Since the Global Financial Crisis, 2007-08, financial services industry worldwide has been subjected to detailed regulatory laws; however, the resolution of disputes through alternative means, still remains a nascent area. While a number of significant amendments to the Arbitration and Conciliation Act, 1996 were made in 2015 and 2019, their reach to the financial sector entities still remains untested. The author attempts to highlight the significance of financial services arbitration in making India a hub for global arbitrations by suggesting structural changes to the existing framework, taking reference from the comparative developments internationally.


The Parliament made sweeping changes to the Indian Arbitration & Conciliation Act, 1996 (Arbitration Act) to expedite disputes resolution process and promote their use-case and application to market-wide players. However, till date no structural changes have been made or proposed to expand the reach of arbitration and include financial services industry. The financial services entities have been traditionally utilizing litigation and administrative adjudication before concerned regulator as mode for disputes resolution. The trust in the litigation process for these entities stems from the fact that generally courts are empowered with greater powers as compared to arbitral tribunals and the public character of the proceedings creates pressure upon the defaulter. The author attempts to debunk this myth by arguing that arbitral tribunals are equally powerful in terms of granting adequate remedies and the confidential nature of arbitral proceedings helps these entities to preserve adverse impact on stock prices and investor confidence.

In fact, internationally, banks and financial institutions prefer arbitrating disputes as primary mode of disputes resolution, considering the expertise offered by the arbitrator. To illustrate, as many as 32% of arbitrations at the London Court of International Arbitration (LCIA) and 58% at the American Arbitration Association (AAA) involves financial sector entities as either claimants or defendants.1 Moreover, arbitration as mode of alternative disputes resolution is more beneficial for financial sector entities as it offers choice of opting favorable governing legislation, appointing the adjudicator, expedited resolution and cost-efficient solution to consumer disputes. While the judicially created negative list of inarbitrable disputes affects the accessibility of financial sector entities to take recourse to arbitration, the author attempts to suggest structural changes to the arbitral practice of the country to institutionalize the resolution process.

Existing Legal & Regulatory Framework for Disputes Resolution in Financial Services in India

The breadth of financial services disputes in India varies from disputes concerning securities violations, banking disputes, insurance disputes, antitrust allegations and insolvency claims. The different types of disputes can range from violations concerning insider trading, unfair and fraudulent trading in securities, stock exchange filing defaults, credit default, regulatory violations, non-compliances to ethical code of conducts, insurance mis-selling, insolvency admission claims etc. Presently, India follows a fragmented and piecemeal financial adjudication system wherein the SEBI governs the securities and capital markets disputes whereas the RBI adjudicates banking issues, CCI investigating antitrust violations, IRDA regulating the insurance and reinsurance sector disputes and the NCLTs adjudicating insolvency claims.

In terms of banking disputes, the depositors (consumers) must approach the defaulting bank or non-bank entity first before complaining to the Ombudsman as per the RBI Integrated Ombudsman Scheme, 2021. Prior to the 2021 Scheme, RBI had prescribed separate Ombudsman mechanism for disputes against banks, non-banks and for digital transactions, which created problems of double-jurisdiction, lack of jurisdiction and identification of appropriate jurisdiction.2 Further, Ombudsman resolution is inherently inefficient due to prescriptions like resolving firstly with the defaulting bank. For instance, a report shows that of 75,183 complaints more than half were rejected by the Ombudsman for various reasons including not following the process of approaching the defaulting bank first and in only 1% of the cases was an order passed.3

In context of digital payments, RBI also prescribed in-house online dispute resolution (ODR) mechanism for all licensed payment system operators. The ODR mechanism only covers disputes arising out of failed transactions and compensation thereof, excluding a wide ambit of disputes in the payments and non-payments ecosystem.4 Additionally, non-resolution of the dispute, the consumer must approach the Integrated Ombudsman, leaving no scope for centralized resolution of the dispute. The RBI Integrated Ombudsman mechanism is lengthy mode of disputes resolution as there is no direct recourse to the centralized institution for resolution and limitation for filing case is merely one year from cause of action.5 On the other hand, arbitration of such disputes offers flexibility to the consumer with limitation period of three years and direct recourse to the arbitrator where an arbitration agreement is made between the service provider and the customer.6 It also reduces time spent in litigating these disputes and thereby minimizing losses for both consumers and service providers.

The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) envisages debt recovery for banks and financial institutions through the mechanism of Asset Reconstruction Companies (ARCs) and Debt Recovery Tribunals (DRTs). Similarly, the Insolvency & Bankruptcy Code, 2016 (IBC) also provides forum for restructuring of NPAs within a prescribed time-bound process. However, the lack of recovery and losses to creditors (consumers) on account of court-based adversarial process amplifies the need for exploring newer modes of resolution.7 For instance, an RBI report suggests that only 14% of the NPAs have been resolved through ARCs over the last 10 year period.8 The IBC on the other hand provides more than half of the recovery of dues but leads to massive creditor haircuts (losses) which in some cases amount to over 94% of due amount.9

For securities and capital markets violations, investors (consumers) must register themselves on the SEBI Complaints Redress System, 2011 (SCORES) platform and file complaint against concerned listed company and intermediaries including against stock brokers, depositories, investment banks etc. The role of SEBI is restricted to overseeing the mutual resolution process and seek action taken report from the accused entity. It cannot act as an arbiter to decide on these complaints and the investors have to pursue remedies as available under the SEBI Act, 1992.10 Moreover, trivial requirements like maximum of 1000 words description of complaint and 2MB limit size for attaching supporting documents acts as hindrance.11 While the objective behind SCORES was to ensure transparent and investor-friendly resolution of complaints, but the lack of powers of SEBI has resulted in effective and lengthy disposal of securities violation cases. The stock exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) offers arbitration facility independently for disputes between investors and trading members or between members inter-se, but there are no provisions for arbitration of disputes against unlisted and private companies.12

The IRDA (Protection of Policyholders' Interests) Regulations, 2017 requires the insurance and re-insurance companies to have in-house grievance redressal officer for resolution of disputes concerning deficiency of services in relation to general, health and life insurance. Additionally all insurance companies have to register themselves on the IRDA Integrated Grievance Management System (IGMS), similar to SEBI SCORES.13 Upon non-resolution of the complaint of the policy-holder (consumer) on the IGMS, the policy-holder shall have to initiate legal proceedings under the Insurance Act, 1938 and there is no recourse to centralized resolution.14 The shortcomings of the IGMS are similar to the SCORES that the IRDA lacks the power to adjudicate insurance claims, leading to increased transaction costs for the policy-holder.

The Competition Act, 2002 empowers the CCI to investigate, through its Director-General, and to adjudicate allegations concerning antitrust agreements, abuse of dominance and anti-competitive corporate restructuring. The aggrieved consumer can submit reference to the CCI based upon which the CCI shall determine the relevant product or geographic market and hold the accused entity liable depending on satisfaction of factors laid down in Section 19(3), 19(4) and 20(4) of Competition Act, 2002.15 The jurisdiction of the CCI is restrictive in essence that disputes concerning gross violation of antitrust laws must be demonstrated and individualistic contractual or consumer disputes are ousted.16 Moreover, under Section 53N of Competition Act, 2002 personal injury and compensation cases concerning antitrust violation have to be compulsorily appealed before the National Company Law Appellate Tribunal (NCLAT). The compulsory adjudication of such personal rights before appellate forums defies principle of expeditious resolution of disputes.

To promote and augment supply of financial services to international banks, insurance companies and capital market intermediaries, Section 18 of the Special Economic Zones Act, 2005 (SEZ Act) incorporated the International Financial Services Centre (IFSC) regulated by the IFSC Authority (IFSCA). The IFSC facilitates offshore banking, insurance and reinsurance services and listing of debt, derivative and equity securities in IFSC-specific international exchanges. It also enables providing of ancillary services like legal advisory, secretarial compliance, auditing and asset management services. The IFSCs are a hybrid combination in terms of dispute resolution oversight as for purposes of exchange control and customs, they are deemed foreign territory whereas but for adjudication considered within Indian territorial borders.17 In line with the territorial jurisdiction of Dubai International Financial Courts (DIFC) and Abu Dhabi Global Markets (ADGM), Section 23 of SEZ Act, 2005 designates special courts for disputes resolution however, no such court or adjudicating body has been appointed till date.18 In fact, considering the territorial jurisdiction of the IFSC being in Gujarat, the Gujarat DRT and NCLT shall appropriate jurisdiction till establishment of special body for dispute resolution in the IFSC.19 Clearly, having a separate branch of a uniform arbitral body or institution within the IFSC can reduce jurisdictional uncertainties for resolution of disputes.

Understanding the Nature & Scope of Arbitrability of Disputes under Indian Law

While Section 7 of the Arbitration Act, 1996 defines an arbitration agreement but it does not specifically mention the list of disputes which are can be arbitrated before an arbitral tribunal. The need for specific enumeration of disputes which can be arbitrated stems from the fact that Section 34(2)(b)(i) allows setting aside of arbitral award where the concerned dispute is incapable of settlement by way of arbitration. Similarly, in context of international arbitration, Section 48(2)(a) read with Section 57(1)(b) refuses enforcement of foreign arbitral awards in India passed under the New York Convention, 1958 and Geneva Convention, 1927 where the subject-matter of dispute is incapable of settlement by arbitration. Interestingly however, Article II of the New York Convention, 1958 while defining "arbitration agreement" emphasises on the fact that disputes contemplated within the arbitration agreement must be "capable of settlement by arbitration", which is omitted under Section 7 of Arbitration Act, 1996.20 This creates a discrepancy where seat of arbitration is India that arbitration agreement containing disputes "incapable of settlement by arbitration" are valid but arbitral awards passed in consequence of such award can be set aside or refused enforcement.21

Although, the arbitration jurisprudence in the country has developed certain negative list of disputes which are "inarbitrable" however the omission of the phrase acts as a deterrent for financial sector entities to arbitrate disputes on account of uncertainty in law.22 In fact, the need for specific enumeration is also necessitated from fact that the arbitrators might consider a particular subject-matter as capable of settlement by arbitration whereas the Court may consider it as inarbitrable or vice-versa. For instance, disputes concerning virtual currencies can be considered arbitrable as there exists no outright prohibition on their usage whereas it can be argued as being inarbitable on account of violating public policy of not promoting money laundering.23 While there is no traceable legislative history to ascertain the intention behind omission of the phrase from Section 7, the Parliament has sought correction through the Mediation Bill, 2021. Schedule I to the Mediation Bill 2021, specifically lists down disputes which are not fit for resolution through mediation. The list includes disputes where are generally held inarbitrable by judicial pronouncements as discussed below. To better appreciate the concept of "arbitrability" of disputes, a perusal of judicial decisions which have over the period of time developed the negative list of disputes would be useful.

The Indian Supreme Court for the first time in Booz Allen Case objectively determined arbitrability of disputes based on nature of rights involved and categorized list of inarbitrable disputes.24 It includes disputes pertaining to criminal offenses, corporate winding-up and insolvency, guardianship and testamentary claims, eviction and matrimony. Since these disputes involved adjudication of public rights and rights of third-parties, they are rights in rem, which requires public adjudication and cannot be submitted to private arbitral tribunals.25 The 'nature of rights' test was later expanded by the Supreme Court in Vidya Drolia Case to also exclude (a) disputes expressly or impliedly non-arbitrable (b) disputes involving third-parties rights effectuating centralised resolution and (c) dispute which is a sovereign and public interest function of the State.26 The effect of this verdict was that other disputes of commercial and financial nature like intra-company conflicts, trust disputes, issue of intellectual property and tenancy matters were also held inarbitrable.

The larger repercussions stems from the fact that the subjective, undefined and broad-end usage of terms like "sovereign", "public interest" "third-party rights" and "centralised adjudication" makes the entire gamut of financial services disputes potentially inarbitrable.27 For instance, prospective banking and antitrust cases becomes inarbitrable considering they are inalienable sovereign functions of the State. Moreover, securities violations and insurance claims often involves third-party rights, which by default also makes them inarbitrable to arbitral tribunals. Interestingly, the Delhi High Court in Satpal Singh Bakshi Case by respecting party autonomy had held existence of specific remedy under the RDB Act, 1993 doesn't ipso facto ousts the jurisdiction of arbitral tribunals.28 However, the Supreme Court in Vidya Drolia Case set aside this pro-arbitration verdict on account of implied exclusion of arbitration under the RDB Act, 1993. This shows that the test laid down in Vidya Drolia Case is flawed in relation to arbitrability of financial services disputes and dampens the remedy of alternative disputes resolution in the industry. In fact, where there is no express exclusion of arbitral remedy in the governing legislation, arbitral tribunals should be allowed to arbitrate disputes, respecting party autonomy of the disputants.29 In this light it would be useful to understand the international development of arbitrability of financial disputes, to propose enabling framework for the Indian arbitral practice.

International Framework on Arbitrability of Financial Services Disputes

While over 118 jurisdictions have adopted the UNCITRAL Model Law on International Commercial Arbitration, 1985, the absence of any provision relating to arbitrability of disputes, has resulted in unilateral determination of subject-matter of disputes capable of settlement by arbitration. The manner and scope of determination of arbitrability of disputes plays a significant role in choosing seat of arbitration, especially in case of international arbitration.30 For instance, most international financial institutions would be inclined to include UK Arbitration Act, 1996 as governing law considering the exemptions and relaxations for financial-sector entities.31 An objective assessment of the comparative jurisdictional development of financial services arbitration can provide sufficient evidence to assess the need for envisaging a specific framework for financial entities in India.

The matured and emerging arbitration jurisdictions like the US, UK, Singapore and Hong Kong have been catering to the specific interests of financial institutions and financial services industry to amplify the existing use-cases of arbitration as mode of disputes resolution. For instance, the US Financial Industry Regulatory Authority (FINRA) arbitrates securities and other financial law related disputes. In fact its arbitrated rules are approved by the US Securities and Exchange Commission (SEC).32 Moreover, FINRA utilizes their proprietary algorithms - the Neutral List Selection System (NLSS) to randomly generate a list of arbitrators from the arbitrator roster, ensuring quick appointments and reducing judicial scrutiny.33 Similarly, the Singapore Financial Industry Disputes Resolution Centre (FIDReC) instituted up by the Monetary Authority of Singapore (MAS) mandatorily asks consumers to arbitrate disputes before undertaking judicial recourse.34

Unlike the FINRA, the Singapore Court for International Arbitration (SIAC) serves as a single-point arbitral institution for resolution of all categories of international disputes, including the financial services industry.35 Hong Kong, on the other hand, passed a sui generis law namely the Financial Dispute Resolution Scheme (FDRS), 2014 which incorporated the Financial Dispute Resolution Centre (FDRC) as specialized body for financial consumer arbitration. Post the passing of the FDRS, the banking regulator - Hong Kong Monetary Authority (HKMA) was adrift of the powers of adjudication with the FDRC given the primary responsibility of arbitrating the disputes.36 The scope of arbitrability of financial disputes has consequently widened post the incorporation of the FDRS as the FDRC Guidelines on Intake of Case, 2018 requires "disputes of monetary nature" as conditions for the initiation of proceedings. The existence of specific institutions governing institutional financial service arbitration ensures quicker resolution of disputes and limited escalation to courts and regulatory bodies. To illustrate, the FINRA statistics highlights that over the period of 5 years, as many as 69% of financial arbitrations have resulted in settlements and mere 18% have escalated towards court proceedings.37

From the standpoint of soft governing law, international standard setting organizations like the International Chamber of Commerce (ICC), International Swaps and Derivatives Association (ISDA) and the Panel for Recognized International Market Experts in Finance (PRIME Finance) have developed specialized arbitration rules catering to resolution of derivatives, project and sovereign finance, assets management and regulatory matters.38 The presence of unilateral arbitral appointment clauses, emergency arbitrator services, summary procedure and ease of award enforcement have aided arbitral institutions around the world to cater to more financial institutions.39 Indeed there cannot be a single-stop standardized approach towards inculcating financial services arbitration, considering that arbitration is not a customary practice of disputes resolution in this industry.40 However, adopting the key traits which financial institutions desire with litigation, as an exceptional measure, can go a long way in deepening of arbitration as mode of resolution.

Exploring the Scope for Arbitrability of Disputes in Financial Services

The liberal interpretation of the test of "inarbitrability" in Vidya Drolia Case has opened gateway to newer subject-matter which can be made arbitrable. The resistance of banks, financial institutions and other financial services entities and intermediaries who have historically preferred litigating disputes, can be addressed through systemic categorization. The different category of financial sector disputes which can be made arbitrable to deepen inclusion of arbitration as mode of disputes resolution includes:

  1. Insolvency Claims: The blanket prohibition on arbitrating insolvency disputes in Booz Allen Case may be sound in law but poses practical problems, considering the delay of over 500 days for adjudicating insolvency claims.41 The Supreme Court in Indus Biotech Case affirmed the verdict in Booz Allen to hold that on admission of insolvency petition, the proceedings loses the character of arbitrability42 and becomes non-est in law.43 Although, determination of insolvency involves existence of multiple creditors which by default makes the process public in nature, contractual proceedings like pre-insolvency disputes or avoidance claims can be made arbitrable.44 Moreover a presumption that existence of arbitration agreement cannot extent to insolvency disputes, dampens stakeholder confidence in evolving insolvency regime of the country.45 For instance, Section 157(b) of the US Bankruptcy Code, 1978 allows non-core disputes like unfair preferences be subjected to arbitral proceedings to expedite resolution process. There are limited incentives for creditors to pursue avoidance proceedings under the IBC and consequently there have been limited successful asset recovery.46 Accordingly, allowing arbitrators to decide on asset recovery as parallel function to restructuring process saves time spent on avoidance by insolvency professionals.
  2. Antitrust Violations: The mandate of arbitral tribunals is constricted to examining contractual clauses and they may not be well suited to adjudicate matters concerning antitrust investigation and violations.47 Since determination of abuse of dominance or anti-competitive agreements or restructuring involves adjudication of rights in rem, CCI is better suited as specialized forum for disputes resolution. However for instances of personal injury and compensation matters under Section 53N of Competition Act, 2002, arbitral tribunals can be empowered with jurisdiction to arbitrate, considering they involve adjudication of rights in personam.48 For instance, Section 172 proceedings of the Canadian Business Practices and Consumer Protection Act, 2004 can be arbitrated for determination of personal injury and compensation.49 Moreover, the CCI is not empowered to adjudicate on such cases and only on appeal can the NCLAT in its discretion pass a judgment to award personal compensation to the aggrieved person. Thus, direct adjudication of personal injury and compensation claims saves time and costs associated with initiating proceedings before CCI and NCLAT.
  3. Banking & Recovery Disputes: While banking and document financing disputes are one of the most common category of disputes arbitrated internationally, surprisingly, the RBI has not prescribed arbitration as one of the modes of disputes resolution. In fact, consumer disputes with payment system operators, bank and non-bank entities and asset reconstruction companies seldom involve existence of third-party rights.50 However, restrictive precedents like the Vidya Drolia Case acts as deterrent for banks and financial institutions to refer recovery matters to arbitral tribunals as specific remedy is provided under RDB Act. Since there is no prescribed timeline for adjudication of disputes before the DRTs and constant apprehension of unilateral security enforcement action by banks under the SARFAESI Act, 2002, the bank debt recovery disputes continue to lag.51 The RBI can consider allowing bank and non-bank entities to refer matters to arbitral tribunals for purpose of expeditious recovery and settlement. Even the Niti Aayog also recommended suitable amendments to the RDB Act judicial review of the Satpal Singh Bakshi Case in larger public interest of institutionalizing arbitration process in the country.52
  4. Securities Default: The stock exchanges already allow disputes between brokers and investors and brokers inter-se to be arbitrated. The range of disputes expressly made arbitrable include those pertaining to defaults with respect to trading on exchange floors or in relation to listing of securities. For e.g. disputes pertaining to non-receipt of dividend, interest on securities, annual report and other financial statements, non-issuance of contract notes, charging excess brokerage etc. In practice, though, recourse to stock exchange arbitration is rarely made on account of lack of awareness binding nature of the awards issued by the arbitral tribunal.53 However, grave matters concerning securities like insider trading, fraudulent trading, violation of code of conduct by market intermediaries are either administratively adjudicated by the SEBI or settled without acknowledgement of guilt of the offender. Regulation 5 of the SEBI (Settlement Proceedings) Regulations, 2018 bars settlement of securities disputes which have market-wide impact and causing losses to large number of investors. As the transactions costs and public interest associated with such cases is generally high, arbitrating them can help preserve confidentiality and result in expeditious resolution.54 In fact mere allegation of fraud cannot be considered as ground to hold such disputes as inarbitrable.55 While grave instances of securities violation may invoke right in rem however, providing the discretion to the arbitrators to decide on nature of right will be beneficial, considering the adjudicative burden on the Courts and SEBI.
  5. Insurance Claims: Unlike, banking or securities disputes, in events of default of insurance payment, the policy-holder cannot approach the concerned regulator but must take recourse to civil courts or consumer courts, in absence of arbitration agreement. Moreover, where the insurance company has expressly denied liability of payments, arbitration clause cannot be triggered.56 Consequently, insurance policies are drafted in a manner that the policy-holder as a condition precedent must obtain arbitral award before filing civil suit before civil courts57, resulting in denial of any remedies to the consumer.58 The anti-arbitration precedents and lack of any definitive stance of the IRDA suggests that mandatory arbitration of insurance disputes, can help expedite claims process and increase industry confidence for insurance as asset class in the country.

Resolving the Challenges associated with the Indian Arbitration Practice

The lack of financial sector entities to take recourse to arbitration under the Arbitration Act, 1996 can be also be associated with the lack of incentives for them to arbitrate their disputes. The opening of arbitration practice to these financial sector entities shall require structural amendments and reforms to the existing arbitral practice:

  1. Determining arbitrability based upon legal remedies and relief instead of legal rights: The wide variety of conflicting judgments passed by the judiciary under the Arbitration Act, 1996 have sought to determine arbitrability of disputes based upon the legal rights involved in the dispute. However, neither the Arbitration Act, 1996 nor the Ney York Convention, 1959 prescribes any qualification to this extent. In fact, Section 23 of the Arbitration Act, 1996 asks the claimant to the dispute to present the statement of claim based upon the relief or remedy sought instead of affirmation of any pre-existing rights. Section 9(3) of the Arbitration Act, 1996 anyways allows jurisdiction to the court to grant relief when the arbitral tribunal is not empowered to grant such remedy. In fact, in the Rakesh Malhotra Case, the Bombay High Court distanced itself from rights-based test laid down in Booz Allen Case, and asserted that the concerned oppression and mismanagement claim cannot be arbitrated as the arbitral tribunal cannot grant relief sought by the shareholders.59 Thus, instead of mechanically holding an entire gamut of disputes as inarbitrable simply on account of one of the process involved is of public character berefts arbitration as alternative mechanism for dispute resolution.60 For instance, judicial determination of abuse of dominance or insolvency of an enterprise on account of existence of right in rem doesn't mean, personal injury or avoidable claims proceedings cannot be arbitrated. By allowing determination of arbitrability based upon individual facts and circumstances of the dispute, offers adequate flexibility to both arbitrators and the parties to trust and take recourse to arbitration.
  1. Increasing the mandate for statutory arbitrations: Often, prior to the dispute, parties do not mention arbitration in the governing contract as one of the forums for dispute resolution or post dispute, the defaulting party disagrees to signing submission agreement.61 Statutory arbitration can play a critical role to make such disputes arbitrable by dispensing with the requirement of entering into an arbitration agreement as required under Section 7 of Arbitration Act, 1996. Section 2(4) of the Arbitration Act, 1996 recognizes such a deemed creation of law by allowing arbitrations under other legislations for the time being in force.62 In fact, the advantage associated with statutory arbitrations is that the parties can file arbitration claims where the parent statute or the delegated legislation expressly allows so. For e.g. Section 18(3) of Micro, Small & Medium Enterprises Development Act, 2006 allows parties to initiate institutional arbitration, even if they have not agreed to an arbitration or submission agreement. The existence of such provisions in the parent statutes of financial sector entities can help promote mandatory arbitration of financial disputes and upon failure of such proceedings traditional recourse to administrative bodies or courts can be made.
  1. Improving recognition and enforcement of arbitration-related foreign judgments: Part II of the Arbitration Act, 1996 incorporates conditions for enforcement of foreign arbitral awards passed under the New York Convention, 1958 and Geneva Convention, 1927 based upon Article 35 of the UNCITRAL Model Law on International Commercial Arbitration, 1985. However, there exists no international standard for the recognition and enforcement of arbitrated-related foreign judgments due to practice of redundant doctrine of comity and reciprocity.63 Accordingly, Section 44A of the Code for Civil Procedure, 1908 requires declaration of countries as reciprocating nation for automatic enforcement and execution of arbitration-related judgments. Thus, arbitration-related foreign judgment passed by a competent court in non-reciprocating territory has to be retried before the Indian civil court.64 This results in loss of time, costs and efforts made at the foreign territory to obtain the favourable judgment. It is essential that automatic recognition of arbitration-related judgments be allowed, similar to the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments, 2019 as they may contain directions for the consequent arbitral process.65 In context of financial services arbitration, automatic recognition of foreign judgments, not based on reciprocity, can ease enforcement process for banks and other financial entities incorporated in non-reciprocating territory obtaining favourable judgment therein.
  1. Allowing modified application of strict procedural norms on financial sector entities: Since financial sector entities operate in distinct commercial realm, they require expeditious resolution without any disruption to business operations as any delay may lead to huge financial losses for investors and stakeholders.66 Accordingly, most commercial legislations provides exemption or application of special rules of these entities. For instance, Section 6(4) of the Competition Act, 2002 exempts banks and financial institutions from notifying anti-competitive restructuring to the CCI pursuant to any financing facility.67 Similarly, Section 227 of the IBC mandates special resolution regime for financial entities in form of IBBI (Financial Service Providers) Rules, 2019. Similarly, the Arbitration Act, 1996 can also provide such exemptions or special provision dedicated to such entities to promote financial services arbitration. Since timely resolution is of essence for financial service entities, the Arbitration Act, 1996 can provide for emergency arbitrator services for expeditious dispute management. While the Supreme Court in the Future Retail Case recognized foreign emergency arbitrator services68, there still remain lacunae over initiation of domestic foreign arbitral proceedings in absence of express provision to this extent. Additionally, most loan agreements and insurance policies are standard-form contracts containing unilaterally arbitrator appointment clause to ensure adequately qualified arbitrators.69 In fact, Section 17(2) of the UK Arbitration Act, 1996 allows unilateral appointments and consequently most international financial entities prefer English law for disputes resolution.70 However, the Indian law doesn't facilitate unilateral appointment to arbitrators on grounds of apparent bias, even where both parties have expressly agreed to be bound by it.71 The Arbitration Act, 1996 can be amended to allow financial sector entities to unilaterally appoint arbitrators to promote party autonomy.
  1. Increased reference to arbitration by financial sector regulators and self-regulatory professional institutes: While arbitral institutions play a critical role in professionalizing institutional arbitration, financial sector regulators and self-regulatory professional institutes can help deepen the use-case of arbitration in the country. The large scale promotion and utility of institutional arbitration mechanism can only be fostered by asking the concerned regulatory and self-regulatory bodies to refer matters to arbitration, especially in absence of any legislative mandate.72 For instance, the Hong Kong Securities & Futures Commission regularly refers clients to submit disputes to FDRC arbitration.73 The US Securities & Exchange Commission also asks securities issuers to incorporate mandatory arbitration clauses in the charter documents of the company.74 Similarly, in Indian context, financial regulators like SEBI, IRDA, RBI and IFSCA can be asked to refer issuers, insurers, banks etc. to refer disputes to institutional arbitration. Alternatively, self-regulatory bodies like the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India and the Institute of Company Secretaries of India can ask their members to refer clients to intuitional arbitration to deepen arbitration use-cases.

Aside of these, the grounds for refusal of enforcement of domestic and foreign arbitral awards can be decreased and the definition of "public policy" in context of enforcement of awards can be objectively defined to increase investor confidence. The establishment of a central institutional arbitral body, on the lines of SIAC, can help centralized arbitration and reduce instances of forum shopping and regulatory arbitrage. A separate class of arbitrators can be adequately trained in financial markets and empanelled on institutional arbitral platforms to disseminate specialized disputes resolution. The usage of non-arbitrability as grounds for lack of enforcement under Section 34, 48 and 57 of Arbitration Act, 1996 needs to removed, in absence of delineation of positive list of disputes which can be arbitrated as an objection of lack of arbitrability can be raised for challenging an arbitral award, even if it was done at the jurisdiction stage.75 This delaying tactic results in loss of time, money and efforts of parties and arbitrators to the dispute.


The Parliament revamped the Arbitration Act, 1996 through the amendments in 2015 and 2019 by expediting the timelines in the process and reducing court intervention. However, increased judicial scrutiny of arbitral awards through setting aside and enforcement of awards have resulted in defying the objectives of those amendments. As the arbitration process is subject to judicial supervision, it is essential that there are minimal ambiguities in the existing framework to reduce court intervention and expedite resolution process. It is often argued that financial innovation in the service industry is a response to a financially and economically inefficient framework However, over the past few year, several financial governance regulations have been passed, but none have affected resolution of disputes. The time is ripe to make structural changes to the legislation and widen the exiting use-cases and application to include financial service entities. The financial sector disputes are one of the most litigated disputes both court and administrative level in the country and mandatorily arbitrating these disputes can deepen the inclusion of arbitration as mode of commercial disputes resolution. Moreover, the continuous utilisation of arbitration as the first preferred mode of disputes resolution has the ability to place India in the competition for becoming the global arbitration hub.


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30. Natalia Ivanovskaya, Alternative Ways to Resolve Disputes Related to Consumer Protection of Financial Services in Hong Kong, Singapore and the United States: Innovations 2017-2019, 11 Journal of Advanced Research in Law & Economics 394 (2020).

31. Justin Williams, Hamish Lal & Richard Hornshaw, Arbitration Procedures and Practice in the UK, Thomson Reuters (2018).

32. Jason Burge & Lara Richards, Defining Customer: A Survey of Who Can Demand FINRA Arbitration, 74 Louisiana Law Review 173 (2014).

33. Cory Alpert, Financial Services in the United States and United Kingdom: Comparative Approaches to Securities Regulation and Dispute Resolution, 5 International Law & Management Review 75 (2009).

34. Norsuria Jani & Rusni Hassan, Disputes Resolution in Singapore: Challenges & Opportunities for Islamic Finance, 11 Journal of Islamic Economics, Banking & Finance 4 (2015).

35. Andrew Pullen, Developments for Arbitration of Financial Sector Disputes, SIAC Blogs (2013).

36. Shahla Ali & Antonia Da Roza, Alternative Dispute Resolution Design in Financial Markets - Some More Equal than others: Hong Kong's Proposed Financial Dispute Resolution Center in the Context of the Experience in the United Kingdom, United States, Australia, and Singapore, 21 Pacified Rim & Law Policy Journal 485 (2012).

37. FINRA Dispute Resolution Statistics.

38. Georgios Martsekis, Arbitration in International Project Finance Transactions: The Path to Financial Arbitration, 84 International Journal of Arbitration, Mediation and Dispute Management 2 (2018).

39. Aaron McDonald & Jerome Temme, Financial Services Arbitration under the LCIA Rules: An Outlook, Kluwer Arbitration Blog (2019).

40. ICC Commission Report, Financial Institutions and International Arbitration, ICC (2018).

41. Abhishek Dafria, IBC's Timelines for Corporate Insolvency Resolution Process Remain Unmet Still, ICRA Insights (2019).

42. Indus Biotech Pvt. Ltd. v. Kotak India Venture Fund, AIR 2021 SC 268.

43. Alchemist Asset Reconstruction Company Ltd v. Hotel Gaudayan Pvt Ltd. AIR 2017 SC 5124.

44. Larsen Oil and Gas Pte Ltd v Petroprod Ltd, [2011] SGCA 21.

45. Fiona Trust & Holding Corp v. Privalov, [2007] UKHL 40.

46. MP Ram Mohan, Tracing Director Liability Framework during Borderline Insolvency & Corporate Failure in India, IIM-A W. P. No. 08/02 (2021).

47. Union of India v Competition Commission of India, AIR 2012 SC 993.

48. Abhisar Vidyarthi, Applying Vidya Drolia's "Four-Fold Arbitrability Test" to Antitrust Disputes in India, Kluwer Arbitration Blog (2021).

49. Seidel v Telus Communications Inc., [2011] N.R. TBEd. MR.020.

50. Avinash Kumar, Arbitrability of Oppression & Mismanagement Petitions in India, 36 Statute Law Review 2 (2015).

51. Vijay Kumar Singh, Structural Reforms for Overcoming Delays in Justice Delivery: Increasing Role of the Commercial Tribunals and Courts, 42 Cochin University Law Review 2 (2018).

52. Designing the Future of Dispute Resolution: ODR Policy Plan for India, Niti Aayog (2021).

53. Brahmaiah Bezawada, ADR on Dispute between a Client and Trading Member at The Leading Stock Exchange In India: A Case Study, 9 Indian Journal of Finance and Banking 1 (2022).

54. Brian Fitzpatrick & Randall Thomas, The Indian Securities Fraud Class Action: Is Class Arbitration the Answer?, 40 Northwestern Journal of International Law & Business 203 (2020)

55. A. Ayyasamy v. A. Paramasivam, AIR 2016 SC 386.

56. United India Insurance Co Ltd. v. Hyundai Engineering and Construction Co Ltd, AIR 2018 SC 3932.

57. Oriental Insurance Co Ltd v Narbheram Power and Steel Pvt Ltd., AIR 2017 SC 3362.

58. Narasimhan Vijayaraghavan, Time for Insurance Companies to respect the remedy of Arbitration, Bar & Bench (2019).

59. Rakesh Malhotra v. Rajinder Malhotra, (2015) 2 Comp.L.J. 288 (Bom).

60. Deepanshi Ahlawat, Arbitrability of Oppression and Mismanagement – Rakesh Malhotra & After, IndiaCorpLaw (2018).

61. Richard Oppong, The Nature and Constitutionality of Statutorily-Imposed (Non-Contractual) Arbitration, 65 Journal of African Law 2 (2021).

62. Deepak Raju, Arbitration in India under the Industrial Disputes Act 1947, 11 Asian Disputes Review 43 (2009).

63. Maxi Scherer, Effects of Foreign Judgments Relating to International Arbitral Awards: Is the 'Judgment Route' the Wrong Road?, 4 Journal of International Dispute Settlement 3 (2013).

64. Saloni Khanderia, The Prevalence of 'Jurisdiction' in the Recognition and Enforcement of Foreign Civil and Commercial Judgments, 21 Oxford University Commonwealth Law Journal 2 (2021).

65. Philippe Hovaguimian, The Res Judicata Effects of Foreign Judgments in Post-Award Proceedings: To Bind or Not to Bind?, 34 Journal of International Arbitration 1 (2017).

66. James Freeman, The Use of Arbitration in the Financial Services Industry, 16 Business Law International 77 (2015).

67. John Vickers, Central Banks and Competition Authorities: Institutional Comparisons and New Concerns, BIS W.P. No. 331 (2010).

68. Amazon.com NV Investment Holdings LLC v. Future Retail Ltd., AIR 2021 SC 4492.

69. Joanne Braithwaite, Standard Form Contracts as Transnational Law: Evidence from the Derivatives Markets, 75 Modern Law Review 5 (2012).

70. Pareekshit Bishnoi, Invalidity of a Solo Run for the 'Sole Arbitrator' under the Indian Arbitration Act, Oxford Business Law Blog (2020).

71. Perkins Eastman Architects DPC v. HSCC, AIR 2019 SC 32.

72. Matthew Allen, A Lesson from History, Roosevelt to Obama - The Evolution of Broker-Dealer Regulation: From Self-Regulation, Arbitration, and Suitability to Federal Regulation, Litigation, and Fiduciary Duty, 5 Entrepreneurial Business Law Journal 1 (2010).

73. SFC Consultation, SFC introduces measures to facilitate establishment of FDRC (2012).

74. Rick Fleming, Mandatory Arbitration: An Illusory Remedy for Public Company Shareholders, PLI SEC Speaks (2018).

75. M/s. MSP Infrastructure Ltd v. Madhya Pradesh Road Development Corporation, AIR 2015 SC 713.

Urmil is a student of AURO University, Surat and a Winner in the Honourable Mention category of the 8th Ed. Arb Excel Essay Writing Competition.

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