Duty to appoint independent arbitrators explained

In a recent judgment on whether a clause providing for appointment of arbitrators from a panel of arbitrators was contrary to section 12 of the Arbitration and Conciliation Act, 1996, as amended in 2015, the Supreme Court highlighted that the duty to appoint an impartial and independent adjudicator is particularly onerous when a state authority is involved.

In Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Limited (DMRC), an arbitration clause provided that Voestalpine and DMRC were each to choose one arbitrator from a list of five arbitrators selected by DMRC from a panel of arbitrators it maintains. The two chosen arbitrators were then to choose a third arbitrator from the same list.

Voestalpine invoked the arbitration clause but objected to the above procedure on the grounds that the managing director of DMRC had complete control over the panel; all five candidates had previously worked in the Indian government’s Railways Department (which is a joint venture partner of DMRC); and the dispute was not technical but contractual and required a person with expertise in contractual matters and not engineering.