India's New Path for Arbitration: From Ad-Hoc to Institutional
- Kriti Bhatia
- Dec 15, 2025
- 6 min read
Authored by - Kriti Bhatia (Student, Rajiv Gandhi National University of Law)
Indian companies turned to arbitration for several years, believing that this would speed up and simplify the resolution of their disputes. The latter was considered as a solution to the issue of long delays and costly court proceedings. To make this dream come true, the government launched the Arbitration and Conciliation Act in 1996. Nevertheless, most companies have found that arbitration is still slow and pricey, and resembles court proceedings in a traditional way. In India, it has been a regular practice to select one arbitrator, most commonly a retired judge, and to conduct the hearings informally. Although the participants are comfortable with the method, it has produced difficulties. This method has caused delays and also made the procedure less trustworthy, which negatively impacts those businesses that are looking for quick results.
To solve these issues, the Indian government proposed the Draft Arbitration and Conciliation (Amendment) Bill, 2023[1]. The Bill is intended to discontinue the recourse to informal, ad-hoc arbitration and let also the professional and institutional system be promoted. It is aimed at establishing a reliable and speedy dispute resolution process, hence giving businesses more trust in the method.
Currently, there is a discussion on whether the system will be better off if it is a must to conduct institutional arbitration or if the system will lose too much of the flexibility that is the main advantage of arbitration. Those who favor the Bill think that these changes are indispensable to move forward, while the opponents think that some freedom and informality should still be there for arbitration to be effective.
The Diagnosis: Why the Ad-Hoc Model Is Not Working
To understand the objective and intent behind the Draft Arbitration and Conciliation (Amendment) Bill, 2023, it is very important to first diagnose the prevailing ad hoc system and the problems faced in the process. In an ad-hoc arbitration, the parties themselves, with their lawyers, manage the entire process, from appointing the arbitrator and setting the timeline to arranging the hearing venue and managing the paperwork.
A high-level government committee led by a retired Supreme Court judge, Justice B.N. Srikrishna studied this problem back in 2017. Their report is the foundation for the new bill[2].The committee found that ad-hoc arbitrations in India are full of delays.[3] There is no one to keep the process on track. Parties keep asking for more time, and arbitrators, who often work alone, find it hard to say no.[4]
The Supreme Court itself has expressed frustration with this. In one case, the court pointed out the "lethargy" that has plagued Indian arbitration.[5] Furthermore, when companies cannot agree on an arbitrator, they have to go to court to get one appointed. This means they end up in the very court system they were trying to avoid, causing even more delays.[6] The result is a loss of faith. For a business deciding whether to arbitrate or litigate, the ad-hoc model often presents a false choice: similar delays, but with the added costs of arbitrator fees and venue hire, and without the procedural safeguards of a court.
The Prescription: The Draft Bill's Institutional Mandate
The Draft Arbitration and Conciliation (Amendment) Bill, 2023, acts on the diagnosis of the Srikrishna Committee with an objective to propose the solution to the existing problems of ad-hoc model. Its core focus is to replace party-driven informality with institution-driven professionalism. The most significant change is the proposed modification to Section 11, which deals with the appointment of arbitrators[7].
According to the Draft Bill, it is provided that in most cases of commercial disputes, the authority to appoint an arbitrator, if the parties cannot agree, should be not with the Supreme Court or the High Court, but with a "designated arbitral institution". This change alone is of a very high magnitude. It essentially attempts to separate arbitration from the judiciary at the point which is most judicially and controversially critical. These institutions will be rated and assigned by a powerful Arbitration Council of India (ACI), a body whose role is considerably extended by the Draft Bill to function as a regulator and a facilitator of the arbitration ecosystem.[8]
The intended benefits are compelling. Professional institutions like the Mumbai Centre for International Arbitration (MCIA) or the Delhi International Arbitration Centre (DIAC) bring a suite of benefits that ad-hoc setups struggle to provide: pre-vetted panels of specialized arbitrators, robust procedural rules that enforce timelines, experienced secretariats to handle administrative burdens, and scaled fee structures. This ecosystem is designed to instill predictability, integrity, and efficiency - the very qualities that have made institutions in Singapore (SIAC), London (LCIA), and Paris (ICC) the preferred choices for international commercial parties.
The Big Debate: Efficiency vs. Freedom
The Draft Bill has sparked a debate within the legal and business communities framing a classic dilemma of reform.
The Argument For the New Bill: A Necessary Push
Supporters claim that the forced change should not be considered as a step beyond the power border of the authority but rather as a necessary move. They maintain that the ad-hoc culture, which is deeply entrenched, has not been transformed even after a long period of gentle persuasion.
The Srikrishna Committee observed that "the effectiveness of arbitration depends largely on the institution chosen," and a solid institutional framework is the main condition for India to be a reliable international arbitration hub.[9] This step is viewed as India being in line with global best practices, where institutional arbitration is standard practice rather than being rare. It is expected to lessen court intervention, facilitate the quality of arbitrators, and, what is most important, to provide arbitration's essential service, i.e. speed and finality, which was barely made.
The Argument Against the New Bill: Concerns About Cost and Control
Skeptics, on the other hand, do raise some legitimate points. Their first concern is that of the question of capacity and cost. Can high-quality arbitral institutions, with a reasonable cost, be found widely enough throughout India so as to handle a huge number of disputes? Imposing a mandate on institutions without facilitating their uniform quality and accessibility may result in the formation of new monopolies as well as an increase in the costs, thus small and medium-sized enterprises may be left out of the game.[10]
The second, much more philosophical, concern is about the loss of party autonomy. The basic principle of arbitration is that it is a product of a contract. Opponents claim that a government-imposed mandate for the arbitration method limits the parties' freedom to create a process which is most suitable for their needs and budget[11]. They also point out that the "one-size-fits-all" approach of institutional rules may lose the tailored flexibility that can make ad-hoc arbitration so effective in the right hands.
Conclusion
The Draft Arbitration and Conciliation (Amendment) Bill, 2023 is a major legislative intervention that comprehensively recognizes the systemic deficiencies in India's ad-hoc arbitration model. This move towards mandatory institutional arbitration is a gradual but definite change, based on the historical failures that have been documented and the effectiveness of the institutional frameworks in the countries that are considered leaders in the international judicial systems.[12]
It goes without saying that there are some substantial concerns raised about increased costs and possible limitations to the party's autonomy, and these points should be seriously considered. However, the reforms success will, in fact, depend on the Arbitration Council of India operating efficiently. Most importantly, the Council's capability to regulate the environment effectively and induce competitive standards among the arbitral institutions will be essential.[13]
To sum up, the draft law lays down the basic framework for the indispensable change in India’s dispute resolution ecosystem.[14] Undoubtedly, the execution phase will be fraught with difficulties, but the goal is to create a modern, efficient arbitration system that meets the reasonable expectations of the business community.[15]This legislative move is, in fact, the very first step towards that transformational journey.
[1] Draft Arbitration and Conciliation (Amendment) Bill, 2023 (India), https://law.gov.in (last visited Oct. 26, 2023).
[2] Report of the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India 1 (2017) (India).
[3] Justice B.N. Srikrishna, Keynote Address at the MCIA Conference (2018).
[4] Trilegal, Analysis of the Draft Arbitration Bill, 2023 2 (2023).
[5] Govt of Haryana PWD Haryana v. M/s G.F. Toll Road Pvt. Ltd., (2019) 3 Arb LR 1 (SC) (India).
[6] Arbitration and Conciliation Act, 1996, § 11 (India).
[7] Draft Arbitration and Conciliation (Amendment) Bill, 2023, supra note 1, at cl. 3 (proposing to amend § 11 of the principal Act).
[8] Id. (proposing to amend § 43C of the principal Act to enhance the powers of the Arbitration Council of India).
[9] Srikrishna Committee Report, supra note 2, at 21.
[10] Shreyas Jayasimha, The 2023 Draft Indian Arbitration Bill: A Step Forward, But Proceed with Caution, Kluwer Arb. Blog (Aug. 15, 2023), https://arbitrationblog.kluwerarbitration.com.
[11] Shilpa S., Draft Arbitration Bill, 2023: A Death Knell for Party Autonomy?, Bar & Bench (Aug. 10, 2023), https://www.barandbench.com.
[12]Gary B. Born, International Commercial Arbitration 125 (3d ed. 2021); Ministry of Law, Singapore, Singapore as an International Dispute Resolution Centre, https://www.mlaw.gov.sg (last visited Oct. 26, 2023).
[13] Draft Arbitration and Conciliation (Amendment) Bill, 2023, cl. 4 (India); Bar and Bench, Draft Arbitration Bill, 2023: A Death Knell for Party Autonomy? (Aug. 10, 2023), https://www.barandbench.com.
[14] Khaitan & Co., Legal Alert: The Draft Arbitration (Amendment) Bill, 2023 5 (2023).
[15] Trilegal, Analysis of the Draft Arbitration Bill, 2023 2 (2023); Economic Times, India Pushes to Become a Global Arbitration Hub with New Bill (Aug. 15, 2023)
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