Since the parties place their trust and confidence in the arbitrator, the demands on their skills and experience related to the dispute, integrity and ethics are often exceptionally high.
Arbitration depends on trust in the arbitrator’s independence, competence, and integrity. When an arbitrator acts negligently, in bad faith, or in breach of basic procedural rules, the remedies available to an aggrieved party are indirect. Removal of the arbitrator or setting aside the award often fails to address the pecuniary loss caused by such misconduct. This vast gap has ignited a debate over whether arbitrators should enjoy immunity from civil liability and, if so, to what extent.
Arbitration is a legal process between the parties to the dispute who agree to refer that dispute to an Arbitral Tribunal consisting of one or more odd-numbered independent arbitrators chosen by or on behalf of the parties to oust the jurisdiction of the civil courts of first instance and to obtain an enforceable award passed by the Arbitral Tribunal, which is binding upon the parties. These awards are in writing, which the parties to the dispute are obligated to perform without delay. In case of voluntary non-compliance, the award can be enforced through domestic courts, which is recognised by the arbitration law.
The evolving nature of arbitration has led to a rise in parties’ expectations with respect to the arbitral process and the discharge of an arbitrator’s duties. Since the parties place their trust and confidence in the arbitrator, the demands on their skills and experience related to the dispute, integrity and ethics are often exceptionally high. If an arbitrator voluntarily, negligently, or fraudulently disregards their duties, not only will confidence in the arbitrator be lost, but the parties might sustain crucial pecuniary loss, which could impact the whole arbitration process. In such scenarios, the available remedies are generally limited to the removal of the arbitrator.
Since the existing mechanism fails to account for the economic losses or damages suffered by an aggrieved party due to the misconduct of the arbitrator, such remedies are often regarded as inadequate. There are inherent financial risks in arbitration, and the civil liability claims against arbitrators are one of them, which have come into light in recent years. It has ignited debates over whether arbitrators should enjoy immunity in certain circumstances. In many cases, parties to the arbitration proceedings have sought claims alleging that the arbitrator has abused the arbitral process.
An arbitrator’s status defines their legal relationship with the parties, including their rights, duties, and powers. This status becomes important when considering the questions of liability and immunity. However, many national laws and institutional arbitration rules remain silent on an arbitrator’s liability since they do not directly regulate the relationship between arbitrators and the parties to the arbitration proceedings. Once the arbitral process has commenced, there are no checks and balances on the arbitrator’s conduct. After the appointment of an arbitrator, they are expected to act impartially and independently. In practice, to preserve the integrity and efficiency of arbitration, the courts generally refrain from interfering in the arbitration proceedings after the arbitrator has been appointed and the arbitration proceedings have commenced. Therefore, intervention is rarely seen unless there is a grave misconduct. However, parties to the dispute can challenge the arbitrator’s appointment on the grounds of bias, conflict of interest, or lack of qualifications, but direct checks and balances are limited. Arbitrators can devise their own procedure for conducting the arbitration proceedings. However, parties can seek to set aside enforcement of an award on the grounds of bias, breach of natural justice, or excess of jurisdiction under Section 34, Arbitration and Conciliation Act, 1996. Thereafter, this challenge can go up to four stages of litigation, i.e. Section 37 appeal, special leave petition, review petition, and finally, the curative petition. Had the dispute been litigated in civil courts rather than through arbitration, one stage of this protracted process would have been avoided.
After going through this experience in multiple arbitration awards by the Government, which were intended to be cost-effective and time efficient, often resulted in prolonged litigation and significant financial exposure, and driven by concerns over the perceived risks of arbitral unfairness, ambiguity, and fair adjudication. The Ministry of Road Transport and Highways (MoRTH), through its Circular dated 12 January 2026, has introduced significant changes to the dispute resolution framework under the Model Concession Agreements and contract documents governing build-operate-transfer (BoT) (Toll), Hybrid Annuity Model (HAM), and Engineering, Procurement, and Construction (EPC) highway projects. Monetary claims below Rs 10 crores may still be referred to arbitration, institutionalised through Society for Affordable Redressal of Disputes (SAROD) or the India International Arbitration Centre (IIAC). However, disputes valued at Rs 10 crores and above are excluded from arbitration and are instead required to be resolved through conciliation under the Arbitration and Conciliation Act, 1996.
Contractual status method
Under civil law jurisdiction, the “contractual status theory”1 has gained wide recognition as an explanation of an arbitrator’s position. As per this theory, the arbitrator’s role is rooted in a contractual relationship with the parties to the arbitration. Therefore, liability arises not from the adjudicatory function itself but from the terms of engagement, such as the arbitration agreement, institutional arbitration rules adopted by the tribunal, and arrangements related to fees and expenses. When this contractual relationship is breached, the arbitrator could be held liable for breach of the contractual relationship that they have with the parties, and therefore, the remedy would fall under principles of contract law. In practice, this means that arbitrators may be held accountable for documented failures or irregularities committed during arbitration proceedings that contravene the terms and conditions of their appointment. Such lapses may amount to misconduct or a violation of the duty of fairness owed to the parties.
Functional status method
This method is distinct from the contractual status method. It emphasises the adjudicatory roles and functions of arbitrators rather than their contractual relationship with the parties. According to this method, arbitrators are regarded as akin to judges, since they exercise quasi-judicial functions in the process of delivering justice. Accordingly, the rights and responsibilities conferred upon arbitrators mirror those of the judiciary when handling contentious disputes. On one hand, the contract status principle is adopted by the civil law system, and on the other hand, the functional status principle is adopted by the common law system.2
A comparison of the roles and functions of judges and arbitrators helps explain why advocates of the functional status theory support its application to arbitral liability. Both roles involve examining documentary and oral evidence, weighing that evidence material, and delivering a binding judicial order or award. Both must adhere to procedural standards, though the sources of those procedures differ between judges and arbitrators. Both are required to apply the relevant law to arrive at a final determination that is binding on the parties.
Despite these similarities between judges and arbitrators, there is a stark difference in the source of authority that challenges the notion of treating arbitrators like judges for liability purposes. Arbitrators derive their mandate from the parties’ agreement, while judges exercise their jurisdiction conferred by the State. Parties not only empower the Arbitral Tribunal but also determine the procedural framework governing the arbitration, i.e. whether the arbitration proceedings will proceed under institutional rules or on an ad hoc basis. Judges are constrained to operate within codified rules of the Civil Procedure Code, 1908 and evidence law. There is also a difference in remuneration. Arbitrators are appointed and directly paid by the parties, while judges are assigned by the court system and receive their salaries from the State.
Therefore, many of the rights and duties of an arbitrator can only be understood through the contractual relationship with the parties.
Hybrid status method (India’s approach)
The nature of the arbitrator’s relationship with the parties is often understood from a blended perspective that incorporates elements of both contractual and functional theories. This view is known as the hybrid status theory. This theory treats the arbitrator’s position as a unique contractual arrangement, different from both agency contracts and service agreements, and confers upon the arbitrator a particular set of rights and duties. It also recognises the dual role that the arbitrator plays as both service provider and a private adjudicator, thereby giving rise to the term “quasi-judicial” function.3
In this method, the arbitrator’s powers and duties arise not only from the appointment arbitration agreement but also from national and international law, legal principles, and judicial precedents, which ensure the impartiality and independence of the arbitrator. Hence, an arbitrator’s duties arise from multiple sources, such as the parties‘ contract, the law of the land, institutional arbitration rules, and professional ethics. The arbitrator’s job is to perform these duties in a quasi-judicial capacity and deliver a binding award that determines the rights and liabilities of the parties regarding the dispute. While the hybrid status theory acknowledges distinctions between judges and arbitrators, it emphasises that their central mission remains the same, bringing finality to the dispute between the parties.
An arbitrator’s relationship with parties to the dispute is contractual in nature. Hence, the rights and obligations of an arbitrator are the result of the contractual relations with the parties to the dispute. However, the position under common law is well established that the rights and duties of an arbitrator are derived from a contract and a quasi-judicial status granted by national laws.
In K/S Norjarl A/S v. Hyundai Heavy Industries Co. Ltd.4, Lord Browne-Wilkinson observed that, “it is impossible to distinguish contractual matters from those of quasi-judicial status”. Similarly, in ONGC Ltd. v. Afcons Gunanusa JV5, the Supreme Court recognised that:
the rights and duties of arbitrator’s flow from: 1) the national laws governing arbitration which give a quasi-judicial status to arbitrators whereas they have to act as impartial adjudicators, and 2) the arbitrator’s contract with the parties which governs many aspects of the arbitrator-party relationship including remuneration, confidentiality, and timelines for completion of arbitral proceedings.
An Arbitral Tribunal performs a quasi-judicial function because it substantially determines the rights and liabilities of parties to the dispute through adjudicative means.
Arbitrator misconduct: Misfeasance and nonfeasance
Misfeasance6 denotes affirmative misconduct by an arbitrator, encompassing acts such as unjustified withdrawal from the arbitral process, fraudulent or corrupt practices, and other forms of bad-faith engagement. While fraud and corruption may simultaneously attract criminal liability, the category of affirmative misconduct is often more elusive. In Road Rejuvinating and Repair Services v. Mitchell Water Bd7., the Supreme Court of Victoria in Australia faced that an arbitrator inappropriately communicated with parties to the dispute directly, withdrew from the proceedings without any justification, refused to appear in court, wrote directly to the judges, and refused to abide by the orders of the Court.
In Jones v. Brown8, the Superior Court of Cedar Rapids (US) held that bad-faith behaviour may also attract civil liability, save where the arbitrator acted under a bona fide belief in the propriety of their conduct and the impropriety arose from an unintended error. It could involve claims of misconduct, but it is not punishable if the arbitrator made an honest mistake.
By contrast, nonfeasance9 refers to omissions, such as failure to disclose conflicts of interest, disregard of party requests, neglect of duties imposed by arbitration rules, abstention from arbitration deliberations, or failure to render an award. Such omissions constitute the most prevalent form of arbitrator misconduct. Yet, liability for inaction is a complex issue, necessitating closer examination of the scope of arbitral immunity and the extent to which it insulates arbitrators from abuse of process claims.
Section 12, Arbitration and Conciliation Act, 1996, provides the grounds for challenging the appointment of arbitrators. Section 12(1), Arbitration and Conciliation Act, 1996 mandates that a person who has been approached to be appointed as an arbitrator must disclose in writing any circumstances that are likely to give rise to “justifiable doubts as to his independence or impartiality”. The Fifth Schedule to the Arbitration and Conciliation Act, 1996 specifies 34 categories that give rise to justifiable doubts as to the independence or impartiality of arbitrators. Section 12(1), Arbitration and Conciliation Act, 1996 mandates that an arbitrator disclose in writing any circumstances that are likely to affect the ability to devote sufficient time to the arbitration and, in particular, the ability to complete the entire arbitration within 12 months. The duty of disclosure is a continuing duty. Section 12(3), Arbitration and Conciliation Act, 1996 further provides that the appointment of an arbitrator may be challenged only if: 1) circumstances exist that give rise to justifiable doubts as to independence or impartiality, or 2) the arbitrator does not possess the qualifications agreed to by the parties to the dispute.
Immunity versus liability10
Immunity: In most common law jurisdictions, the justification for granting arbitrators complete immunity has been based on the analogy with judges, a method known as the functional status method. The doctrine of judicial immunity is well settled in law, with courts emphasising that judicial independence would be compromised if judges could be sued for their judgments. Judges enjoy absolute protection against civil suits arising out of their judicial decisions.
Jurists and courts have long maintained that the duties performed by arbitrators closely resemble those of judges; therefore, the same standard of immunity should apply to the arbitrators. Allowing civil action claims against judges would not only dissuade prospective judges from seeking, but could also jeopardise the integrity of the judicial decisions by creating fear of personal liability whenever a decision is in favour of one party over the other party in the dispute. Such a vulnerability could lead to intimidation and loss of impartiality, which is essential to adjudication.
Accordingly, judges are afforded full immunity from civil actions, a protection designed to safeguard independence and ensure fearless decision-making. However, immunity is not absolute in shielding the corrupt conduct, such as bribery or other criminal offences; even judges are not exempt from prosecution for criminal conduct.
Liability: In Arenson v. Casson Beckman Rutley & Co.11, the argument against special immunity for arbitrators was made by Lord Kilbrandon in his dissenting opinion. He opined that arbitrators, like any other professionals engaged for their services, should be answerable to render those services with reasonable skill and care. In the hybrid status method, arbitrators hold quasi-judicial power and offer a contractual service to the parties who have appointed them. This means that there is a fundamental difference between their adjudicatory role and their broader professional duties.
If arbitrators were seen as experts, they could be held liable for failing to meet the standards ordinarily expected within the profession. In other words, an arbitrator could be held responsible for any mistakes he makes in the discharge of his functions. In practice, it would allow dissatisfied parties to seek damages and claims against arbitrators whenever an award has been made against their interests. It will increase the possibility of frequent suits against arbitrators, which destroys the whole point of the arbitration. It will defeat the purpose of the arbitration, which is supposed to be a swift and cost-effective alternative to judicial proceedings.
Qualified (limited) liability
The doctrine of “qualified liability” offers a middle ground when it is not possible to grant arbitrators absolute immunity or to expose them to unrestricted liability. It does not fully protect arbitrators, but at the same time, it does not subject them to the same level of liability as ordinary professionals or service providers. Rather, it makes a distinction between an arbitrator’s adjudicatory functions and their ancillary duties.
The claims against an arbitrator for damages are generally confined to situations where there was no valid award, an award has been annulled, or the Tribunal has failed to render a legally cognizable decision. This doctrine protects the independence of the arbitrator as a neutral arbiter and the parties against serious misconduct. In practice, many jurisdictions restrict judicial review of arbitral awards on the grounds of reconsidering the merits, but will set aside on the grounds of serious misconduct or ethical violations.
Accordingly, the qualified liability is limited since it gives immunity to the arbitrators from actions arising out of their decision-making capacity, and it also recognises that liability may exist where an award is voided due to substantial error, corruption, or misconduct.12
Case study: An arbitrator conducts undermining due process
In DJP v. DJO13, the Supreme Court of Singapore set aside an arbitral award made by an Arbitral Tribunal which was chaired by a former Chief Justice of India. The Court held that a substantial portion of the award had been reproduced verbatim from the previous decisions authored by the same presiding arbitrator. The Court further held that the Tribunal had made significant errors, including applying the incorrect procedural law to issues relating to interest and costs.
The Supreme Court of Singapore observed that the Tribunal had relied on materials taken from parallel proceedings to which the parties to the present case were not entitled to access or to be heard. By importing such content without disclosure in the award, the Tribunal denied the parties their right to be heard. Since the material was taken from proceedings in which the other members of the Tribunal did not participate, it also created an imbalance within the panel itself.
The Supreme Court of Singapore upheld the High Court’s decision on the abovementioned grounds and set aside the award, underscoring the importance of transparency, fairness among arbitrators, and adherence to the rule of procedural law in arbitral decision-making.
Such episodes highlight the challenges of positioning India as an arbitration hub for international commercial arbitration. Especially when there is a demand within the arbitration community towards arbitration as the preferred mechanism for dispute resolution.
Arbitral immunity: Shield or burden?
In many countries, the trend of arbitral immunity indicates a gradual shift toward a qualified immunity or limited liability model as the most balanced approach. In the United Kingdom, the support of the functional status method has led to express statutory protection for arbitrators. In several civil law systems based on the contractual status method, arbitrators have been treated as professionals exposed to contractual liability. However, the stance of some civil jurisdictions in their statutes and jurisprudence has been to restrict liability and provide protection to arbitrators by means of an implied hybrid status method, which effectively establishes a form of qualified immunity.
The gulf between common law and civil law jurisdictions is wide. Common law systems embrace immunity by virtue of the arbitrator’s quasi-judicial role, while civil law systems consider the arbitrator to be an expert service provider who must be answerable for his misconduct. The question of whether arbitrators should enjoy judicial style immunity is far from being settled, and compelling arguments have been made on both sides of the issue. Hence, efforts should be made to find a middle ground that is most consistent with the foundational principles of arbitration. Arbitrators should be immune from liability for ordinary errors. Provided that such errors do not amount to manifest disregard of the law, a breach of the rules applicable to arbitral proceedings, or misconduct.
In my opinion, the doctrine of qualified liability provides a balanced approach that protects arbitrators from baseless or frivolous claims arising from dissatisfaction with an award, but can hold arbitrators liable for gross misconduct. Such a model would balance two essential objectives: firstly, maintaining the integrity and quality of the arbitral process; and secondly, preserving the independence of arbitrators without discouraging competent professionals from serving. In practice, liability would be filtered through a dual safeguard. Firstly, annulment of the award; and secondly, proof of at least gross negligence, thus protecting parties from a harassing process, and supporting confidence in the arbitral process.
Supporters of arbitral immunity often argue that if arbitrators are exposed to civil liability, then it could discourage qualified individuals from accepting appointments, which leads to a smaller pool of arbitrators available. However, arbitrators continue to accept appointments despite the risk of liability, which has serious consequences only if the conduct is found questionable. The possibility of civil claims arising from alleged professional negligence can be seen as a risk to be managed by arbitrators in the usual manner, that is, by taking insurance coverage.
The challenge lies in the variety of liability standards in different jurisdictions. Civil and common law jurisdictions differ in their approaches, and since arbitrator liability is so often related to national doctrines of tort, contract, and damages, achieving global uniformity is naive. However, the international arbitration community can only hope to persuade national legislatures to adopt clear statutory rules on the scope of arbitrator liability. A system of qualified or limited liability would provide clarity, transparency, and predictability. It will further strengthen confidence in the arbitration as a fair, reliable, and effective mechanism for dispute resolution.
*Advocate, Supreme Court of India. Author can be reached at: harshsinghmunday@gmail.com.
1. Alexander J. Belohlavek, “Arbitration and Basic Rights: Movement from Contractual Theory to Jurisdictional Theory” (2013) Pécs, Universitas Quinqueecclesiensis 17.
2. Dario Alessi, “Enforcing Arbitrator’s Obligations: Rethinking International Commercial Arbitrators’ Liability” (2014) 31 Journal of International Arbitration 735—742.
3. Susan Franck, “The Liability of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity” (2000) 20(1) NYLS Journal of International and Comparative Law 5.
5. (2024) 4 SCC 481Civ : (2024) 3 SCC (Civ) 604.
6. Susan Franck, “The Liability of International Arbitrators: A Comparative Analysis and Proposal for Qualified Immunity” (2000) 20(1) NYLS Journal of International and Comparative Law 11.
7. Supreme Court of Victoria, 15 June 1990.
8. (1880) 54 Iowa 140, 142-143.
9. Jones v. Brown , (1880) 54 Iowa 140, 142-143.
10. Agata Cevc, Civil Liability of Arbitrators, EU and Comparative Law Issues and Challenges Series — Issue 3, 406.
11. (1975) 3 All ER 901 : 1977 AC 405.
12. Federal Republic of Nigeria v. Process & Industrial Developments Ltd., 2023 EWHC 2638 (Comm).
13. 2025 SCC OnLine SGCA 2.
