I.  INTRODUCTION

India has spent the last decade positioning itself as a future global arbitration hub. Even government committees, legislative amendments, new arbitration centres, and judicial reforms have all been geared towards changing India from no more of a litigation-laden culture but rather a more modern and institutionalised form of arbitration. However, despite this powerful policy thrust, institutional arbitration is still the exception rather than the rule, and ad hoc arbitration still reigns supreme in the Indian system of dispute resolution.¹ This is the paradox of the story of arbitration in India: a well-developed legal system to facilitate institutional arbitration is juxtaposed with a culture that is deeply of an ad hoc nature and that is overwhelmingly favoured by the Indian population. This blog discusses the reasons the institutional arbitration has not succeeded, the shift to ad hoc arbitration as the default choice, and the developments in the arbitration situation in India since the Arbitration and Conciliation Act, 1996 (A&C Act).

II.  Evolution of Arbitration in India: From the 1940 Act to the 1996 A&C Act

To understand the persistent preference for ad hoc arbitration, it is essential to trace the historical trajectory of arbitration in India. For decades, arbitration functioned under the Arbitration Act of 1940. Scholars often described arbitration under the 1940 regime as being virtually indistinguishable from litigation, with arbitral proceedings frequently stalled by procedural objections and judicial review and so much of court interference. The introduction of the Arbitration and Conciliation Act, 1996 was intended to break from this problematic history by incorporating the UNCITRAL Model Law and providing a modern, autonomy- driven framework. Despite the progressive structure of the 1996 Act, it did not significantly shift party behaviour. Early Indian arbitration centres lacked administrative professionalism, standardised processes, transparency, and credibility, leaving users hesitant to engage with institutional mechanisms. Consequently, ad hoc arbitration continued to be preferred as it had always been the case even in the new legal regime.²

^[1] Government of India, National Initiative on Strengthening Arbitration and Enforcement in India (Ministry of Law & Justice, 2016).

^[2] A. Mehta, Institutional Arbitration in India: A Historical Appraisal, 12 Nat’l L. Sch. India Rev. 75 (2019).

III.  India’s Current Institutional Landscape

India today hosts a range of arbitral institutions seeking to professionalise the field. The MCIA has turned out a comparatively sound centre with clear fee rates, outlined regulations and an annual report that brings to light its management, publicity and expanding case workload.³ Another significant change made by the Delhi International Arbitration Centre (DIAC) is the publication of revised rules in 2023 to enhance procedural discipline and modernisation of the case administration.⁴ NDIAC is the flagship institution set up in New Delhi to ensure that arbitration is conducted in the country. In addition to these works, the Gujarat International Finance Tec-City (GIFT IFSC) has also started to make institutional rules to entice the cross-border disputes and establish the presence of India in the global commercial arbitration market which is backed by the suggestions of expert committees and comparative analysis.⁵Although these developments have an institutional growth indicator, their implications on user behaviour have not been extensive. Relative to other established international arbitral hubs like SIAC and HKIAC, institutional arbitration is less preferred in India. This under-linkage does not just solely lie in a lack of proper infrastructure, but it is a form of more pertinent behavioural and systemic limitations that still give preference to ad hoc systems.

^[3] Mumbai Centre for International Arbitration, Annual Report 2022–23 (MCIA 2023).

^[4] Delhi International Arbitration Centre, DIAC Arbitration Rules, 2023 (Delhi High Court 2023).

^[5] International Financial Services Centres Authority (IFSCA), Report of the Expert Committee on Arbitration in GIFT-IFSC (2022).

IV.  Why Ad Hoc Arbitration Continues to Dominate

The prevalence of ad hoc arbitration in India is due to a cluster of perceptions, customs, and utilitarian choices which have established the way disputes are solved over decades. This is a constant misconception that institutional arbitration is costlier. Registration costs, administrative costs, and schedule-dependent costs are typically seen as prohibitive by parties to the ad hoc setting, where the potentially flexible fee structure can be adopted with greater ease.⁶ But higher costs in the long term are common in ad hoc proceedings because they lack any structured approach to case management and are frequently associated with delays, case adjournments and arbitrary practices in setting arbitrator fees. A second influential force of ad hoc dominance is high propensities towards procedural autonomy. Indian parties and counselfind the possibility to plan the process, select timelines, and decide the fees without being bound to institutional regulations. According to the Srikrishna High-Level Committee, the independent party status is the most significant determinant which led to the favour of ad hoc arbitration in India.⁷Such leniency compares well with the ease with which many parties have when it comes to appointing retired judges as arbitrators. The corporate and government litigants have traditionally used past high court and Supreme Court judges, as they feel that they are experienced; their stature and familiarity with the Indian legal system add credibility to the process.⁸ This culture has established an arbitration culture in India. The role of senior counsel is also important. Lawyers like ad hoc settings more since they have more control over the way things are conducted, the sequence of evidence presented, the timing of the proceedings, and even how the tribunal behaves.⁹ In institutional arbitration, it transforms procedural control to the institutional level where several practitioners perceive it to be restrictive. The other reason that is perpetuating ad hoc dominance is that there is still distrust of domestic arbitration institutions. The issues of neutrality, administrative capability and consistency are raised again in the surveys and academic research concerning Indian arbitral centres. These perceptions, true or remnants of previous institutional failures, discourage the use of institutional mechanisms by parties.

^[6] P. Bhattacharya, Institutional vs. Ad-Hoc Arbitration: Cost Perception in India, SCC Online Blog (2020).

^[7] High Level Committee (Justice B.N. Srikrishna), Report on Institutionalisation of Arbitration Mechanism in India (2017).

^[8] Law Commission of India, Report No. 246: Amendments to the Arbitration and Conciliation Act, 1996 (2014).

^[9] Rishab Gupta, Counsel Preferences and Ad-hoc Dominance in Indian Arbitration, 8(2) Indian Arb. L. Rev. 45 (2020).

V.  Why Institutional Arbitration Has Not Yet Taken Hold

The lack of interest in institutional arbitration in India cannot be purely explained by the preference of the parties; this also indicates systemic and reputational issues. In the past, Indian arbitration institutions did not have sufficient administration or trained employees and were doped with procedural inconsistency, which resulted in concerns that had existed over a long period on issues of quality and reliability.¹⁰ Such initial shortcomings have had a long-term residual effect, as there is a perception of the domestic institutions being less reliable or effective than those abroad. By contrast, international organisations like SIAC, ICC and HKIAC have good international brands, well established case management structure, effective oversight systems, and years of stable performance.¹¹ Research constantly singles out the credibility and impartiality of these institutions as the major factors behind their success with international parties. Similar global recognition and trust are yet to be gained by Indian institutions. Moreover, empirical research shows that a significant number of Indian litigants and even counsellors do not know about such institutional advantages as emergency arbitration, conflict checks, expedited schedules, or structured case management conferences.¹² This institutional adoption is an obstacle to institutional arbitration. These are increased by resistance in the public sector. Historically, government agencies and PSUs have written arbitration terms supporting ad hoc processes to maintain an understanding of appointments and processes. Even though the policy guidelines are motivating the institutions, the deep-rooted contractual practices are expensive to change, which slows down the popularisation of the institutional clauses.

VI.  Consequences of Weak Institutionalisation

The continued pre-eminence of the ad hoc arbitration presents major implications for the Indian dispute resolution regime. Ad hoc proceedings are often plagued by an inability to predict the time schedule, inconsistent scheduling and lengthy evidentiary hearings, which negatively affect the efficiency that arbitration is expected to offer. Arbitrators who lack institutional support must provide administrative support in terms of documentation, scheduling and procedural control, which may cause inconsistency as well as delay. The other implication is the inability of certainty of Indian arbitral awards in overseas jurisdictions ¹³. The institutional awards tend to have a better procedure record and even internationally recognised standards of case management, which can be useful in the enforcement process in foreign countries. The fact that institutional tools are scarcely utilised implies that Indian parties can possibly lose out on more certainty and a more successful enforcement of awards in foreign courts. Another implication is the fact that little arbitral jurisprudence has been developed in India. Best practice awards, guidelines and practice notes are published by leading global institutions on a regular basis anonymously and add to the stability and predictability. Such practices have only just started being embraced by Indian institutions and a comparatively lean body of publicly available arbitral guidance is therefore left. Such deficiency in jurisprudence constrains the exposure and apparent maturity of the arbitration ecosystem in India. Eventually, the desire of India to rival Singapore or Hong Kong as an international dispute seat is compromised by institutional weaknesses.

^[10] supra 3 at 1

^[11] Singapore International Arbitration Centre, Annual Report 2023 (SIAC 2024).

^[12] Gary B. Born, International Commercial Arbitration 2, 312–15 (3d ed. 2021).

^[13] Clyde & Co., Enforcement of Arbitral Awards in Foreign Jurisdictions: India Report (2022).

VII.  The Road Ahead

The institutional arbitration system in India needs to be reinforced through a multidimension approach. Credibility building in institutions should be achieved by building transparency in governance, professional case administration and ongoing procedural standards. The issue of trust-building will be of paramount importance; the institutions will have to show their independence, objectivity, and efficiency in their work and social reporting. It is also necessary to reform the government and PSU contracting practice, because the institutional clauses of public procurement are obligatory; they may substantially impact the volumes of institutional cases and introduce industry-wide standards¹⁴. Capacity-building programmes, especially the one aiming at training arbitrators, case managers, and administrative employees, will also be essential. The necessity of systemic accreditation and professional skill building as the keys to successful institutionalisation has been repeatedly stressed by the expert committees¹⁵. It will also be essential to build global brand value. To increase its global position, Indian institutions should focus on international relations, inclusion in international arbitration forums, and publication of redacted awards. Lastly, the use of technology, especially in its combination with online dispute resolution systems, can update the institutions and make them more efficient. The implementation of digital case platforms and virtual hearing systems and AI-supported scheduling tools may enhance the experience of the institution significantly and make it more appealing to the users¹⁶.

^[14] NITI Aayog, Recommendations on Institutional Arbitration for Government Contracts (2021).

^[15] Expert Committee on Arbitration, Report on Accreditation and Training Standards (2020).

^[16] Ministry of Electronics & IT, ODR Policy Plan for India (2022).

VIII.  Conclusion

The narrative of institutional ambition faced by cultural inertia and organisational inertia the history of arbitration in India is a tale of institutional aspiration against time-honoured and cultural habits and structural limitations. Even though the legal framework has changed drastically and these institutions have enhanced their rules and infrastructure, the fact that reliance on ad hoc arbitration remains deep-rooted still dwarfs these reforms. This road to institutionalisation is by no means only about new legislation or new buildings; it is about a change of behaviour, expectations, and confidence between parties, between counsel and arbitrators and actors in the public sector. India is surely heading in the right direction, but institutionalisation will take time before it is sustained and effective without long-term dedication to the reform of governance, capacity building, creation of awareness, and international interaction. When such functions work in conjunction, then institutional arbitration can become the rule and not the exception which would place India in the long- awaited position of being a global arbitration hub.

     ENDNOTES

1. Government of India, National Initiative on Strengthening Arbitration and Enforcement in India (Ministry of Law & Justice, 2016).
2. Mehta, Institutional Arbitration in India: A Historical Appraisal, 12 Nat’l L. Sch. India Rev. 75 (2019).
3. Mumbai Centre for International Arbitration, Annual Report 2022–23 (MCIA 2023).
4. Delhi International Arbitration Centre, DIAC Arbitration Rules, 2023 (Delhi High Court 2023).
5. International Financial Services Centres Authority (IFSCA), Report of the Expert Committee on Arbitration in GIFT-IFSC (2022).
6. P.Bhattacharya, Institutional vs. Ad-Hoc Arbitration: Cost Perception in India, SCC Online Blog (2020).
7. High Level Committee (Justice B.N. Srikrishna), Report on Institutionalisation of Arbitration Mechanism in India (2017).
8. Law Commission of India, Report No. 246: Amendments to the Arbitration and Conciliation Act, 1996(2014).
9. Rishab Gupta, Counsel Preferences and Ad-hoc Dominance in Indian Arbitration, 8(2) Indian Arb. L. Rev. 45 (2020).
10. Supra 3 at 1.
11. Singapore International Arbitration Centre, Annual Report 2023 (SIAC 2024).
12. Gary B. Born, International Commercial Arbitration 2, 312–15 (3d ed. 2021).
13. Clyde & Co., Enforcement of Arbitral Awards in Foreign Jurisdictions: India Report (2022).
14. NITI Aayog, Recommendations on Institutional Arbitration for Government Contracts (2021).
15. Expert Committee on Arbitration, Report on Accreditation and Training Standards (2020).
16. Ministry of Electronics & IT, ODR Policy Plan for India (2022).