How much fee is enough?

Arbitration process must be cost-effective, credible

The Punjab and Haryana High Court has been confronted with an uncomfortable question. How much should arbitrators charge as fees? The question reached the court after the Jalandhar Municipal Corporation and 22 other municipal bodies complained that two former judges and a former IAS officer appointed as arbitrators charged exorbitant fees to settle their dispute with a private company. The Arbitration and Conciliation Act was enacted in 1996 and amended in 2015 to make arbitration cost-effective, speedy and with minimum court intervention. 

Of late, arbitration has been picking up as a mode of alternative disputes resolution (ADR) mechanism. The government and the judiciary have been working to promote it, particularly commercial arbitration, as it would add to ease of doing business by boosting investors’ confidence. This is vital given the fact that the mainstream court system is already clogged with millions of cases awaiting disposal. But the controversy has raised questions over cost-effectiveness, time taken, and above all, credibility. The controversy also raises certain serious questions of ethics as the allegation is that the arbitrators modified an order to enhance their fees from Rs 49 lakh per arbitrator, with an additional 10 per cent amount for the presiding arbitrator, to Rs 98 lakh per arbitrator. 

The development comes at a time when the government is trying to promote arbitration by strengthening institutions whose role has been identified as critical to dispute resolution. Justice BN Srikrishna Committee, which examined issues relating to arbitration, recommended the establishment of an independent body for the grading of arbitral institutions and accreditation of arbitrators. Parliament amended the Act last year, with a view to making India a hub of institutional arbitration for both domestic and international arbitration. What is needed is a set of clear guidelines to avoid such unsavoury controversies that give a bad name to ADR and those involved in the process.

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