The Arbitration Act has a cap of ₹30 lakh on arbitration fees to be charged in a single matter.
Senior advocate Abhishek Manu Singhvi, representing engineering firm Afcons in a dispute with ONGC under arbitration, said this cap translated into a measly ₹30,000 as fees per sitting if 100 such sittings were required to resolve the issue.
“How can you expect retired judges to work at ₹30,000?” he argued.
He instead accused ONGC of delaying the arbitration only because it need not pay any interest on delayed payments.
The problem arises when the cap is ₹30 lakh but ONGC wants 80 more sittings, SInghvi said. He also accused ONGC of stalling any virtual sittings in the last 2 years.
However, ONGC contended that the exorbitant fees being charged by arbitrators would destroy India as an arbitration hub.
The AG said that in some cases, the arbitrators after agreeing to the schedule of fees prescribed in the Act, had fixed fees for themselves charging ₹1 lakh to ₹1.5 lakh per sitting, besides reading fees of ₹6,00,000 and additional fees as conference charges.
As a result, their daily fees go up to ₹3 lakh per day, he contended.
Given that arbitration in complicated commercial cases involves multiple sittings and a long time, in some cases the total fees per arbitrator goes up to ₹80-85 lakh, he argued.
Venugopal said that often the other party, mostly private claimants, in an arbitration were more than willing to pay such fees, but Indian companies, especially PSUs, run into problems with the CAG if they pay more than the fixed payments.
ONGC, he said, was in a quandary as it had to face CAG audits and had to answer why such huge fees were being paid to arbitrators on one hand, or run the risk of prejudicing the arbitrators if it refused to pay their fees.
He cited a judgement by Justice R.F. Nariman which said arbitrators must recuse themselves from accepting any arbitration work at the outset if they cannot accept the payment schedule fixed in the Act.
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