The Rights of the Deceased: Moral Rights Incidental to Copyright Law
- Vanshika Agrawal
- 2024-04-25
Contents hide
2 Indian approach towards double-hatting
4 Safeguards against bias due to double-hatting
Double Hatting in Domestic Arbitration – The process of arbitration is root of the principle of party autonomy. The autonomy extends to the selection of not only the seat, venue, and law applicable to the arbitration but also the constitution of the arbitral tribunal. This high regard place on the discretion of the parties is often the reason why arbitration and other such dispute resolution processes prefer traditional litigation.
Independence and impartiality of the arbitral tribunal is an important feature in the arbitration process. Due to the pivotal role play by arbitrators in an arbitration, the selection, and
appointment of arbitrators guide by the Indian Arbitration Act. The Act allows the parties to agree upon any procedure to appoint arbitrators[1] and permits the parties to appoint an arbitrator of any nationality.
[2] The qualifications prescribed in the Act corresponds to the personal and professional integrity of the person along with his professional qualifications and knowledge in law[3]. The Act has laid down standards of conduct for arbitrators to ensure that there is no bias or apprehension of bias in the disposal of their functions. Although there exists no categorical ban on persons engaging in the roles of both arbitrator
as well as arbitration counsel in different cases, this is subject to certain limitations as well. The phenomenon known as ‘double hatting’, extensively seen in international commercial arbitrations, is not unknown to domestic arbitrations.
Double Hatting in Domestic Arbitration – Indian approach towards ‘impartiality and independence of the arbitral tribunal’ has always revolved around the concept of ‘justifiable doubt’.
Any circumstance that raises a reasonable suspicion of bias is as serious
as an instance of actual bias and has been made a ground for applying to set aside the arbitral award. Seventh Schedule of the Act lists circumstances that make a person ineligible to act as an arbitrator in a case and mandates that the arbitrator shall not be representing or advising any of the parties or affiliates of any of the parties[4], a person who represents the lawyer or the law firm of one of the parties at the time of the arbitration[5] nor can he be a lawyer in the law firm representing any of the parties.
[6] The Fifth schedule is an exhaustive list of circumstances giving rise to justifiable doubt’ based on which a party can challenge the appointment of an arbitrator. The Schedule prescribes that an arbitrator should not have partnered or
affiliated with another arbitrator or any of the counsel in the same arbitration within the past three years.
Even if a close family member of the arbitrator happens to be working with the counsel firm of one of the parties, although not involved in the dispute at hand, he becomes ineligible.[7] There exists an additional restriction that the arbitrator should not have been appointing more than three times
by the same counselor in the same law firm within the past three years.[8]
Double Hatting in Domestic Arbitration – The pertinent question is whether there should be a complete ban on double hatting. The issue of ‘double hatting’ has been the source of heated debate on the international plane recently.
The strongest argument raised against double-hatting is that an arbitrator is likely to favor the counsel representing one of the parties
if it is likely that their roles will be reversed in a different matter later. While some advocate a total ban on double hatting, some others favor a regulated approach like ours. In the context of the judiciary, the Indian approach has always been strict. Judges is prohibiting from practicing as lawyers during their tenure.
The judges of the Supreme Court and the High courts further enjoined, after retirement, from practicing in courts of the same hierarchy
where they functioned as judges. This is a constitutional mandate institute to ensure the independence of the judiciary. Arbitration being an institution created as an alternative to the rigors of the traditional courts, it is unreasonable
to hold it up to the same standards as that of the judiciary.
The discretion granted to parties to handpick their own arbitral panel serves as an additional reason
as to why such rigid rules of impartiality are unnecessary.
In the international context, arguments in favor of double hatting primarily center around the need to permit new entrants into the field, who due to
factors including finance may not be able to completely renounce their counsel practice.
The same applies to India as well. It is a known fact that the trend in domestic arbitrations in India is to favor experienced legal professionals
as arbitrators-mostly retired judges and lawyers. Hence it is unreasonable to expect young lawyers to abandon their legal practice upon their first appointment
as an arbitrator, in expectation of a successful career as an arbitrator.
Further, an outright ban on double hatting would have the effect of excluding a large number of knowledgeable and
experienced legal professionals from the potential arbitrator pool. This would be particularly handicapping for a legal system like ours that requires arbitrators
who are well versed in Indian law. This would also severely impair the principle of party autonomy that regard as a hallmark of the entire arbitration process
by denying parties access to desirable individuals on the ground of double hatting.
The possible side-effects of double-hatting are to nullify by the restrictions placed under the Fifth Schedule, including those based on time-intervals. Any possibility of future interaction between an arbitrator and
a counselor a co-arbitrator even in a different matter can arise only after three years.
This three-year limitation also extends to every fourth appointment of an arbitrator made by a lawyer or a law firm. The issue of ‘repeat arbitrators’ is also kept at bay by this regulative provision. While these circumstances would not render the arbitrator ineligible for appointment per se, it is open to the parties to challenge the appointment[9] on grounds of ‘justifiable doubt’. Moreover, an award renders by a challenged arbitrator may be liable to be set aside.[10] The apprehension of such a challenge discourages parties from appointing persons likely to raise justifiable doubts.
The Supreme Court in the case of Vinod Bhaiyalal Jain v Wadhwani Parmeshwari Cold Storage Pvt. Ltd[11] was dealing with an allegation of arbitral bias against the arbitrator who rendered the final award. The Appellants allege that the arbitrator has acted as the counsel of the other party (the Respondents) in unrelate litigation and
that the objections raised regarding this at the time of his appointment are rejected.
The challenge against the arbitral award passed by him was made on the basis of Section 12(1)
which requires the arbitrator to disclose in writing any circumstances likely to give rise to justifiable doubts
as to his independence or impartiality when he is approached regarding the appointment. Since the agreement was entered into prior to the 2015 amendment, the matter was decided based on the law
as it stood before. The court held that the facts of the case formed the basis for a reasonable apprehension of bias and
set aside the arbitral award.
Although this is not an example of double-hatting in the strictest sense, it gives a sufficiently good idea as to
how every possibility of bias in the arbitrator-counsel dealings accounts for in our law. With the introduction of the new schedules, the arbitrator in the above case
would have been ineligible to be appointed as an arbitrator had it happened today.
Double Hatting in Domestic Arbitration – Our legal provisions serve as a sufficient check against arbitral bias due to double hatting. The objective of these provisions is to eliminate all possible forms of bias or even suspicion of bias in the arbitration process, while at the same time not denying the opportunity for persons to function both as arbitrators and
counsels. Further, the fact that cases involving issues of impartiality or
bias due to double-hatting are very rare in our domestic arbitrations is sufficient to prove that a complete ban on double-hatting is a measure that is disproportionate to the cause sought to be achieved and
that a regulated approach like ours is the way to go.
[1]The Arbitration and Conciliation Act, 1996, Section 11(2)
[2]the Id at S.11(1)
[3] 3 Id at Schedule VIII
[4]4 Id at Schedule VII (2)
[5] 5 Id at Schedule VII (3)
[6] 6 Id at Schedule VII (3)
[7]7 Id at Schedule V (28)
[8] 8 Id at Schedule V (29)
[9]The Arbitration and Conciliation Act, 1996, Section 13(2)
[10] Id. at Section 13(5)
[11] 2019 (9) Scale 787
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