SC holds unilateral arbitrator appointment clauses in public-private contracts invalid
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The principle of equal treatment of parties applies at all stages of arbitration proceedings, including the stage of appointment of arbitrators, a led by Chief Justice DY Chandrachud ruled.
“The Arbitration Act does not prohibit PSUs from empanelling potential arbitrators. However, an arbitration clause cannot mandate the other party to select its arbitrator from the panel curated by PSUs,” it said, adding that a clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator.
Further, such a unilateral clause is exclusive and hinders equal participation of the other party in the appointment process of arbitrators, the apex court said.
“In the appointment of a three-member panel, mandating the other party to select its arbitrator from a curated panel of potential arbitrators is against the principle of equal treatment of parties. In this situation, there is no effective counterbalance because parties do not participate equally in the process of appointing arbitrators, according the judgement.
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