Commercial Arbitration in India: A Strategic Guide for Businesses

The Evolution of Indian Arbitration

Those of us who practiced arbitration in India two decades ago remember a different landscape. Arbitration meant court interference, interminable delays, and awards that were easier to challenge than enforce. The Arbitration and Conciliation Act, 1996 was supposed to change this, but judicial interpretation initially blunted its reforms.

The 2015 amendments marked a genuine turning point. By limiting grounds for court interference, imposing timelines on arbitral proceedings, and clarifying the scope of judicial review, Parliament signaled that arbitration should work as designed—a binding, efficient alternative to litigation.

The 2019 amendments went further, establishing the Arbitration Council of India, creating provisions for confidentiality, and clarifying immunity for arbitrators. While implementation has been gradual, the direction is clear: India wants to be an arbitration-friendly jurisdiction.

The numbers reflect this shift. We've seen arbitration clauses move from optional to standard in significant commercial contracts. Institutional arbitrations have grown substantially—SIAC's India-related caseload, for instance, has increased significantly over a decade. Domestic institutions like MCIA and DAC have established themselves as credible alternatives.

The judiciary has largely supported this development. The Supreme Court's recent judgments have reinforced party autonomy, narrowed grounds for setting aside awards, and streamlined enforcement. The "pro-arbitration" judicial philosophy, once aspirational, has become operational.

Crafting Effective Arbitration Agreements

The arbitration agreement is foundational—get it wrong, and you've created problems that expensive litigation will eventually sort out. Get it right, and disputes resolve efficiently according to your chosen mechanism.

Start with clarity on scope. "All disputes arising out of or in connection with this contract" is the gold standard. Narrower formulations—disputes "relating to" specific provisions—invite challenges about whether particular claims fall within the arbitration clause.

Seat selection determines the supervisory court. Choose a seat in a jurisdiction with arbitration-friendly courts and convenient logistics. In domestic arbitrations, Delhi, Mumbai, and increasingly Bengaluru and Hyderabad offer good options. For international arbitrations, Singapore and London remain popular seats for India-related disputes, though Indian seats are increasingly viable.

The number of arbitrators involves trade-offs. A sole arbitrator is faster and cheaper but concentrates risk. A three-member tribunal provides broader expertise and collegial decision-making but at higher cost. For disputes above ₹10-15 crore, three arbitrators typically make sense.

Institutional versus ad-hoc arbitration is another choice. Institutions provide administrative support, established rules, and fee structures—valuable for parties without arbitration experience. Ad-hoc arbitration offers more flexibility but requires parties to self-administer. For significant disputes, institutional arbitration usually proves worthwhile.

Include practicalities: language of proceedings, governing law of the contract (distinct from the law governing the arbitration agreement), and any specific procedural requirements. The more you specify, the less you litigate later.

Managing Arbitral Proceedings

Effective arbitration management begins before proceedings commence. By the time disputes crystallize, your strategic options are constrained by what the contract specifies. Planning during contract negotiation is planning for dispute resolution.

When disputes do arise, document preservation is immediate priority. Unlike litigation with its formal discovery mechanisms, arbitration relies on parties to identify and preserve relevant documents. Establish litigation holds immediately, preserve electronic communications, and secure physical records. Document spoliation can have devastating evidentiary consequences.

Arbitrator selection is perhaps your most important procedural decision. In a three-member tribunal, you typically nominate one arbitrator, the counterparty nominates one, and the two nominees select the presiding arbitrator. Choose someone with relevant expertise, no conflicts, availability for the expected schedule, and reputation for efficiency.

The preliminary hearing sets the roadmap. Experienced practitioners invest significant effort in the procedural timetable, document production parameters, and hearing logistics. A well-structured preliminary order prevents later delays and disputes about process.

Witness preparation deserves more attention than it typically receives. Arbitration permits direct examination in ways that Indian litigation does not—your witnesses tell their story, then face cross-examination. Prepare them thoroughly: what questions to expect, how to handle difficult areas, how to present technical material accessibly.

Evidence and Advocacy in Arbitration

Arbitration evidence differs from courtroom evidence. The formal requirements are relaxed—no Evidence Act strictures on hearsay, no automatic bar on documents without original copies. What matters is persuading the tribunal.

Documentary evidence typically carries the case. Contracts, correspondence, reports, financial records—these tell the story. Expert evidence supplements where technical matters require explanation. Witness testimony fills gaps that documents leave.

Document production in arbitration follows different rules than litigation discovery. The IBA Rules on Taking of Evidence have become the default standard, requiring parties to identify specific documents or narrow categories rather than broad fishing expeditions. Requests must be material and relevant; the tribunal has discretion to deny overbroad requests.

Oral advocacy in arbitration should be efficient. Tribunals have typically read the submissions; they don't need a recitation of what they already know. Focus oral presentations on the key disputed issues, the strongest points in your case, and responses to your opponent's best arguments.

The post-hearing brief, where permitted, is often decisive. This is where you weave the evidence together, address questions raised during hearings, and present the strongest formulation of your case. Invest accordingly.

Challenging and Enforcing Awards

The grounds for setting aside an arbitral award under Section 34 are narrow by design. The court cannot review the merits—it can only address jurisdictional issues, procedural fairness, public policy violations, and patent illegality appearing on the face of the award.

The "patent illegality" ground has been the source of most controversy. The 2015 amendments clarified that this doesn't permit review of evidence appreciation or conclusions of fact. Yet some High Courts continue to engage in disguised merits review under this rubric. Know your jurisdiction's tendencies.

Timing matters critically. A Section 34 application must be filed within 3 months of receiving the award, with a possible 30-day condonation period. Miss this window and you've accepted the award regardless of its defects.

Enforcement of awards is increasingly routine. Under Section 36, an award becomes enforceable like a court decree once the limitation period for challenge lapses or the challenge fails. For awards against parties with assets in India, enforcement is straightforward.

International award enforcement under Part II follows the New York Convention framework. Indian courts have become more receptive to enforcing foreign awards, recognizing that India's credibility as an arbitral seat depends on reliable enforcement. Recent judgments have narrowed the public policy ground for resisting enforcement.

Asset protection planning should begin before arbitration. Parties facing potential adverse awards may dissipate assets. Seek interim measures to protect your eventual recovery—Section 9 courts can grant attachment orders even before arbitration commences.

Cost-Effective Arbitration: Practical Strategies

Arbitration's reputation for high costs is partly earned, partly exaggerated. Significant disputes inevitably involve significant costs—the alternative is under-investment in a matter that matters. But unnecessary costs can be avoided through disciplined management.

Procedural efficiency starts at the preliminary hearing. Agree on a realistic timetable with built-in contingency. Avoid multiple rounds of submissions where one focused round will suffice. Use document production judiciously—every request generates response costs.

Bifurcation can reduce costs where threshold issues are dispositive. If liability is genuinely in question, addressing it before quantifying damages saves the potentially wasted expense of damages evidence. But bifurcation that merely delays the inevitable is counter-productive.

Witness and expert selection should be strategic. You don't need witnesses on every issue—focus on disputed matters. Expert evidence should address questions beyond the tribunal's expertise, not provide advocacy dressed as technical opinion.

Consider early settlement seriously. Arbitration, like litigation, has a settlement rate far below 100%. The costs of proceeding to award should be weighed against settlement alternatives at every stage. Mediation—separately or as part of the arbitration framework—can facilitate resolution without the winner-take-all dynamic of adjudication.

Finally, choose counsel wisely. The cheapest option rarely provides best value; the most expensive option often provides diminishing returns. What matters is expertise in your type of dispute, efficiency in managing proceedings, and alignment with your objectives.