The Schedules: Grounds of Ineligibility, Fees, and the One That Was Deleted

Three points that carry marks.

It is a model, not a tariff. Section 11(14) says a High Court may frame rules "after taking into consideration" the rates. The Schedule does not itself fix what an arbitrator is paid.

It does not apply to international commercial arbitration, nor to other arbitrations where the parties have agreed that fees be determined by the rules of an arbitral institution. The Explanation to section 11(14) says so.

It can be amended without Parliament. Under section 11A, chapter 270, the Central Government may amend the Fourth Schedule by notification, subject to laying a draft before both Houses.

Because the figures can move by notification, do not quote the bands as though they were fixed for all time. Quote the mechanism and the starting figure, and check the current Schedule.

The Fifth Schedule: grounds that guide justifiable doubts

Referred to in Explanation 1 to section 12(1): the grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

It is a long list, organised by the kind of relationship, and its main groupings are worth knowing:

• the arbitrator's relationship with the parties or counsel, including being an employee, consultant, adviser, or having a past or present business relationship;
• the arbitrator's relationship to the dispute, including having given advice or an opinion on it, or having previous involvement in it;
• the arbitrator's direct or indirect interest in the dispute, including a financial interest in the outcome or in a party;
• previous services for one of the parties or other involvement in the case, including having served as counsel or arbitrator in a related matter within a stated period;
• relationships between the arbitrator and another arbitrator or counsel, including being in the same chambers or firm; and
• the arbitrator's relationship with the subject matter, and the extent of any social or professional relationship with a party.

Notice the effect the Schedule has, which is procedural as much as substantive. Because Explanation 1 makes these grounds a guide, a prospective arbitrator preparing the section 12(1) disclosure works through them; and because they are only a guide, the presence of one does not disqualify. It produces a disclosure, and then a party may challenge under section 12(3)(a) and section 13.

The Sixth Schedule: the form of disclosure

Referred to in Explanation 2 to section 12(1): the disclosure shall be made in the form specified in the Sixth Schedule.

It is a short prescribed form in which the prospective arbitrator states any past or present relationship with or interest in the parties or the subject matter, and any circumstances likely to affect his ability to devote sufficient time and to complete the arbitration within twelve months.

That second item is the link to section 12(1)(b) and to section 29A, chapter 360. The disclosure is about availability as well as independence.

The Seventh Schedule: ineligibility

Referred to in section 12(5): notwithstanding any prior agreement to the contrary, a person whose relationship with the parties, counsel or the subject matter falls within a Seventh Schedule category shall be ineligible to be appointed as an arbitrator, waivable only by an express written agreement after the dispute has arisen.

The categories are drawn from the same material as the Fifth Schedule but are the serious ones, and they include, among others, where the arbitrator:

• is an employee, consultant, adviser or has any past or present business relationship with a party;
• is a manager, director or part of the management, or has a similar controlling influence, in a party, or in an affiliate of a party involved in the dispute;
• regularly advises a party or an affiliate and derives significant financial income from it;
• has a significant financial interest in a party or in the outcome of the case;
• has previously advised or been consulted on the dispute, or has previous involvement in it; or
• is a lawyer in the same law firm as the counsel for a party.

The whole force of chapter 280's cases comes from this Schedule. It is because an employee of a party falls within it that the Managing Director in TRF was ineligible, and it is because the ineligibility arises from an interest in the outcome that Perkins Eastman extended the reasoning to a party's power to appoint.

Keep the two Schedules apart when answering. Fifth: guides doubts, supports a challenge. Seventh: makes ineligible, cannot be contracted around in advance.

The Eighth Schedule: inserted, then deleted

The Eighth Schedule was inserted by the 2019 amendment and prescribed qualifications, experience and norms for accreditation of arbitrators under section 43J.

The consolidated text now reads:

[THE EIGHTH SCHEDULE.] Omitted by the Arbitration and Conciliation (Amendment) Act, 2021 (3 of 2021), s. 4 (w.e.f. 4-11-2020).

Why it was deleted is examinable and is a good illustration of policy meeting drafting. As enacted, the Schedule listed the categories of person qualified to be an arbitrator in India, and it was read as effectively excluding foreign lawyers and foreign professionals from acting as arbitrators here, since the qualifications listed were Indian ones. For a country trying to attract international arbitration, that was self-defeating. The 2021 amendment removed the Schedule and left accreditation norms to be laid down under section 43J by the Arbitration Council of India.

And chapter 440 supplies the sting in the tail: the Council has not been constituted, so there are at present no accreditation norms from that source either.

Note also the retrospective effect: the omission takes effect from 4 November 2020, which is earlier than the 2021 Act itself, so the Schedule is treated as never having operated after that date.

A worked example

A party proposes as sole arbitrator a chartered accountant who audited the claimant's accounts three years ago and whose firm still does occasional work for the claimant's subsidiary.

Which Schedule applies? Both, and they do different things.

Disclosure first. Under section 12(1) he must disclose in writing, in the Sixth Schedule form, any past or present relationship with or interest in a party. The Fifth Schedule guides what counts, and a past professional relationship and a continuing one with an affiliate are squarely within its groupings.

Is he merely challengeable, or ineligible? That depends on whether the relationship falls within the Seventh Schedule. Being a consultant or adviser to a party, or regularly advising a party or an affiliate and deriving significant financial income from it, is within it. If it does, section 12(5) makes him ineligible notwithstanding any prior agreement, and the parties can only waive that by express written agreement after the dispute has arisen.

If it falls only within the Fifth Schedule? Then he may act unless challenged. A party may challenge under section 12(3)(a) by the section 13 procedure, and chapter 290 explains that the tribunal decides it.

What if the parties want him anyway? If he is ineligible, they may waive under the proviso to section 12(5), but only after the dispute has arisen and in writing. A clause in the original contract will not do.

What are his fees? If a High Court has framed rules under section 11(14) having taken the Fourth Schedule into account, those rules apply, unless this is an international commercial arbitration or the parties have agreed on institutional fee rules.

What beginners get wrong

The Schedules are part of the Act, not appendices, and the Fifth and Seventh are operative law through section 12.

The Fifth Schedule does not disqualify. It guides justifiable doubts. Only the Seventh Schedule makes a person ineligible.

The Fourth Schedule is a model, not a binding tariff, and it does not apply to international commercial arbitration or where institutional fee rules are agreed.

The Eighth Schedule no longer exists, having been omitted with effect from 4 November 2020.

The First to Third Schedules are treaty texts, and they support Part II, not Part I.

Quick revision

• First (s.44) New York Convention 1958; Second and Third (s.53) the Geneva Protocol 1923 and Geneva Convention 1927.
• Fourth (s.11(14)) model fees by sum in dispute, starting at Rs. 45,000 up to Rs. 5,00,000; a model only; not for international commercial arbitration or where institutional fee rules are agreed; amendable by the Central Government under section 11A.
• Fifth (Explanation 1 to s.12(1)) grounds that guide justifiable doubts; supports a challenge under s.12(3)(a).
• Sixth (Explanation 2 to s.12(1)) the form of disclosure, covering independence and the ability to finish within twelve months.
• Seventh (s.12(5)) relationships making a person ineligible, notwithstanding any prior agreement; waiver only by express written agreement after the dispute has arisen. The basis of TRF and Perkins Eastman.
• Eighth: inserted 2019 for accreditation qualifications under s.43J; omitted by Act 3 of 2021, s.4, w.e.f. 4 November 2020, having been read as excluding foreign lawyers.

Test yourself

1. What is the difference in effect between the Fifth and Seventh Schedules? The Fifth Schedule, through Explanation 1 to section 12(1), guides whether circumstances give rise to justifiable doubts as to independence or impartiality, and so supports a challenge under section 12(3)(a). The Seventh Schedule, through section 12(5), makes a person ineligible to be appointed at all, notwithstanding any prior agreement, subject only to an express written waiver made after the dispute has arisen.

2. Does the Fourth Schedule fix what an arbitrator is paid? No. Section 11(14) permits a High Court to frame rules for the fees of the tribunal after taking into consideration the rates specified in the Fourth Schedule, and the Explanation excludes international commercial arbitration and cases where the parties have agreed on an arbitral institution's fee rules.

3. Which Schedule was omitted, when, and why? The Eighth Schedule, omitted by the Arbitration and Conciliation (Amendment) Act 2021, section 4, with effect from 4 November 2020. It had prescribed qualifications for accreditation of arbitrators under section 43J and was read as effectively excluding foreign lawyers and professionals from acting as arbitrators in India.

4. Which Schedules reproduce treaties, and which sections refer to them? The First Schedule reproduces the New York Convention 1958 and is referred to in section 44; the Second and Third Schedules reproduce the Geneva Protocol 1923 and the Geneva Convention 1927 and are referred to in section 53.

5. In what form must an arbitrator make his disclosure? In the form specified in the Sixth Schedule, under Explanation 2 to section 12(1), covering past or present relationships with or interests in the parties or the subject matter and any circumstances affecting his ability to devote sufficient time and to complete the arbitration within twelve months.