INSTITUTIONAL ARBITRATION HAS SOLUTION FOR REDUCING THE ARBITRATION COST

Union of India -vs- Singh Builders Syndicate 2009(2) Arb. LR 1 (SC)

The Supreme Court has held that the cost of arbitration can be high if the Arbitral Tribunal consists of retired Judge/s.  When a retired judge is appointed as arbitrator in place of serving officers, the government is forced to bear the high cost of arbitration by way of private arbitrator’s fee even though it had not consented for the appointment of such non-technical non-serving persons as arbitrator/s.  There is no doubt a prevalent opinion that the cost of arbitration becomes very high in many cases where retired judge/s are arbitrators.  The large number of sitting and charging of very high fees per sitting, with several add-ons, without any ceiling, have many a time resulted in the cost of arbitration approaching or even exceeding the amount involved in the dispute or the amount of the award.  When an arbitrator is appointed by a court without indicating fees, either both parties  or at least one party is at a disadvantage.  Firstly, the parties feel constrained to agree to whatever fees is suggested by the arbitrator, even if it is high or beyond their capacity.  Secondly, if a high fee is claimed by the arbitrator and one party agrees to pay such fee, the other party, who is  unable to afford such fee or reluctant to pay such high fee, is put to an embarrassing position.  He will not be in a position to express his reservation or objection to the high fee, owing to an apprehension that refusal by him to agree for the fee suggested by the arbitrator, may prejudice his case or create a bias in favour of the other party who readily agreed to pay the high fee.  It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost.  Institutional arbitration has provided a solution as the arbitrators’ fees is not fixed  by the arbitrators themselves on case-to-case basis, but is governed by a uniform rate prescribed by the institution under whose aegis the arbitration is held.  Another solution is for the court to fix the fees at the time of appointing the arbitrator, with the consent of parties, if necessary in consultation with the arbitrator concerned.  Third is for the retired judges offering to serve as arbitrators, to indicate their fee structure to the Registry of the respective High court so that the parties will have the choice of selecting an arbitrator whose fees are in their ‘range’  having regard to the stakes involved.  What is found to be objectionable is parties being forced to go to an arbitrator appointed by the court and then being forced to agree for a fee fixed by such arbitrator.  It is unfortunate that delays, high cost, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process.  Delay and high cost are two areas where the arbitrators by self regulation can bring about marked improvement.

By

D.Saravanan, Chairman

Council for National and International Commercial Arbitration (CNICA)