India’s growing aspiration to become an economic powerhouse in the world is contingent on many issues that involve more than just infrastructure and investment incentives. An important component, often ignored, is the performance of India’s dispute resolution system. Over the years, arbitration has been promoted as an expedient, flexible, and a private method of dispute resolution and subsequently the proposed solution to India’s overburdened court system. Unfortunately, despite a number of successful reforms, India’s arbitration system continues to bear fundamental flaws which deter interested parties, both domestic and foreign from relying on it.

In the last ten years, India has amended the Arbitration and Conciliation Act, 1996, several times, most importantly in 2015, 2019, and 2021. The nature of the reforms, which aim to encroach upon the judicial aspect of arbitration, aimed to reduce the interfering role of the judiciary, increase the efficiency of the arbitral process, and promote institutional arbitration. For example, in 2015, three amendments were made: first, the time period for completing arbitration was set at strict 12 months; second, the public policy ground to challenge an award was narrowed; and third, an arbitral tribunal may grant enforceable interim measures. The 2019 reform further attempted to promote institutional arbitration through the creation of a national Arbitration Council of India to standardize practices and lay the groundwork for institutional faith in arbitration.

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While this development signified a move in the right direction, the changes made in 2021 effectively turned back the clock on much of the reform progress and allowed courts to stay enforcement of arbitral awards on a mere suspicion of fraud, i.e. it allowed circumventing of key precepts of arbitration. This vague and easily abused allowance led critics to warn that it would have the same deleterious effect on arbitration as was noted by both the Law Commission and the Working Group on arbitration i.e., resuscitating delay, extension of proceedings and resorting to the courts, all of which were the very issues the reforms hoped to overcome.

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Ultimately, despite the reforms, India’s arbitral landscape remains predominantly ad hoc, and institutional arbitration has yet to gain a foothold. This translates into inconsistency in procedures, unnecessarily long timelines and continued court involvement in disputes. While there are institutions such as the Mumbai Centre for International Arbitration (MCIA) and the Delhi International Arbitration Centre (DIAC), neither has developed the level of international reputation or caseload to be considered in the same family as some of the leading international arbitration institutions, such as Singapore’s SIAC and London’s LCIA.

In addition, enforcement of awards, particularly in the lower courts, is often a tedious, drawn out process with various delays and issues. Moreover, there is a lack of competent arbitrators with some understanding of complex, commercial matters in India, which could directly impact the ability to make enforceable awards.

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The issue is not simply technical. In April 2025, a significant problem was brought to light when the Union government recognized the “legislative gap” in India’s arbitration regime, during proceedings before the Supreme Court. This gap is with courts being unable to modify arbitral awards, while they may set them aside. The government was also clear that correcting this gap should be a matter for the legislature, not interpretation by the judiciary.

The government said that this represented a broader issue; while India has made some progress in its arbitration laws to conform to reputable norms elsewhere, a number of practical aspects have not been considered. For example, to not have provisions to allow for modification of arbitral awards creates delays and inefficiencies and frustrates the intent of arbitration as a fast and efficient method of dispute resolution.

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Comparison with internationally recognized arbitration centres such as Hong Kong and Singapore reveals the stark contrast between arbitration in India. There, their arbitration regime has an “off the shelf” and predictable legal framework, consistent judicial support, and robust institutional credibility; all underpinned by pillars of trust and confidence from the investment community.

In India however, courts take decidedly different approaches to interpreting the same arbitration law, meaning uncertainty that does not encourage international commercial actors.

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In addition, the legislation’s ambiguous drafting such as the conflicting status of emergency arbitrators or its criteria for institutional recognition creates added confusion. Where to next? India should first empower and operationalize the Arbitration Council of India to be an independent office with internationally competitive standards for accreditation and transparency. Institutional arbitration should be the expectation not the exception.

Second, specialized arbitration benches in courts staffed by judges trained on commercial and arbitral jurisprudence could alleviate enforcement delays. Third, India should aim to clarify the law and cease repetitive piecemeal amendments to regain investor confidence.

Fourth, India should invest in training arbitrators, legal practitioners and even law students to firmly build a sustainable ecosystem. Finally, establishing digital tools and online-dispute resolution frameworks particularly for MSMEs and e-commerce environments could encourage faster and more equitable arbitration.

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India has a long way to go in terms of reforming arbitration. The intentions are great and the framework is still being developed, but we are stuck somewhere in between. For arbitration to be a true alternative to litigation (not just in name), India needs regular, bold and future-oriented reforms. This will bring arbitration to a central role in India’s legal and economic future, that businesses, investors and individuals trust.

References

• Hindustan Times Article — “In SC, govt flags legislative gap in arbitration law” (April 2025) https://www.hindustantimes.com/india-news/in-sc-govt-flags-legislative-gap-in-arbitration-law-101739471665944.html
• World Bank Group — Ease of Doing Business Report 2020: Enforcing Contracts – India Profile https://www.doingbusiness.org/
• Press Information Bureau (PIB) – Government statements on arbitration reforms https://pib.gov.in/