politics · 2026-06-18
India's Arbitration Picks Need Clear Rules
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India relies heavily on institutional arbitration, treating it as quasi-judicial, but lacks a consistent process for designating institutionsCourts can ad-hoc select arbitration institutions, but there is no clear legal framework governing how those picks are made or challengedWithout party consent, arbitration institutions have no independent judicial sanctity, creating legal uncertainty for businesses
Why does picking an arbitrator matter so much?
Arbitration institutions are treated as quasi-judicial bodies, similar to courts. When a court picks one ad-hoc without clear rules, the appointment itself can be legally challenged. This creates a [Catch-22: the dispute resolution mechanism becomes a new dispute], delaying outcomes for both parties.
What makes arbitration 'quasi-judicial'?
Arbitral tribunals can issue binding awards enforceable like court decrees. They follow due process, hear evidence, and apply law. But unlike courts, [arbitration institutions themselves] are private bodies. They gain judicial character only through the proceeding, not through their own constitutional authority.
Why can't parties just pick their own body?
Parties often do choose by mutual consent. The problem arises when they disagree. In such cases, [Section 11 of the Arbitration Act] requires courts to step in. The court then designates an institution, but the law doesn't specify transparent criteria for that selection, opening the door to challenges.
What role does the chief justice play here?
Under Indian law, the [Chief Justice of the relevant High Court] can request an institution to handle a case when parties cannot agree. But without codified selection standards, different chief justices may use different criteria. This inconsistency means [a Delhi designation may follow different logic than a Mumbai one].
What does this mean for business disputes?
Businesses choose India-seated arbitration expecting speed over litigation. Unclear designation rules mean companies face [months of additional legal wrangling over which institution should hear the case]. For sectors like [infrastructure and energy] with multi-billion contracts, this uncertainty raises costs and pushes parties toward foreign-seated arbitration instead.
How does this delay contract enforcement?
When a losing party challenges the institution's designation, enforcement of the arbitral award stalls. In [infrastructure PPP disputes], this can freeze projects worth thousands of crores for years. The irony: arbitration was chosen precisely to avoid the ~5-year average timeline of [Indian commercial litigation].
Which sectors face the biggest impact?
Capital-intensive sectors like [real estate, energy, and telecom] suffer most. These involve long-duration contracts where disputes are near-certain. [NHAI highway contracts], for instance, routinely include arbitration clauses, and ambiguous designation rules compound delays in an already slow resolution pipeline.
Could this push firms to arbitrate abroad?
Yes. [Singapore and London] are already preferred seats for high-value India-linked disputes. When parties see that even the arbitration institution selection is contestable in India, the cost-benefit shifts. [Major M&A deals worth over $500Mn] increasingly specify foreign-seated arbitration to avoid this risk entirely.
How do other countries handle this better?
Countries like [Singapore and the UK] maintain pre-designated lists of approved arbitration institutions with published criteria. Singapore's [SIAC] handles ~400 cases/year with transparent appointment rules. India processes fewer institutional cases partly because its designation process remains ad-hoc, with no codified selection framework.
How many cases does India handle vs. Singapore?
India's domestic arbitration caseload is hard to quantify because there is no centralized registry. [SIAC in Singapore] publishes annual data showing ~400 filings/year, with ~30% involving an Indian party. India's [Mumbai Centre for International Arbitration] handles far fewer, partly due to the designation uncertainty that discourages institutional use.
What reform would fix this fastest?
A pre-approved panel of arbitration institutions, published by the central govt with transparent eligibility criteria, would eliminate ad-hoc court picks. The [2019 Arbitration Amendment] tried this by creating the Arbitration Council of India, but [the Council was never fully operationalized], leaving the gap unresolved.
Has any court flagged this gap before?
Yes. [Justice BN Srikrishna], a former Supreme Court judge, has long advocated for institutional reform. The [Law Commission's 246th Report] also recommended designated institution lists. Despite these recommendations, no binding framework has been legislated, leaving courts to improvise case by case.
Source: livemint.com