Further Indian jurisprudence on appointments of former employees as arbitrators

Since our previous report on the Delhi High Court refusing to uphold an arbitration clause that provided for the tribunal to be comprised of one party’s employees or retired employees, there have been several cases which have provided useful guidance in relation to the appointment of arbitrators under the new provisions in the Arbitration and Conciliation (Amendment) Act 2015, which came into force on 23 October 2015 and amended the Arbitration and Conciliation Act 1996 (“Amended Act“).  The Amended Act applies to arbitration agreements which pre-date the amendments.[1]

The recent jurisprudence on appointing former employees as arbitrators has dealt with a number of issues, but four key principles emerge:

  1. The provisions of the Amended Act dealing with independence of arbitrators do not prohibit the appointment of former employees.
  2. Nonetheless, it is still important for there to be no doubts in relation to the neutrality, impartiality and independence of the arbitral tribunal. Therefore, where a party has a contractual right to compose a list or panel from which the other parties are to select an arbitrator, a ‘broad based’ approach must be adopted.
  3. The Courts have adopted a narrow definition of what constitutes an employee, and therefore all government employees are not automatically ineligible to be appointed as an arbitrator where one of the parties is a government body.
  4. If an ineligible person (e.g. an employee) was nominated as an arbitrator in the arbitration agreement but is now ineligible as a consequence of the Act, that person cannot nominate another independent arbitrator, notwithstanding what the agreement might provide.

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