THE AUTHOR:
Debomita Sadhu, Principal Associate Designate at Argus Partners
Does the arbitrator’s duty to disclose operate on a separate and independent footing irrespective of considerations of bias or its likelihood? In its recent decision in MSA Global LLC (Oman) v. Engineering Projects (India) Limited, the Delhi High Court (“DHC”) has answered the question in the affirmative while refusing enforcement of a partial award (“the Award”) rendered in a Singapore-seated international arbitration under the International Chamber of Commerce (“ICC”) Arbitration Rules.
In this case with a chequered history, the DHC had previously granted an anti-arbitration injunction holding that the non-disclosure by a co-arbitrator, Mr. Andre Yeap SC, of his prior engagement in an arbitration involving the Chairman of the Award-Holder, undermined the neutrality of the Tribunal and qualified for an injunction under Indian law, whereas both the ICC Court and the Singapore High Court, on parallel challenge proceedings on the ground of impartiality, had found that Mr. Yeap’s non-disclosure did not support an inference of apparent bias.
Against such factual background, the DHC has held that the arbitrator’s duty to disclose forms a component of the fundamental policy of Indian law, and thus non-disclosure by itself would be sufficient to invoke the public policy exception. The decision sits at the epicentre of discussions around the extent of the duty of disclosure and its overlap with bias, as it appears to dilute the two-tier mechanism of disclosure first and subsequent bias challenge. It further raises questions about India’s status as a pro-arbitration jurisdiction since it signals an over-interventionist trend of Indian courts qua foreign awards.
Factual Background
The dispute arose from a sub-contract entered into between the Award Holder (an Omani security systems integrator) and the Award Debtor (an Indian public sector undertaking) for an electronic surveillance system. The Award Holder initiated arbitration and nominated Mr. Yeap, who submitted his acceptance by declaring he had no facts or circumstances to disclose that may give justifiable doubts as to his impartiality under the ICC Rules. Thereafter, the proceedings commenced, and the Award was passed.
Subsequently, the Award Debtor discovered that Mr. Yeap had previously been involved in arbitral proceedings connected with the Chairman of the Award Holder and filed an application under Article 14(1) of the ICC Rules before the ICC Court. In parallel, the Award Debtor moved an application for the setting aside of the Award on, inter alia, the ground of impartiality before the Singapore High Court. The challenges to impartiality were rejected by both the ICC Court and the Singapore High Court. Thereafter, the Award Holder initiated proceedings before the DHC to enforce the Award, leading to the instant decision.
The Court’s Findings
The main issue before the enforcement Court was whether the non-disclosure by Mr. Yeap made the Award passed by a three-member Tribunal in conflict with Indian public policy.
After a thorough analysis of the scope of a public policy challenge and the domestic framework pertaining to disclosure obligations, the DHC held that the obligation to disclose is sacrosanct in India and transcends from mere procedure to a safeguard of natural justice. Thus, failure to disclose by itself would make an award in conflict with the public policy of India.
The judgment’s holding of mandatory disclosure without delving into an inquiry of bias or its likelihood raises several concerns, discussed below.
Duty to Disclose v. Bias Considerations – Ignoring the Doctrinal Overlap
An arbitrator’s duty to disclose is predicated on principles of independence and impartiality. Disclosure ensures procedural fairness as parties can then decide whether they are satisfied with the independence and impartiality of the arbitrator and can opt for timely challenges, if necessary.
In India, Section 12(1) of the Arbitration and Conciliation Act 1996 (“the Act”) imposes a duty on arbitrators to disclose all such circumstances that are “likely to give rise to justifiable doubts as to his independence or impartiality”. Thus, the obligation to disclose is not absolute but gets triggered only when the circumstances warrant an inference against impartiality. Further, the phrase “justifiable doubts” indicates that the threshold is objective, wherein the arbitrator must make an assessment as to whether circumstances exist such that a reasonable third party might harbour doubts about his impartiality. While making such an assessment, the arbitrator is guided by the Fifth Schedule of the Act.
This threshold of disclosure is significantly lower than the threshold of challenge under Section 12(3), read with Section 13 of the Act, which requires that circumstances giving rise to justifiable doubts as to an arbitrator’s independence or impartiality actually exist.
Thus, the obligation of an arbitrator to disclose is inherently tied to the aspect of bias challenge and together form a two-tier framework under Indian law – disclosure is triggered by a likelihood of circumstances that might give rise to “justifiable doubts” while bias challenge succeeds only when such circumstances actually exist.
In such a backdrop, the question here is not whether the duty to disclose can be held to be independent and absolute but rather, whether the enforcement court can legitimately treat the duty to disclose as mandatory and attach consequences to it when India’s statutory framework contemplates a two-tier framework with separate thresholds for disclosure and bias?
The DHC has correctly noted that although there is an overlap between non-disclosure and bias, they operate on an independent footing. However, in failing to engage as to whether the circumstances around the non-disclosure were such as to justify apprehensions of bias, the Court has disregarded the difference between the two standards.
Significantly, the facts of the instant case did not automatically trigger disclosure under the Indian statutory framework. In terms of Entry 22 of the Fifth Schedule of the Act, disclosure was warranted only when the prior arbitration was conducted within the preceding three years, on two or more occasions, whereas in the present case it was conducted four years earlier.
Under such factual circumstances, by holding that non-disclosure simpliciter would contravene public policy without assessing whether the duty to disclose was at all triggered, the Court has overlooked that although the disclosure threshold is low, it gets triggered only when there is an objective assessment of circumstances “likely to give rise to justifiable doubts”. Inasmuch as the common phrase “justifiable doubts” connects the disclosure and challenge threshold, it may not be possible to treat an inquiry of disclosure as completely independent from that of an inquiry of likelihood of bias at the enforcement stage.
Such conclusion also finds support from the 2024 decision of the Indian Supreme Court in Avitel Post Studioz Limited v. HSBC PI Holdings (Mauritius) Limited, where in a case of bias challenge of a foreign award due to non-disclosure, in the absence of an inference of bias or likelihood of bias that would shock the basic notions of morality or justice (as necessary in terms of Section 48(2)(b)), the Supreme Court did not allow the challenge to the enforcement of the award.
In fact, the ICC Court had applied the same substantive standard to hold that although disclosure would have been prudent, a failure to do so did not give rise to justifiable doubts about Mr. Yeap’s impartiality.
The DHC has not challenged such finding but in fact has stated that “such prior engagement may not, in itself, be disqualifying”, only to simultaneously hold that non-disclosure of those same facts breached his disclosure obligation.
Thus, the Court has travelled beyond the facts of the case to carve out an independent duty to disclose that is not anchored in considerations of bias, thereby elevating the procedural compliance of disclosure to a fundamental principle of Indian law, without regard either to the underlying domestic framework or to the Avitel decision on limits of public policy interference in the case of foreign awards.
Disclosure as a Fundamental Policy – A Disproportionate Elevation?
The elevation of the duty of disclosure to a fundamental policy of Indian law further raises questions as to the standard of public policy for foreign awards in India.
What is fundamental policy of India is not defined in the Act but starting from Renusagar Power Co. Ltd. v. General Electric Co. to Vijay Karia v. Prysmian Cavi E Sistemi SRL, the Indian Supreme Court, on multiple occasions, has confirmed that mere violation of the law of India would not suffice for a successful public policy challenge – there has to be a breach of core values or legal principles of India that cannot be compromised.
Further, on the issue of determining bias for enforcement challenge of foreign awards, the DHC in Mercator Ltd. v. Dredging Corporation of India Ltd, has specifically held that only internationally recognised narrow standards of public policy that affront the basic notions of morality or justice can be considered.
The same has yet again been affirmed in Avitel, where the Supreme Court has gone further to clarify that the standards of public policy differ for domestic and international arbitration and courts should attempt to apply international standards when dealing with bias challenges at the enforcement stage.
In this connection, the implications of non-disclosure globally need to be considered.
The 2024 IBA Guidelines on Conflicts of Interest in International Arbitration, which inform the Fifth and Seventh Schedules of the Act and codify the international consensus on arbitrator disclosure, explicitly provide that a failure to disclose does not automatically imply a conflict of interest, and that a conflict of interest is assessed objectively and is not dependent on the arbitrator’s disclosure or lack thereof. As per the IBA framework, the disclosure obligation and the existence of a conflict are two distinct inquiries: the former is a transparency obligation, the latter is a substantive assessment of impartiality.
Further, in Halliburton v. Chubb, the UK Supreme Court drew a distinction between the duty of disclosure and the assessment of bias. The Court recognised that non-disclosure is a factor in assessing whether there is a real possibility of bias and may, in certain circumstances, itself contribute to a finding of apparent bias. However, even in the existence of a legal duty to disclose, the breach of such duty does not automatically establish bias.
Recently, the Court of Appeal for Ontario, in the decision of Aroma Franchise, observed that the breach of a legal duty to disclose may be relevant but not a determinative factor in deciding whether there is a reasonable apprehension of bias, thus treating the duty to disclose and the existence of reasonable apprehensions of bias as two distinct inquiries.
Against such established jurisprudence, the DHC’s elevation of the duty to disclose, by itself, to a ground for a public policy challenge moves Indian law away from the international consensus. The DHC’s broad ratio, by making any non-disclosure, irrespective of the likelihood of bias, potentially fatal to enforcement, also undermines the calibrated approach of Indian courts to adopt the international framework to decide public policy grounds for foreign awards.
Conclusion
In MSA Global, the DHC appears to conflate two carefully distinguished concepts – disclosure and the existence of bias. By treating a conditional statutory mechanism of disclosure as an absolute fundamental policy principle, without requiring any finding of apparent bias or its likelihood, the Court has moved Indian enforcement law away from the international framework. The ratio, read broadly, suggests that any non-disclosure, however minor or in good faith, can be a ground for enforcement refusal on public policy, leaving India’s enforcement landscape uncertain for foreign awards until further clarifications.
ABOUT THE AUTHOR
Debomita Sadhu is an India-qualified disputes lawyer and Principal Associate Designate at Argus Partners. Her practice spans international and domestic arbitration, and commercial litigation, with a focus on infrastructure, mining and energy disputes. She has represented both public and private sector clients in domestic and international disputes, and regularly appears before courts, ad hoc arbitral tribunals and arbitral institutions. Her areas of interest include public international law, developments in the Indian and Southeast Asian arbitration space, Global South discourse in international arbitration, and the evolving use of AI in dispute resolution.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
