Not All Unilateral Appointments are Unfair: Lessons from St Frosso

[Kush and Shreya are students at National Law University Jodhpur and National Law University Delhi, respectively.]

Arbitration, being a quasi-judicial process, is governed by the principles of natural justice. On 27 June 2025, Justice Moushumi Bhattacharya of the Telangana High Court, in St Frosso Shipping Corporation v. M/s Eastern Multitrans Logistics Private Limited (St Frosso), delivered a significant judgment holding that if a sole arbitrator is appointed by one of the parties, after giving due notice to the other party, and provided that the contract allows it, the appointment of the sole arbitrator will not be termed invalid due to the inaction of the other party. 

The judgment clarifies that not every clause that apparently allows unilateral appointment necessarily violates the rule against bias. Unilateral appointments are problematic because they often deprive one party of its valuable right to a level playing field in appointing an arbitrator. Against this backdrop, the court here emphasized the need to distinguish between impermissible one-sided appointments that exclude the other party altogether, and equitable mechanisms, like Clause 22(a) of the BIMCO Terms 2015 (Clause 22(a)), that safeguard fairness by providing equal rights for both parties, and allow appointing a sole arbitrator only when one party defaults. 

By doing so, the court reaffirmed that the arbitration clauses should be assessed in light of their particular wording and context, in accordance with the principles of natural justice, instead of being struck down mechanically under a general prohibition.

The author(s) in this blog have tried to analyze this case in detail, specifically in the context of unilateral appointment of arbitrators. The blog then extensively covers the Indian jurisprudence to support the ratio decidendi of St Frosso and highlights how the procedure for appointment of arbitrators in St Frosso was in line with principles of fairness, unlike the previous cases. Lastly, the author(s) advocate for a more context-specific approach rather than a blind and rigid prohibition. 

The Factual Substratum of St Frosso 

The parties, in the present case, entered into a Fixture Recap for chartering the petitioner’s vessel to the respondent, pursuant to which, the petitioner issued a hire statement claiming an approximate amount of USD 443,300. The respondent acknowledged the same but failed to pay. 

The petitioner appointed Mr Alan Oakley as the sole arbitrator and informed the respondent to appoint its arbitrator within 14 days from the notice, but it failed to do so. Later, as per Clause 22(a), the petitioner’s arbitrator proceeded ahead as the sole arbitrator, as the respondent failed to appoint his arbitrator within the stipulated timeline. 

The sole arbitrator proceeded with the arbitration since the respondent failed to comply with the final order and submit any defence. The award directed the respondent to pay an approximate sum of USD 443,300 along with interest and costs of arbitration, but he failed to comply with the same. 

Court’s Reasoning on Arbitrator Appointments

The respondent hinges its entire argument upon Section 48(2)(b) of the Arbitration and Conciliation Act 1996 (Act) and contends that enforcing the award would be contrary to India’s public policy, as it conflicts with the most fundamental notions of justice. Typically, the intention of the parties must be inferred from the express and implied undertakings in the arbitration agreements. Therefore, it is essential to look at how Clause 22(a) is constructed to negate this charge of unilateral appointments.

The arbitration agreement, under Clause 22(a), is democratically worded, giving both parties the right to nominate their arbitrator. It specifically provides that a party must appoint its arbitrator and send its notice to the other party, who must appoint its own arbitrator within 14 days of that notice. In case of a failure, the arbitrator appointed by the first party will proceed as the sole arbitrator. 

It must be noted that the sole arbitrator’s appointment is only legitimized where the second party fails to act within the stipulated timeframe. It is not a situation where the arbitrator appointed by the first party is a final act, with the second party being deprived of its right to participate in the appointment process. Therefore, the provision of a sole arbitrator to carry the arbitration forward is a matter of expediency and not unilaterality. A similar mechanism can be traced to Section 17 of the English Arbitration Act 1996 (United Kingdom).

The respondent’s argument that the petitioner should have approached a neutral forum is waived by the fact that he himself agreed to the arbitration agreement. Furthermore, the respondent’s objection to the enforcement of the award puts the onus on him entirely to show by documentary evidence that the sole arbitrator was unilaterally appointed, as per Section 48(1) of the Act. However, a perusal of the documents on record shows that the Respondent was kept informed at all stages of the arbitration. 

His stubborn refusal to acknowledge the emails sent by the petitioner and to participate demonstrates his deliberate avoidance of the arbitration process, which is not a credible defence to set aside the arbitral award passed, as there exists no patent illegality in it.

Judicial Precedents Supporting the Court’s View

Indian courts have recognized that the validity of arbitrator appointments depends on whether fairness and party participation are preserved in practice, rather than a general prohibition on unilateral appointments.

In Arjun Mall Retail Holdings (Private) Limited v. Gunocen Inc., the Delhi High Court upheld an arbitral award passed by a unilaterally appointed sole arbitrator on the ground that the appellant chose not to participate in the arbitration proceedings despite knowing about it. Similarly, in Naval Kishore v. India Cement Capital and Finance Limited and Others, it was held that if any party has knowledge about the appointment of an arbitrator and kept quiet during the whole process and then challenges it on a later stage, then that award will not be set aside. 

Additionally, the court in McLeod Russel India Limited v. Aditya Birla Finance Limited asserted that not all unilateral arbitrator appointments are inherently invalid, and it would become ineligible only if its relationship directly fell under the Seventh Schedule of the Act.

Furthermore, in Power Grid Corporation of India Limited v. Mirador Commercial Private Limited, it was held that if the petitioner fails to appoint its arbitrator even after the respondent has diligently followed the prescribed procedure as provided in the agreement, the court shall not deny the mandate of the sole arbitrator appointed by the respondent. Additionally, parties shall not divert from the terms that have been mutually agreed upon between the parties.

Collectively, these rulings establish that as long as both parties are provided with an equal opportunity to appoint an arbitrator, the unilateral appointment of arbitrators due to the silence or inaction of one of the parties is justified.

Distinguishing Impermissible Unilateral Appointments

The courts also need to recognize that not all cases termed as “unilateral” stand on the same footing. Instead of blindly applying the post-2015 “unilateral appointment” rule, they must examine the specific clauses of the arbitration agreement and the unique circumstances of each case to see whether they ensure fairness or are strikingly one-sided. 

This was highlighted by Justice Narasimha in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), where he held that not all unilateral appointment clauses are inherently void. Since the Act does not expressly deny such appointments, they remain valid as long as the arbitrator chosen was otherwise eligible. To hold otherwise would go against party autonomy.

This perspective helps us distinguish St Frosso from past jurisprudence, where one of the parties used to have exclusive control over the selection process, which used to completely deprive the other party of any participation in the selection. The Indian courts struck down such arrangements.

In Voestalpine Schienen GmbH v. DMRC, the claimant was asked to nominate an arbitrator from a panel curated by the DMRC itself, which was flagged as inherently biased by the Supreme Court as it restricted the claimant’s choice. Similarly, in Perkins Eastman Architects DPC v. HSCC (India) Limited, the Supreme Court clarified that while mutual appointment by both parties is permissible, blatantly vesting the appointment power in the CMD of one party vitiates fairness. In contrast, St Frosso provides no such one-sided blatant control, and a measure of fairness is in place over the appointment process, giving equal rights to both parties.

It is hence significant for courts to examine the whole agreement, rather than mechanically invalidating all the agreements, which, on the surface, might appear to allow unilateral appointments. In fact, clauses like Clause 22(a) are meticulously designed to balance efficiency with the principles of natural justice as well as party autonomy, as envisioned under Section 18 of the Act, which provides for the fair treatment of both parties. 

Way Forward

An important aspect of arbitration is its requirement to strictly adhere to the procedural framework and timelines as stipulated in the arbitration agreement, and this is not merely a matter of formality. When one party fulfils its obligations as provided in the arbitration agreement and the counterparty remains unresponsive despite being granted sufficient time and opportunity, it is in line with the principles of equity and justice that the party that complies be allowed to proceed with the appointment. 

Furthermore, the Supreme Court has consistently held that parties cannot adopt a “blow hot, blow cold” approach. A party cannot cherry-pick clauses of the arbitration agreement that it finds convenient, while ignoring the ones that impose a liability. 

The courts must not endorse cases where delay tactics are deliberately employed by a party to halt the arbitration process because that will set a wrong precedent and empower parties to abuse the arbitration frameworks and eventually defeat the very objective that arbitration seeks to achieve, i.e., expedient dispute resolution. 

The court in the present case, instead of mindlessly relying upon general prohibition, has adopted a grounded and commercially balanced approach. Therefore, we assert that parties who adhere to a fairly constructed arbitration agreement should not suffer due to the deliberate non-responsiveness of the counterparty. Instead, the party that chose silence must bear the consequences of its inaction.