India’s arbitration landscape: Reforms and future prospects
Authored by - Hemant Batra, global corporate & UN lawyer, senior legal consultant and lead for new ventures & growth, Shardul Amarchand Mangaldas & Co.
Over the past five years, India has significantly transformed its legal arbitration landscape to improve efficiency, transparency, and inclusivity. These changes demonstrate India's commitment to developing a strong arbitration framework that aligns with international standards and meets the evolving needs of both domestic and global stakeholders.
The 2015 Amendment Act marked a pivotal change by establishing mandatory timeframes for arbitration proceedings, reducing judicial intervention, and enhancing the enforcement of arbitral awards. The 2019 amendments created the Arbitration Council of India, a regulatory body responsible for maintaining a panel of qualified arbitrators and promoting ethical standards in arbitration practice. They also bolstered the confidentiality of arbitral proceedings by including specific provisions. The 2021 Amendment resolved a couple of legal anomalies, thereby speeding up the arbitral process. The 1996 act had permitted a party to file for the annulment of an arbitral award. Courts had interpreted this provision to mean that an automatic stay on an arbitral award was granted on filing the annulment application. However, the 2015 amendment clarified that this automatic stay would no longer apply merely upon filing. The 2021 amendment only allowed a grant of stay if the court found evidence of fraud or corruption in the arbitration agreement or award. Additionally, this amendment established specific qualifications and experience requirements for arbitrators.
In June 2024, the ministry of finance issued guidelines advising against the routine inclusion of arbitration clauses in public procurement contracts. Instead, it emphasised mediation under the Mediation Act of 2023 for amicable dispute resolution. The Government of India is actively enhancing the dispute resolution framework through legislative changes to improve the ease of doing business and contract enforcement. To improve the arbitration landscape in India, the Government of India has issued a 2024 Draft Bill. The bill aims to speed up arbitral processes and reduce court intervention. The department of legal affairs has invited comments/feedback from the public as part of the public consultation exercise on the draft amendments.
Recent developments encourage the use of established arbitral institutions like the New Delhi International Arbitration Centre (NDIAC) to enhance transparency and fairness in arbitration proceedings. The Supreme Court has consistently issued judgments supporting the pro-arbitration stance, further solidifying the shift towards arbitration as a preferred dispute resolution mechanism. With these reforms, India is increasingly seen as a reliable and attractive venue for international commercial arbitration, attracting more cross-border disputes.
While the legal framework has improved, challenges remain regarding consistently applying the new provisions and addressing potential delays in the arbitration process. Continued efforts are needed to raise awareness among legal practitioners and businesses about arbitration's benefits and develop a robust pool of qualified arbitrators. There is an increasing focus on improving diversity in the arbitration field, with leaders like the Chief Justice of India calling for better gender and regional representation among arbitrators. This push for diversity is viewed as essential for enhancing the integrity and effectiveness of the arbitration process.
This article is authored by Hemant Batra, global corporate & UN lawyer, senior legal consultant and lead for new ventures & growth, Shardul Amarchand Mangaldas & Co.