in existence since the inception of mankind on earth. If this is not resolved and settled at an early stage then it can become a threat to the security, stability, and tranquility of a nation, which are the elementary parameters required for the development of a nation. And for settling disputes the government of different countries has established structures that are identified as courts and tribunals. These structures are judicial bodies. But despite the existence of these structures, there are private arrangements which are used to settle disputes. These arrangements are classified as Alternative Dispute Resolution (ADR) mechanisms[1].

Alternative Dispute Resolution is a mechanism that provides an alternative to the conventional way of dispute resolution[2]. ADR is preferred over conventional methods because it is expeditious and sometimes even cost-effective compared to the conventional court proceedings which are slow, rigid, costly, and unpredictable. Some of the most popular forms of ADR mechanisms are arbitration, mediation, conciliation, negotiations, etc.

According to UNCITRAL Model Law arbitration means any arbitration whether or not administered by a permanent arbitral institution[3]; According to the Republic of Egypt, arbitration means a process of voluntary arbitration accepted by the parties to dispute in accordance of their free will[4], whether or not the selected body to which the arbitration mission is endowed by agreement of the two is a permanent arbitral organization or center. On Consolidating different definitions available one can say that Arbitration is a dispute resolution mechanism wherein a neutral third party determines a controversial issue and then makes an award. In this process, the dispute is brought before an arbitral institution/ individual arbitrator who then makes a binding award after hearing both the parties to the dispute.

One of the most rudimentary parameters of arbitration is that there must be one or three arbitrators[5]. And one of the most crucial aspects involved in the process of arbitration is choosing the arbitrator. Now the disadvantage with one arbitrator is that in this framework both the parties will have to agree to a common arbitrator but in case of three arbitrators both the parties can nominate one arbitrator and the nominated arbitrators will appoint the third arbitrator, who will act as the presiding officer in the said matter. The rationale behind this practice is that in case of three arbitrators both parties have an option to choose their own arbitrator and they don’t have to agree on a common arbitrator[6]. When two parties are in dispute, that means they are not having a congenial relationship, and in such a situation it is almost impossible for the parties to come together and choose one common arbitrator. This is why there is a tendency of choosing three arbitrators.

Choosing three arbitrators has its own advantages like there is a presiding officer who ensures that they all work together and do their tasks efficiently. Then in case of International Commercial Arbitration, the arbitrators predominantly deal with complex issues and thus there is a greater probability of mistake because the arbitrator may miss something, but if there are three arbitrators then the arbitrators can help each other and eliminate mistakes. In the process of arbitration, it is very crucial to eliminate mistakes because there is no appeal in the case of an arbitral award[7]. Then in international commercial arbitration, the dispute is mostly between two parties belonging to different cultures so if the respective parties are allowed to choose their own arbitrator then they will choose someone who is more capable of understanding their arguments and the evidence produced by them. These are the reasons why it's advisable to opt for three arbitrators in International Commercial Arbitration[8].

Problems and concerns attached in case of three arbitrators. First, an arbitration proceeding where the dispute amounts to 5 million USD then as per ICC rules the cost the fees of the sole arbitrator will be 87,000 USD. So according to this, the fees of three arbitrators will be around 260,000 USD which is a considerable portion of the 5 million USD dispute. Second is timing, in case of a sole arbitrator it’s the schedule of one arbitrator that is to be taken into consideration to set a hearing date but in case of three arbitrators the schedule of all the three arbitrators should align to set a hearing date and in this, there can be several rounds of discussion between the arbitrators so that they all can agree upon a common view, so it usually takes longer. Third, there is biasness and sympathy towards the party who has nominated the particular arbitrator[9], so the arbitrators chosen by the parties will be biased and will have sympathy towards the respective parties who have chosen them.

The solution to the above-mentioned problem will be to leave it open for choice. While making the agreement the parties should not decide the number of arbitrators instead they should leave it on the tribunal who will decide it after confirming with the parties. This will be suitable for both situations because there is always a likelihood of both large and small disputes. So if the numbers of arbitrators are not specified in the agreement then there can be flexibility as to the size of the panel. Thus a panel of appropriate size can be formed after the dispute has arisen. In this way, the expense and the time taken in completion of the process can be kept in check. But there can be certain situations which cannot be done away with a single arbitrator then in such a situation its always better to appoint a bigger panel because a bigger panel can decipher a complex issue deftly by making fewer errors and when hundreds of millions are involved then in such cases paying 260,000 USD to the arbitrators will be a petty sum. And it’s a lot of money involved so there’s no harm if the parties have to wait for the award as we already know that there is no appeal in case of arbitration.

Bibliography

Books Referred

• Sukumar Ray, ‘Alternative dispute resolution’, Eastern Law House, (2012).
• J.C Goldsmith, Arnold Ingen-Housz and Gerald H. Pointon, ‘ADR in Business practice and Issues Across Countries and Cultures’, Kluwer Law International, (2006).
• Amazu A. Asouzu, ‘International Commercial Arbitration and African states’, Cambridge University Press, (2001).

Webpages

• https://www.ashurst.com/en/news-and-insights/legal-updates/one-arbitrator-or-three/
• https://www.mondaq.com/india/x/205186/Arbitration+Dispute+Resolution/Law+Of+And+Procedure+For+Appointment+Of+ArbitratorS
• https://court-inter.us/node/53
• https://icsid.worldbank.org/en/Pages/process/Number-of-Arbitrators-and-Method-of-their-Appointment-(Additional-Facility-Arbitration).aspx
• https://www.icaindia.co.in/icanet/rules/commercialarbitration/arbitration&conciliation/chapter1d.htm