The 6-Year Void: Delay in Constituting the Arbitration Council of India
January 2026 marks six years since Parliament amended the Arbitration and Conciliation Act, 1996 to provide for the establishment of the Arbitration Council of India (ACI). Yet, the ACI — a proposed regulator expected to transform India's arbitration landscape — remains unconstituted. This institutional vacuum is glaring, particularly as India aspires to become a global hub for arbitration.
The Disruption of Institutional Arbitration Norms
The non-implementation of the ACI breaks from India's legislative tradition of "fast-tracking" economic reforms aimed at improving ease of doing business. The 2019 amendment, specifically Section 43B, provided the framework for the ACI, empowering it to grade arbitration institutions, develop professional standards, and regulate arbitrators. However, the absence of the Council has left these promises unfulfilled.
Ironically, India amended the Arbitration Act to align with international practices, specifically those followed in Singapore and London — two widely preferred arbitration hubs. Rather than reducing procedural bottlenecks, the dominance of ad hoc arbitration remains unchecked, exacerbating the very inefficiencies that institutional arbitration aims to solve. The ACI's envisioned role in steering cases away from the chaotic realm of ad hoc arbitrations cannot be understated.
The Machinery That Never Started
The Arbitration and Conciliation (Amendment) Act, 2019 aimed at structural reforms, yet implementation remains elusive. Critical sections such as Section 43B, which outlines the composition and powers of the ACI, and Section 43C, which describes the qualifications for its chairperson and members, are still legal text without institutional action.
The matter rests with the Ministry of Law and Justice, which is yet to clarify the reasons behind the delay. Budgetary allocations for arbitration-related development have been negligible—2023-24 saw less than ₹50 crore earmarked for dispute resolution reforms, an amount insufficient for building capacities comparable to existing arbitration hubs.
The appointment process for the ACI, involving a chairperson from the judiciary, nominees from recognized arbitral institutions, and other experts, appears bogged down by bureaucratic inertia. While the Act mandates inclusivity, no progress has been made on either personnel selection or institutional design.
What the Landscape Tells Us
The government champions arbitration as a mechanism of swift justice. Yet data from World Bank’s Ease of Doing Business Report (2020) undermines these claims. India ranks 163rd (out of 190 countries) in contract enforcement. An arbitration infrastructure discouraging international investors only deepens skepticism over India’s dispute resolution framework.
Contrast this with Singapore, which saw institutional arbitration cases handled by the Singapore International Arbitration Centre (SIAC) grow by 22% annually between 2017 and 2022. SIAC’s success stems from clear procedural rules, transparency, and aggressive marketing as an arbitration-friendly jurisdiction. India’s reliance on the Indian Council of Arbitration (ICA), operating under a not-for-profit model since 1965, pales in comparison. ICA processes, while robust, remain burdened with delays, costs, and inadequate technology adoption.
Meanwhile, ad hoc arbitration dominates the Indian market, often entailing disputes that mirror the delays and inefficiencies of regular litigation. Parties, disillusioned by high costs and procedural uncertainty, increasingly prefer international venues such as London or Singapore — a practice colloquially termed "forum shopping."
Uncomfortable Questions About Institutional Capacity
Delays in constituting the ACI raise deeper questions. Is the regulatory mechanism envisioned by the 2019 amendment flawed? Without operational norms or grading systems for arbitrators and institutions, the market remains unchecked. Procedural arbitrariness, ambiguous contracts, and uneven standards among institutions further hinder India’s embrace of institutional arbitration.
There is also a question of state-level implementation. Arbitration, while governed at the national level, frequently involves disputes linked to local jurisdictions. The absence of robust state arbitration bodies compounds inefficiencies and undermines professional arbitration ecosystems. Building competent arbitration councils at the state level would require coordination, but the Ministry of Law and Justice has shown scant attention to regional capacities.
Lastly, regulatory capture is a lurking concern. The prospect of appointing stagnating bureaucratic networks rather than independent experts to the ACI could undermine credibility — a problem that plagues other regulatory bodies such as the Telecom Regulatory Authority of India (TRAI).
Lessons from Singapore: A Pointed Comparison
Singapore’s arbitration success highlights the importance of institutional readiness. The SIAC operates on a modern framework, offering expedited procedures and technological integration. Crucially, Singapore positions itself as impartial, granting procedural independence to international parties. India, lacking centralized promotional efforts and institutional autonomy, struggles to offer comparable confidence to global investors.
The absence of the ACI not only undermines India's ambitions of replicating Singapore’s model but also strengthens foreign arbitration centres as default venues for Indian business disputes. The real risk lies in losing high-value arbitration cases that could generate international visibility for India’s legal systems.
Examination Corner: Prelims and Mains
- Prelims MCQ 1: Which section of the Arbitration and Conciliation Act, 1996, was amended to create the Arbitration Council of India?
- A. Section 12
- B. Section 43B (Correct Answer)
- C. Section 31
- D. Section 74
- Prelims MCQ 2: Which of the following countries has achieved prominence as a global hub for institutional arbitration?
- A. Switzerland
- B. Singapore (Correct Answer)
- C. Germany
- D. Japan
Mains Question: To what extent has the delay in constituting the Arbitration Council of India affected India’s international standing as a destination for dispute resolution?
Practice Questions for UPSC
Prelims Practice Questions
- 1. The ACI is responsible for grading arbitration institutions in India.
- 2. The ACI has been successfully constituted and is operational.
- 3. The ACI aims to reduce procedural bottlenecks in arbitration.
Which of the above statements is/are correct?
- 1. Dominance of ad hoc arbitration.
- 2. Slow bureaucratic processes in the arbitration sector.
- 3. High costs associated with arbitration in India.
Select the correct answer using the codes given below:
Frequently Asked Questions
What is the significance of the Arbitration Council of India (ACI) in the context of India's legal reforms?
The Arbitration Council of India (ACI) is envisioned as a pivotal regulator that aims to transform India's arbitration landscape by grading arbitration institutions, establishing professional standards, and regulating arbitrators. Its delay in constitution poses challenges for India's aspiration to be a global arbitration hub and undermines the legislative intent behind the 2019 amendment to the Arbitration and Conciliation Act.
How does the delay in the ACI's constitution reflect on India's ease of doing business?
The delay undermines India's legislative tradition of expediting economic reforms like those intended for arbitration through the ACI. It reflects poorly on the country's Ease of Doing Business ranking, particularly in contract enforcement, and discourages international investment by perpetuating procedural inefficiencies in dispute resolution.
What role does bureaucratic inertia play in the establishment of the ACI?
Bureaucratic inertia is a significant factor contributing to the delay in constituting the ACI, as the process of appointing a chairperson and members is mired in bureaucratic complexities. This stagnation not only hinders the establishment of a much-needed regulatory framework but also raises concerns over the independence and credibility of the ACI.
What challenges does India face in contrast to successful arbitration hubs like Singapore?
India faces several challenges compared to Singapore, including reliance on ad hoc arbitration that fails to provide timely resolutions and a lack of clear procedural rules. Additionally, India's arbitration infrastructure suffers from inadequate technology adoption and high costs, leading to a preference for international venues over domestic options.
Why is the concept of state-level arbitration councils important for the overall arbitration ecosystem in India?
State-level arbitration councils are crucial because arbitration frequently involves disputes linked to local jurisdictions. Strengthening these councils could enhance efficiency, improve institutional capacity, and support a more cohesive arbitration ecosystem to address ongoing challenges in the national framework.
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