Automation of the Arbitration Mechanism available through Stock Exchanges
With a view to incorporate transparency and to remove any scope of unfairness to investors seeking arbitration, the Securities Exchange Board of India vide its circular CIR/MRD/ICC/8/2013 dated 18.03.2013 has notified the introduction of an automated process in the existing arbitration mechanism available through Stock Exchanges. This innovated mechanism shall replace the process of appointment of Arbitrator that is currently being followed at the Stock Exchanges. The summary of the changes to be incorporated by the Stock Exchanges in this regard are as follows:
- 1. ‘Common Pool'' of Arbitrators : SEBI has suggested that the list of arbitrators on the panel of every stock exchange which has nationwide terminals shall be consolidated and be called a ‘Common Pool’. This pooling of the names shall be done centre wise so that any applicant from within the region covered by that centre can choose an arbitrator from the common pool for that region.
- 2. The ‘Common Pool’ list to be publicly available: This list shall be made publicly available by displaying on the website of the stock exchange or by any other way.
- 3. Automated Process for selection of arbitrator: Where the client and the member have failed to choose an arbitrator, the automated process will come into the picture in the following manner:
- a. Randomized, computer generated selection of Arbitrator from the “Common Pool”.
- b. Selection in chronological order of receipt of reference
- c. System generated, real time alert in the form of SMS, email, etc. to be sent to every entity involved in a particular case.
- d. Communication of appointment of Arbitrator shall be sent immediately or latest by the next working day from the day of selecting the Arbitrator, by the Stock Exchange on which the dispute had taken place, to all the entities concerned in a particular case.
- 4. Situation of conflict of interest in an arbitration reference: In such a case, the chosen arbitrator will have to decline an arbitration reference and convey the same to the stock exchange within 15 days of being informed, by any means of communication that ensures proof of delivery. Post that, a new arbitrator shall be chosen through the automated system and the cycle of declination and selection shall be repeated till no conflict of interest exists. If in this case the stock exchange exceeds the time limit of 30 days for appointing an arbitrator, it shall put on record the reasons for the same.
- 5.Fees of the arbitrator: The fees shall be dealt in line with the existing provisions, by the Stock Exchange on which the dispute had taken place.