Arbitrators don't have power to fix their own fees: SC

The Supreme Court on Tuesday declared that arbitrators do not have the power to unilaterally determine their own fees as it violated the principles of party autonomy.

The top court said the ceiling of Rs 30 lakh is applicable to each individual arbitrator, and not the arbitral tribunal as a whole, which consists of three or more arbitrators. A sole arbitrator should be paid 25% over and above the amount in accordance with the Fourth Schedule of the Arbitration and Conciliation Act, 1996, it added.

A three-judge bench presided over by Justice DY Chandrachud approved the government's stand that under the Act the upper limit of what an arbitrator can charge is Rs 30 lakh per individual if the quantum of dispute is more than Rs 20 crore.

The court ruled that a unilateral determination of fees violated the principles of party autonomy and the doctrine of the prohibition of in rem suam decisions, i.e., the arbitrators cannot be a judge of their own private claim against the parties regarding their remuneration.

However, it said that the 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 Act and also demand a deposit (advance on costs) in accordance with Section 38.

"If while fixing costs or deposits, the arbitral tribunal makes any finding relating to arbitrators’ fees (in the absence of an agreement between the parties and arbitrators), it cannot be enforced in favour of the arbitrators," the court said.

The court further ruled that arbitrators in a case, unless it is an international arbitration case, can not determine their fee without consent of the parties involved.

The bench also comprising Justices Sanjiv Khanna and Surya Kant passed the judgement on a petition by Oil and Natural Gas Corp, aggrieved with an arbitration panel which had raised its fee midway.