Arbitrators in a dispute cannot determine their fees unilaterally and make it binding on the parties, the Supreme Court held in a judgment on Tuesday.
A Bench led by Justice D.Y. Chandrachud said arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration. Unilateral determination of fees violates the principles of party autonomy and the doctrine of prohibition.
Exercising plenary powers under Article 142 of the Constitution, the court held that “arbitrators do not have the power to unilaterally issue binding and enforceable orders determining their own fees. A unilateral determination of fees violates the principles of party autonomy and the doctrine of the prohibition in rem suam decisions, i.e., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration”.
It, however, said an arbitral tribunal has the discretion to apportion the costs (including arbitrators’ fee and expenses) between the parties in terms of Section 31(8) and Section 31A of the Arbitration Act and also demand a deposit (advance on costs) in accordance with Section 38 of the Arbitration Act.
The judgment said arbitrators’ fee must be decided at the inception to avoid conflict.
