India continues work to modernise arbitration landscape

India is at an inflection point, moving towards becoming a hub for international and institutional arbitration. Efforts to strengthen the arbitration ecosystem, legislative amendments, and the establishment of dedicated arbitration centres and membership organisations are driving this shift.

Changes to arbitration legislation

The Indian government recently completed a consultation on a bill featuring proposed amendments to the Indian Arbitration Act. The Arbitration and Conciliation (Amendment) Bill 2024 (72-page / 617KB PDF) contains the third round of proposed amendments since the Act was first enacted in 1996, with the changes aiming to better align the law with international standards and promote ease of doing business, while working to promote India as a robust and reliable arbitration hub.

Among the proposed amendments is a new provision for the appointment of emergency arbitrators. Also, under the amended Act, arbitral tribunals would be required to decide jurisdictional challenges as a preliminary issue within 30 days, unless there are reasonable grounds for deciding otherwise. Arbitral tribunals are also empowered to confirm, modify or vacate interim measures granted by courts or emergency arbitrators under the proposed changes.

In addition, the bill proposes to replace ‘place’ of arbitration with ‘seat’ of arbitration throughout the new legislation, extends the time limit for making arbitral awards to 18 from 12 months, and provides for appellate tribunals to be introduced as an alternative to court-based challenges to awards. The bill further proposes changes to the grounds for setting aside.

The proposed amendments to the Indian Arbitration Act are the results of a report delivered by an expert committee led by Dr T.K. Viswanathan, which submitted its final report on arbitration reforms in February 2024. The committee, constituted by the Ministry of Law and Justice, examined the Arbitration Act 1996, and recommended significant reforms to make arbitration both more efficient and more cost-effective.

The changes are widely seen as welcome additions to the existing Act, providing consistency and confidence for parties of arbitration.

Government encourages mediation for public procurement disputes

The Indian government has issued new guidelines encouraging mediation over arbitration for large public procurement disputes. These guidelines, issued in June 2024, aim to streamline dispute resolution processes, improving the efficiency of resolving disputes involving government entities.

Arbitration will no longer be routinely included in procurement contracts, especially for high-value disputes. It will be reserved for disputes valued under ₹10 crore (approximately US$1.2 million), with higher-value disputes requiring careful consideration and approval by senior authorities. When arbitration is used, institutional arbitration will be preferred to ensure consistency and quality in proceedings. Further, disputes not covered by arbitration clauses and where alternative methods fail will be adjudicated by the courts.

These guidelines reflect a broader trend towards alternative dispute resolution methods, aiming to reduce the burden on the judiciary and promote faster, more cost-effective resolutions.

Supreme Court ruling impacts arbitration strategies

A ruling by the Supreme Court in India in April 2024 – Delhi Metro Rail Corporation Limited v Delhi Airport Metro Express Pvt Limited – significantly impacted arbitration in India.

The Supreme Court’s decision in this case to overturn a previous ruling highlighted the need for businesses to carefully review their arbitration approaches.

The case involved a dispute between Delhi Airport Metro Express Private Limited (DAMEPL) and Delhi Metro Rail Corporation (DMRC) over alleged defects in a metro rail project. Initially, an arbitral tribunal ruled in favour of DAMEPL, awarding it a termination payment plus interest. However, DMRC challenged this decision, leading to a series of appeals.

Ultimately, the Supreme Court exercised its constitutional powers to overturn its own previous decision, requiring DAMEPL to refund the awarded amount. This ruling underscore the court’s potential to intervene in arbitration awards, particularly when it involves significant public interest or substantial financial implications.

Businesses should be prepared for the possibility of increased judicial scrutiny of arbitral awards following this case, especially in high-stakes disputes. It may also be advised to reassess arbitration clauses to ensure they are robust and can withstand potential legal challenges.

This ruling serves as a reminder that while arbitration is intended to be a final and binding resolution mechanism, the Indian judiciary retains the authority to review and overturn arbitral awards under certain circumstances. 

Vinesh Phogat, sports arbitration and important judicial rulings

The disqualification of wrestler Vinesh Phogat during the Paris Olympics brought sports arbitration into the spotlight in India. The case, handled by the Court of Arbitration for Sport (CAS), highlighted the importance of fair and transparent dispute resolution in sports.

Phogat’s disqualification and subsequent appeal underscore the importance of having robust arbitration mechanisms in place to ensure clarity and consistency. This case may intensify the focus on arbitration, especially outside of the commercial sphere, in Indian and may prompt future reforms in India’s sports arbitration landscape.

Another important lesson unfolded in the case of Vedanta Limited v Shreeji Shopping. Here, the Delhi High Court ruled that an arbitration agreement specifying multiple seats of arbitration is not void for ambiguity or uncertainty. Once the arbitration seat is determined, the courts of that seat have exclusive jurisdiction over the proceedings.

In Techno Compact Builders v Railtel Corporation of India Limited, the Delhi High Court emphasised the need for diversity in arbitration panels, asserting that the lack of diversity would necessitate the court to establish an independent and unbiased trial.

Bilateral trade and investments

The bilateral investment treaty (BIT) between India and the UAE, effective from 31 August 2024, marks a significant milestone in enhancing India’s arbitration landscape in 2025 and beyond This second treaty between the two nations aims to provide robust investment protection and foster a more resilient investment environment, boosting investor confidence as both countries expand their economic cooperation in sectors such as infrastructure, technology, and renewable energy.

The enforcement of the BIT is expected to boost bilateral investment. The UAE, already a major investor in India, contributes approximately 3% of India’s total foreign direct investment (FDI) inflows. The BIT uses an asset-based definition of investment, including portfolio investments, aligning more closely with international norms, addressing previous exclusions under India’s 2016 Model BIT.

The treaty includes provisions for investor-state dispute settlement (ISDS) through arbitration, ensuring investors have access to an independent forum for dispute resolution. It assures investors of non-discrimination, protection against denial of justice, and arbitrary treatment by the host state, promoting a stable environment for investments. Additionally, the treaty balances investor protection with the state’s right to regulation, maintaining policy space for measures related to taxation, local government, and other critical areas.

Certain areas such as taxation, government procurement, subsidies and compulsory licensing are exempt from the BIT’s provisions, providing states with policy-making flexibility. The 2024 BIT reduces the mandatory duration to exhaust local legal remedies from five years, as per the 2016 Model BIT, to three years before initiating arbitration. It also excludes investments associated with corruption, fraud or round-tripping from protection. The treaty upholds each state’s right to regulate in public interest but prohibits third party funding of the investor in case of a dispute.

As the UAE is India’s third largest trading partner, the BIT is expected to boost investor confidence by providing a clear and reliable framework for dispute resolution, aligning with India’s broader efforts to position itself as a global arbitration hub. Recent bilateral investments include the UAE commitment of $2 billion for food processing in Gujarat. This is expected to enhance India’s food security infrastructure, generate jobs, and increase farmer incomes while positioning India as a major food exporter to the UAE and the Gulf. Another key development is the establishment of Abu Dhabi Investment Authority’s (ADIA) subsidiary in Gujarat International Finance Tec-City (GIFT City). GIFT City is designed to facilitate efficient dispute resolution, including arbitration. This development is likely to enhance arbitration infrastructure, promote institutional arbitration, and strengthen India’s position as a global arbitration hub, enhancing its attractiveness for international commercial disputes.

By providing robust protections to investors, the BIT encourages foreign investment and economic growth. Simultaneously, the carve-outs and regulatory rights ensure that the host state retains the necessary autonomy to govern effectively and implement policies in the public interest. The dual focus on protection and autonomy aims to create a stable and predictable investment environment, attractive to investors while safeguarding the state’s ability to regulate and manage its affairs.

Permanent Court of Arbitration opens India office

The Permanent Court of Arbitration, one of the world’s leading arbitral institutions, is to open an office in Delhi.

This development was announced at a conference on International Arbitration and the Rule of Law in New Delhi from September 13 to 15, 2024, hosted by The Supreme Court of India and the Permanent Court of Arbitration.

The conference was held in collaboration with the United Nations Commission on International Trade Law (UNCITRAL) and commemorated both the 75th anniversary of the Supreme Court and the 125th anniversary of the PCA, featuring prominent speakers and discussions on arbitration.

MCIA public consultation on new rules

The Mumbai Centre for International Arbitration (MCIA) announced the commencement of a public consultation on the draft 3rd edition of the MCIA Rules. The new rules aim to incorporate the latest innovations in international arbitration while remaining attuned to the Indian market. Features of the proposed revisions include an accelerated timeline for low-value or simple disputes, mechanisms which cater to multi-party / multi-contract scenarios, and clearer costs guidance.

Recent statistics issued by the MCIA in its annual report for 2024 illustrate how it continues to grow as institutional arbitration gains traction in India. Highlights include that the MCIA’s caseload has increased 48% and that 91% of awards were made in eight months, and none were set aside by courts. 

Indian railway award set aside

In a landmark decision, the Singapore International Commercial Court (SICC) set aside an International Chamber of Commerce (ICC) arbitral award in a dispute involving Indian freight train corridors in August 2024. The ruling was based on the tribunal’s substantial “copy-and-paste” approach, which breached principles of natural justice.

The ruling demonstrates the importance of maintaining high standards of fairness and independence in arbitration proceedings. The decision encourages best practices and may prompt Indian arbitration institutions and practitioners to adopt more rigorous practices to avoid similar issues, thereby enhancing the credibility and reliability of arbitration in India.

The dispute arose between an Indian government entity and a consortium of companies over railway track construction. The tribunal had presided over two related arbitrations and was found to have copied over 200 paragraphs from previous awards into the current decision. The case was described as “unusual and troubling”, with the tribunal’s actions suggested to be potentially biased, lacking independent assessment of the case’s unique facts. This led to the annulment of the award, emphasising the need for tribunals to maintain impartiality and thoroughness in their rulings.

The case also highlights the role of judicial oversight in ensuring the integrity of arbitration processes, which could lead to more robust mechanisms for reviewing arbitral award in India.

Establishment of the Arbitration Bar of India 

The Arbitration Bar of India was established, and its first joint conference with the Bombay Bar Association was held in Mumbai in September 2024.

The conference emphasised the need to professionalise arbitration to ensure ethical standards and efficiency. Practitioners must treat it as a specialised discipline, staying current on laws and rules while guiding the next generation of counsel.

Key strategies include drafting precise clauses, selecting the right arbitrators, and balancing costs with effective dispute resolution. Adaptability, attention to detail, and continuous improvement are critical to maintaining fairness and delivering better outcomes.

As commercial demands grow, shifting arbitration matters from courts to specialised tribunals could enhance efficiency and timeliness. By embracing homegrown solutions, these local challenges can be addressed more effectively in order to drive positive change in arbitration practices.