International Arbitration in India: A Complete Guide for Businesses

This guide explains how international arbitration works in India, the governing law, the role of courts, enforcement of awards, and the practical steps businesses should take.

What Is International Commercial Arbitration?

Arbitration is a private dispute resolution process in which parties agree to have their dispute decided by one or more arbitrators instead of a court. The decision, called an award, is binding.

Under Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, an arbitration is international commercial arbitration when it arises from a commercial legal relationship and at least one party is:

•   An individual who is a national of, or habitually resident in, a country other than India

•   A body corporate incorporated outside India

•   A company, association, or body of individuals whose central management and control is exercised outside India

•   The government of a foreign country

Arbitration between two Indian parties is domestic, and Indian parties generally cannot choose a foreign seat. The classification affects timelines, the court that hears challenges, and the rules on appointing arbitrators.

The Legal Framework

India's arbitration law is the Arbitration and Conciliation Act, 1996, modelled on the UNCITRAL Model Law. It is divided into parts:

•   Part I: Arbitrations seated in India, both domestic and international.

•   Part II: Enforcement of foreign awards under the New York Convention (Chapter I) and the Geneva Convention (Chapter II).

The Act has been amended in 2015, 2019, and 2021 to reduce court interference, set time limits, and improve institutional arbitration. India is a party to the New York Convention (1958), subject to two declarations: it applies only to awards made in countries India notifies as reciprocating territories, and only to disputes considered commercial under Indian law.

Seat, Venue, and Governing Law

Three concepts are often confused, and confusing them can lead to expensive litigation.

•   Seat: The legal home of the arbitration. It decides which country's courts supervise the process and hear challenges to the award.

•   Venue: The physical location of hearings, which can differ from the seat.

•   Governing law: There are usually three layers: the law governing the main contract, the law governing the arbitration agreement, and the procedural law of the seat.

The Supreme Court's decision in Bharat Aluminium Co. v. Kaiser Aluminium (BALCO, 2012) adopted the territorial approach: Part I of the Act applies only to arbitrations seated in India. Later decisions, including BGS SGS Soma v. NHPC (2019), confirmed that designating a seat is akin to an exclusive jurisdiction clause for that seat's courts.

Practical point: Name the seat expressly in your contract. Ambiguous wording such as "arbitration in London" has generated years of disputes over whether London is the seat or merely the venue.

The Arbitration Agreement

A valid arbitration agreement must be in writing, which includes exchanges of electronic communication. It can be a clause in the contract or a separate agreement.

A well-drafted clause covers:

1.  Scope: "all disputes arising out of or in connection with" the contract

2.  Seat and venue

3.  Institutional rules or an ad hoc procedure

4.  Number of arbitrators, usually one or three

5.  Method of appointment and qualifications

6.  Language of proceedings

7.  Governing law of the contract and the arbitration agreement

8.  Confidentiality and costs allocation

Under the doctrine of separability, the arbitration clause survives even if the main contract is declared invalid. Under kompetenz-kompetenz (Section 16), the tribunal can rule on its own jurisdiction.

Choosing Institutional or Ad Hoc Arbitration

Ad hoc arbitration is run by the parties and tribunal without an institution. It is flexible but can stall when parties disagree on procedure.

Institutional arbitration uses an established body's rules and administrative support. Common choices for India-related contracts include:

•   Singapore International Arbitration Centre (SIAC), widely used in Indian cross-border deals

•   London Court of International Arbitration (LCIA)

•   International Chamber of Commerce (ICC)

•   Hong Kong International Arbitration Centre (HKIAC)

•   Mumbai Centre for International Arbitration (MCIA), Delhi International Arbitration Centre (DIAC), and other Indian institutions

The 2019 amendment created the Arbitration Council of India to grade institutions, though its operation has been slow. India has been actively promoting itself as an arbitration hub, and the 2019 reforms also cut some regulatory hurdles for institutions.

Appointing Arbitrators

Parties are free to agree on the appointment method. If they fail, Section 11 lets a party approach the court. For international commercial arbitration seated in India, the application goes to the Supreme Court, and for domestic arbitration to the High Court. After the 2019 amendment, the Supreme Court or High Court may designate arbitral institutions to make appointments.

Section 12 requires arbitrators to disclose any circumstances that could raise doubts about their independence and impartiality, guided by the Fifth and Seventh Schedules. A person with a relationship listed in the Seventh Schedule is ineligible to act as arbitrator, and the Supreme Court has held that a party cannot have its own nominee decide appointments in a way that compromises neutrality (TRF Ltd. v. Energo Engineering and Perkins Eastman v. HSCC).

Conduct of Proceedings

Proceedings are typically structured as follows:

9.  Notice of arbitration invoking the clause

10.   Statement of claim and defence, with documents

11.   Procedural orders set timelines, disclosure, and hearings

12.   Evidence: witness statements, expert reports, and document production

13.   Hearing: oral arguments and cross-examination, often held virtually

14.   Final award with reasons

Section 18 requires the parties to be treated equally and given a full opportunity to present their case. Section 29A sets a 12-month period for domestic arbitrations to make an award, extendable by six months by consent. International commercial arbitrations are not bound by that deadline, though the tribunal is expected to conclude expeditiously.

Interim relief: Under Section 9, a party can approach Indian courts for interim measures, such as asset preservation, before or during arbitration. Section 17 empowers the tribunal to grant similar measures. Section 9(3) bars courts from entertaining applications once the tribunal is constituted, unless the tribunal's remedy is inadequate. Section 2(2) extends Sections 9, 27, and 37(1)(b) and (3) to arbitrations seated outside India unless the parties have agreed otherwise, which means Indian courts can still assist with interim relief in support of foreign-seated arbitration.

Emergency arbitrators: Institutional rules allow urgent relief before the tribunal forms. Indian courts have recognised emergency awards for India-seated arbitrations, notably in Amazon.com NV Investment Holdings v. Future Retail (2021).

Challenging an Award in India

For India-seated arbitrations, an award can be set aside only on the grounds in Section 34, filed within three months (extendable by 30 days):

•   Incapacity of a party or invalid arbitration agreement

•   Lack of proper notice or inability to present one's case

•   The award deals with matters beyond the scope of submission

•   Improper tribunal composition or procedure

•   The dispute is not arbitrable under Indian law

•   The award conflicts with the public policy of India

The public policy ground has been narrowed. After the 2015 amendment, an award is against public policy only if it is induced by fraud or corruption, violates fundamental policy of Indian law, or conflicts with the basic notions of morality or justice. For domestic awards, patent illegality is an additional ground, but it is not available for international commercial arbitration awards. Courts cannot review the merits.

Appeals lie under Section 37 to the appellate court.

Enforcing Foreign Awards in India

Enforcement of a foreign award under Part II follows the New York Convention. The party seeking enforcement must produce:

•   The original or a certified copy of the award

•   The original arbitration agreement or a certified copy

•   Translations where documents are not in English

The award holder files in the High Court with jurisdiction over the assets or the subject matter. Once the court finds the award enforceable, it is treated as a decree of that court.

Grounds for refusing enforcement (Section 48) mirror the Convention: incapacity, invalid agreement, lack of notice, excess of authority, improper composition, an award not yet binding or set aside at the seat, non-arbitrable subject matter, and conflict with the public policy of India. The Shri Lal Mahal v. Progetto Grano (2013) ruling limited the public policy ground to fundamental policy of Indian law, the interests of India, and justice or morality, and excluded review on merits. The 2015 amendment codified this position.

Reciprocity requirement: India enforces awards only from countries it has notified as reciprocating territories. Awards from the UK, Singapore, the US, France, Germany, and many others qualify. An award from a non-notified country is not enforceable under Part II, though a party may seek to enforce the underlying claim through a civil suit.

Timing: Enforcement can take time because of court backlogs, so businesses should plan for that delay. Commercial Courts and specialised benches of High Courts, including the Delhi and Bombay High Courts, have become more efficient in handling these cases.

Arbitrability and State Parties

Not every dispute can be arbitrated. Criminal matters, matrimonial disputes, insolvency, and certain public rights are generally non-arbitrable. In Vidya Drolia v. Durga Trading Corporation (2020), the Supreme Court set out a four-fold test for arbitrability and held that disputes involving rights in rem, such as some tenancy matters governed by special statutes, are typically not arbitrable, whereas rights in personam usually are.

When the counterparty is a government entity or public sector undertaking, note that contracts often include arbitration clauses, but the government's contract terms can constrain who appoints the arbitrator. Businesses should check whether the counterparty has authority to agree to arbitration and whether any prior approvals are required.

Third-Party Funding, Confidentiality, and Costs

Section 42A of the Act, added in 2019, requires confidentiality of arbitral proceedings, except for the disclosure of the award where necessary for implementation or enforcement. Costs follow the event in most cases, with the tribunal having discretion under Section 31A. Third-party funding is not expressly regulated, but is increasingly used in high-value claims.

Practical Tips for Businesses

•   Draft a clear clause with a defined seat, rules, language, and number of arbitrators.

•   Choose the seat with enforcement in mind. Confirm the seat's country is a New York Convention state and a notified reciprocating territory for enforcement in India.

•   Address the arbitration agreement's governing law expressly.

•   Preserve evidence from the first sign of a dispute.

•   Consider interim relief early if the counterparty's Indian assets are at risk.

•   Review the counterparty's assets to ensure an award will be enforceable in practice.

•   Consider mediation or tiered clauses before arbitration, including under the Mediation Act, 2023.

Conclusion

India's arbitration regime Parens Patrice has become more supportive of international arbitration, with narrower grounds for court intervention and a clearer approach to enforcement. Even so, results still depend on precise drafting and informed choices on seat, rules, and enforcement strategy. Businesses that plan for dispute resolution when signing the contract are far better placed than those that address it only after a dispute begins.