Stop asking whether arbitration is dead, start asking why it isn't delivering

In conversations around endless events, panel discussions, fireside chats and the like, ‘experts’ promote arbitration as the most effective method of dispute resolution in the commercial space. Water cooler tete-a-tete, however, tells us a different story.

A chat with a General Counsel of any respectable multinational will disclose a disquiet about the increasing costs, delays and unpredictability normally associated with arbitration in India. Thus, the real question to address is why the system, as it currently stands, is not consistently delivering on its promise within the Indian context.

Recent remarks have brought this debate into sharp focus. On the one hand, there are concerns that aspects of the current arbitral framework may be undermining its effectiveness. On the other, there is a strong and concurrent recognition of the tremendous scope of arbitration and mediation in the light of mounting pendency before courts. This apparent paradox is significant. It reflects not a system in decline, but one at a crossroads: simultaneously critiqued for its shortcomings while at the same time seen as an essential solution to endemic judicial burdens.

Against this backdrop, this article does not subscribe to the alarmist call to move away from arbitration in India. To do so is both puerile and misdirected. The pertinent question to ask is why arbitration is not consistently delivering on its foundational promise of cost effectiveness, efficiency, finality and party autonomy within the Indian context. This shift in perspective is not merely semantic; it fundamentally alters the narrative. It moves the discourse away from abandoning arbitration as an alternative dispute resolution mechanism and instead directs attention towards diagnosing the structural, procedural and institutional challenges that hinder its effective functioning.

Importantly, these concerns are not unique to India. Mature arbitration hubs such as Singapore, London, Paris and New York continue to grapple with recurring criticisms relating to rising costs, procedural delays, the quality and consistency of arbitrators, enforceability concerns, and questions of overall efficiency. Yet, none of these jurisdictions have concluded that arbitration is a lost cause. Instead, they have responded through continuous refinement of rules, building institutional support and nuanced practices. When viewed from this prism, the criticism in India is not indicative of systemic failure, but rather of a maturing ecosystem that is increasingly self-reflective and reform-oriented.

At the heart of this debate is a group of people who are frequently ignored, and yet play a final deciding role - General Counsel. The success in arbitration is largely decided well before any dispute occurs. It begins at the stage of contract drafting, through the choice of arbitral seat, the framing of dispute resolution clauses, the selection (or omission) of institutional rules and the clarity with which procedural expectations are set. In this way, General Counsel wield enormous influence over the eventual effectiveness, efficiency, cost and enforceability of arbitration. The recent discourse questioning the effectiveness of arbitration in India must, therefore, also engage with the evolving role and responsibility of in-house legal teams.

Rather than viewing arbitration as a default or boilerplate mechanism, there is a growing need for deliberate and informed design of dispute resolution frameworks. This includes careful selection of arbitral mechanisms, calibrated approaches to arbitrator appointments and foresight on issues such as timelines and interim relief. The conversation, therefore, is not merely about reforming arbitration from the outside, but about strengthening it from within, beginning at the drafting table.

Pillar One: Invest in the arbitration clause

The starting point lies in the arbitration clause itself. Far too often, arbitration clauses are copied and inserted into contracts with little to no consideration of the specific commercial context. This practice overlooks several essential elements such as the nature and complexity of potential disputes, the transaction value, number of arbitrators, governing law both for the substantive contract and the arbitration agreement, choice of seat, institutional framework, language and the availability of mechanisms such as expedited procedures, emergency relief and consolidation.

Compounding this concern is the most ignored and yet common practice in contemporary practice to treat arbitration clauses as routine insertion, particularly with increasing reliance on AI-driven drafting tools. While such tools enhance efficiency, they also risk encouraging a mechanical adoption of standard-form clauses without the necessary application of mind. Parties today are often reluctant to invest time in tailoring dispute resolution provisions, assuming that a “one-size-fits-all” clause suffices. This misplaced reliance frequently results in clauses that are misaligned with the commercial realities of the transaction, ultimately creating unavoidable complexities once dispute erupts.

A poorly drafted arbitration agreement does more harm than create ambiguity; it invites procedural disputes that delay commencement of proceedings and inflate costs before the merits are even engaged. Questions of jurisdiction, scope and process then become battlegrounds in themselves, undermining the very efficiencies arbitration promises to deliver. Thus, the arbitration clause must be viewed not as boilerplate, but as a critical business risk management tool. It warrants the same level of strategic attention as other key commercial provisions.

Pillar Two – Choose the right arbitrator

Every arbitration is only as good as the arbitrator. This proposition, though simple, is often underappreciated in practice. It cannot be gainsaid that confidence in arbitrators’ independence, impartiality, competence and appropriate experience is key to any dispute. Time in hand, availability, commercial orientation required to manage a demanding case, along with sufficient confidence in the process of selection and appointment, can be a game changer. In India, this assumes even greater significance given the statutory timeline prescribed for completion of arbitration, most notably, the requirement under Section 29-A of the Arbitration and Conciliation Act, 1996, which mandates that domestic arbitral awards be rendered within a period of 12 months. While such timelines are intended to promote efficiency and distinguish India from many other jurisdictions, their success ultimately depends on the capacity, availability and discipline of the arbitrator.

In reality, General Counsel frequently approach arbitrator selection as a reactive exercise, seeking to match or counterbalance the opposing party’s nomination. This approach misses the larger objective. The moot question ought not to be merely who is appointed, but how one chooses an arbitrator. The relevant considerations should be more substantive: does the arbitrator have the time and bandwidth to meaningfully engage with the dispute? Is the individual known for procedural efficiency and discipline? Does the arbitrator possess industry-specific expertise? Is there a demonstrated ability to actively case-manage proceedings and prevent drift? Crucially, does the arbitrator have a track record of delivering awards within reasonable timelines?

A structural challenge in the Indian context also warrants attention. Unlike more mature arbitration ecosystems, India does not yet have a sufficiently distinct and specialised pool of full-time arbitrators. Parties often, therefore, turn to retired judges and the same members of the Bar who are actively practicing before courts to man their disputes. The question is not whether retired judges or litigating lawyers make good arbitrators. The question is whether judicial office or litigation experience can, by themselves, be treated as a proxy for arbitral suitability.

Ultimately, arbitrator appointment is the most critical aspect of a dispute resolution clause. An efficient and engaged tribunal can significantly curtail both cost and delay. Conversely, a passive or overextended tribunal can exacerbate inefficiencies, regardless of the institutional framework in place. The choice of arbitrator is, therefore, not merely a formal step. Rather, it is a decisive strategic choice that shapes the entire arbitral process.

Pillar Three: Conduct arbitration like a business project

Even the most well-drafted arbitration clause and carefully constituted tribunal cannot compensate for ineffective conduct of proceedings by the parties themselves. Arbitration must be approached with the discipline and clarity of a business project. This requires early identification and narrowing of issues, a conscious effort to avoid unnecessary procedural applications and the use of technology to streamline document management and hearings. Parties should work towards agreeing on realistic timelines, resisting the tendency for excessive pleadings and empowering external counsel to take pragmatic procedural decisions without constant recalibration.

In practice, delay in arbitration is often less a function of systemic inadequacy and more a product of party conduct. The tendency to over-litigate procedural issues, seek repeated adjournments, or artificially expand the scope of disputes contributes significantly to inefficiency. For instance, jurisdictional objections under Section 16 are frequently escalated prematurely through challenges under Article 227 of the Constitution of India, which are only to be revisited at the stage of challenge under Section 34 of the Arbitration and Conciliation Act, 1996. Likewise, the parallel initiation of suits or even criminal proceedings during the pendency of arbitration is often deployed as a tactic to derail or delay the arbitral process. Such approaches fundamentally undermine the efficiency that arbitration is designed to achieve.

Equally, this discussion must recognise the government’s approach bordering on approbation and reprobation towards arbitration. From a bare reading of the office memorandum in question, it is not clear whether the problem has been identified or if it is a mere suspicion. In either circumstance, the answer does not lie in throwing the baby out with the bathwater. A more constructive path lies in aligning governmental intention and resultant conduct with its stated ambition of positioning India as a credible and robust arbitration hub. This requires consistency in enforcement, calibrated judicial intervention and a willingness to repose confidence in institutional mechanisms.

At the same time, while the government’s increasing emphasis on mediation is both progressive and welcome, mediation cannot be seen as a substitute for arbitration. The two serve distinct functions: mediation facilitates consensual resolution, whereas arbitration provides binding and enforceable outcomes. Elevating one cannot come at the cost of neglecting the other.

Meaningful dialogue can help build alignment and create a definitive path forward. However, unless the stakeholders translate their commitments into action and truly walk the talk, the desired change will remain elusive.

Rather than lamenting failed outcomes, parties need to look inward and recognise the missteps that contributed to it. In times of disappointment, it is easy to look for scapegoats. The more constructive approach is to identify lapses, learn from them and never repeat them.

Arbitration remains one of the most meaningful and significant alternatives to litigation. It offers privacy, procedural flexibility, international enforceability, commercial sophistication and a neutral forum - advantages that are particularly significant in cross-border transactions. The success of this mode of dispute resolution depends largely on the willingness of those who use it to engage meaningfully, honour their commitments and translate intent into action.

Naresh Thacker is an Independent Counsel practicing before the Bombay High Court.