Arbitration Fee Calculator
Supreme Court on Arbitration Fees Calculation
Introduction
In a significant ruling, the Supreme Court of India delivered a landmark judgement in the case of Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV 2022(12) Scale 482 : 2022 AIR (Supreme Court) 4413 shedding light on the arbitration fee structure and the powers of arbitrators. This article aims to dissect the implications of this judgement on arbitration proceedings in India.
Case Background
The case revolved around disputes between Oil and Natural Gas Corporation Ltd. and Afcons Gunanusa JV, with arbitration being the chosen method for resolution. The interpretation of various provisions of the Arbitration Act, 1940, was central to the arguments presented including the calculation of Arbitration fee.
Understanding Arbitration Fees
Before delving into the specifics of the judgement, it's crucial to understand the concept of arbitration fees. Arbitration fees encompass the remuneration for arbitrators, administrative expenses, and other associated costs involved in the arbitration process.
Analysis of the Supreme Court Decision
The Supreme Court's decision provided clarity on several contentious issues related to arbitration fees. One key aspect was the interpretation of Section 38(1) of the Arbitration Act, which addressed the arbitrators' authority to determine their fees.
The court emphasized that arbitrators do not possess unilateral power to fix their fees, as it would contravene the principles of party autonomy and the doctrine of prohibition against deciding one's own case.
Calculation of Arbitration Fees
The exact way to calculate the Arbitration Fees complying with both the 4th Schedule of the Act as well as the Hobble Supreme Courts Judgement is to simply put the sum in dispute in the calculator on the top of the Article and then specify whether the Arbitrator is individual i.e. sole or not. It will automatically determine the exact fee complying with the Act as well as Supreme Court decisions.
The same calculator is to be used in case of calculation of Arbitration Fees for counter claim or any other additional claim.
Significance of the Ceiling of Rs. 30,00,000 on Arbitration Fees
The judgement also addressed the ceiling of Rs. 30,00,000 on Arbitration Fees specified in the Fourth Schedule of the Arbitration Act. It clarified that this ceiling applies to each individual arbitrator and not to the arbitral tribunal as a whole, particularly in cases involving multiple arbitrators.
Clarification on Arbitrators' Power to Determine Arbitration Fees
While arbitrators lack the authority to unilaterally determine their fees, the arbitral tribunal retains discretion in apportioning costs between parties and demanding deposits in accordance with relevant provisions of the Arbitration Act.
Discussion on Party Autonomy and Doctrine of Prohibition
The court reiterated the importance of party autonomy in arbitration agreements and underscored the doctrine of prohibition against arbitrators adjudicating their own fee disputes with the parties involved.
Discretion of Arbitral Tribunal in Apportioning Costs
Sections 31(8) and 31A of the Arbitration Act grant the arbitral tribunal the discretion to allocate costs, including arbitrators' fees and expenses, among the parties. Additionally, the tribunal may exercise a lien over the delivery of the arbitral award if outstanding fees remain unpaid.
Enforcement and Review of Arbitration Fees
Parties have the recourse to approach the court for a review of arbitration fees if they believe them to be unreasonable. However, any findings related to arbitration fees made by the arbitral tribunal in the absence of an agreement between the parties and arbitrators cannot be enforced.
Definition of "Sum in Dispute"
The judgement clarified that the term "sum in dispute" in the Fourth Schedule of the Arbitration Act refers to the individual amounts in the claim and counter-claim separately, rather than cumulatively. Therefore, separate Arbitration fees are applicable to both.
Separate Arbitration Fees for Claim and Counter-Claim
In ad hoc arbitration proceedings, arbitrators are entitled to charge separate fees for the claim and counter-claim. The ceiling specified in the Fourth Schedule applies separately to each, ensuring clarity in fee structures.
Applicability of the Ceiling to Individual Arbitrators
The ceiling of Rs. 30,00,000 on Arbitration Fee applies to each individual arbitrator, ensuring parity in fee structures. Sole arbitrators are however, entitled to receive 25 percent over and above the specified amount, as per the Note to the Fourth Schedule of the Act.
Conclusion
The Supreme Court's judgement in the case of Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV provides crucial insights into arbitration fee structures and the powers of arbitrators. It underscores the principles of fairness, party autonomy, and the need for clarity in fee regulations.
For reading the complete judgement click here.
FAQs on Arbitration Fees
1. Can arbitrators unilaterally determine their fees?
No, arbitrators cannot unilaterally fix their fees as per the Supreme Court's ruling. It contravenes principles of fairness and impartiality.
2. What recourse do parties have if they find arbitrators' fees unreasonable?
Parties can approach the court for a review of arbitrators' fees if they deem them to be unreasonable under the provisions of the Arbitration Act.
3. Does the ceiling on arbitration fees apply to the entire arbitral tribunal?
No, the ceiling applies to each individual arbitrator, ensuring equitable fee distribution in arbitration proceedings.
4. Are separate fees applicable for claim and counter-claim in arbitration?
Yes, arbitrators are entitled to charge separate fees for the claim and counter-claim, ensuring fairness in fee structures.
5. What is the significance of the doctrine of prohibition in arbitration?
The doctrine of prohibition prohibits arbitrators from adjudicating their own fee disputes, ensuring impartiality and fairness in arbitration proceedings.
