Third Arbitrator: Umpire or Chairperson?

This article is in continuation of the paper entitled “Pakistani Arbitration Law: Ripe for Reform”, which was published on Pakistan Arbitration Law on 19 June 2020. This article discusses an important concept, which is somewhat exclusive to Pakistan and certain other common law jurisdictions: the appointment of an umpire when the parties agree to two or more arbitrators.

Further to Section 3 and the First Schedule (Implied Conditions of Arbitration Agreements) of the Arbitration Act, 1940 (“the Arbitration Act”), parties are free to agree the number of arbitrators for the resolution of their dispute. In the absence of such an agreement, the default position is that a sole arbitrator is appointed. Although the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) differs in this respect, the position under the Arbitration Act is consistent with national arbitration laws of other common law jurisdictions, such as England[1] and India[2]. Likewise, procedural rules of leading arbitral institutions also prescribe a sole arbitrator as the default position, in circumstances where the parties have not agreed the number of arbitrators.[3] Having said that, appointment of a three-member tribunal is the default position in jurisdictions which have followed the Model Law in its entirety.[4]

The First Schedule of the Arbitration Act implies a further condition into arbitration agreements: if the parties have agreed to an even number of arbitrators, the arbitrators are required to appoint an umpire within one month of their appointment. In other words, the parties are permitted to agree to an even-numbered tribunal with the additional requirement to appoint an umpire. This is a concept which is central to the Arbitration Act, making Pakistan one of the few jurisdictions where appointing an umpire is still a possibility.[5]

The Arbitration Act creates a distinction between an umpire and a third arbitrator.[6] This is important because the functions and powers of both are different. It is a fine legal distinction, and to understand it one must carefully read Section 10 of the Arbitration Act, which is paraphrased below.

  • Section 10(1): if the parties agree to refer a dispute to three arbitrators, where each party appoints an arbitrator and the two arbitrators then appoint a third arbitrator, that third arbitrator is deemed to be an umpire.
  • Section 10(2): if the parties agree to refer a dispute to three arbitrators who are appointed by a method other than the one set out in Section 10(1), subject to the parties’ agreement to the contrary, an award by the majority thereof will prevail.
  • Section 10(3): if the arbitrators are equally divided in their opinions, subject to the parties’ agreement to the contrary, the award of the umpire will prevail.

If an arbitrator acts as an umpire, the decisions are made by the party-appointed arbitrators, and the umpire is required to step in if the other arbitrators cannot agree. The First Schedule further explains this principle as follows: “if the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration agreement or to the umpire a notice in writing stating that they cannot agree, the umpire shall forthwith enter on the reference in lieu of the arbitrators.” On other hand, where an arbitrator is acting as a third arbitrator (appointed in a manner other than as given under Section 10(1)), the tribunal’s decisions are required to be made by a majority (including the third arbitrator). However, the Arbitration Act does not extend the role of the third arbitrator to that of a chairperson, such that it does not state that the third arbitrator’s view will prevail if the arbitrators cannot reach a unanimous or majority decision.

The distinction between an arbitrator and an umpire is also validated by decisions of the Pakistani courts. For example, in Gerry’s International (Private) Limited vs. Aeroflot Russian International Airlines[7], the Supreme Court of Pakistan made several references to “arbitrator or umpire”, indicating its understanding that there is a difference between the two concepts. The Supreme Court also referred to other authorities in which the concept of an umpire has been recognised.[8]

Guidance can also be sought from Sections 20 and 21 of the English Arbitration Act 1996. The Expert Guide to International Arbitration published by CMS[9] articulates a helpful short note on these provisions. Section 21 of the English Arbitration Act 1996 prescribes a default position which is similar to Section 3, and the implied condition set out in the First Schedule, of the Arbitration Act: where the party-nominated arbitrators cannot agree, the umpire will replace them as the tribunal, and will have the power to make decisions, orders and awards as if he were the sole arbitrator.

The concept of an umpire is not present in the Model Law or the major institutional rules, nor do the Model Law and institutional rules recognise tribunals with an even number of arbitrators. However, the Rules of Arbitration of the International Chamber of Commerce[10] and the Arbitration Rules of the London Court of International Arbitration[11] stipulate that, if an arbitral tribunal cannot decide by majority, the presiding arbitrator (i.e., the chairperson of the tribunal) has the authority to decide that issue.

From a Pakistani law perspective, it might well be said that the presiding arbitrator’s authority under the institutional rules cited above is akin to the authority of an umpire under the Arbitration Act. However, parties may still face serious practical and intellectual difficulties in Pakistan-seated institutional arbitrations. These may arise in circumstances where parties have agreed to an even-numbered tribunal (an umpire’s appointment is therefore implied under the Arbitration Act). In that case, it is difficult to discern whether the court or secretariat of an international arbitral institution would accept the reference of such an arbitration, given that an even-numbered tribunal, albeit with an umpire, “may be incompatible with [their] expectation that all members of the tribunal participate in the arbitral procedure”.[12] This is because the role of an umpire cannot be mutated into that of a chairperson, particularly where the law of the seat explicitly recognises the notion of an umpire. Further, this may have other implications, such as in respect of the enforcement of an award, especially if there is a conflict on this issue between the Arbitration Act and the law of the jurisdiction where enforcement will be sought.[13]

Therefore, if the Arbitration Act were to be reformed on the basis of the Model Law, or otherwise, the concept of an umpire should be abandoned. Where the parties agree to three arbitrators, the appointment process prescribed in Section 10(1) can be retained without the caveat that the third arbitrator will be deemed to be an umpire. The third arbitrator should act as the chairperson and be involved in the arbitral process from its commencement. Any decisions taken by the tribunal should be decided by a majority or, where a majority decision is not possible, by the third arbitrator in their capacity as the chairperson or president of the tribunal. In this way, the practical impediments and enforcement risks that have been highlighted above can be avoided.

Pakistan Arbitration Law

References

  1. Article 15(3), the English Arbitration Act 1996.
  2. Section 10(2), the Indian Arbitration Act 1996.
  3. For example, see Article 12(2) of the Rules of Arbitration of the International Chamber of Commerce, and Article 5.8 of the Arbitration Rules of the London Court of International Arbitration.
  4. For example, see Article 10 of Law No. 2 of 2017 of the State of Qatar, and Article 9(1) of Federal Law No. 6 of 2018 of the United Arab Emirates.
  5. Regis Bonnan, ‘Even-Numbered Arbitral Tribunals’ (2019) Vol. III (1) Indian Journal of Arbitration Law 49.
  6. This distinction is maintained throughout the Arbitration Act by using the phrase “arbitrators or umpire”: see Sections 13, 26A and 30 of the Arbitration Act.
  7. 2018 SCMR 662.
  8. Muhammad Farooq Shah v. Shakirullah [2006] SCMR 1657; and The Superintending Engineer v. B. Subba Reddy [1993] 2 ALT 687. (The latter is an Indian authority dated prior to the enactment of the Indian Arbitration Act 1996, since the Indian Arbitration Act 1996 does not support the concept of an umpire.)
  9. R Bamforth and J Foley, CMS Expert Guide to International Arbitration (CMS, 2020). 
  10. Article 32(1).
  11. Article 26.5.
  12. Regis Bonnan, ‘Even-Numbered Arbitral Tribunals’ (2019) Vol. III (1) Indian Journal of Arbitration Law 49.
  13. Ibid. 

Author:

Ahmed Durrani

The author is an international arbitration lawyer based in Doha, Qatar.