In a courtroom, a judge presides over disputes and delivers a judgment. In arbitration, the decision-makers are called arbitrators — neutral individuals selected to hear a dispute and issue an award, which serves as the arbitration equivalent of a court judgment.
Many people don’t realize that arbitrators come in different types. Depending on the complexity of the dispute, the terms of the agreement, and the chosen procedure, parties may appoint different kinds of arbitrators.
When parties sign a contract, they often include an arbitration clause — a promise that any disputes will be resolved through arbitration rather than in court. Hidden within that clause is a key decision: should the dispute be handled by a sole arbitrator or by a panel of arbitrators?
Let’s explore the various types of arbitrators, how they are appointed, and the situations in which each type makes the most sense.
Types of Arbitrators
1. Sole Arbitrator
- Only one arbitrator hears the case and decides the dispute.
- Quick, cost-effective, and suitable for smaller contracts.
Example:
Company A and Company B sign a services contract worth ₹20 lakhs. The contract says “disputes shall be referred to a sole arbitrator.” If a dispute arises, both sides must agree on one neutral person. If they fail, the court or arbitral institution steps in to appoint the arbitrator.Effect:
- Both parties must try to agree on one arbitrator.
- If they fail, the institution (in institutional arbitration) or the Court (in ad hoc arbitration) steps in to appoint the sole arbitrator.
- This is common in contracts where disputes are expected to be small or straightforward (e.g., supply agreements, service contracts).
2. Nominee Arbitrator
- In a three-member tribunal, each party nominates one arbitrator — these are the nominee arbitrators.
- They are expected to act independently, despite being chosen by one party.
Example:
Company A nominates Ms. Y.
Company B nominates Mr. Z.Effect:
Each party chooses its nominee arbitrator. The two nominees appoint the presiding arbitrator (chairperson). This is preferred in high-value or complex contracts (e.g., construction contracts,
3. Presiding Arbitrator (Chairperson)
- The two nominee arbitrators jointly appoint the presiding arbitrator, also called the chairperson.
- The presiding arbitrator leads the proceedings, issues procedural directions, and may have a casting vote if the other two disagree.
Example:
Ms. Y and Mr. Z together appoint Justice K (Retd.) as presiding arbitrator. Justice K chairs the tribunal.
4. Emergency Arbitrator
- Appointed temporarily when urgent relief is needed before the full tribunal is formed.
- Common in international arbitration and now recognized in India (e.g., Amazon v. Future Retail).
Example:
Party A fears Party B will transfer assets before arbitration starts. The institution quickly appoints an emergency arbitrator who orders Party B to maintain status quo.
5. Institutional vs. Ad hoc Arbitrator
- Institutional Arbitrator: Appointed by an arbitral institution (like ICC, SIAC, ICA) from its official panel.
- Ad hoc Arbitrator: Appointed directly by the parties under the Arbitration and Conciliation Act, without institutional involvement.
Who Presides the Chair and When?
- One arbitrator (sole) → that person decides everything.
- Three arbitrators (tribunal) → each party nominates one, and together they choose the presiding arbitrator to chair the tribunal.
- If parties or nominee arbitrators cannot agree → the court (in ad hoc arbitration) or arbitral institution (in institutional arbitration) appoints the arbitrator.
- If urgent relief is needed before tribunal forms → an emergency arbitrator may be appointed temporarily.
How These Clauses Appear in Contracts
Before proceeding further, please look at this excerpt from a High Court order:
This excerpt is stating the Prayer (What the applicant wants):
The applicant has two main requests for the court:
a) Appoint a Sole Arbitrator: The primary request is for the court to appoint a single arbitrator to resolve the disputes. This is based on Clause 56 of the aformentioned agreement.
b) In the alternative, appoint a nominee arbitrator: If the court doesn't appoint a sole arbitrator, the applicant requests the court to appoint an arbitrator on behalf of the respondent. This is also based on Clause 56 of the agreement.
In simple terms, this is a formal legal document showing that one party is asking a court to appoint an arbitrator to settle a business dispute as per the terms of their contract.
The arbitration clause itself decides whether disputes go to a Sole Arbitrator or a Nominee (three-member tribunal) Arbitrator.
Sample Sole Arbitrator Clause
Sample Three-Member Tribunal Clause
When to Use Which Clause?
Use Of Sole Arbitrator Clause
- ✔ Best for small and medium-value contracts.
- ✔ Quicker and cheaper.
- ❌ Risk: disagreement over the choice can delay proceedings.
- If a real estate developer intends to engage an internet service provider for their residential society, the contract would typically include a sole arbitrator clause to resolve any potential disputes.
Some other example where the sole arbitrator clause is used.
1. IT Services
When a company hires an IT service provider for routine support or software development, the contract typically includes a sole arbitrator clause to resolve any disputes efficiently and cost-effectively.
2. Residential Utilities
If a real estate developer engages an internet or cable service provider for a residential society, the agreement usually contains a sole arbitrator clause to settle potential disagreements quickly.
3. Small Supply Contracts
For small-scale supply agreements, such as office stationery or equipment, parties often include a sole arbitrator clause to ensure a single neutral arbitrator can decide disputes without delay.
Use Of Nominee Arbitrator Clause
- ✔ Best for high-value, complex, or cross-border contracts.
- ✔ Gives each party confidence in fairness (since both get to nominate one arbitrator).
- ❌ Costlier and slower than a sole arbitrator.
- If a landowner enters into a Joint Development Agreement (JDA) with a real estate developer, the contract may include a nominee arbitrator clause to ensure any disputes are resolved by a balanced three-member tribunal.
Some other example where the sole arbitrator clause is used.
1. Joint Development Agreements (JDA)
When a landowner signs a JDA with a real estate developer, the contract may include a nominee arbitrator clause to ensure disputes are resolved by a balanced three-member tribunal.
2. Large Construction Projects
In contracts for infrastructure or large construction projects, each party typically nominates one arbitrator, and the two nominees appoint a presiding arbitrator to handle complex disputes impartially.
3. Cross-Border Joint Ventures
For international joint ventures or high-value collaborations, a nominee arbitrator clause is often included so that each partner has confidence in the neutrality of the arbitration process through a three-member tribunal.
Golden Rule:
- Sole Arbitrator Clause → simpler, faster, cheaper, ideal for small or routine contracts.
- Nominee Arbitrator Clause → balanced, fair, suited for high-value, complex, or cross-party agreements.
Final Takeaway
Arbitrators are the judges of the arbitration world — but whether you deal with a sole arbitrator or a tribunal of nominee and presiding arbitrators depends entirely on what your contract says. A carefully drafted clause can make the difference between a smooth resolution and a procedural mess.
That wraps up our exploration of arbitrators in contracts—sole, nominee, and presiding. I’ll be back next week with another insightful article to simplify complex legal concepts!
Want to stay updated on Indian law and practical contract insights? Subscribe to the blog and never miss a post that could empower your legal understanding.
Have thoughts, questions, or experiences to share? Join the discussion in the comments below — your perspective matters!
– Anupama
Stay informed. Stay empowered.
No comments:
Post a Comment