Supreme Court Crystallises the Law on Independence and Impartiality of Arbitrators in Indian Law: An Analysis of the Verdict in CORE II

The reference

A recent ruling of a 5-Judge Bench of the Supreme Court of India in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV)¹, (CORE II) presents an important milestone in the evolution of the Indian arbitral jurisprudence on fundamental facets of impartiality and neutrality of arbitrators.

In Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)², (CORE I) a 3-Judge Bench of the Supreme Court was faced with several legal questions. Firstly, whether the appointment of retired railway officers as arbitrators was valid, given the provisions contained in Section 12 read with the Seventh Schedule of the Arbitration and Conciliation Act, 1996. The Supreme Court upon placing reliance on the decision in Voestalpine Schienen GmbH v. DMRC Ltd.³, held that Section 12(5) of the Arbitration and Conciliation Act, 1996 does not bar former employees from being appointed as arbitrator.

Secondly, whether the General Manager of an enterprise could appoint arbitrator(s) from a group/panel so long as the counter-party got to nominate at least one arbitrator as its nominee. The Supreme Court placed reliance on the decisions in TRF Ltd. v. Energo Engg. Projects Ltd. and Perkins Eastman Architects DPC v. HSCC (India) Ltd. and opined that the legal position⁴ in TRF case⁵ and Perkins case⁶ did not apply to the facts in this case. The Supreme Court was of the view that right of the General Manager to form the Arbitral Tribunal is balanced by the counter-party’s right to choose any two out of the four given names of which the General Manager was required to appoint at least one as the counter-party’s nominee arbitrator.

In a subsequent decision in Union of India v. Tantia Constructions Ltd.⁷, another 3-Judge Bench of the Supreme Court while dealing with a similar matter, prima facie disagreed with the legal position laid in CORE I⁸. Accordingly, the matter was referred in Tantia Constructions case⁹ to a larger Bench to look into the correctness of the view taken by the 3-Judge Bench in CORE I¹⁰.

Issues for determination

The following issues were framed for the determination of the Supreme Court in CORE II¹¹:

(i) Whether an appointment process which allows a party who has an interest in the dispute to unilaterally appoint a sole arbitrator, or curate a panel of arbitrators and mandate that the other party select their arbitrator from the panel is valid in law?

(ii) Whether the principle of equal treatment of parties applies at the stage of the appointment of arbitrators?

(iii) Whether an appointment process in a public-private contract which allows a government entity to unilaterally appoint a sole arbitrator or majority of the arbitrators of the Arbitral Tribunal is violative of Article 14 of the Constitution?

Before addressing the above issues and rendering its findings, the Supreme Court undertook a scholarly examination of various aspects which are dealt with below.

Principles under the Arbitration Act

The Arbitration and Conciliation Act, 1996 is a single consolidated Code governing both domestic and international arbitrations in India.¹² The enactment aligns the Indian legal position on domestic arbitration in consonance with the Uncitral Model Law on International Commercial Arbitration, 1985 (Uncitral Model Law). Amongst other aspects, one of the objectives of the Arbitration Act is to establish procedures that are fair, and efficient.¹³

(i) Party autonomy

Arbitration is founded on the bedrock of mutual consensus amongst parties to submit disputes inter se them to a neutral, third party, and often non-State decision-maker(s) for arriving at a binding resolution of the dispute following the adjudicatory process. As such, party autonomy is the backbone of the arbitration and is designed to provide the disputing parties with the maximum scope of tailoring the dispute resolution process to suit their needs, and the existing commercial interests and realities.¹⁴

Like any other arbitral jurisdiction, in India as well, parties in exercise of their autonomy are free to agree on: (i) the place of arbitration; (ii) the laws governing the arbitration; (iii) the date of commencement of arbitral proceedings; (iv) the language of the arbitration; (v) procedure and practices for hearings and written proceedings; (vi) consequences of default by either of the parties; (vii) appointment of expert witnesses; (viii) appointment of arbitrators; and (ix) the manner of decision making by Arbitral Tribunal.¹⁵ In essence, the Arbitration Act recognises the principle of party autonomy to the fullest extent albeit subject to the general principles of fairness and equality.

The Arbitration Act contains several words and phrases which demonstrate that the Indian lawmakers, in their wisdom, gave utmost pre-eminence to party autonomy in all steps of the arbitral process. Examples of such phrases include: “unless otherwise agreed by the parties”, “failing any agreement”, “the parties are free to agree”, “failing such agreement”, and “unless the agreement on the appointment procedure provides other means”.¹⁶

(ii) Appointment of arbitrator(s)

Section 10 of the Arbitration and Conciliation Act, 1996 provides that parties are free to determine the number of the arbitrators so long as the same is not an even number (to prevent a potential deadlock in the decisions rendered by the Arbitral Tribunal). When parties fail to set the number of arbitrators, the Arbitration Act provides that the arbitral proceedings would be conducted under a sole arbitrator.

In terms of the provisions contained in Section 11 of the Arbitration and Conciliation Act, 1996 parties are also free to agree on a procedure to appoint the arbitrator(s). Should they fail to follow the agreed procedure, the provisions under Section 11 outline the next steps.

Three-arbitrator scenario: If an arbitration agreement requires the appointment of a three-Arbitrator Tribunal, but the parties do not agree on the procedure for constitution the same, Section 11(3) specifies that each party must appoint one arbitrator. The two appointed arbitrators then have the task of selecting a third arbitrator, who will serve as the presiding arbitrator. If either side fails to appoint an arbitrator within 30 days of being asked, or if the two arbitrators cannot agree on the third and presiding arbitrator within 30 days of their own appointments, an application can be made to the Supreme Court, High Court, or a designated institution to finalise the appointment.

Sole arbitrator scenario: For cases requiring a single arbitrator, if the parties are unable to agree within 30 days of one party’s request, a similar application process with the Court¹⁷ or a designated institution is triggered under Section 11(5).

Section 11(8) of the Arbitration Act requires the appointing authority to be mindful of the qualifications required for the arbitrator(s) as agreed by the parties. To give an example, if the parties agree that sector-specific experts would be appointed, the appointing courts must have due regard to the same to secure appointment of an independent and impartial tribunal.

As would be noted from the above, the courts step in to take up the role of selecting an impartial arbitrator only after party negotiations fail. Judicial intervention is therefore framed as a secondary, fallback measure that ensures the continuation of the arbitration process without overtaking party autonomy.

(iii) Independence and impartiality of arbitrators

In India, the independence and impartiality of arbitrators constitute the core of the arbitration framework, with legal provisions designed to prevent conflicts of interest and bias in arbitral proceedings. The most important provision for maintaining these safeguards is Section 12 of the Arbitration Act which establishes strict requirements for arbitrators to disclose any relationships or interests that could raise doubts about their neutrality.

In terms of Section 12(1) of the Arbitration Act before accepting an appointment, an arbitrator is required to disclose any circumstance that might reasonably create doubts about their impartiality. This duty of disclosure includes any financial, business, or other significant relationships with parties involved in the dispute, whether past or present. Additionally, arbitrators must declare any potential time constraints that may affect their ability to handle the arbitration in a timely manner. Notably, the disclosure obligation on arbitrators is ongoing. In other words, arbitrators are expected to keep parties informed of any new developments that could affect their impartiality throughout the arbitration process.

The 2015 Amendments to the Arbitration Act introduced the Fifth and Seventh Schedules, which explicitly list circumstances likely to raise “justifiable doubts” regarding an arbitrator’s impartiality or independence. The Fifth Schedule contains 34 categories, covering relationships between arbitrators and parties, past services provided to parties, or involvement in related cases. The Seventh Schedule goes further, making individuals with certain conflicts ineligible to serve as arbitrators unless the parties explicitly waive this disqualification in writing after the dispute has arisen.

An arbitrator, for instance, cannot have a direct business relationship with either party or be in a managerial role with an affiliated entity directly involved in the dispute. The criteria under the Fifth and Seventh Schedules of the Arbitration Act draw clear boundaries, promoting a standard of impartiality that mirrors international arbitration norms, such as those outlined in the Uncitral Model Law and the International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitrations.

Section 12(5) introduces a bar on the appointment of individuals with specific relations to the parties or the dispute itself. Arbitrators falling into the categories set out under the Seventh Schedule are automatically considered ineligible to serve. However, if both parties mutually agree in writing to continue with the said arbitrator after a dispute arises, they can waive this restriction. This provision seeks to balance party autonomy with the assurance of an impartial arbitration process, allowing flexibility in situations where parties may trust an individual despite the relationship(s) mentioned under the Seventh Schedule. Thus, Section 12 of the Arbitration Act when read with the Fifth and Seventh Schedules of the Arbitration Act aims to provide a fair and level-playing field where each party is confident in the arbitrator’s neutrality.

If a party believes an arbitrator is biased or lacks independence, they may challenge the appointment under Section 13 of the Arbitration Act. Section 13(1) leaves it to the parties to elect a procedure for challenging the arbitrator’s appointment. If the parties fail to agree upon a procedure, the Arbitral Tribunal itself shall decide on the challenge. If the Tribunal rejects the challenge, arbitration proceeds, but the dissatisfied party retains the right to contest the final award through an appeal under Section 34 of the Arbitration Act.

The emphasis on independence and neutrality of arbitrators in Indian law reflects a broader shift towards fostering a credible arbitration system. Prior to the 2015 Amendments, there was a greater tolerance for clauses that allowed one party to exercise significant control over selection of arbitrator(s). However, the amended provisions of the Arbitration Act now generally prohibit, and at the very minimum disfavour these practices.

(iv) Equality in arbitrations in India

The principle of equal treatment for all parties is recognised in Section 18 of the Arbitration and Conciliation Act, 1996. The principle stipulates that both parties must be treated with equal fairness and provided with an unrestricted opportunity to present their case. Commonly referred to as the “due process clause” of arbitration, Section 18 embodies two key elements: a requirement for equality in treatment and a fundamental right to a fair hearing.¹⁸

The insistence on equality is rooted in international arbitration practices, particularly the Uncitral Model Law, from which Section 18 draws. The concept began as a restriction on procedural autonomy, originally part of Article 19 in the Uncitral Model Law and read as below:

“3. The freedom of the parties is subject only to the provisions of the model law, that is, to its mandatory provisions…”

Later, however, the importance of procedural fairness led to its elevation to a standalone provision, reinforcing its status as an absolute principle from which the parties cannot derogate. In separating equality from procedural autonomy, the Uncitral Model Law underlined the non-negotiable nature of fairness in arbitral proceedings.

Within the Indian framework, party equality applies to every phase of arbitration, including appointment of arbitrators, establishing procedures, presentation of arguments, etc. While the parties are permitted to outline the procedures, this autonomy is constrained by the overriding mandate of fairness. No party, regardless of contractual leverage, may impose terms or appoint arbitrators in a manner that fundamentally tilts the process in its favour. Such protective measures ensure that arbitration, although private, remains consistent with standards of equity found in judicial proceedings.

For instance, if one party has greater control in the process of constituting the Arbitral Tribunal due to an asymmetric appointment clause, the law may enable the disadvantaged party to seek judicial intervention to redress this imbalance. Thus, the arbitration framework prioritises procedural parity even when contracts attempt to sway the scales.

Notably, the courts and arbitral institutions in India are mandated to ensure that the principles of equal treatment are honoured, particularly during arbitrator appointments. Section 11(8) reinforces this obligation by requiring appointing authorities to select arbitrators who embody both independence and impartiality, aligning with the equality and fairness required under Section 18.

Judicial precedents emphasise the binding nature of equality in arbitration. For example, the Supreme Court’s observations in Union of India v. Vedanta Ltd.¹⁹, highlighted that equitable and fair treatment is a non-negotiable foundation upon which arbitration is built. The Supreme Court went on to observe that fair treatment forms the “edifice of the alternate dispute resolution mechanism”, encapsulating the judicial perspective that Section 18’s equality clause is integral to maintaining the credibility of arbitration as a legitimate alternative to court litigation.

The principle of equality also mandates that the parties have equivalent capacities to engage in the arbitration process, including equal opportunities to produce evidence, make arguments, and respond to counterarguments.²⁰

(v) Natural justice in arbitrations

Natural justice is a principle embedded deeply within Indian arbitration law, ensuring that the arbitration process upholds the values of fairness and equity at every step. While arbitration is often seen as a private mechanism for dispute resolution, Indian law insists on certain standards that are non-negotiable, drawn from the broader principles of natural justice. These standards aim to prevent any miscarriage of justice and ensure that the process remains not only fair but also perceived as such. Two pillars of natural justice are especially relevant: the rule against bias (nemo judex in causa sua) and the right to a fair hearing (audi alteram partem).

Article 14 of the Indian Constitution, which guarantees equality before the law, reinforces these principles in arbitration by demanding that State action, judicial and quasi-judicial decisions are fair and non-arbitrary. The Supreme Court has often underscored that a breach of natural justice constitutes arbitrariness, which violates Article 14 of the Indian Constitution. This interpretation extends to arbitration proceedings, which, while contractual, are subject to certain expectations of fairness as set by law.

In the landmark case of Union of India v. Tulsiram Patel²¹, the Supreme Court clarified that natural justice is part of the constitutional guarantee of equality. Any deviation from fair treatment or impartiality, even in non-State actions, stands as a violation of this constitutional mandate. Indian arbitration law thus integrates natural justice not merely as a procedural necessity but as a core constitutional feature that validates the process.

(vi) Bias

The test for “real likelihood of bias” is crucial to maintaining the impartiality of the Arbitral Tribunal. This test is grounded in the principle that even the “appearance” or a “hint” of partiality can undermine the fairness of arbitration, particularly as articulated in A.K. Kraipak v. Union of India²². In A.K. Kraipak case²³, the Supreme Court emphasised that actual bias need not be proven. Instead, what matters is whether an objective observer would “perceive” a “reasonable chance” of bias. This approach considers human nature, assuming that subtle interests or relationships can sway judgments, even unconsciously, which could cast doubt on the integrity of the process.

To support this standard, Indian arbitration law mandates that arbitrators disclose any circumstances that could raise doubts about their neutrality. Section 12 of the Arbitration Act read with the Fifth and Seventh Schedules requires full transparency from arbitrators, and set out, in detail, the kinds of relationships and interests that automatically disqualify an arbitrator. These schedules incorporate both objective relationships, such as financial ties, and more nuanced professional associations, creating a framework where impartiality can be assessed both broadly and specifically.

In HRD Corpn. v. GAIL (India) Ltd.²⁴, the Supreme Court, while dealing with a matter pertaining to arbitration, made observations similar to those in A.K. Kraipak case²⁵ by holding that the real likelihood test should be based on whether a reasonable observer, knowing all relevant facts, would anticipate bias.

Early developments and the establishment of fair appointment principles

(i) 246th Report of the Law Commission of India

In its 246th Report, the Law Commission of India focused on the importance of reforming the Arbitration Act to align it with widely recognised international standards of arbitrator impartiality and neutrality. Within the section titled “neutrality of arbitrators”, the Commission argued that any quasi-judicial process, including arbitration, must adhere to fundamental principles of natural justice. At the time, prevailing judicial attitudes showed a preference for upholding contractual terms entered in business with open eyes, over ensuring procedural fairness, a stance the Commission deemed far from satisfactory. To illustrate, the Report referred to numerous cases where courts upheld arbitration clauses in government contracts that designated active department employees as arbitrators, affirming their validity and enforceability.

The Commission emphasised that a sound legal framework should not allow the appointment of an arbitrator who is directly involved in the dispute or employed by one of the disputing parties, even if both sides had agreed to this arrangement. The Report stressed that while party autonomy is essential, it should not undermine the need for impartial and independent dispute resolution. To address these concerns, the Commission proposed specific amendments to enhance the provisions on arbitrator neutrality in the Arbitration Act. This included adding schedules derived from the “red” and “orange” lists of the IBA Guidelines on Conflicts of Interest in International Arbitration. This schedule, as per the Commission, was intended to serve as a reference for determining whether circumstances exist that might cast reasonable doubt on an arbitrator’s independence and impartiality.

The Commission further recommended that if a prospective arbitrator fell under any of the categories in the schedule that was borrowed from the “red” list in the IBA Guidelines, they would be legally barred from serving as an arbitrator. However, the Commission left room for flexibility, acknowledging that genuine party autonomy should be preserved in specific instances. Accordingly, it proposed that parties could agree in writing, after a dispute has arisen, to waive the restrictions set out in Section 12(5) of the Arbitration Act. These recommendations from the Commission were subsequently incorporated into the Arbitration Act with the enactment of the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment).

(ii) The decision in Voestalpine

In a landmark ruling emphasising the essential role of independence and neutrality in arbitration, the Supreme Court in Voestalpine case²⁶ drew upon recommendations from the Law Commission and set forth several pivotal insights. The Supreme Court began by affirming that impartiality and independence form the bedrock of any adjudicative system, elements that must be upheld consistently throughout the arbitration process. Citing international precedents to illustrate how these principles are recognised globally, the Supreme Court opined that allowing parties unrestricted autonomy in ways that overlook the well-established standards of fairness and equality would be both inappropriate and unlawful. Furthermore, the Supreme Court noted that Section 12, as revised in the 2015 Amendment, was explicitly designed to reinforce arbitrator neutrality, clarifying the primary intent behind the statutory update.

(iii) Judicial trends

Before the Arbitration Act came into force, under the framework of the Arbitration Act of 1940, the Supreme Court addressed issues related to the unilateral appointment of an arbitrator in Dharma Prathishthanam v. Madhok Construction (P) Ltd.²⁷, and rendered the following judgment:

12. A unilateral appointment as well as unilateral reference — both will be illegal. It would make a difference if in respect of a unilateral appointment and reference if the other party had submitted to the jurisdiction of an arbitrator so appointed and if the rights which it has under such an agreement has been waived, then an arbitrator so appointed may proceed with the reference and the party submitting to his jurisdiction and participating in the proceedings before him may later on not be allowed to raise any objection in with regard to such appointment of arbitrator.

The 2015 Amendment and the introduction of a new arbitration framework solidified and intensified the rules around the prohibition of unilaterally appointed arbitrators. In TRF case²⁸, the Supreme Court scrutinised the implications of Section 12(5) and the Seventh Schedule within the Arbitration Act. The key question before the Court was whether an individual, once disqualified by Section 12(5) and the Seventh Schedule from serving as an arbitrator, could legally nominate someone else in their place. The Supreme Court firmly answered this in the negative, stating:

54. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Arbitration Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. Once cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as a sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated.

The ruling in TRF case²⁹ holds that any outcome rooted in an unlawful unilateral appointment of an arbitrator is inherently tainted, as illustrated with the analogy that a poisoned root yields poisoned fruit.

A similar issue arose in Bharat Broadband Network Ltd. v. United Telecoms Ltd.³⁰, where the appellant, after having made a unilateral arbitrator appointment, approached the Delhi High Court under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996. The appellant contended that, following the decision in TRF case³¹, the appointed arbitrator was legally not permitted to continue. The appellant therefore requested appointment of a substitute arbitrator. However, the Delhi High Court dismissed the petition, arguing that the appellant, having appointed the arbitrator, could not now contest the arbitrator’s ineligibility.

Ultimately, the Supreme Court overruled the Delhi High Court’s decision, asserting that it is legally untenable for someone who is themselves statutorily barred from acting as an arbitrator to appoint another person to the role. The Court noted that a unilateral appointment could only stand if, after a dispute had arisen, both parties expressly agreed in writing to waive Section 12(5). Accordingly, in setting aside the Delhi High Court’s ruling, the Supreme Court concluded:

15. Section 12(5), on the other hand, is a new provision which relates to the de jure inability of an arbitrator to as such. Under this provision any prior agreement to the contrary is wiped out by the non obstante clause in Section 12(5) the moment any person whose relationship with the parties or the counsel or the subject-matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be “ineligible” to be approved as arbitrator. The only way in which this ineligibility can be removed is by the proviso, which again is a special provision which states that parties may, subsequent to disputes having arisen between them, waive the applicability of Section 12(5) by an express agreement in writing. … Obviously, the “express agreement in writing” has reference to a person who is interdicted by the Seventh Schedule, but who is stated by parties (after disputes have arisen between them) to be a person in whom they have faith notwithstanding the fact that such person is interdicted by the Seventh Schedule.³²

The bar for permitting the unilateral appointment of an arbitrator under the Arbitration Act is set notably high. Only after a dispute has emerged can both parties formally agree in writing to waive the application of Section 12(5) concerning the suggested arbitrator.

The question of unilateral appointments arose again in Perkins case³³. Here, the Supreme Court, referencing its decision in TRF case³⁴, opined that what is prohibited outright cannot be accomplished through indirect means. Once a person is rendered ineligible by law to act as an arbitrator, they cannot appoint any other person as arbitrator to circumvent the law.

Over time, various rulings³⁵ have shaped a clear set of principles concerning unilateral arbitrator appointments:

(i) Unilateral appointments of a sole arbitrator are generally void from the outset, and any individual proposed in this manner is, by law, ineligible under Section 12(5) combined with the Seventh Schedule of the Arbitration and Conciliation Act, 1996.

(ii) Parties involved in a dispute may choose to waive the restrictions of Section 12(5), but this waiver must be documented in a written agreement made after the dispute has arisen.

(iii) If an arbitrator is deemed ineligible, this flaw fundamentally affects the proceedings, rendering any actions or decisions stemming from such an appointment legally void.

Prospective ruling in Core II

Upon having made extensive discussion on the subjects covered above, the Supreme Court, in its verdict in CORE II³⁶, discussed the idea of a prospective ruling to avoid disrupting existing arbitration cases by applying the new legal standard retroactively.

Typically, the Supreme Court’s decisions are applied to both past and present cases unless stated otherwise. However, in this instance, the Supreme Court recognised that a retroactive application of the law could impact numerous completed and ongoing arbitrations, especially those with three-member panels, and could risk destabilising established commercial arrangements involving Government and private entities.

To prevent such widespread disruption, the Supreme Court exercised its powers under Article 142 of the Indian Constitution, deciding that the ruling would only affect arbitrator appointments made after the judgment date.

Supreme Court’s conclusion in Core II

Based on its extensive discussion, the Supreme Court in CORE II³⁷, held the following:

(i) Equal treatment of parties: The Supreme Court stressed that fair treatment for both parties is crucial throughout the arbitration process, including when arbitrators are chosen. Any procedure that gives one side an advantage disrupts the basic fairness expected in arbitration.

(ii) PSU empanelment: Although public sector undertakings (PSUs) may form panels of arbitrators, the Supreme Court ruled that PSUs cannot insist that the other party select an arbitrator solely from their curated list. Such a demand undermines fairness in the selection process.

(iii) Unilateral appointment of a sole arbitrator: The Supreme Court found that clauses allowing one party to appoint a sole arbitrator on its own create doubts about the arbitrator’s impartiality and independence. These clauses give an unfair edge to the appointing party, limiting balanced participation.

(iv) Three-member panels and curated lists: In cases involving three-member tribunals, requiring one party to choose an arbitrator from a list created by the other side fails to ensure equal treatment. This arrangement was seen as favouring the Railways, leading to a skewed arbitration setup.

(v) Constitutional basis (Article 14): The Supreme Court held that unilateral appointment clauses in public-private contracts go against Article 14 of the Indian Constitution, which guarantees equality. When government bodies hold excessive control over the arbitration setup, it creates an unfair advantage, violating the principles of impartiality and fairness that are expected in public dealings.

(vi) Waiver under Section 12(5): The Supreme Court clarified that waiving potential bias, as allowed under Section 12(5) of the Arbitration and Conciliation Act, 1996 can only be agreed upon after the dispute has arisen.

(vii) Section 18 to apply at all stages: Section 18 applies to all stages of an arbitration including the stage of appointment/Constitution of the Arbitral Tribunal. The Arbitration Act does not provide any special treatment to the Government in this regard.

(viii) Party autonomy in making of an arbitration agreement is an essential feature of arbitration. It commences with choosing the members of the Arbitral Tribunal, extends to the procedure that would apply for its conduct, and concludes with the method by which an award could be challenged before a court. It is thus a brooding and guiding spirit of arbitration. Party autonomy is sufficiently incorporated in the Arbitration Act, along with a restraint on judicial intervention.

(ix) If an arbitration agreement is considered by the court as not enabling constitution of an independent and impartial tribunal, any submission that the said agreement is a binding contract, or it is in exercise of party autonomy is not tenable as such an agreement will be against public policy and as such not an enforceable contract.

Implications

The ruling in CORE II³⁸ significantly impacts public sector entities and their counter-parts in arbitration under Indian law. Government contracts often have clauses that give the State entity considerable sway in choosing arbitrators, just as seen in this case. With this decision, such clauses are now open to challenge if they undermine impartiality or violate the standard of equal treatment.

Parties in public-private partnerships, especially in high-stakes projects, will now need to revisit their arbitration clauses to ensure balanced selection methods. Ignoring this could lead to arbitrator appointments being ruled invalid, opening the door to protracted legal battles and disruptions in arbitration. The judgment also has immediate implications for legal professionals, arbitrators, and those drafting contracts. They will now need to review existing arbitration clauses closely to ensure they meet the standards set by the Supreme Court.

Looking ahead, arbitration clauses will likely evolve to prevent potential legal risks. We may see more balanced appointment structures, with joint selection methods or independent institutions overseeing appointments. Legal experts anticipate that this decision will strengthen India’s reputation in the global arbitration community, aligning its approach with international standards of fairness and neutrality.