FAQs on Arbitral Tribunal's fee for ad-hoc arbitrations in India after Supreme Court's judgment in ONGC v. Afcons Gunanusa JV

FAQs on Arbitral Tribunal's fee for ad-hoc arbitrations in India after Supreme Court in ONGC v. Afcons Gunanusa JV C.A 5880 of 2022, judgment dated 30 August 2022 clarified the provisions of fee of the arbitrators

?Q1.???????????Is Arbitral Tribunal bound by the fee fixed in the arbitration agreement?

?Yes, fee payable to the Arbitral Tribunal is governed by the arbitration agreement. However, if the Arbitral Tribunal considers that fee payable as per arbitration agreement is not workable, then fee can be revised with the consent of the parties. [Directive No 1 at Para 104 of the Judgment] ??

Q2.???????????Can the Arbitral Tribunal unilaterally fix its fee for arbitration?

No, fixing of fee unilaterally by the Arbitral Tribunal would go against the principle of party autonomy. As per the Directives given in Chapter C.2.4 of the Judgment Court has suggested that if the party does not agree to the fee fixed by the arbitrator, then arbitrator should decline the assignment. [Directive No 2 at Para 104 of the Judgment] ??

Q3.???????????Can the Arbitral Tribunal revise the fee later?

No. Directive no. 3 suggests that once the Terms of Reference have been finalised and issued, it would not be open for the arbitral tribunal to vary either the fee fixed or the heads under which the fee may be charged.

However, as per Directive no. 4, in case of fixed fee, it is open for the parties and Arbitral Tribunal to revise a fix fee after certain number of hearings. However such provision may be incorporated in the Terms of Reference during the preliminary hearing itself.

Q4.???????????Can a Court decide the fee of the Arbitral Tribunal while appointing it under Section 11 of the Arbitration Act?

Maybe. As per Directive no. 5, In cases where the arbitrator(s) are appointed by the Court, the order of the Court should expressly stipulate the fee that arbitral tribunal would be entitled to charge. However, where the Court leaves this determination to the Arbitral Tribunal in its appointment order, the arbitral tribunal and the parties should agree upon the Terms of Reference as specified in the manner set out in practice direction No. 1.

?Q5.???????????Is the fee model under Fourth Schedule of the Arbitration Act binding on the Arbitral Tribunal?

?No. It is not binding. With the consent of parties, it is open for the Arbitral Tribunal to fix the fee as it may deem fit depending upon the complexities in the matter and the duration of arbitration trial. However, it is open to the arbitral tribunal to charge the fee as stipulated in the Fourth Schedule, which is the model fee schedule and can be treated as binding on all.?[Para 105 of the Judgement]

Q6.???????????Is fee for claims and counter-claims to be calculated separately?

Yes. The Arbitration and Conciliation Act, 1996 (“Arbitration Act”) recognises claims and counter-claims as separate and independent. Therefore, fee is to calculated separately for claim and counter-claim under Schedule IV of the Arbitration Act. [Para 136 of the judgement]

?Q7.???????????Are parties responsible to pay fee only for their claims?

No. In terms of Section 38 (2) of the Arbitration Act, any deposit or fee shall be payable in equal shares by the parties. For instance, If Claimant has a claim of INR 20 Crores, then total fee for INR 20 Crores i.e. INR 19.87 Lakhs is equally divided and individual share is around INR 9.93 Lakhs. If Respondent raises a counter-claim of INR 10 Crores, then total fee payable for counter claim would be INR 3.37 Lakhs i.e. INR 1.68 Lakhs individual share. [Para 116 of the judgment ]

?Q8.???????????Is "sum in dispute" under Fourth Schedule of the Arbitration Act means total sum involved in claims are claims?

No, the term ”sum in dispute” refers to independent claim amounts for the claim and counter-claim. Such an interpretation is also supported by the definition of claim and counter-claim, and by the fact that the latter constitutes proceedings independent and distinct from the former. [Para 136 of the judgment]

?Illustration- If claim amount is INR 20 Crores and Counter-Claims is INR 10 Crores, then fee is to be calculated separately for INR 20 Crores (claim amount) and INR 10 Crores (counter-claim amount) and not cumulative on INR 30 Crores.

?Q9.???????????Is the ceiling limit set out in Fourth schedule, Sr. 6 of the Arbitration Act INR 30 Lakhs or base value plus INR 30 Lakhs ?i.e. INR 19,87,500/- plus INR 30,00,000/- which is INR 49,87,500/- ?

Ceiling limit of Sr. No. 6 of Fourth Schedule of the Arbitration Act is INR 30 Lakhs for base and variable amount. In simple words maximum fee payable is INR 30 Lakhs and not INR 49,87,500/-.

?Q10.????????Whether ceiling limit of INR 30 Lakhs is for the entire Arbitral Tribunal or each member of the Arbitral Tribunal?

?Ceiling limit of INR 30 Lakhs is for each member of the Arbitral Tribunal. For instance, if the Arbitral Tribunal comprises of three members, then each of the member would be entitled to maximum of INR 30 Lakhs. In case of Sole Arbitrator, he/she shall be entitled to additional 25% fee above INR 30 Lakhs which would be INR 37.5 Lakhs i.e. maximum fee payable to Sole Arbitrator as per model fee of Fourth Schedule. The celling limit is for claims only. Separate fee is to be calculated for counter-claims.

?Q11.????????Arbitral Tribunal fixed the fee for cumulative amount of claims and counter-claims as per the Fourth Schedule. After the clarification given by the Supreme Court on 30 August 2022, can the Arbitral Tribunal revise the fee?

It may be open for the Arbitral Tribunal to revise the fee now since Court has clarified the position of law. Para 105 of the Judgment also states that “when an arbitral tribunal fixes the fee in terms of the Fourth Schedule, the parties should not be permitted to object the fee fixation.” Therefore, to illustrate if the Arbitral Tribunal calculated the fee considering the total value of claims and counter-claims combined, then after the clarification given by the Supreme Court, Arbitral Tribunal may revise its fee and calculate is separately for claims and counter-claims. As per para 105 of the Judgment, parties may not be permitted to raise objection to it. Since the Judgement clarifies the position of law, it will be applicable retrospectively.