Arbitration Law

Lite Bite Foods Pvt. Ltd. vs. Airports Authority of India [MANU/MH/3423/2019]: Bombay High Court

A brief on the unilateral appointment of the sole arbitrator by a person who is party to the dispute.

26. In summary, the legal principles are these:

(a)    An officer or employee of one party cannot be the arbitrator or, upon eligibility, the person empowered to appoint an arbitrator. This is the TRF Ltd. category or rule.

(b)   Where the arbitration clause provides for nomination by each side, and for the appointment of an umpire by the two nominee arbitrators, of a person from a panel:

                             (i)            that panel cannot be hand-picked by one side; and

                           (ii)            it must be broad-based and inclusive, not narrowly tailored to persons from a particular category. The opponent and the two nominee arbitrators must have the plenitude of choice. This is the rule in Voestalpine Schienen. Conceivably, a broad-based panel commonly agreed in the contract by both sides would serve the purpose.

A clause that confers on one party’s employee the sole right to appoint an arbitrator, though that employee is himself not to the arbitrator, is also not valid, and this is a logical and inescapable extension of the TRF Ltd. doctrine. It makes no difference whether this power is to be exercised by choosing from a panel or otherwise. This is the rule in Eastman Perkins. The guiding principle is neutrality, independence, fairness and transparency even in the arbitral-forum selection process.