OIL AND NATURAL GAS CORPORATION LTD. v. AFCONS GUNANUSA JV

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parties are not involved in negotiations with the arbitrator(s) to decide A the fees. However, in ad hoc arbitrations, parties enter into their own arrangements with the arbitrators regarding their remuneration28. C.1.1 Position of international organisations (i) United National Commission on International Trade 29 B

41Copy pinpoint41. The UNCITRAL adopted a model law on International Commercial Arbitration on 21 June 1985. It was hoped that states would give due consideration to the model law while framing their own domestic legislation. The Arbitration Act has also been enacted taking into account the UNCITRAL Model Law. The Preamble to the Act states: C “WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International commercial Arbitration in 1985: AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the D law of arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980; E AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation; AND WHEREAS the said Model Law and Rules make significant F contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations; AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model G Law and Rules; 28 Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (6th Edition, 2015), Chapter 4, Paragraph 4.203 (“Redfern and Hunter on International Arbitration”) 29 “UNCITRAL” H

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A BE it enacted by Parliament in the forty-seventh Year of the Republic of India as follows:-”

42Copy pinpoint42. The UNCITRAL Model Law does not explicitly recognise the right of remuneration of arbitrator(s). However, arbitrators must be compensated for their services. This flows from the contractual B relationship between the parties and the arbitrator and customary practice30.

43Copy pinpoint43. The original UNCITRAL Rules introduced in 1976 could be used to govern ad hoc arbitrations as well as arbitrations where an arbitral institution was involved. The 1976 Rules allowed the arbitrator(s) C to determine their own fees, which were to be reasonable taking into account the sum in dispute and the complexity of the dispute31. The UNCITRAL rules also required the arbitrator(s) to take into account the schedule of fees that has been issued or provided by an appointing authority, if designated by the parties32. In the absence of such a fee schedule, the arbitral tribunal could fix its fees only after consulting with the appointing authority if a party has requested the appointing authority to furnish a statement for determining the fees and the appointing authority has consented to providing such a statement33. However, the appointing authority did not have the power to alter the decision of the tribunal regarding remuneration payable to arbitrators. The arbitrators had the final authority to determine their remuneration34. Commentators have noted that this was an “unusual approach” for establishing the fees of arbitrators and was subject to criticism because it granted arbitrator(s) undue authority to determine their compensation35.

44Copy pinpoint44. The UNCITRAL Rules were revised in 2010. The Rules F continue to grant a substantial role to the arbitrators in deciding their own fees but the appointing authorities, if designated by the parties, or the Permanent Court of Arbitration36, have greater control over such

30 Gary B Born, International Commercial Arbitration (3 nd edition, 2021), Chapter 13 (“GaryBorn on Arbitration”) G 31 Article 38(a) read with Article 39(1), UNCITRAL Rules 1976 32 Article 39(2)-(3), UNCITRAL Rules 1976 33 Article 39(3)-(4), UNCITRAL Rules 1976 34 D Caron and L Caplan, The UNCITRAL Arbitration Rules: A Commentary (2 nd edition, 2013), page 863 35 Supra at note 30 36 “PCA” H

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determination. Article 40(2)(a) read with Article 41 of the UNCITRAL A Rules 2010 empowers the arbitral tribunal to fix their fees subject to the same reasonableness requirement and the other criteria prescribed under the 1976 Rules37. The arbitral tribunal is required to inform the parties as to “how it proposes to determine its fees and expenses, including any rates it intends to apply” promptly after its constitution38. B It is noted that this makes the process of determining fees more transparent39. The fees set by the arbitrators can be reviewed they are not reasonable. Under Articles 41(3) 40 and 41(4)(b) 41 of the UNCITRAL Rules 2010, within 15 days of receiving the arbitral tribunal’s determination of fees, the parties can refer the fees determined by the arbitral tribunal to the appointing authority for review and if no such authority has been designated, then the review will be undertaken by the Secretary-General of the PCA. If the Secretary- General of the PCA or the appointing authority (if designated) finds that the fee proposed to be charged is excessive, then it can make necessary adjustments in terms of Article 41(4)(c)42. The fees so revised are binding on the tribunal43.

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A (ii) Permanent Court of Arbitration

45Copy pinpoint45. The PCA Rules have been formulated on the basis of the UNCITRAL Rules 2010. A mandatory automatic review of the fees and expenses determined by the arbitral tribunal is carried out by Secretary General of the PCA (as the appointing authority under the PCA Rules) B at the conclusion of each case44. The process of review of fees set by the arbitral tribunal is not automatic under the UNCITRAL Rules 2010. Parties may hesitate to invoke the provisions of review in the fear of upsetting the tribunal or they may raise unjustified requests for review if they are dissatisfied with the award. The PCA Rules avoid these pitfalls. The PCA is also empowered to manage the advances of costs incurred C by the arbitrators. Every time a payment is made to an arbitrator out of the deposit, it is subject to review45. The PCA rules become relevant since India has signed a Host Country Agreement with the PCA and a PCA facility is in the process of being set up in India. (iii) London Court of International Arbitration46 D

46Copy pinpoint46. The LCIA’s Schedule of Costs of arbitrations governs the fees payable to the arbitrator(s). The arbitral tribunal is required to agree in writing to the rates specified in the schedule. The tribunal’s fees are calculated on the basis of the work done by the arbitrator(s) in connection with the arbitration, the complexity of the case and requirements relating E to the qualification of the arbitrator(s). The fees are charged on an hourly basis not exceeding £500 unless there are exceptional circumstances 47. The role of the arbitrator(s) thus is limited to reporting the hours worked which forms the basis of the fees to be paid.

F (iv) International Centre for Dispute Resolution48

47Copy pinpoint47. The ICDR case administrator fixes the daily or hourly rate for arbitrator(s)49.The determination of fees may involve an element of

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negotiation between the parties and the arbitrator(s)50. Article 38 of the A ICDR Rules 2021 provides that the “[t]he fees and expenses of the arbitrators shall be reasonable in amount, taking into account the time spent by the arbitrators, the size and complexity of the case, and any other relevant circumstances”. (v) International Chamber of Commerce51 B

48Copy pinpoint48. The ICC Rules 2021 stipulate that the ICC Court will determine the arbitrators’ fee52 according to the fee scale based on the sum in dispute, or where the sum is not stated, based on its discretion53. The ICC Court while setting the fees of the arbitrator(s) has to consider various factors like “the diligence and efficiency of the arbitrator, the C time spent, the rapidity of the proceedings, the complexity of the dispute and the timeliness of the submission of the draft award”54. The ICC Court is empowered to increase the fees if the arbitration has been conducted expeditiously and reduce the fees if there has been a delay in pronouncing the award55. (vi) Singapore International Arbitration Centre56 D

49Copy pinpoint49. The fees are fixed by the Registrar in accordance with the Schedule of Fees on basis of the amount in dispute57. The time spent on

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A the matter and the complexity of the dispute are considered for the determination of fees58.The parties have the discretion to provide an alternative method of determining the fees prior to the constitution of the arbitral tribunal59.

(vii) Hong Kong International Arbitration Centre60 B

50Copy pinpoint50. The parties determine the arbitrators’ fees based on either the sum in dispute or at an hourly rate61. If the fees are decided based on the sum in dispute, then the fees will be fixed on the basis of the guidelines and fee table provided in the Rules. If the fees are to be determined at C hourly rates, then aco-arbitrator will negotiate and agree on their fees with the nominating party, and a sole or presiding arbitrator will negotiate with parties jointly62.

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(viii) International Centre for Settlement of Investment A Disputes 63

51Copy pinpoint51. The Secretary General, with the approval of the Chair (Chairman of the Administrative Council), would determine and publish the fee and per diem allowance payable to each arbitrator(s) in terms of the Regulation 14 of the ICSID Administrative and Financial Regulations B 202264. The older 2006 version of the Regulations allowed the parties to contract out of the fee structure prescribed by ICSID65. (ix) Summary

52Copy pinpoint52. Typically, when an arbitration is conducted under the auspices of an arbitral institution, the fees payable to the arbitrator(s)are fixed by C the institution itself. However, some arbitral institutions like ICDR, SIAC and HKIAC allow a certain level of negotiations between the parties and arbitrator(s) for the determination of fees payable to the arbitrators, upholding the principle of party autonomy. ICDR allows determination of compensation by the Administrator in consultation with the arbitrator(s) D and the parties. SIAC allows the parties to propose an alternative method of calculating fees prior to the constitution of the tribunal. HKIAC enables the parties to choose between remuneration based on the sum in dispute or hourly rates. Interestingly, UNCITRAL Rules 2013 allow greater control to the arbitrator(s) in determining their fees. However, the designated appointing authority or the Secretary General of the PCA E can make adjustments to the fees proposed by the arbitrator(s). Thus, none of the international bodies (including arbitral institutions) confer an absolute or unilateral power to the arbitrator(s) to decide their own fees. Gary Born in his treatise on international commercial arbitration has noted that, “[a] number of other institutional rules also minimize the role F 63 “ICSID” 64 Regulation 14 (2) states: “The Secretary-General, with the approval of the Chair, shall determine and publish the amount of the fee and the per diem allowance referred to in paragraph (1)(a) and (c). Any request by a member for a higher amount shall be made in writing through the Secretary-General, and not directly to the parties. Such a request must be made before the constitution of the Commission, Tribunal or Committee G and shall justify the increase requested”. 65 Regulation 14 states: “(1) Unless otherwise agreed pursuant to Article 60(2) of the Convention, and in addition to receiving reimbursement for any direct expenses reasonably incurred, each member of a Commission, a Tribunal or an ad hoc Committee appointed from the Panel of Arbitrators pursuant to Article 52(3) of the Convention (hereinafter referred to as “Committee”) shall receive…” H

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A of arbitrators in fixing the tribunal’s fees. These rules typically fix the amount of the arbitrator’s fees by reference to the amount in dispute” 66. C.1.2 Position in other national jurisdictions

53Copy pinpoint53. While it will not be possible to undertake a comprehensive review of all the foreign jurisdictions in respect of the legal regime B governing the payment of remuneration to arbitrators, we have discussed a few jurisdictions that either have explicitly recognised an arbitrators’ entitlement to remuneration and/or have dealt with the issue of arbitrators’ power of fixing their own remuneration. (i) England C

54Copy pinpoint54. The English courts have held that the arbitrator’s rights and duties result from a conjunction of contract and status67. Upon accepting the appointment, the arbitrator becomes a party to the arbitration agreement, giving rise to a trilateral contract between the parties and the arbitrator68. However, the English courts acknowledge that certain aspects of the relationship between the arbitrator and parties are also influenced by the quasi-judicial status of the arbitrator, which requires the arbitrator to be independent of the parties69.

55Copy pinpoint55. Section 28 of the English Arbitration Act 199670 recognises the entitlement of an arbitrator to remuneration. This is a mandatory provision which cannot be derogated from71. Section 28(1) codifies the common law position72 that parties are jointly and severally liable to pay reasonable fees and expenses to the arbitrator(s) as is appropriate in the circumstances. In terms of Section 28(5), the arbitrator(s) are entitled to be paid the fees and expenses agreed by them with the parties 73. F However, if there is no such agreement, the arbitral tribunal can seek

66 Supra at note 30 67 KS Norjarl AS v. Hyundai Heavy Indus. Co., [1992] 1 QB 863, 884 68 Compagnie Européenne de Céréales SA v. Tradax Exp. SA, [1986] 2 Lloyd’s Rep. 301 (QB) 69 Jivraj v. Hashwani, [2011] UKSC 40 G 70 “English Arbitration Act” 71 Section 4(1) and Schedule 1 of the English Arbitration Act 72 Loukas A Mistelis (ed), Concise International Arbitration (2nd edition, 2015), Chapter 23 (“Mistelis on Arbitration”) 73 Section 28(5) provides: “Nothing in this section affects any liability of a party to any other party to pay all or any of the costs of the arbitration (see sections 59 to 65) or H any contractual right of an arbitrator to payment of his fees and expenses.”

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payment of such fees and expenses from one, some or all the parties74. A The parties’ liability to pay fees and expenses may be determined by courts. The court may consider factors like the standard fees of the arbitrator(s), the time invested, complexity of the dispute, and whether the procedures adopted by the tribunal were suitable75.Section 33(1)(b) stipulates that it is the duty of the arbitral tribunal to adopt procedures that are suitable to the circumstances of the case and to avoid unnecessary delays or expenses, to provide a fair means for the resolution of the dispute. The court is also entitled to review the fees76 determined by the arbitrator(s) or arbitral institution, which has not been contractually agreed to by the parties77. However, if the agreement with an arbitrator(s) or an arbitral institution is not clear regarding the terms of the payment, the court can intervene to review the fees, in order to examine if they are reasonable78. It is also important to note that where only one party has agreed to the fees and the fees have been held to be unreasonable, then the other party is only jointly and severally liable to pay the amount that the court has determined to be reasonable, but the first party may be liable contractually to pay the contractually agreed amount79. (ii) Italy

56Copy pinpoint56. Article 814 of the Italian Code of Civil Procedure provides that the arbitrators have a right to expenses and the fees for the work done, unless they have waived this right at the time of acceptance or through a subsequent written statement. Article 814 also provides that the parties are jointly and severally liable for paying the fees and expenses of the arbitral proceedings, irrespective of how the arbitration costs are apportioned between them. If one party has made all the payments of the fees and expenses payable to the arbitrator(s), they are entitled to recover this amount from the other party subject to the limits set out in the award.

74 Supra at note 72 75 ibid 76 Section 28(2) provides: “Any party may apply to the court (upon notice to the other parties and to the arbitrators) which may order that the amount of the arbitrators’ fees and expenses shall be considered and adjusted by such means and upon such terms as it may direct.” 77 Hussmann (Europe) Ltd v.Al Ameen Development & Trade, [2000] 2 Lloyd’s Rep. 83. Queen’s Bench Division (Commercial Court)), paragraphs 71-72 78 ibid 79 Supra at note 72 H

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57Copy pinpoint57. Article 814 also recognises that arbitrator(s) determine their own fees in the award and allocate the responsibility of the payment of such fees. However, such a determination is not binding unless the parties approve the fees proposed by the arbitrator(s). If the fees have not been paid, the arbitrator(s) can approach the President of the court in the district where the arbitration is seated for the determination of the fees. B This order is enforceable against the parties80. The schedule of fees is provided in the Ministerial Decree issued by the Italian Ministry of Justice for domestic ad hoc arbitrations81. (iii) Sweden

58Copy pinpoint58. The arbitral tribunal is empowered to set its own fees unless there is an agreement between the parties82. Section 37(1) of the Swedish Arbitration Act83 provides that the parties are jointly and severally liable to pay reasonable compensation to the arbitrator(s) for work and expenses. The Swedish Supreme Court has interpreted the words “reasonable compensation” to mean an assessment of time spent by the arbitrator(s) and the qualification of the arbitrator(s)84. The Swedish Supreme Court has also noted that a disproportionately high cost of arbitration compared to the value of sum in dispute does not necessarily require a reduction in the compensation85.

59Copy pinpoint59. Section 37 of the Swedish Arbitration Act is applicable “unless otherwise jointly decided by the parties in a manner that is binding upon the arbitrators”. Commentators have thus noted that Section 37 is non-

80 CMS Expert Guides, “International Arbitration Law and Rules in Italy”, available at <https://cms.law/en/int/expert-guides/cms-expert-guide-to-international-arbitration/ italy> accessed on 29 June 2022; See also, Italian Code of Civil Procedure, available at F <https://www.international-arbitration-attorney.com/wp-content/uploads/2013/07/ Italy-Arbitration-Law.pdf> accessed on 29 June 2022 81 Cecilia Carrara, Stefano Parlatore, Daniele Geronzi et.al, Arbitration Procedures and Practice in Italy, available at <https://uk.practicallaw.thomsonreuters.com/6-383- 9187?transitionType=Default&contextData=(sc.Default)&firstPage=true#co_anchor_a719112> accessed on 29 June 2022 82 Annette Magnusson, Jakob Ragnwaldh and Martin Wallin (eds), International G Arbitration in Sweden: A Practitioner’s Guide (2nd edition, 2021), Chapter 9 83 The Swedish Arbitration Act (SFS 1999:116), available at <https://sccinstitute.se/ media/1773096/the-swedish-arbitration-act_1march2019_eng-2.pdf> accessed on 29 June 2022 84 Supra at note 82 85 NEMU Mitt i Sverige AB v. Jan H, Gunnar B and Bo N (the arbitrators), the H Supreme Court, 22 October 1998, NJA 1998 p. 574 (T 105-98)

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mandatory and can be altered or waived off by the parties 86. However, A it is understood that if the arbitrator(s) are not parties to an agreement with respect to their compensation, it becomes binding on the arbitrator(s) only if they are aware and understand the agreement when they accept the appointment87. Section 39 of the Swedish Arbitration Act further provides that an agreement regarding compensation to the arbitrator(s) B which is not entered jointly by the parties is void.

60Copy pinpoint60. Section 41 enables a party or an arbitrator to file an application before the District Court regarding the amendment of the award with respect to the payment of compensation to the arbitrator(s). The District Court is empowered to reduce the compensation of the arbitrator(s). C The national courts also have the power to revise the fees set by arbitral institutions, if the seat of the arbitration is in Sweden88. This is an unusual exception since typically rules of arbitral institutions setting the fees are never subject to judicial review89. (iv) Germany D

61Copy pinpoint61. The German arbitration law is governed by the Tenth Book of the Code of Civil Procedure (Zivilprozessordnung)90. In the absence of an agreement in ad hoc arbitrations, the ZPO does not contain any provision regulating the fees payable to arbitrator(s). Fees are then to be charged in terms of the rules of the German Civil Code (Bürgerliches E Gesetzbuch)91 depending on whether the contract between the parties is to be classified as a service contract or contract for work. The provisions of the BGB provide that remuneration for such contracts is deemed to be the fees of the arbitrator(s) in absence of an agreement between the parties92. F

62Copy pinpoint62. However, in Germany, the arbitrator(s) are prohibited from determining their own fees in the absence of an agreement under the 86 Supra at note 82 87 ibid 88 Soyak Int’l Constr. & Inv. Inc. v. Hobér, Kraus & Melis, Case No. O 4227-06 G (Swedish S.Ct. 2008) 89 Supra at note 30 90 “ZPO” 91 “BGB” 92 K. Bockstiegel, Stefan Kröll and Patricia Nacimiento (eds), Arbitration in Germany: The Model Law in Practice (2nd edition, 2015), Chapter VI H

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A doctrine of prohibition ofin rem suam decisions, i.e., arbitrators cannot be a judge of their own cause93. Earlier, even a decision regarding the sum in dispute by the arbitral tribunal was seen as indirectly determining the amount of fees when fees are calculated as a percentage of the amount at stake and thus, was considered to be a violation of the above doctrine 94 . However, recently, the Federal Court of Justice B (Bundesgerichtshof)95 held that a decision of the tribunal regarding the sum in dispute, even if it influences the fees payable to the arbitrator(s), does not violate the doctrine of prohibition ofin rem suam decisions96. The BGH observed that since the ZPO obligates the arbitral tribunal to render a determination on costs, which often includes a determination regarding the sum in dispute, such a determination, even if it indirectly includes a decision on the fees, would not become a decision in rem suam97. The BGH further noted that while a determination of the sum in dispute only binds the parties, it is not actually a decision in rem suam from the arbitrators’ perspective98. In any event, an indirect determination by the arbitrator(s) as to their own fees only forms the basis of an arbitrator’s claim against a party and can be enforced only through court action if the party fails to pay the amount. In terms of the BGB, the courts can review such a claim to decide if it’s equitable. Thus, the arbitrator(s) cannot determine their fees arbitrarily99.

E (v) Japan

63Copy pinpoint63. Under Article 47(1) of the Japanese Arbitration Law100, the fees payable to the arbitrator(s)are to be governed by the agreement between the parties. If there is no agreement, then in terms of Article 47(2), the arbitral tribunal has the power to determine the remuneration F of the arbitrator(s). In such cases, the remuneration has to be of an appropriate amount.

93 ibid 94 ibid 95 “BGH” G 96 BGH 28.03.2012, SchiedsVZ 2012, 154 cited in supraat note 30;Seealso, supra at note 92 97 ibid 98 ibid 99 ibid 100 Law No138 of 2003, available at <https://japan.kantei.go.jp/policy/sihou/ H arbitrationlaw.pdf> accessed on 29 June 2022

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(vi) Singapore A 101

64Copy pinpoint64. Section 40(1) of the Arbitration Act 2001 provides that the parties are jointly and severally liable to pay reasonable fees and expenses to the arbitrator(s) that are appropriate to the circumstances. Section 40(2) provides that in the absence of a written agreement between the parties as to the fees payable to the arbitrator(s), any party can approach the Registrar of the Supreme Court within the meaning of the Supreme Court of Judicature Act 1969 for the assessment of fees. While Section 41(1) of the Singapore Arbitration Act empowers the arbitral tribunal to refuse to deliver an award if the parties have not made full payment of their fees and expenses, Section 41(2) allows a party to apply to the court to review the fees102. This has been understood as the right of the parties to challenge unreasonable fees103. (vii) United States

65Copy pinpoint65. The United States Federal Arbitration Act 1925104 does not explicitly make a reference to the rights or duties of the arbitrator(s). D The Uniform Arbitration Act, enacted in 1955, is also of relevance. It functions as a model arbitration statute to enable each state to adopt a uniform arbitration law. It was revised in 2000. Section 21(d) of the revised version of the Act provides that “an arbitrator’s expenses and fees, together with other expenses, must be paid as provided in the award.” The comment to this Section under the Act provides that “Section 21(d)… E allows arbitrators, unless the agreement provides to the contrary, to

101 Available at <https://sso.agc.gov.sg/Act/AA2001#:~:text=1.,is%20the%20 Arbitration%20Act%202001.&text=the%20arbitral%20tribunal%20as% 20authorised, and%20all%20the%20relevant%20circumstances>accessed on 29 June 2022 (“Singapore Arbitration Act”) F 102 Section 41(2) reads: “(2) Where subsection (1) applies, a party to the arbitral proceedings may, upon notice to the other parties and the arbitral tribunal, apply to the Court, which may order that — (a) the arbitral tribunal must deliver the award upon payment into Court by the applicant of the fees and expenses demanded, or any lesser amount that the Court may specify; (b) the amount of the fees and expenses demanded are to be assessed by the Registrar G of the Supreme Court; and (c) out of the money paid into Court, the arbitral tribunal must be paid the fees and expenses that may be found to be properly payable and the balance of the money (if any) must be paid out to the applicant”. 103 Bernard Hanotiau and Alexis Mourre (eds), Players Interaction in International Arbitration (ICC, 2012), Chapter 12 104 "FAA” H

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A determine in the award payment of expenses, including the arbitrator’s expenses and fees”105. In the United States, it has been held that it is a violation of public policy if the arbitrator(s) attempt to renegotiate the fees at a later stage once they are appointed, owing to the concern that the parties may be compelled to accede to the demand fearing adverse consequences106. B (viii) Summary

66Copy pinpoint66. Although there are jurisdictional differences, the following broad principles emerge from our discussion above: C (i) Typically, the fees payable to arbitrator(s) are determined through an agreement between the parties (of which the arbitrator(s) become aware of when they take up the assignment) or a separate agreement of the parties with the arbitrator(s). The arbitrator(s) then become bound by such contractually agreed fees; and D (ii) Certain arbitration legislations give the arbitrator(s) effective power to determine their own fees, typically when there is an absence of agreement between the parties on the subject. However, such determination of fees is subject to review by the courts who can reduce the fees if they are not reasonable.

67Copy pinpoint67. Thus, arbitrator(s) do not possess an absolute or unilateral power to determine their own fees. Parties are involved in determining the fees of the arbitrator(s) in some form. It could be by: (i) determining the fees at the threshold in the arbitration agreement; or (ii) negotiating with the arbitrators when the dispute arises regarding the fees that are payable; or (iii) by challenging the fees determined by the tribunal before a court.

G 105 Uniform Arbitration Act (Last Revisions Completed Year 2000), available at <https:/ /www.uniformlaws.org/HigherLogic/System/DownloadDocumentFile.ashx? DocumentFileKey=8fff228f-9517-f310-36a1-989efa4a826e&forceDialog=0> accessed on 29 June 2022 106 Double-M Construction Corp. v. Central School District No 1 Town of Highlands Orange County, (1978) 402 NYS 2d 442 cited in Jeffrey Waincymer, Procedure and Evidence in International Arbitration (Walters Kluwer, 2012) H

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C.2 Statutory scheme on payment of fees to arbitrators in A India C.2.1 Party autonomy

68Copy pinpoint68. Party autonomy is a cardinal principle of arbitration. The arbitration agreement constitutes the foundation of the arbitral process. The arbitral tribunal is required to conduct the arbitration according to B the procedure agreed by the parties. The procedure may stipulate adherence to institutional rules or ad hoc rules or a combination of both. Redfern and Hunteron International Commercial Arbitration (supra) compares arbitration to a ship, highlighting the extent of control parties exercise over arbitral proceedings: C “In some respects, an international arbitration is like a ship. An arbitration may be said to be ‘owned’ by the parties, just as a ship is owned by shipowners. But the ship is under the day-to-day command of the captain, to whom the owners hand control. The owners may dismiss the captain if they wish and hire a replacement, but there will always be someone on board who is in command (5) —and, behind the captain, there will always be someone with ultimate control.” The leading treatise on international commercial arbitration further notes that the principle of party autonomy is entrenched in the international and national regimes on arbitration: “Party autonomy is the guiding principle in determining the procedure to be followed in an international arbitration. It is a principle that is endorsed not only in national laws, but also by international arbitral institutions worldwide, as well as by international instruments such as the New York Convention and the Model Law. The legislative history of the Model Law shows that the principle was adopted without opposition, (7) and Article 19(1) of the Model Law itself provides that: ‘Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.’ This principle follows Article 2 of the 1923 Geneva Protocol, which provides that ‘[t]he arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties …’, and Article V(1)(d) of the New York Convention, under which recognition and enforcement of a foreign H

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A arbitral award may be refused if ‘the arbitral procedure was not in accordance with the agreement of the parties’.”

69Copy pinpoint69. The Arbitration Act recognises the principle of party autonomy in various provisions. It allows the parties to derogate from the provisions of the Act on certain matters. Several provisions of the B Arbitration Act explicitly embody the principle of party autonomy. Section 2(6)107 of the Arbitration Act provides that parties have the freedom to authorise any person, including an arbitral institution, to determine the issue between them. Section 19(2)108 provides that the parties are free to choose the procedure to be followed for the conduct of arbitral proceedings. Section 11(2)109 provides that parties are free to decide on the procedure for the appointment of arbitrators. In Bharat Aluminium Co. v. Kaiser Aluminium Technical Services110, this Court observed that party autonomy is the “brooding and guiding spirit” of arbitration. In Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd111, this Court referred to party autonomy as the backbone of arbitration.

70Copy pinpoint70. Having spelt out party autonomy as the cardinal principle of arbitration in India, in the sections which follow we analyse how provisions relating to the payment of fees to arbitrators have to be interpreted in light of this principle. E C.2.2 Fourth Schedule and regulation of arbitrators’ fees

71Copy pinpoint71. Appointment of arbitrator(s) in India may take place either through an agreement between parties or by taking recourse to courts under Sections 11(3) and 11(6) of the Arbitration Act. Prior to the amendment of the Arbitration Act by the Arbitration Amendment Act F 2015, a practice emerged, especially in cases of ad hoc arbitrations, where arbitrators would unilaterally, and in some cases arbitrarily, fix

107 Section 2 (6) of the Arbitration Act states: “Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue”. G 108 Section 19(2) of the Arbitration Act states: “Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings”. 109 Section 11(2) of the Arbitration Act states: “Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators”. 110 (2016) 4 SCC 126, paragraph 5 111 (2017) 2 SCC 228, paragraph 38 H

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excessive fees for themselves. In Singh Builders (supra), this Court A noted that such arbitrary fixation of fees by the arbitrators, specifically court-appointed arbitrators, has made arbitration an expensive proposition, bringing it into disrepute. The Court suggested some possible solutions. This Court observed: “22. When an arbitrator is appointed by a court without indicating fees, either both parties or at least one party is at a disadvantage. Firstly, the parties feel constrained to agree to whatever fees is suggested by the arbitrator, even if it is high or beyond their capacity. Secondly, if a high fee is claimed by the arbitrator and one party agrees to pay such fee, the other party, which is unable to afford such fee or reluctant to pay such high fee, is put to an embarrassing position. He will not be in a position to express his reservation or objection to the high fee, owing to an apprehension that refusal by him to agree for the fee suggested by the arbitrator, may prejudice his case or create a bias in favour of the other party which readily agreed to pay the high fee. D

23. It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost. Institutional arbitration has provided a solution as the arbitrators’ fees is not fixed by the arbitrators themselves on case-to-case basis, but is governed by a uniform rate prescribed by the institution under whose aegis the arbitration is held. Another solution is for the court to fix the fees at the time of appointing the arbitrator, with the consent of parties, if necessary in consultation with the arbitrator concerned. Third is for the retired Judges offering to serve as arbitrators, to indicate their fee structure to the Registry of the respective High Court so that the parties will have the choice of selecting an arbitrator whose fees are in their “range” having regard to the stakes involved.

24. What is found to be objectionable is parties being forced to go to an arbitrator appointed by the court and then being forced to agree for a fee fixed by such arbitrator. It is unfortunate that delays, high costs, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process. Delay and high costs are two areas where the arbitrators by self-regulation can bring about marked improvement.” H

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72Copy pinpoint72. In Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust and Ors.112, this Court in a similar vein observed that arbitrators in ad hoc arbitrations in India are charging disproportionately high fees. While interpreting Section 11 of the Arbitration Act, this Court held that the word “appointment” does not merely refer to nominating or designating a person to act as an arbitrator, but it includes the court’s power to stipulate B the fees that can be charged by an arbitrator appointed by the court. The fees should be stipulated after hearing the parties and, if required, after ascertaining the fees structure from prospective arbitrators. This will avoid a situation where parties have to negotiate the terms of the fees of the arbitrators, after their appointment. Referring to Singh Builders (supra), C this Court acknowledged the increased complaints against disproportionate fees being charged by the arbitrators and made certain suggestions for the healthy development of arbitration in India. One such remedy suggested by this Court was disclosure of the fee structure prior to the appointment of arbitrators to enable any party to express their unwillingness to bear such expenses. This Court observed thus: D “41. There is a general feeling among the consumers of arbitration (parties settling disputes by arbitration) that ad hoc arbitrations in India—either international or domestic, are time consuming and disproportionately expensive. Frequent complaints are made about two sessions in a day being treated as two hearings for the purpose of charging fee; or about a session of two hours being treated as full session for purposes of fee; or about non-productive sittings being treated as fully chargeable hearings. It is pointed out that if there is an Arbitral Tribunal with three arbitrators and if the arbitrators are from different cities and the arbitrations are to be held and the arbitrators are accommodated in five star hotels, the cost per hearing (arbitrator’s fee, lawyer’s fee, cost of travel, cost of accommodation, etc.) may easily run into rupees one million to one-and-half million per sitting. Where the stakes are very high, that kind of expenditure is not commented upon. But if the number of hearings become too many, the cost factor and efficiency/ G effectiveness factor is commented. That is why this Court in Singh Builders Syndicate [(2009) 4 SCC 523 : (2009) 2 SCC (Civ) 246] observed that the arbitration will have to be saved from the arbitration cost.

112 H (2012) 1 SCC 455

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42. Though what is stated above about arbitrations in India, may A appear rather harsh, or as a universalisation of stray aberrations, we have ventured to refer to these aspects in the interest of ensuring that arbitration survives in India as an effective alternative forum for disputes resolution in India. Examples are not wanting where arbitrations are being shifted to neighbouring Singapore, B Kuala Lumpur, etc. on the ground that more professionalised or institutionalised arbitrations, which get concluded expeditiously at a lesser cost, are available there. The remedy for healthy development of arbitration in India is to disclose the fees structure before the appointment of arbitrators so that any party who is unwilling to bear such expenses can express his unwillingness. Another remedy is institutional arbitration where the arbitrator’s fee is prefixed. The third is for each High Court to have a scale of arbitrator’s fee suitably calibrated with reference to the amount involved in the dispute. This will also avoid different designates prescribing different fee structures. By these methods, there may be a reasonable check on the fees and the cost of arbitration, thereby making arbitration, both national and international, attractive to the litigant public. Reasonableness and certainty about total costs are the key to the development of arbitration. Be that as it may.”

73Copy pinpoint73. It was in the above context that the LCI 246th Report (supra) E proposed reforms for regulating arbitrators’ fees in ad hoc arbitrations. The Commission recommended that a model schedule of fees should be inserted into the Arbitration Act, which was to serve as a guide for High Courts to frame their own rules governing the fixation of arbitrators’ fees. The Commission accepted that different values and standard of fees may be adopted in international commercial arbitrations, which led to the exclusion of the applicability of the Fourth Schedule to the Arbitration Act to international commercial arbitrations. The Commission adversely commented on the practice of charging fees on “per sitting” basis in ad hoc arbitrations where sometimes there are 2-3 sittings in a day in the same matter between the same parties. The Commission also noted that costs are further increased by continuation of proceedings for years since dates are given with significant gaps, resulting in the denial of timely delivery of justice to the aggrieved party.

74Copy pinpoint74. The Arbitration Amendment Act 2015 introduced the Fourth Schedule to the Arbitration Act as a model schedule of fees in terms of H

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A the recommendations of the LCI 246th Report (supra). The Fourth Schedule came into effect on 23 October 2015. Section 11 of the Arbitration Act was also accordingly amended to add sub-Section (14) to Section 11, which reads as follows: “Section 11. Appointment of arbitrators B […] (14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule. C Explanation: For the removal of doubts, it is hereby clarified that this subsection shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitralin stitution.” D The Fourth Schedule has to be read along with the provisions of sub-Section (14) of Section 11. In terms of the Explanation to Section 11(14), the Fourth Schedule will not be applicable to international commercial arbitrations. Further, the Fourth Schedule will not be applicable where parties have agreed to the determination of the arbitrators’ fees E according to the rules of an arbitral institution. The Fourth Schedule was to serve as a guide for different High Courts to frame rules for determining the fees of arbitrators. The High Courts have been slow, if not tardy, in framing these rules. Apart from the High Courts of Rajasthan, Kerala and Bombay, other High Courts have not framed rules under Section 11 F (14) of the Arbitration Act for the determination of fees. Further the rules framed by High Courts of Bombay and Rajasthan only govern arbitrators appointed by the courts. Thus, the purpose of Section 11(14) for regulating fees in ad hoc arbitrations remains unrealised.

75Copy pinpoint75. A dispute arose before the Delhi High Court regarding the applicability of the Fourth Schedule to the arbitration agreement in a G situation where the fee payable to the arbitrator(s) has already been stipulated in the arbitration agreement. In Gammon Engineers and Contractors Pvt. Ltd. v. NHAI113, the fee schedule was fixed by the parties in accordance with a policy decision of the National Highways

113 H 2018 SCC OnLine Del 10183 (“Gammon”)

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Authority of India dated 31 May 2004. However, the arbitral tribunal decided that its fees will be regulated in terms of the Fourth Schedule introduced through the Arbitration Amendment Act 2015 by observing that the latest provisions in the amended Act empower it to unilaterally determine its own fees, irrespective of the agreement between the parties. NHAI moved an application under Section 14 of the Arbitration Act to terminate the mandate of the arbitral tribunal since it had wilfully rejected the agreement between the parties. A Single Judge of the Delhi High Court held that since there was an agreement between the parties regarding the fixation of fees, the Fourth Schedule will not be applicable. The Single Judge further held that while Section 31A of the Arbitration Act discusses different aspects of “costs” to be fixed by the arbitral tribunal while passing an award, it is only one of the aspects to be considered by the tribunal for determining costs payable by one party to another. The words “unless otherwise agreed by the parties” were omitted from Section 31(8) of the Arbitration Act (as amended by the Arbitration Amendment Act 2015) to ensure that parties cannot contract out of paying costs and denude the ability of the tribunal to award costs in favour of the successful party. The Single Judge, thus, terminated the mandate of the arbitral tribunal since it wilfully ignored the agreement between the parties. In doing so, the Single Judge disagreed with the view of another Single Judge of the Delhi High Court in NHAI v. Gayatri Jhansi Roadways Ltd.114. E

76Copy pinpoint76. In Gayatri Jhansi (Delhi High Court) (supra), it was held that Section 31(8) and Section 31A of the Arbitration Act govern the determination of fees and since the expression “unless otherwise agreed by the parties” has been removed from Section 31(8) by the Arbitration Amendment Act 2015, the power of the parties to fix the arbitrators’ F fees has been specifically taken away except in international commercial arbitrations and arbitrations where parties have agreed that the fees will be fixed under the rules of an arbitral institution. Thus, in Gayatri Jhansi (Delhi High Court) (supra), the arbitral tribunal was allowed to fix its fees according to the Fourth Schedule dehors the agreement between the parties. G

77Copy pinpoint77. The appeals against both the judgements of the Delhi High Court were heard by this Court in Gayatri Jhansi Roadways Ltd (supra), where a two-Judge Bench of this Court was called upon to 114 2017 SCC OnLine Del 10285 (“Gayatri Jhansi (Delhi High Court)”) H

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A determine the applicability of the Fourth Schedule when the arbitrators’ fee has been fixed by an agreement between the parties. This Court held that Section 31(8) read with Section 31A will not be applicable if the fees of the arbitrator(s) have been fixed by an agreement. This Court upheld the observations of the Single Judge of the Delhi High Court in Gammon (supra) in this regard. Justice Rohinton F Nariman, B speaking for the Bench, observed as follows: “14. However, the learned Single Judge’s conclusion that the change in language of Section 31(8) read with Section 31-A which deals only with the costs generally and not with arbitrator’s fees is correct in law. It is true that the arbitrator’s fees may be a C component of costs to be paid but it is a far cry thereafter to state that Sections 31(8) and 31-A would directly govern contracts in which a fee structure has already been laid down. To this extent, the learned Single Judge is correct. We may also state that the declaration of law by the learned Single Judge in Gayatri Jhansi D Roadways Ltd. [NHAI v. Gayatri Jhansi Roadways Ltd., 2017 SCC OnLine Del 10285] is not a correct view of the law.” However, this Court observed that the fee schedule contained in NHAI’s circular dated 1 June 2017 would substitute the earlier schedule and the arbitrators would be entitled to charge their fees in accordance E with the updated fee schedule, but not in terms of the Fourth Schedule to the Arbitration Act. This Court further observed that the mandate of the arbitral tribunal in Gammon (supra) should not be terminated since the arbitrator(s) had merely followed the law which had been laid down in Gayatri Jhansi (Delhi High Court) (supra).

78Copy pinpoint78. The Arbitration Amendment Act 2019 was introduced on the basis of the report of High Level Committee dated 30 July 2017 for promoting institutional arbitration. Sub-Section 11(14) has been subsequently amended by the Arbitration Amendment Act 2019. The amended sub-Section (14) to Section 11 provides thus: G “Section 11. Appointment of arbitrators […] (14) The arbitral institution shall determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule. H

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Explanation: For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.” Further, sub-Section (3A) has been introduced to Section 11, which stipulates thus: “Section 11. Appointment of arbitrators […] (3A) The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council under section 43-I, for the purposes of this Act: Provided that in respect of those High Court jurisdictions, where no graded arbitral institution are available, then, the Chief Justice D of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section and the arbitrator appointed by a party shall be entitled to such fee at the rate as specified in the Fourth Schedule: E Provided further that the Chief Justice of the concerned High Court may, from time to time, review the panel of arbitrators.” The amendments introduced to Section 11 by the Arbitration Amendment Act 2019came into force on 30 August 2019. However, F even after a lapse of three years, the Arbitration Council has not been established in accordance with Part IA of the Arbitration Amendment Act 2019. In the absence of the Arbitration Council of India, graded arbitral institutions for the purpose of implementing amendments to Section 11 are yet to come into existence. While several High Courts have taken concerted steps to establish and refer matters to court adjunct arbitration G centres, ad hoc arbitrations continue to hold the field since the amendments made by the Arbitration Amendment Act 2019 have been non-starters. . However, the amendments indicate the legislative intent that going forward, the fixation of fees of arbitrator(s)would be carried out by an arbitral institution designated for such purpose in terms of sub- H

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A Section (14) of Section 11. Further, there is one notable difference between the sub-Section (14) as it stood before the amendment and after, in terms of the applicability of the Fourth Schedule. Earlier, the rates specified in the Fourth Schedule were only to be taken into consideration by the High Court while framing the rules relating to the fixation of fees. However, now the provision reads that, “[t]he arbitral institution shall determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule”. There are two exceptions to this – Section 11(14) is not applicable to international commercial arbitrations and to a situation where the parties have agreed to determine fees in terms of the rules of an arbitral institution as stipulated in the Explanation to Section 11(14). It is important to note that the newly introduced Section 11(3A) provides that the Supreme Court and the High Courts shall have the power to designate arbitral institutions from time to time, which have been graded by the Arbitration Council of India under Section 43(1) of the Arbitration D Act. The first proviso to sub-Section (3A) to Section 11 provides that in those jurisdictions of High Courts where there are no graded arbitral institutions available, the Chief Justice of the High Court may maintain a panel of arbitrators for discharging the functions and duties of an arbitral institution. In terms of the first proviso, the reference to such an arbitrator would be deemed to be reference to an arbitral institution for the purpose of Section 11 and arbitrator appointed by a party is entitled to such fee at the rate as specified in the Fourth Schedule. A harmonious reading of the first proviso to sub-Section (3A) of Section 11 and sub-Section (14) of Section 11 indicate that the Fourth Schedule shall have a mandatory effect on the stipulation of fees for arbitrator(s) appointed by arbitral institutions designated for such purpose in terms of Section 11 of the Arbitration Act in the absence of an arbitration agreement governing the fee structure.

79Copy pinpoint79. Based on the above discussion, we summarise the position as follows: G (i) In terms of the decision of this Court in Gayatri Jhansi Roadways Ltd (supra) and the cardinal principle of party autonomy, the Fourth Schedule is not mandatory and it is open to parties by their agreement to specify the fees payable to the arbitrator(s) or the modalities for determination of arbitrators’ fees; and H

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(ii) Since most High Courts have not framed rules for determining arbitrators’ fees, taking into consideration Fourth Schedule of the Arbitration Act, the Fourth Schedule is by itself not mandatory on court-appointed arbitrators in the absence of rules framed by the concerned High Court. Moreover, the Fourth Schedule is not applicable to international commercial arbitrations and arbitrations where the parties have agreed that the fees are to be determined in accordance with rules of arbitral institutions. The failure of many High Courts to notify the rules has led to a situation where the purpose of introducing the Fourth Schedule and sub-Section (14) to Section 11 has been rendered nugatory, and the court-appointed arbitrator(s) are continuing to impose unilateral and arbitrary fees on parties. As we have discussed in Section C.2.1, such a unilateral fixation of fees goes against the principle of party autonomy which is central to the resolution of disputes through arbitration. D Further, there is no enabling provision under the Arbitration Act empowering the arbitrator(s) to unilaterally issue a binding or enforceable order regarding their fees. This is discussed in Section C.2.3 of this judgement. Hence, this Court would be issuing certain directives for fixing of fees in ad hoc arbitrations where arbitrators are appointed by E courts in Section C.2.4 of this judgement. C.2.3 Costs and fees: Two different paradigms

80Copy pinpoint80. Prior to the Arbitration Amendment Act 2015, Section 31(8) governing the determination of costs of arbitration by the arbitral tribunal read thus: F

“Section 31. Form and contents of arbitral award […] (8) Unless otherwise agreed by the parties:- G (a) the costs of an arbitration shall be fixed by the arbitral tribunal; (b) the arbitral tribunal shall specify— (i) the party entitled to costs, (ii) the party who shall pay the costs, H

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A (iii) the amount of costs or method of determining that amount, and (iv) the manner in which the costs shall be paid. Explanation.—For the purpose of clause (a), “costs” means reasonable costs relating to- B (i) the fees and expenses of the arbitrators and witnesses, (ii) legal fees and expenses, (iii) any administration fees of the institution supervising the arbitration, and C (iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral award.” The unamended sub-Section (8) of Section 31 enabled the arbitral tribunal to fix the costs, unless otherwise agreed by the parties. The term “costs” meant “reasonable costs” relating inter alia to the fees and expenses payable to the arbitrators and witnesses, in terms of the Explanation to Section 31(8). The LCI 246th Report (supra) had recommended the recognition of the “loser pays” principle for costs to reflect the relative success and failure of the parties. The Law Commission noted that the “loser pays” principle serves as a deterrent against frivolous invocation of disputes and incentivises contractual compliance.

81Copy pinpoint81. Pursuant to the LCI 246th Report (supra), the Arbitration Amendment Act 2015 deleted the phrase “unless otherwise agreed by the parties” from sub-Section 31(8) and the arbitral tribunal was given the power to fix costs in terms of Section 31A of the Arbitration Act. The amended Section 31(8) reads thus: “Section 31. Form and contents of arbitral award [...] (8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A.” Section 31A of the Arbitration Act stipulates thus: “31A. Regime for costs (1) In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act pertaining to the arbitration, the

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Court or arbitral tribunal, notwithstanding anything contained in A the Code of Civil Procedure, 1908 (5 of 1908), shall have the discretion to determine— (a) whether costs are payable by one party to another; (b) the amount of such costs; and B (c) when such costs are to be paid. Explanation.—For the purpose of this sub-section, “costs” means reasonable costs relating to— (i) the fees and expenses of the arbitrators, Courts and witnesses; C (ii) legal fees and expenses; (iii) any administration fees of the institution supervising the arbitration; and (iv) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award. D (2) If the Court or arbitral tribunal decides to make an order as to payment of costs,— (a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or E (b) the Court or arbitral tribunal may make a different order for reasons to be recorded in writing. (3) In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including— (a) the conduct of all the parties; F (b) whether a party has succeeded partly in the case; (c) whether the party had made a frivolous counter claim leading to delay in the disposal of the arbitral proceedings; and (d) whether any reasonable offer to settle the dispute is made by G a party and refused by the other party. (4) The Court or arbitral tribunal may make any order under this section including the order that a party shall pay— (a) a proportion of another party’s costs; H

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A (b) a stated amount in respect of another party’s costs; (c) costs from or until a certain date only; (d) costs incurred before proceedings have begun; (e) costs relating to particular steps taken in the proceedings; B (f) costs relating only to a distinct part of the proceedings; and (g) interest on costs from or until a certain date. (5) An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen.” Section 31A provides that the arbitral tribunal or the court has the discretion to determine costs of arbitration which includes, inter alia, reasonable costs relating to the fees and expenses of the arbitrators, courts and witnesses. Sub-Section (5) of Section 31A specifies that an agreement between parties apportioning costs is only valid if it is made after the dispute has arisen. The provision has an effect of limiting party autonomy when an agreement regarding apportioning of costs can be entered between the parties. However, it does not completely efface the principle of party autonomy.

82Copy pinpoint82. Section 38 of the Arbitration Act also becomes relevant since it enables the arbitral tribunal to demand an advance for costs in the form of deposits. The provision reads thus: “Section 38 - Deposits

F (1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit, as the case may be, as an advance for the costs referred to in sub-section (8) of section 31, which it expects will be incurred in respect of the claim submitted to it: Provided that where, apart from the claim, a counter-claim has been submitted to the arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim. (2) The deposit referred to in sub-section(1) shall be payable in equal shares by the parties: Provided that where one party fails to pay his share of the deposit, the other party may pay that share:

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Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter-claim, as the case may be. (3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the party or parties, as the case may be.” Section 38(1) of the Arbitration Act empowers the arbitral tribunal to determine the deposit that is payable as advance on costs based on its own assessment of what may be incurred as costs for adjudicating the claim and counter-claim (if any) before it. Section 38(2) also empowers the arbitral tribunal to suspend or terminate the proceedings if the parties fail to pay the deposit.

83Copy pinpoint83. Additionally, Section 39(1) enables the arbitral tribunal to hold a lien on an arbitral award if there are any unpaid costs of arbitration. D Section 39 of the Arbitration Act provides thus: “Section 39 - Lien on arbitral award and deposits as to costs (1) Subject to the provisions of sub-section (2) and to any provision to the contrary in the arbitration, agreement, the arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of the E arbitration. (2) If in any case an arbitral tribunal refuses to deliver its award except on payment of the costs demanded by it, the Court may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the applicant on payment into Court F by the applicant of the costs demanded, and shall, after such inquiry, in any, as it thinks, fit, further order that out of the money so paid into Court there shall be paid to the arbitral tribunal by way of costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant. G (3) An application under sub-section (2) may be made by any party unless the fees demanded have been fixed by written agreement between him and the arbitral tribunal, and the arbitral tribunal shall be entitled to appear and be heard on any such application. H

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A (4) The Court may make such orders as it thinks fit respecting the costs of the arbitration where any question arises respecting such costs and the arbitral award contains no sufficient provision concerning them.”

84Copy pinpoint84. The legal regime on costs under the Arbitration Act has been set out in some detail above because it has been argued on behalf of the respondents that the arbitral tribunal’s power to fix costs under Section 31(8) read with 31A entails the power to fix arbitrators’ fees, which are also a component of the costs in terms of the Explanation to Section 31A. According to the respondents, this position is bolstered by the fact that the arbitral tribunal has the power to fix the amount of deposit that is payable as an advance on costs and it can also hold a lien on the arbitral award if such costs remain unpaid.

85Copy pinpoint85. In Gayatri Jhansi Roadways Ltd(supra), this Court held: “14. However, the learned Single Judge’s conclusion that the change in language of section 31(8) read with Section 31A which deals only with the costs generally and not with arbitrator’s fees is correct in law. It is true that the arbitrator’s fees may be a component of costs to be paid but it is a far cry thereafter to state that section 31(8) and 31A would directly govern contracts in which a fee structure has already been laid down…” E

86Copy pinpoint86. The above interpretation of this Court is in harmony with the observations of the Law Commission in the LCI 246th Report (supra) where it had recommended changes to the regime of costs only to provide a statutory recognition to the “loser pays” principle. The Report contained the following observations: F “70.Arbitration, much like traditional adversarial dispute resolution, can be an expensive proposition. The savings of a party in avoiding payment of court fee, is usually offset by the other costs of arbitration – which include arbitrator’s fees and expenses, institutional fees and expenses, fees and expenses in relation to G lawyers, witnesses, venue, hearings etc. The potential for racking up significant costs justify a need for predictability and clarity in the rules relating to apportionment and recovery of such costs. The Commission believes that, as a rule, it is just to allocate costs in a manner which reflects the parties’ relative success and failure in the arbitration, unless special circumstances warrant an H

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exception or the parties otherwise agree (only after the dispute has arisen between them). 71.The loser-pays rule logically follows, as a matter of law, from the very basis of deciding the underlying dispute in a particular manner; and as a matter of economic policy, provides economically efficient deterrence against frivolous conduct and furthers compliance with contractual obligations.” The Law Commission was seeking to regulate how costs are apportioned and recovered between parties by suggesting amendments to the legal framework on costs.The same LCI 246th Report (supra) dealt with redressing the issue of exorbitant fees being charged by arbitrators and recommended the introduction of a model schedule of fees, based on which High Courts could frame rules on fixing fees, to decrease the control arbitrators have over fixing their own fees. Hence, it is evident that the Law Commission understood that the issue of arbitrators’ fees is independent of the issue of allocation of costs. The LCI 246th Report (supra) was attempting to address the concern of arbitrary and unilateral fixation of fees by the arbitrators. The interpretation suggested by the respondents, that while allocating costs the arbitral tribunal can enter into a fresh and unilateral determination of fees, would be contrary to what the Law Commission sought to achieve by recommending the regulation of fees charged by arbitrators. E

87Copy pinpoint87. The concepts of costs and fees in arbitration must be distinguished. Fees constitute compensation or remuneration payable to the arbitrators for their service. Arbitrators are entitled to “financial remuneration by the parties in return for performance of his or her mandate”115. While the national laws governing arbitration give a quasi- F judicial status to arbitrators where they have to be impartial adjudicators, many aspects of the relationship between the parties and arbitrators are contractual in nature116. Without acknowledging the contractual nature of the relationship, there is no satisfactory explanation for the parties’ right to appoint arbitrator(s) (and the corresponding right of the arbitrator(s) to decline such appointment), arbitrators’ remuneration, G arbitrators’ duty to conduct arbitration in terms of the arbitration agreement (independently of the requirement of fairness and equality)

115 Supra at note 30 116 ibid H

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A and the parties’ right to jointly remove arbitrator(s)117. In Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd.118, this Court, while holding that the arbitrator has to act impartially and independently, recognised the contractual nature of the relationship between the parties and arbitrator(s) in the following extract: B “20. Independence and impartiality of the arbitrator are the hallmarks of any arbitration proceedings. Rule against bias is one of the fundamental principles of natural justice which applied to all judicial and quasi-judicial proceedings. It is for this reason that notwithstanding the fact that relationship between the parties to the arbitration and the arbitrators themselves are contractual in nature and the source of an arbitrator’s appointment is deduced from the agreement entered into between the parties, notwithstanding the same non- independence and non-impartiality of such arbitrator (though contractually agreed upon) would render him ineligible to conduct the arbitration. The genesis behind this rational is that even when an arbitrator is appointed in terms of contract and by the parties to the contract, he is independent of the parties. Functions and duties require him to rise above the partisan interest of the parties and not to act in, or so as to further, the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial. The United Kingdom Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj, (2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p. 1889, para 45) F “45. … the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not G personal services under the direction of the parties.” (emphasis supplied)

117 ibid 118 H (2017) 4 SCC 665

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88Copy pinpoint88. The relationship between parties and arbitrator(s) is contractual in nature. Upon that relationship, the law superimposes a duty upon the arbitrator(s) to act as an impartial and independent adjudicator. The principle of party autonomy plays a substantial role in the determination of arbitrators’ fees. We have noted in Section C.1 of this judgement that party autonomy plays a central role in the determination of arbitrators’ fees in the rules of international arbitral institutions and domestic legislation of other countries. Aside from institutional arbitration, arbitrators’ fees in ad hoc arbitration are arrived at through negotiations between the parties and the arbitrator(s)119. The primacy of parties’ agreement in determination of arbitrators’ fees was also reaffirmed by this Court in Gayatri Jhansi Roadways Ltd C (supra). However, there may be instances where the parties have not entered into any agreement with respect to the fees. In ad hoc arbitrations this leads to a peculiar situation where it has to be determined who will fix the fees in such circumstances. While certain foreign jurisdictions enable the arbitral tribunal to fix the fees typically subject to D review by courts, there are jurisdictions which continue to give value to parties’ consent in determining renumeration for arbitrators. As discussed above in Section C.1, in certain jurisdictions like Germany, arbitrators are prohibited from unilaterally fixing their fees because it violates the doctrine of the prohibition of in rem suam decisions, i.e., arbitrators cannot give an enforceable ruling on their own fees. Austria and E Switzerland also do not allow arbitrators to issue binding and enforceable orders regarding fixation of their own fees120. In Italy, while the arbitrators can determine fees in absence of an agreement between parties, such fees become binding only once the parties’ consent to it. In Singapore, in absence of a written agreement, a party may approach F the Registrar of the Supreme Court within the meaning of the Supreme Court of Judicature Act 1969 for the assessment of fees.

89Copy pinpoint89. In contrast, costs are typically compensation payable by the losing party to the winning party for the expenses the latter incurred by G 119 Supra at note 28 120 Michael Wietzorek, “Chapter II: The Arbitrator and the Arbitration Procedure: May Arbitrators Determine their own Fees?” in Christian Klausegger, Peter Klein, et al (eds), Austrian Yearbook on International Arbitration 2012, Austrian Yearbook on In ternational Arbitration, Volume 2012 (Manz’sche Verlags- und Universitätsbuchhandlung; Manz’sche Verlags- und Universitätsbuchhandlung, 2012). H

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A participating in the proceedings121. In Salem Advocate Bar Assn. (II) v. Union of India122, this Court has defined costs in a similar manner in the context of litigation: “37. Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs are awarded against the unsuccessful party. Unfortunately, it has become a practice to direct parties to bear their own costs. In a large number of cases, such an order is passed despite Section 35(2) of the Code. Such a practice also encourages the filing of frivolous suits. It also leads to the taking up of frivolous defences. Further, wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35(2) provides for cost to follow the event, it is implicit that the costs have to be those which are reasonably incurred by a successful party except in those cases where the court in its discretion may direct otherwise by recording reasons therefore. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental costs besides the payment of the court fee, lawyer’s fee, typing and other costs in relation to the litigation. It is for the High Courts to examine these aspects and wherever necessary make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow.” (emphasis supplied)

90Copy pinpoint90. The principle of the payment of “costs” remains the same in litigation and arbitration even though the form of expenses may vary. Redfern and Hunter on International Commercial Arbitration (supra) has classified the various components of costs under the following headings123:

G 121 John Y. Gotanda, “Part I: International Commercial Arbitration, Chapter 7: Bringing Efficiency to the Awarding of Fees and Costs in International Arbitrations”, in Stefan M. Kröll, Loukas A. Mistelis, et al. (eds), International Arbitration and International Commercial Law: Synergy, Convergence and Evolution (Kluwer Law International, 2011) 122 (2005) 6 SCC 344 123 H Supra at note 28, Chapter 9

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“•‘costs of the tribunal’ (including the charges for administration of the arbitration by any arbitral institution); •‘costs of the arbitration’ (including hiring the hearing rooms, interpreters, transcript preparation, among other things); and •‘costs of the parties’ (including the costs of legal representation, expert witnesses, witness and other travel-related expenditure, among other things).” The first category of “costs of the tribunal” includes the fees, travel-related and other expenses, payable to the arbitrators. However, this category also includes fees and expenses relating to the experts appointed by the tribunal, administrative secretary or registrar and other incidental expenses incurred by the tribunal in respect of the case124. Fees of arbitrators constitute a component of the diverse elements which make up the costs that are payable by one party to another. The purpose of awarding costs is to “indemnify the winning party”. The “loser pays” principle apportions the costs between the parties through the costs follow the event125 method. The primary purpose of the CFE method is to “make the claimant whole”126. The CFE method has been statutorily recognised in some national legislations. The English Arbitration Act provides that “unless the parties otherwise agree, the tribunal shall award costs on the general principle that costs should follow the event except where it appears to the tribunal that this principle is not appropriate in relation to whole or part of the costs”127. Since costs are typically awarded at the conclusion of the proceedings on the basis of the relative success or failure of parties, an award of costs forms a part of the final award. However, interim awards or rulings on costs may also be issued. Most international arbitral institutions give arbitral tribunals the discretion to allocate costs unless there is an agreement between the parties regarding the apportionment of costs. It has been noted that the “loser pays” principle is a common approach128 followed for awarding 124 ibid 125 “CFE” G 126 Supra at note 121 127 Section 61(2), English Arbitration Act 128 There are some institution rules which do not prescribe a general rule and leave the apportionment of the costs to the arbitral tribunal. The ICDR (Art. 34) and HKIAC (34.3) require the tribunal to carry out a reasonable apportionment of costs. The ICC Rules (Art. 38(5) and SIAC Rules (Art. 35)leave the apportionment of costs upto the discretion of the tribunal. H

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A costs129. The UNCITRAL Rules, while providing that costs of arbitration shall be “borne by the unsuccessful party” as a general principle, allow the arbitral tribunal to take the ultimate decision130. The LCIA Rules allow the arbitral tribunal to depart from the general principle “in circumstances (in which) the application of such a general principle would be inappropriate” 131. The Arbitration Act also provides statutory recognition to the principle of “loser pays” in Section 31A (2) 132 as the general principle of allocating costs, which can be derogated from at the discretion of the tribunal provided it records its reasons in writing. Further, the Arbitration Act seeks to limit the ability of parties to contractually allocate fees by specifying in Section 31A(5) that such an agreement will only be valid “if such agreement is made after the dispute in question has arisen”. The intention of the legislature to limit party autonomy in allocation of costs is also evident from the deletion of the phrase “unless otherwise agreed by the parties” from Section 31(8) through the Amendment Act 2015.

91Copy pinpoint91. We can see that the functional role of costs and fees is different. While fees represent the payment of remuneration to the arbitrators, costs refer to all the expenses incurred in relation to arbitration that are to be allocated between the parties upon the assessment of certain parameters by the arbitral tribunal or the court. Section 31A(3) provides E that an arbitral tribunal or the court has to take into account the following factors for determining costs: “(a) the conduct of all the parties; (b) whether a party has succeeded partly in the case; F (c) whether the party had made a frivolous counter claim leading to delay in the disposal of the arbitral proceedings; and

129 Arif Hyder Ali, Jane Wessel, et al. (eds), The International Arbitration Rulebook: A Guide to Arbitral Regimes(Kluwer Law International, 2019), Chapter 8 130 Article 42(1), UNCITRAL Rules G 131 Article 28(4), LCIA Rules 132 Section 31A(2) provides: “(2) If the Court or arbitral tribunal decides to make an order as to payment of costs,— (a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or (b) the Court or arbitral tribunal may make a different order for reasons to be recorded H in writing.”

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(d) whether any reasonable offer to settle the dispute is made by A a party and refused by the other party.” This is accompanied by the general rule under Section 31A(2) that the unsuccessful party has to bear the costs of arbitration.

92Copy pinpoint92. Another way to understand the difference between costs and fees is to distinguish between the nature of the claim that both reflect. B Redfern and Hunter on International Commercial Arbitration (supra) discusses costs in Chapter 9, titled “Awards”. It states that “[a] claim in respect of the costs incurred by a partyin connection with an international arbitration is, in principle, no different from any other claim, except that it usually cannot be quantified until the end of the arbitral proceedings”133. The decision of an arbitral tribunal ordering one party to pay arbitration costs is considered as an “award” within the meaning of the New York Convention and UNCITRAL Model Law since the decision resolves a claim one party has towards another in respect to the entitlement of being repaid by the other party for expenses incurred during arbitration134. Gary Bornon Arbitration (supra) specifically notes the difference between costs and fees, and states that any decision of the arbitral tribunal relating to payment of fees to the members of the tribunal is not considered an award since it does not resolve a claim between the parties; rather it resolves a claim between the arbitrator(s) against the parties135. The Swiss Federal Tribunal has observed in this context that136: “[A]ccording to the majority of legal writing the arbitral tribunal has no authority to issue an enforceable decision as to the fees it may derive from the arbitration agreement (receptum arbitri). This is because claims resulting from the relationship between the arbitral tribunal and the parties do not fall within the arbitration clause; also because this would be an unacceptable decision in one’s own case. The decision on costs in an arbitral award is therefore nothing else as a rendering of account which does not bind the parties or a circumscription of the arbitrators’ private law claim based on the arbitration agreement on which in case of dispute the State Court will have to decide.”

133 Supra at note 123 134 Supra at note 30, Chapter 23 135 ibid 136 Judgment of 10 November 2010, DFT 136 III 597, 603 cited in ibid H

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A The German arbitration law also takes the above position, where a portion of the award relating to costs of arbitration was denied enforcement as arbitrators are prohibited from fixing their own fees and costs, except when there is an agreement between the parties and arbitrators137.

93Copy pinpoint93. Since fees of the arbitrators are not a claim that needs to be quantified at the end of the proceedings based, inter alia, on the conduct of parties and outcome of the proceedings, they can be determined at the stage when the arbitral tribunal is being constituted. Redfern and Hunter on International Commercial Arbitration (supra) discusses the concept of fees of arbitrators in Chapter 4, titled “Establishment and C Organisation of an Arbitral Tribunal”, indicating that fees have to be determined much earlier at the inception of the proceedings. In fact, the commentary states that in ad hoc arbitrations, “it is necessary for the parties to make their own arrangements with the arbitrators as to their fees. The arbitrators should do this at an early stage in the proceedings, in order to avoid misunderstandings later”138.

94Copy pinpoint94. It has been argued on behalf of the respondents that the power of arbitrator(s) under Section 38(1) of the Arbitration Act to demand a deposit as an advance on costs “which it expects will be incurred” in relation to the claim and counterclaim (if any) indicates that the tribunal is entitled to determine its own fees. If such a deposit is not paid, the tribunal can suspend or terminate the proceedings under Section 38(2) of the Arbitration Act. It can also hold a lien on the award if the costs of arbitration remain unpaid under Section 39(1) of the Arbitration Act.

95Copy pinpoint95. Gary Born on Arbitration(supra) explains the concept of an advance on costs or deposits in the following terms139: F “Once the arbitral tribunal is in place, the parties are generally required to provide security for the fees and costs of the arbitrators. Most institutional arbitration rules contain express provisions for payment by the parties of an advance on costs (or deposit), and arbitrators often have the power under national law to require G payment of an advance even absent express provision to that effect in either the arbitration agreement or institutional rules.

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The amount of the advance on costs is based upon the expected total amount of fees and expenses of the arbitrators and institutional administrative costs. If the parties do not pay the advance, the arbitration will not go forward; if one party fails to make payment, the other may do so on its behalf, so that the arbitration will proceed, hopefully to conclude with a decision in its favor, in which the prevailing party will be awarded (among other things) reimbursement of the amounts it advanced on behalf of its counter- party.” The above extract and Section 38140 of the Arbitration Act indicate that the purpose of demanding a deposit is to simply secure the future expenses or the “costs” relating to the arbitration, including arbitrators’ fees. The arbitrator(s) may resign or cease their work until such payment is made. This principle cannot be extended to establish that the arbitrator(s) have a unilateral power to fix their own fees while demanding a deposit. The arbitral tribunal can also ask for a supplementary deposit, which indicates that the amount fixed in the deposit is provisional in nature. Upon the termination of the mandate of the arbitral tribunal, it is required to provide an account of the deposits and if the deposits exceed the total amount of costs, the tribunal is required to return the balance. This indicates that the order on deposits is not a binding determination as to costs (including arbitrators’ fees). It is a procedural order issued for the purpose of securing payment of future expenses.

140 "Section 38 - Deposits (1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit, as the case may be, as an advance for the costs referred to in sub-section (8) of section F 31, which it expects will be incurred in respect of the claim submitted to it: Provided that where, apart from the claim, a counter-claim has been submitted to the arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim. (2) The deposit referred to in sub-section(1) shall be payable in equal shares by the parties: Provided that where one party fails to pay his share of the deposit, the other party may pay that share: G Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter-claim, as the case may be. (3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the party or parties, as the case may be.” H

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96Copy pinpoint96. While the arbitral tribunal can exercise a lien over the arbitral award for any unpaid costs of arbitration under Section 39(1) of the Arbitration Act, a party can also approach the court for the release of the award and the court on inquiry can assess whether the costs demanded are reasonable under Section 39(2). These costs would include the arbitrators’ fees that have been previously agreed upon. However, even if there is no agreement between the parties and the arbitrator(s) regarding the fees payable to the arbitrator(s), any determination of costs relating to arbitrators’ fees by the tribunal is a non-binding demand that has been raised by the tribunal. As has been discussed above, while costs, in general, are to be decided at the discretion of the tribunal or the court because they involve a claim that one party has against the another relating to resolution of a dispute arising from the arbitration agreement, fees of the arbitrators are not a claim to be decided between the parties. Rather, it is an independent claim that the arbitrator(s) have against the parties141. It will be for the court to decide whether the claim of the arbitrator(s) regarding their remuneration is reasonable. This also becomes clear from sub-Sections (2) and (3) of Section 39, which provide: “Section 39 - Lien on arbitral award and deposits as to costs […] (2) If in any case an arbitral tribunal refuses to deliver its award except on payment of the costs demanded by it, the Court may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the applicant on payment into Court by the applicant of the costs demanded, and shall, after such inquiry, in any, as it thinks, fit, further order that out of the money so paid into Court there shall be paid to the arbitral tribunal by way of costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant. (3) An application under sub-section (2) may be made by any party unless the fees demanded have been fixed by written agreement between him and the arbitral tribunal, and the arbitral tribunal shall be entitled to appear and be heard on any such application. […]” (emphasis supplied) 141 H Paragraphs 91-92of this judgement

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Sub-Section (2) provides that an application can be made to the court if the arbitral tribunal is refusing to deliver the award, except on payment of costs demanded by it. The court can then order the arbitral tribunal to deliver the award to the applicant on payment of the costs demanded by the tribunal to the court. Crucially, the court can conduct an inquiry to determine if the costs are reasonable and out of the money paid to the court, it can direct the payment of reasonable costs to the tribunal and the balance (if any) to be refunded to the applicant. Sub- Section (3) provides that an application under sub-Section (2) for the delivery of an award withheld by the arbitral tribunal exercising a lien over it, can only be made if the fees demanded have not been fixed by a written agreement by the party and the arbitral tribunal. Section 39 of the Arbitration Act is similar to Section 38 of the now repealed Arbitration Act 1940. Section 38 of the erstwhile legislation provided thus: “38. Disputes as to arbitrator’s remuneration or costs: (1) If in any case an arbitrator or umpire refuses to deliver his award except on payment of the fees demanded by him, the Court D may. on an application in this behalf, order that the arbitrator or umpire shall deliver the award to the applicant on payment into Court by the applicant of the fees demanded, and shall, after such inquiry, if any, as it thinks fit, further order that out of the money so paid into Court there shall be paid to the arbitrator or umpire by way of fees such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant. (2) An application under Sub-section (1) may be made by any party to the reference unless the fees demanded have been fixed by written agreement between him and the arbitrator or umpire, and the arbitrator or umpire shall be entitled to appear and be heard on any such application. (3) The Court may make such orders as it thinks fit respecting the costs of an arbitration where any question arises respecting such costs and the award contains no sufficient provision concerning them.” Section 38(1) of the Arbitration Act 1940 enabled an arbitrator or umpire to refuse delivery of an award if the payment of fees demanded by them remained unpaid, and in such cases the court could direct the H