Appointment of former employees of a party has been a controversial topic and it was expected that the 2015 amendments would settle the issue once and for all. However, recent developments have titled in favour of allowing former employees to act as arbitrators. A few days back, the Supreme Court of India held in —The Government of Haryana PWD Haryana (B and R) Branch v. M/s. G.F. Toll Road Pvt. Ltd. & Ors., that there is no bar under the Arbitration and Conciliation Act, 1996, even after the 2015 amendments, barring former employees of a party from acting as arbitrator. This 14 slide presentation addresses the decision of the Supreme Court.
The presentation notes that the decision does not cite an important decision on similar lines: Offshore Infrastructure Limited v. Bharat Heavy Electricals Limited (2018). —In Offshore, a Section 11 application was filed in the Madras High Court since a former employee was appointed by BHEL as arbitrator. —The High Court along held the same lines as the Supreme Court- Item 1 of V Schedule does not include former employee but cited Item 31 of the same schedule (“The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner.”) and held that a former employee could be appointed provided he retired three years before the appointment.
—In the Pre-2015 amendments regime, only government entities could appoint former employees as arbitrators. Now, with decisions like Offshore Infrastructure & the present case, there is no bar on private parties retaining the right to appoint arbitrators to appoint their former employees as arbitrators.
In order to be recognised as an important centre for international arbitration, it is important for India to have an independent panel of arbitrators with rigorous training and excellent credentials. —A larger Bench should revisit these two decisions.
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