The Great Arbitration Race: Why India Is Losing Ground to Singapore and London

In the global arbitration arena, India faces stiff competition from established powerhouses like Singapore and London. This intriguing shift raises the question: why is India’s arbitration scene struggling to keep pace? 

Arbitration Rising; India Lagging

In recent years, arbitration has become one of the most sought-after methods of Alternative Dispute Resolution (ADR) in the business world, with most global business contracts typically including an arbitration clause. India, through its Arbitration and Conciliation Act of 1996 (ACA) and subsequent amendments, aims to establish itself as an arbitration hub. However, the question remains: Can it still achieve this goal?

Over the past decade, the Indian government and various arbitration institutions have shown renewed commitment to harnessing the potential of the Indian Council of Arbitration. They have launched multiple initiatives to create a business-friendly environment and enhance their services. Despite these efforts, India still has a long way to go to match the success of leading arbitration jurisdictions worldwide, particularly compared with Singapore and London, which are recognised as prime examples.

Arbitration offers several advantages over traditional court proceedings for settling commercial disputes, including confidentiality, neutrality, impartiality, and time and cost-effectiveness. Since India’s liberalisation, arbitration has developed significantly, notably with the enactment of the Arbitration and Conciliation Act in 1996 and the subsequent Arbitration and Conciliation (Amendment) Act in 2021. Singapore has successfully developed its international arbitration landscape over the past two decades. According to the Queen Mary University of London Survey, Singapore is ranked as the most preferred arbitral seat in the world, sharing this top position with London, and is also recognised as the most preferred seat in the Asia-Pacific region. 

While both India and Singapore have adopted arbitration practices, their legal frameworks, institutional mechanisms, and judicial attitudes differ significantly.  Singapore has emerged as an international arbitration hub, characterised by minimal judicial intervention, robust institutional support, and strong confidentiality. In contrast, India's arbitration regime is currently undergoing a transitional phase, with ongoing legislative reforms and judicial rulings aimed at reducing delays and enhancing the autonomy of arbitral proceedings.

The identified reasons indicate that India still has a long way to go to achieve the status of a ‘popular seat.’ 

Jurisdiction - Identifying the ‘seat’ and ‘place’ of the dispute

The Indian Supreme Court has confirmed that Part I of the Arbitration and Conciliation Act, 1996 adheres to the “Shashoua principle” from Shashoua & Ors. v. Sharma [2009] EWHC 957. This principle states that an agreement on the seat of arbitration designates the law of that seat as the governing law, similar to an exclusive jurisdiction clause. The criteria of Kompetenz-Kompetenz are outlined in Section 16 of the ACA, which specifically requires the arbitral tribunal to conduct a test of its jurisdiction that may be brought before it by any of the parties to the dispute. 

The Court has realised that “seat” and “place” are often interchangeable. When parties clearly specify a seat, no interpretation is needed, and the legal implications are straightforward. However, when the seat is not specified or is referred to as a “venue” or “place,” the parties' intentions become unclear. Indian courts have explored this issue. Consequently, Indian courts have largely accepted that the choice of seat implies the choice of law of that seat to govern arbitration, known as the “seat approach,” while the “main contract approach” is not widely recognised in current jurisprudence.

Unlike India, Singapore and London have relatively smaller geographical areas. As a result, India needed to establish numerous commercial arbitration institutions to serve its business communities effectively. In contrast, Singapore, being a city-state, established the Singapore International Arbitration Centre (SIAC), the leading institution for administering arbitration in the country.

According to Singapore’s International Arbitration Act (IAA) of 1994, an arbitration is deemed “international” if one party to the arbitration agreement had its place of business outside Singapore when the agreement was concluded or if the mutually agreed place of arbitration is located outside the country where the parties have their place of business. The updated provisions of the IAA include arbitrator immunity, court assistance in gathering evidence, confidentiality requirements, the conditions for setting aside an award, and the appointment of a third arbitrator. Under Section 10 of the IAA, an arbitral tribunal may determine that it lacks jurisdiction. The High Court may review the arbitral tribunal's ruling (whether favourable or unfavourable) if it addresses jurisdiction as a preliminary matter. With leave from the High Court, an appeal may be made to the Court of Appeal over this matter.

In both Singapore and London, parties have the autonomy to choose the seat of arbitration.  Experts have often examined three major areas that must be observed for a country to achieve the status of a “popular seat.” These areas are: (1) expansion and improvements of arbitral institutions devoted to not only conducting but also promoting arbitration as the best possible course of action, (2) a judiciary that takes a positive approach towards arbitration by ensuring little intervention, and (3) competent legislation that governs the entire arbitration regime in a country.

Judicial Interventions — Setting Aside of Award 

In India, an award-holder may apply for recognition and enforcement of a foreign award through a single petition. A proceeding seeking recognition and enforcement of a foreign award has two stages. Provided the necessary evidence (as discussed below) is produced, in the first stage, the court determines the enforceability of the award having regard to the conditions set out in Section 48 (in the case of a New York Convention award) and under Section 57 (in the case of a Geneva Convention award) of the Arbitration Act. Once the court decides the enforceability of the foreign award, in the second stage it takes steps to execute the award. 

The Singapore Court of Appeal has confirmed that the threshold for setting aside arbitral awards is high, and it should be applied only where serious procedural irregularities undermine the fundamental fairness of the proceedings. This strict approach deters sky-high challenges to arbitral awards, thereby creating a conducive enforcement environment for international arbitration in Singapore. Singapore’s courts have consistently taken a pro-arbitration approach, promoting party autonomy, minimal intervention and finality of arbitral awards. Section 6 of the IAA incorporates the kompetenz-kompetenz doctrine, which permits tribunals to determine that their jurisdiction is admissible by the courts. The principle that courts should not entertain jurisdictional challenges at an early stage, absent a manifest lack of jurisdiction, has been buttressed by the Singapore courts in cases like Tomolugen Holdings. Singapore courts intervene in international arbitrations only when absolutely necessary. The only restriction on arbitration is when the dispute or its subject matter contradicts Singapore's public policy.

Minimal judicial intervention is essential for maintaining a pro-enforcement regime. To achieve this, India has amended the Arbitration Act and related statutes multiple times to reduce the courts' role in the arbitral process. These amendments aim to minimise judicial involvement in enforcing foreign awards. Consequently, they are crucial for fostering a pro-arbitration environment in India that is conducive to foreign investment.

India's judicial approach to arbitration has significantly transformed over the years. Historically, Indian courts were interventionist and often allowed challenges to arbitral proceedings under Section 34 and Section 48 of the Arbitration and Conciliation Act (ACA). Landmark cases like ONGC v. Western Co. of North America (1987) exemplified this excessive interference and discouraged foreign investment in arbitration in India. However, after the amendments in 2015, 2019, and 2021, the courts adopted a more pro-enforcement stance, as seen in the Supreme Court's ruling in BALCO v. Kaiser Aluminium (2012), which emphasised minimal judicial intervention. Despite these advances, judicial delays and inconsistent interpretations at the lower court level remain significant issues. Additionally, some award debtors exploit procedural loopholes to delay enforcement, further complicating the situation. While Singaporean courts have taken a firm approach to frivolous challenges, this can still prolong enforcement proceedings. Reciprocity concerns also pose hurdles. 

Although Singapore enforces awards from all jurisdictions under the New York Convention, some countries, such as China and Indonesia, can refuse enforcement on public policy grounds, raising doubts about the uniformity of international arbitration. Singapore's pro-enforcement philosophy and limited judicial oversight make it one of the most arbitration-friendly jurisdictions globally. Its expansive legal options for parties contrast with India's more restrictive system. The establishment of the Singapore International Arbitration Centre (SIAC) has further cemented Singapore's reputation, with its clear processes and separation from the judiciary enhancing its effectiveness. Singapore is recognised for efficient arbitration, especially in finance, trade, and shipping, making it a popular choice for commercial arbitration worldwide.

Judicial Intervention — Interim Measures and Urgent Relief

Interim measures of protection are vital to safeguard parties' interests while disputes await final resolution. This need has led to rules and procedures for urgent interim relief, even before an arbitral tribunal is formed. Major institutions like the ICC, LCIA, and SIAC support this.

In India, while major arbitral institutions have updated their rules to allow urgent relief, the Indian Arbitration and Conciliation Act, 1996 (Arbitration Act) lacks provisions to recognise interim orders from foreign-seated tribunals or courts. This creates challenges for enforcing such measures in India. Parties typically have several options: they can file a new civil suit in India to enforce the interim order, seek confirmation from the appropriate court at the arbitration seat, or petition under Section 9 of the Arbitration Act for similar interim relief from an Indian court. Under Section 17 of the Arbitration Act, arbitral tribunals can issue enforceable interim reliefs. The ICA rules allow for interim orders at any point during proceedings. In Singapore, the IAA grants courts the same authority as arbitral tribunals to issue interim orders, although they cannot grant security for costs or order discovery of documents. Courts can provide interim remedies regardless of the arbitration’s seat, and may intervene when the tribunal cannot provide necessary relief.

The Delhi High Court has ruled that Indian courts can hear Section 9 petitions unless there is a clear agreement between the parties excluding this jurisdiction. The Court noted that the SIAC Rules allow parties to seek interim relief from judicial authorities, indicating their implicit agreement to approach Indian courts for such relief. It also highlighted that Section 17H of the 1985 UNCITRAL Model Law, relating to the enforcement of interim measures by foreign-seated tribunals, is not included in the Indian Arbitration Act, making Section 17 of 1978 inapplicable to foreign arbitrations.

The Supreme Court stated that an emergency arbitrator’s order is equivalent to an interim order from a properly constituted arbitral tribunal. It confirmed that agreeing to the SIAC Rules does not bypass the Arbitration Act's mandatory provisions and that an emergency arbitrator's award is enforceable under Section 17, like a court order.

In contrast, jurisdictions such as Hong Kong and Singapore provide clearer frameworks for enforcing interim measures by foreign-seated tribunals. Hong Kong, a prominent arbitration hub, enforces interim measures granted by arbitral tribunals as court orders, requiring the court’s leave, which it grants only if the order meets the criteria for enforceability under its laws. While Section 9 of the Arbitration Act offers a route to interim relief, it may be less efficient, as it involves re-adjudication and delays. India is making progress toward establishing itself as a global arbitration hub through reforms and supportive judicial practices. It would strengthen its position further if parties to foreign-seated arbitrations could easily comply with interim measures ordered by such tribunals.

Third Party Funding

Third-party funding is an arrangement in which a funder, not involved in a dispute, agrees to finance one party's legal costs in exchange for a share of the proceeds. This funding is increasingly used by individuals and companies to pursue legitimate claims, allowing businesses to conserve cash, manage litigation expenses, and avoid the risks of an adverse outcome. The rise of third-party funding can be linked to market globalisation and the growing preference for arbitration in international disputes.

While Indian law does not explicitly prohibit third-party funding, its ambiguous legality has hindered its growth as a viable alternative. This uncertainty largely stems from the public policy requirements surrounding legal financing. The Arbitration and Conciliation (Amendment) Act, 2015 introduced two significant public-policy changes. It introduced Section 34(2A), allowing domestic awards to be set aside for “patent illegality,” effectively clarifying that this is not part of public policy under Section 34(2)(b)(ii). It also specified that public policy reviews do not involve re-examining case merits or evidence, thereby overruling an earlier Supreme Court interpretation. However, the concept of "Fundamental policy of Indian law" remains undefined, allowing for broad judicial interpretation.

Historically, in Ram Coomar Condoo v. Chunder Canto Mookerjee (1876), the Privy Council ruled that agreements for funding civil cases in exchange for a share of the outcome are not inherently opposed to public policy. In 2018, the Supreme Court affirmed the permissibility of such funding arrangements in Bar Council of India v. AK Balaji, stating there are no restrictions on third parties (non-lawyers) funding litigation.

Although Indian law lacks explicit recognition of third-party financing, concepts like champerty and funding have been acknowledged in amendments to Order XXV of the Code of Civil Procedure (CPC) in some states, which address security for costs from plaintiffs. A careful examination of the Bar Council of India (BCI) rules suggests that no clear statute prohibits third-party funding in arbitration unless it involves lawyers. 

In contrast, the Law Ministry of Singapore implemented the Civil Law (Amendment) Act, 2017, along with the Civil Law (Third-Party Funding) Regulations and amendments to the Legal Profession Act (LPA) and the professional conduct rules for lawyers, legalising third-party funding in international arbitration. Under these regulations, third-party funders may finance "the entire process of resolving or attempting to resolve a dispute," which encompasses "any civil, mediation, conciliation, arbitration, or insolvency proceedings."

India can draw lessons from the evolving global litigation financing landscape. We are beginning to see a relative uniformity in third-party funding practices across jurisdictions. Such alignment with established rules and principles—particularly regarding procedural aspects of arbitration—can enhance confidence in the process. For instance, the 2021 edition of the International Court of Arbitration rules from the International Chamber of Commerce specifically addresses various issues arising from third-party funding arrangements. Similarly, the rules of the Singapore International Arbitration Centre (2016) and the Hong Kong International Arbitration Centre (2018) contain provisions that regulate various aspects of third-party funding arrangements. 

In certain jurisdictions, like Singapore and Hong Kong, specific legislation has been enacted to govern the use of third-party financing arrangements in arbitration proceedings. Unfortunately, India has not considered recent advancements in international commercial arbitration—such as the emergency arbitrator and hybrid arbitral procedures. This stagnation is inadequate to promote the institutionalisation of arbitration in India.

Way Forward — Improved Institutionalisation of Qualified Domestic Arbitrators in India

The 2017 Report of the High-Level Committee on Arbitration in India highlighted the "poor quality of domestic arbitrators and their lack of professionalism" as a key issue impeding arbitration's growth.

The Eighth Schedule, introduced through the 2019 amendment to the Arbitration Act, set strict qualification criteria for arbitrators, including requirements such as being an advocate with ten years of experience or having senior-level administrative experience in government or reputable private companies. However, it has faced criticism for party autonomy in arbitrator appointments, as reflected in Section 11(1) of the Arbitration Act, which allows individuals of any nationality to serve as arbitrators. World-class hearing facilities and the professionalism of national courts are essential for attracting international arbitration. India, Singapore, and London are examples of jurisdictions working to enhance their status as arbitration hubs.

In 2019, India enacted the New Delhi International Arbitration Centre Act to establish the NDIAC, aiming to create a major institutional arbitration hub with modern infrastructure. Additionally, the International Arbitration and Mediation Centre (IAMC) was established in Telangana in 2021.

Singapore has also made substantial strides by enacting the International Arbitration Act (IAA) in 1995, which has been amended to meet business needs. The IAA governs international and domestic arbitrations when the parties specify it. Recently, Singapore has legalised a new concept known as the conditional fee arrangement (CFA). This arrangement creates an agreement between the client and the lawyer, stipulating that the client will pay a success fee if the outcome is favourable. The CFA was legalised through an amendment to the Legal Profession Act (LPA). Under this agreement, the lawyer receives payment from the client only after certain specified conditions are met. These conditions could include successful claims or defences, or any other result desired by the client. The remuneration that the lawyer receives is ultimately determined through mutual agreement between the client and their counsel. This development is expected to improve access to justice and provide more flexibility for potential claimants.

In the United Kingdom, parties often appoint arbitrators who do not necessarily have a legal background, particularly in industries such as construction, shipping, and commodities. Often, arbitrators with experience in international shipping or the maritime sector are chosen because their commercial expertise is more pertinent to the case than a purely legal perspective.

In addition to Section 11(1), Section 11(9) of the Indian Arbitration Act states that in the appointment of a sole or third arbitrator for international commercial arbitration, the arbitral institution designated by the Supreme Court may appoint an arbitrator of a nationality different from those of the parties, particularly when the parties are from different countries. The Eighth Schedule has faced criticism for failing to achieve its intended objectives. The HLC Report noted that a decentralised accreditation system already exists, with various professional bodies and arbitral institutions developing standards for grading and appointing professional arbitrators. The report highlighted a decline in arbitrator standards in India and recommended establishing a formal accreditation system, arguing that creating an additional body to accredit arbitrators would lead to duplicated efforts and require a significant financial commitment from the government. Instead, it suggested recognising professional institutes that already offer accreditation.

The report cautioned against a “top-down” approach that imposes strict legislative criteria for qualifying arbitrators. It advocated for allowing arbitral institutions to manage this function, thus avoiding unnecessary complications. This would enable parties to tailor the arbitration process according to their specific backgrounds and requirements, promoting India as a preferred arbitration destination. Additionally, leading arbitral institutions have developed standardised instruments that serve as effective templates for addressing practical issues related to using technology in arbitration. For instance, Article 6 of the Seoul Protocol on Video Conferencing in International Arbitration encourages testing electronic equipment and holding a test conference with all participants before the actual proceedings.

India's progress in the evolving arbitration landscape stems from various factors, including legislative initiatives, judicial mandates, and adherence to international obligations. The country has made significant strides in improving arbitration enforcement mechanisms. India's standing would improve if parties in foreign-seated arbitrations involving Indian subject matter could easily and efficiently comply with interim measures ordered by those foreign arbitral tribunals.