Image source -

This article is written by Aditya Saurabh, pursuing a Diploma in Business Laws for In House Counsels from LawSikho.


While the Indian judicial system has been over-burdened with a massive backlog of cases that are even stuck for more than a decade pending resolution, it is becoming a standard practice for the parties to enter into arbitration as the preferred mode of dispute resolution for commercial disputes. Arbitration is a form of Alternative Dispute Resolution (ADR) process, which is considered to be beneficial for the parties due to its quicker resolution nature, cost efficiency and flexibility. 

But unfortunately this is often found to be not true because parties and their counsel do not evaluate their strategies and do not take steps to ensure effective conduction of arbitration, thus making the process equivalent to a trip to court. This has resulted in a major problem as the arbitration mutates into a private judicial system that looks and costs the same or more as litigation, and no longer remains as a ‘real’ arbitration.

Download Now

The key to an effective arbitration is to have broad, flexible guidelines or clauses which are outcome oriented where the parties streamline the process of arbitration by limiting the costs and time consumed in the arbitration and reach a conclusion that both the parties are satisfied with. Thus, inserting a clause in a contract is itself not enough as there are numerous standard Dispute Resolution clauses to ensure the arbitration to be a ‘real’ and effective arbitration. It is rather the strategies adopted by the parties to complement the dispute resolution clause so that the focus on an outcome is in everyone’s best interests.

Further, the 2015 and 2019 amendments brought up to the Arbitration and Conciliation Act, 1996 (Act) has tried to make the disputes pro-arbitrable by enhancing the flexibility, enforceability and ensuring less interference by the court, so that the dispute is timely and effectively arbitrated.

Impediments in effectively arbitrating a dispute

An arbitration will be said to be effective when it is final and enforceable for the parties and is cost and time efficient. However, there are several impediments that the parties have to face in effectively arbitrating a dispute, some of which are:

  • The process of choosing the right arbitrator is comparatively hard for the parties who prefer ad-hoc arbitration over institutional arbitration, as the Government has not recognised a separate panel of accredited arbitrators to facilitate this process. 
  • The pool of seasoned arbitrators before the parties is small for selection and may charge very highly, thus increasing the cost of arbitration.
  • Under Section 11 of the Act, when the courts are approached for the appointment of arbitrators, retired judges are mostly selected as arbitrators which follow conventional court procedures thus causing delay in arbitration. 
  • Further under Section 11 of the Act, these appointed retired judges may not have the required knowledge of technology or field in which the dispute has arisen, causing delay. 
  • The interference of the court in arbitral proceedings can be seen on numerous accounts such as for the appointment of arbitrators, enforcement of arbitration agreement or clause, challenges for disqualification of an arbitrator, setting aside an award, appeal and others. 

Legal framework curbing the impediments 

Several significant amendments have been made to Arbitration and Conciliation Act, 1996 in 2015 and 2019 to curb these above mentioned impediments in order to improve the speed and efficiency of arbitration, which are:

  • Limiting the time for completion: A period of six months is provided as per S. 23 of the Act for the filing of the statement of claim and defence after the notice of appointment of arbitrators; after which the award has to be passed within 12 months (further extension of six months before the court) as per S. 29A of the Act. However, this is not exactly followed as the court may delay in passing an extension and the international commercial arbitration is also exempted from such time limitation as “must endeavour” to pass an award within 12 months is entered.
  • Fast track dispute resolution: The parties can also opt for a faster system of dispute resolution where awards are passed within 6 months as per S. 29B of the Act.
  • Establishment of Arbitration Council of India (ACI): As per the 2019 Act, the rules on grading institutions and setting out norms on accreditation of arbitrators are to be framed by the ACI. Further, it has to improve the quality of institutional arbitration and monitor the performance and conduct training of the arbitrators to ensure speedy and efficient administration of justice. 
  • Appointment of Arbitrators: As per S. 11 of the 2019 Act, the arbitrators are to be appointed by the designated arbitral institutions (accredited by ACI) empowered by the Supreme Court or the High Courts, within a period of thirty days from the receipt of notice, resulting in quick appointment of arbitrators. Further, the High Court shall form a panel of arbitrators where no accredited institutions are available. Also, these arbitral institutions shall determine the cost and fee structure of arbitration as per the rates specified in the Schedule IV of the Act, which is not mandatory to be followed.
  • Cost effective arbitration: As per the 2015 Act S. 31A was inserted, which provides that the Court or arbitral tribunal shall have the discretion to determine costs, and the general rule is that unsuccessful parties have to pay the costs. This will restrict parties to file frivolous and meritless arbitration and litigation that delays in disposal.
  • Reducing interference of courts: 
  • As per the amendments, the court’s interference by engaging into validity and effect of arbitration agreement under S. 8 and 11 has been reduced to only examining the existence of a valid arbitration agreement, and under S. 11 has been omitted in cases where the appointment is made by the designated arbitral institution. 
  • The court’s interference has also been restricted under S. 34, as it is not required to look into the merits of the dispute as the ground of an erroneous application of law or evidence cannot set aside an award. Further, the court’s interference has been restricted under S. 34, where an award could be set aside on limited grounds as per S. 34(2), the courts can only rely on the materials already available on record before the relevant arbitral tribunal. Also, the amendment states that setting aside proceedings has to be completed within one year. This shall surely expedite the arbitration process as setting aside proceedings were sometimes lengthy than the passing of arbitration award itself, and these amendments will lessen such time spent by the courts.
  • The court’s interference has also been reduced under S. 36, where a party wishes to stay the enforcement of the award by making a separate application to the court. The court as per the 2021 amendment is required to stay an award if a “prima facie” case is made out that either the arbitration agreement or the making of award was itself induced or affected by fraud. 

In spite of these amendments, which curb some of the impediments, they are not rigorously followed; and parties along with their counsel need to develop strategies to achieve their goals by conducting arbitration effectively. 


Strategies for successful arbitration

Although institutional arbitrators have developed arbitration procedures which can be followed for effectively arbitrating a dispute, it is not necessarily to be followed and parties can and must in addition to such procedures or in spite of such procedures, follow these strategies that can help in a faster, cost-efficient and effective arbitration process:

  • Draft a Detailed and Clear Arbitration Clause

As per S. 7 of the Act an arbitration agreement/clause must be in writing, signed by the parties and must be recorded. Although parties can enter into arbitration after a dispute has arisen even without an arbitration clause/agreement where there is undisputed acknowledgement by both the parties of such clause/agreement in their exchange of statement of claim and defence. However, it is not advised to arbitrate a dispute without a previously drafted arbitration agreement/clause as many complications may arise.

Most of the parties and their counsels thoughtlessly copy-paste a standard arbitration clause without carefully analysing the terms of their contracts, which ends up consuming more time, expenses and thus disrupts the case. It has to be noted that arbitration is a contract-based process which enables the parties to tailor the process as per their needs and thus be different from litigation which has fixed rules of procedure. Thus, the parties can draft the details of the procedures such as time limit for passing an award, discovery limits, qualification and selecting of arbitrator and others including costs which will be suitable to any likely disputes. A well drafted arbitration clause should have:

  • Enforceability: It is to ensure that the award passed in an arbitration having seat other than India is enforceable in India. India being a party to both the New York Convention and the Geneva Convention on the Execution of Foreign Arbitral Awards; an award passed in another country is enforceable in India if the country is bound by either convention. For instance, the awards passed by UK, US, Singapore, Hong Kong or Switzerland are enforceable under the Arbitration Act as these are gazetted convention countries.
  • Number and qualifications of arbitrators: The arbitrators have to be in odd numbers (single arbitrator is preferred as cost effective), their qualifications suitable for a dispute, unbiased and the way of appointment must be clearly specified.
  • Time limit for passing an award.
  • Arbitration costs: Whether the cost of arbitration has to be divided equally or borne by the prevailing or unsuccessful party has to be clearly specified in the arbitration clause, so that the burden of cost of arbitration does not fall on a single party or the smaller or weaker party.
  • Phased Dispute Resolution Clause: Parties nowadays don’t prefer directly jumping to arbitration for resolving a dispute and rather prefer to firstly involve in negotiations and/or mediations. However, it has to be noted that such negotiations and/or mediations must not be without a time limit, procedure and cost involved.
  • Confidentiality: An arbitration clause may insert a provision for confidentiality relating to the documents, testimony and award so that the autonomy of the parties is maintained and there is no harm to reputation of either party due to bad publicity. The 2019 amendment to the Act also provides for legal obligation on the arbitrator, the arbitral institution and the parties to maintain confidentiality of all arbitral proceedings except where disclosure is necessary for its implementation and enforcement of an award. 
  • Scope of Dispute: Only those disputes can be referred to arbitration which is mentioned in the arbitration clause, thus, the scope of dispute must be analysed, widened and unambiguously drafted so that it doesn’t result in litigation.
  • Form of award: The demand for a reasoned or standard form of award may be clearly mentioned in the clause.
  • Governing law and rules: The substantive law that is to be applied to govern the dispute is the governing law which has to be clearly specified as where two parties belong to two different countries, choosing a governing law becomes a tiring process as each party would force on the governing law of their own country. However, the rules of the arbitration procedures such as the appointment of arbitrators or the exchange of pleadings and evidence, etc. can be determined by the parties as per their convenience and needs beforehand in the arbitration clause or choose to follow the rules of an arbitration tribunal.
  • Prepare and Enforce Budgets

A party must along with its attorney chalk out and update regularly the detailed budget to be invested in various phases of the arbitration such as claim, discovery, witness preparation, experts, hearings and others including the cost to be spent on arbitrators and attorneys, and then should determine whether such investment would give out the desired returns. This shall help in understanding the approximate expenditure on arbitration and thus the cost of Arbitration processes can be reduced and blended accordingly.

  • Select the “Right” Arbitrator

Parties must take the advantage of the fact that in arbitration they have the freedom to select the judges (arbitrators) of their own choice to resolve the disputes. This must not be overlooked and a due diligence must be conducted to select a specific arbitrator which is right for the particular dispute. The “Right” arbitrator here means the one, who is experienced, qualified, has expertise in the area of dispute, received good reviews for previous decisions, is trained and is unbiased. This is because a good and efficient arbitration depends upon a good arbitrator who has the authority to decide and interpret timely the claims, costs, and pass awards. 

Earlier as per the 2019 Amendment Act, both the qualifications and the norms of arbitrators were laid down under the Eighth Schedule, introduced by Section 43J. But now after the 2021 Amendment Act, no qualifications and norms are prescribed as the Eighth Schedule stands deleted, and now parties are even free to choose a foreign qualified lawyer or other professional to act as arbitrators in India. However, as per S. 43J, the ACI shall specify the qualifications, experience and standards for the accreditation of arbitrators.

  • Select Experienced Counsels and Limit the Motions 

Arbitration can be cost and time efficient when experienced counsels are appointed who understand the difference between arbitration and litigation and are more outcomes focused. Counsels not familiar with the arbitration tend to perform extensive discovery, involve in evidentiary fights and not so specific motions, thus treating arbitration as a court proceeding. A lawyer should understand that not every motion or document or witness is important and only those that have the potential to affect the dispute must be submitted. Further, lawyers should not engage in evidentiary fights as per S. 19(1) of the Act, no Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872 is applied to arbitration and an arbitrator may consider evidence to improve his understanding of the case. Thus, experienced counsels who understand the business objectives of the party and evaluate the efficacy of every motion to the time and cost involved must be appointed.

  • Limit the Time and Discovery of Information

The parties along with their counsel must develop a schedule for discovery and submission of their claims and answers either in the arbitration clause or in the preliminary hearing where the parties present their positions to the arbitrator(s). Requests for continuances or extensions of the deadlines must be monitored and fined wherever new information is produced outside the schedule. Scheduling will help in producing only necessary information and not all desired information, before the arbitrators to understand and fairly decide on the dispute. Discovery of information including e-Discovery involves a lot of costs and therefore limitation on it to reasonable procedures consistent with the dispute is necessary to make arbitration cost effective.

  • Conduct during the Hearing: Efficient and Professional

The arbitration procedures in place during the hearings should flow smoothly by considering the time limits. Parties must give pre-arbitration briefs such as the subject of the dispute, issues to be resolved, and jointly prepare a tutorial for complex or technical cases to prepare the arbitrator(s) about the case. Introduction of the witnesses and representatives, preparation of exhibits and making it available to arbitrator(s), parties and witnesses shall help in building a rapport with the arbitrators as the party and his counsel will seem professional. Avoid unnecessary rounds of pleadings and keep it minimal by submitting statements and expert opinions mostly in writing. Do not engage in any tussle, scoff or chuckle with the adverse party while directing your comments or examining any witness and make your statements directly towards the arbitrators. Prepare for cross-examination, and highlight the key issues, relevant evidence, laws, and prepare for the award. 

  • Avoid Appeal and Settle The Matter In Arbitration

Once the dispute is brought for arbitration, parties must keep an open mind to settle it by keeping a track of information affecting the case and how it would develop: favourable or not. Parties should set aside their emotions and talk directly with the adverse party to reassess and negotiate the options throughout the proceeding and try to settle the case during the hearings. This shall reduce the cost and time involved in arbitration. However, in situations where the arbitration is in process or an award is passed, parties should avoid moving to court or filing an appeal as it lengthens the process and increases the cost. Arbitrators’ decision must be trusted by the parties as they have experience and expertise in the field in which dispute has arisen, are more receptive to the dispute and shall pass a much more reasonable and fair award.


Arbitration is an “alternative” dispute resolution process, but the lengthy proceedings and time-consuming factors are taking away its character from being an alternative to the litigation process. However, the government, arbitral institutions and other regulating authorities are putting efforts to make it effective and fair for the parties who proceed to arbitration to protect their economic interests. But this is not enough, as the legislative framework is subject to criticism and parties are not penalised for diligently following it. Therefore, thoughtful effective strategies have to be planned and adopted to successfully arbitrate a dispute even before the dispute has arisen, while drafting a customized arbitration clause or agreement. Regular evaluations and careful monitoring of the arbitral proceedings is required to be performed to be cost and time efficient. These strategies shall help in generating an effective arbitration, satisfying the parties.



Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.


Please enter your comment!
Please enter your name here