The Investing in India programme is curated for existing and prospective foreign investors and their advisors to enhance their understanding of key issues when doing business in India. This session focused on the lifecycle of an international arbitration, from contract drafting to enforcement, with emphasis on the choices made at the contract stage and how they shape outcomes years later.
The session was moderated by Sneha Janakiraman, Partner, Dispute Resolution Practice Group, and led by Kingshuk Banerjee, Partner, Dispute Resolution Practice Group.
Set out below is a summary of the key points discussed during the webinar. The views expressed are those of the individual panel members and not those of Khaitan & Co, and are subject to the disclaimer set out in the webinar recording.
The recording can be viewed here: International Arbitration | Investing in India
The central message of the session was that arbitration is not designed only when a dispute starts. Long before that, at the contract drafting stage, the parties negotiate a package of collective choices: the seat, governing law, institution, rules, tribunal, nationality, neutrality, language and costs. Those choices shape the process years later.
Key points discussed
A. Why arbitration over litigation in India
Cross-border investors are generally concerned about issues such as delay, procedural complexities, limited recovery of legal costs and the difficulty of enforcing judgments, which are often features of court litigation in India.
Arbitration offers a neutral forum, a tribunal chosen for the dispute and a more focused process. Grounds for challenging an arbitral award are limited, unlike litigation, where courts may reopen the entire merits. Following the 20151 and 20192 amendments to the Arbitration and Conciliation Act, 1996 (Act), the direction of travel in the Indian arbitration regime is towards more efficient, institution-led dispute resolution.
B. The arbitration clause: an operating plan
India’s reforms and growing institutional infrastructure are positive developments, but good outcomes still depend on careful choices at the front end. The arbitration clause is the operating plan for a dispute that may not arise for years. The institution’s model clause is a sensible starting point. It should identify the following in clear terms:
- the seat;
- the law of the arbitration agreement;
- the institution and rules;
- the number of arbitrators and how they are appointed. A sole arbitrator may suit a smaller dispute, while a three-member tribunal may suit a larger or technically complex investment;
- any nationality or neutrality requirements;
- language; and
- how costs are allocated.
Two principles make the clause durable:
- Severability: the clause has its own life, so it survives an attack on the main contract.
- Competence-competence: the tribunal can usually decide its own jurisdiction.
- Seat versus venue
The seat is the legal home of the arbitration. It identifies the supervising court, the procedural law and the route for challenging the award. Choose the seat with the supervisory court and the enforcement map in mind.
An Indian seat gives direct access to Indian courts for urgent protection, evidence and enforcement of tribunal-ordered measures. Foreign seats such as Singapore, London or Paris may offer greater neutrality and less routine Indian court involvement. The choice depends on the transaction, the parties, the assets and where enforcement is likely.
The venue is simply where hearings take place. Confusing seat and venue while finalising an arbitration clause can create a jurisdiction fight before the merits are even heard.
C. Institution
The institution (ICC, LCIA, SIAC, MCIA, Indian regional centers) is the process manager; it supplies the discipline to the arbitration. Ad hoc arbitration can be flexible, but once relationships between the parties have broken down, that flexibility becomes a source of delay.
D. Governing law
As regards the governing law, three systems of law should not be blurred: (i) the law of the contract; (ii) the law of the arbitration agreement; and (iii) the law governing the procedure.
Indian law may be preferred where the investment, performance, assets and regulatory approvals are in India. The law of the arbitration agreement should, as far as possible, be aligned with the law of the contract. The two should be separated only in exceptional cases. When it comes to determining jurisdiction and arbitrability, the applicable law governing the arbitration agreement typically determines those issues. A clear choice should be made at the contract stage.
E. Running the arbitration
The usual sequence is the notice of arbitration, the statement of claim, the defence and any counterclaim, and then the reply.
The claim should tell a very clear story: what happened, why it matters legally and what relief is sought.
Document production in arbitration is much narrower than US-style discovery, so one should not rely too heavily on the document production stage.
Evidence is mostly in writing and is tested through cross-examination at the final hearing.
A complex arbitration commonly takes around 12 to 24 months to reach the final hearing. Good case management often aids a focused arbitration process.
F. Interim relief and emergency arbitration
Since 20153, Indian courts have been able to grant interim relief under Section 9 of the Act even in aid of a foreign-seated arbitration. Where the counterparty or the project is in India, this option should not be excluded.
Orders of an emergency arbitrator in an India-seated arbitration are enforceable under Section 17 of the Act. Orders from a foreign seat are not directly enforceable, but High Courts generally respect them when parties apply under Section 9 of the Act.
H. Awards, challenges and enforcement
The tribunal may issue different kinds of award: a partial award, an interim award or a final award. Time limit for challenging an award depend on the law of the seat and should be checked before the award is issued.
A challenge to the award at the seat is not a general appeal on the merits. The grounds are narrow: invalid agreement, lack of notice, excess of jurisdiction, procedural unfairness and limited public policy exceptions. Where the seat is outside India and the award debtor has assets in India, the award is treated as a foreign award. Foreign awards are enforced in India under the New York Convention framework without reopening the merits.
Challenges on public policy grounds have become exceedingly narrow over the years, and Indian courts by and large respect the limited contours of the public policy regime.
Enforcement ought to be planned when the contract is drafted, not when the award arrives. Parties should also budget for enforcement from the beginning. The best award is only as useful as the assets against which it can be enforced. In practice, this means:
- mapping in advance where the counterparty’s assets are and how ownership is structured;
- identifying the jurisdictions that can give meaningful relief;
- keeping the strategy multi-jurisdictional; and
- making the award enforcement-ready, with quantified sums and precise operative directions.
I. Anti-arbitration injunctions and statutory limits
Anti-arbitration injunctions from Indian courts are now few and far between, though some risk remains. Statutory exclusions of arbitration should be seen more as a reality than a risk. Unless there is an express exclusion, the presumption is in favour of arbitration.
Conclusion
For investors doing business in India, it is crucial to understand that the arbitration clause is far more than boilerplate at the end of a contract. It is a set of interlinked commercial decisions on the seat, governing law, institution, tribunal and enforcement strategy, which will determine how effectively rights can be protected and capital recovered if a dispute arises. With Indian courts increasingly confining challenges and public policy objections to narrow limits, presuming in favour of arbitration and supporting foreign-seated arbitrations through interim relief, the Indian framework now offers investors a credible and supportive environment.
Footnotes
1. The Arbitration and Conciliation (Amendment) Act, 2015 (No. 3 of 2016), w.e.f. 23 October 2015
2. The Arbitration and Conciliation (Amendment) Act, 2019 (No. 33 of 2019), w.e.f. 30 August 2019
3. Supra.
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