Institution-Routed, Not Institution-Neutral: Arbitration's Quiet Return To Unilateral Control

There is a deeply troubling pattern emerging in India, particularly in the sphere of financial services arbitration, which, after appearing in several such matters over the past few months, I can no longer remain silent about.For nearly a decade, Indian arbitration jurisprudence has steadily evolved toward one foundational principle: a party interested in the outcome of a dispute cannot control the adjudicatory process. That principle emerged through TRF Ltd. v. Energo Engineering Projects Ltd. [2017 INSC 577], was crystallised in Perkins Eastman Architects DPC v. HSCC (India) Ltd. [2019 INSC 1285], and has been reaffirmed by a Constitution Bench of the Supreme Court in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) [2024 INSC 857] ('CORE-II').The reasoning was simple: - neutrality in arbitration is not confined to the personal impartiality of the individual arbitrator. It extends to ensuring that no party is permitted to control the very process by which the arbitral tribunal is constituted.That principle, however, is now being reshaped.New ArchitectureThe dominant financial institution no longer appoints the arbitrator directly. Instead, it selects a private online arbitral institution or ODR platform, embeds that mechanism within a standard-form loan agreement where the borrower possesses little to no bargaining power, and routes all disputes through that institution. The institution, in turn, appoints the arbitrator from its own panel in accordance with its internal rules.The architecture has changed. The control has not.What happens when the institution's own business model becomes substantially dependent upon repeat mandates from the very same class of claimants?An individual arbitrator's disclosure form cannot cure a conflict that is embedded within the institutional framework itself. The concern is no longer confined to personal bias or individual predisposition. It is one of structural dependence, a form of institutional asymmetry that no disclosure regime under the Arbitration and Conciliation Act, 1996 ('Arbitration Act') was ever designed to meaningfully address.Conscious CircumventionWhat renders this particularly troubling is that this is a calculated pattern. Several large financial institutions and NBFCs, having recognised that unilateral appointment clauses no longer withstand judicial scrutiny, have now adopted a more sophisticated mechanism. Even where the underlying loan agreement contains a plainly unilateral appointment clause, the notice invoking arbitration under Section 21 of the Arbitration Act now proceeds to unilaterally designate a specific private ODR platform or arbitral institution as the administering body. The institution is selected entirely by the claimant, named in the invocation notice itself, and presented to the respondent as a pre-determined decision before the arbitral process has even formally commenced.The effectiveness of this strategy lies in its timing. By embedding the institutional selection within the Section 21 notice, rather than within the original arbitration agreement, the dominant party attempts to portray the exercise as a mere procedural arrangement rather than an appointment mechanism, in an attempt to avoid the judicial scrutiny that decisions such as Perkins and CORE-II would otherwise attract.But the problem still remains the same, the institution has still been chosen unilaterally and the respondent has had no role whatsoever in the selection. And the institution so chosen is, in an overwhelming majority of cases, one whose recurring revenue stream is substantially dependent upon repeat mandates from the very same class of financial institution claimants.A declaration under Section 12 by the individual arbitrator stating that no prior relationship exists with either party does not, and cannot, resolve this structural concern. The declaration addresses the independence of the arbitrator. The conflict, however, lies within the institutional framework itself. These are fundamentally distinct questions, and treating them as the same issue obscures the real concern.This is also where the statutory scheme betrays its limit. Section 12(5), read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996, is the very provision that renders an interested person ineligible to act as arbitrator, and it is the foundation on which both TRF and Perkins rest. But the Seventh Schedule is addressed entirely to the relationships of the individual arbitrator, his connection to a party, to counsel, or to the subject matter of the dispute. It says nothing about the structural dependence of the institution that appoints him upon a particular class of repeat claimants. The disqualification regime the legislature enacted in 2015 simply does not reach the institution. That silence was never intended as a licence for institutional dependence; it is a loophole that the present practice has learned to exploit.And then comes Section...

Institution-Routed, Not Institution-Neutral: Arbitration's Quiet Return To Unilateral Control

Piyo Harold Jaimon

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Piyo Harold Jaimon

Institution-Routed, Not Institution-Neutral: Arbitration's Quiet Return To Unilateral Control

Piyo Harold Jaimon

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Piyo Harold Jaimon

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