Can Arbitrators Fix Their Fee Without Parties' Consent? Is 4th Schedule The Standard Fee Scale? Supreme Court Considers

The Supreme Court on Thursday considered issues relating to the fixation of the arbitrators fees, especially in arbitrations involving Public Sector Undertakings.The bench of Justices DY Chandrachud, Sanjiv Khanna and Surya Kant was considering arbitration petition filed by the Oil and Natural Gas Corporation (ONGC) on the issue related to the mandatory nature of the 'model' fee scale for arbitrators prescribed under the Fourth Schedule of the Arbitration and Conciliation Act 1996.During the hearing, the bench pondered on solutions such as - (a) parties indicating to the arbitrator the estimated number of sittings before the commencement of proceedings and fixing the fees accordingly; (b) allowing the arbitrator to increase the fees beyond the agreed scale to a certain percentage (say 10%) of the sittings exceed the estimate; (c) allowing the arbitrator to approach the Court for increasing fee beyond the allowable percentage; (d) stopping the practice of splitting a day into different hearings and applying Fourth Schedule scale day wise.It may be noted that the Chief Justice of India NV Ramana on March 8, 2022 agreed to constitute a bench to hear the Special Leave Petitions which raise the issue relating to the interpretation of the Fourth Schedule. This was after the Attorney General for India KK Venugopal raised concerns about the "exorbitant and arbitrary" fee charged by the arbitrators and pressed that the Court should lay down uniform standards.In the hearing today, Attorney General for India KK Venugopal made his submissions on behalf of ONGC.Arbitrator's Fees : Supreme Court To Hear Issues Relating To 4th Schedule Of Arbitration ActClaimants Always Ready & Willing To Pay Fees Fixed By Arbitrators But PSU's Have Concerns; No Commonality In Fixing The Fees; PSU's Have A Feeling That Their Reluctance Would Result In Arbitrators Being Biased Against Them : AGAG KK Venugopal commenced his arguments by submitting that ONGC as well as Public Sector Undertakings ("PSU's") were quite concerned on the issue related to fees which resulted in putting PSU'S in a difficult position.There are three methods of fixing the fee : " Firstly, wherein the parties enter into an agreement contract as part of the arbitration clause wherein they say that this will be the fees- and intimate the fees to the arbitrator and if they accept or reject it.The second alternative is the Law Commission recommending in the Arbitration Act, 4th Schedule relating which recommended the rates. Thirdly, arbitrators fixing their own fees will be highly anomalous. They say either 1 lakh per sitting. 1.5, 2.5 or even higher. Sitting is not even one but 2 sittings. Secondly, as far as they are concerned, they ask for a reading fee and conference fee as well as a fee for preparing the award," AG submitted.Against this backdrop, he submitted that this had put PSU's in a difficult position."All this has put PSU in a difficult position. We always find that so far as claimants are concerned, and there are huge contractors- they are always willing to pay whatever fees are fixed but the PSU's have concerns. Therefore they are always reluctant and they show the reluctance openly and this results in them having a feeling that so far as arbitrators are concerned, they will be biased against them. This is the problem and that is where we are asking to consider as to what should be the alternative between these alternative- contractual fees, 4th schedule fee or fees of arbitrators. There is no commonality in fixing the fees," submitted AG.Justice Sanjiv Khanna at this juncture asked AG the stance before the 4th Schedule coming into existence(it was introduced as per the 2015 amendment)."Many of the contracts will be prior to the 4th schedule? After the 4th schedule has been introduced, are they following the 4th schedule? In PSU's if they don't prefer institutionalized arbitration they always prefer ad hoc arbitration," said. Justice Khanna.The AG said that in the instant case, the Tribunal, in the midst of the cross examination, decided to revise the fees after accepting the fees as per the Fourth Schedule. He further added the Tribunal passing an order of directing the claimant to pay the fees and later recover it from the respondent was "humiliating"."Having accepted the fees they contractually agreed to they said that the fees are unrealistic but they should have rejected the same. We are constrained by the fact that we are PSU and this is public money which we have to par treat. They believe that its their right to fix and they see whatever is reasonable," AG submitted.AG also submitted that the Tribunal had also kept the perusal fee opened and when ONGC informed the Tribunal that the management did not approve the Higher Fees, the tribunal did not respond to the same which forced ONGC to approach Bombay High Court."Now they kept the perusal fee open. ONGC informed the tribunal that higher fees are not approved by petitioner's management and this was...

Can Arbitrators Fix Their Fee Without Parties' Consent? Is 4th Schedule The Standard Fee Scale? Supreme Court Considers

Shruti Kakkar

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