Arbitration FAQs: How It Works and When to Use It

Arbitration is a private dispute resolution process where one or more arbitrators hear evidence and argument from both sides and issue a binding decision called an arbitral award. Unlike mediation, an arbitral award is imposed by the tribunal and is enforceable without the losing party's consent.

Yes. A domestic arbitral award is enforceable in the same manner as a decree of a civil court under Section 36 of the Arbitration and Conciliation Act, 1996. It can be challenged in court, but only on very narrow grounds — not simply because a party disagrees with the outcome.

Source: Arbitration and Conciliation Act, 1996, Section 36

Generally, yes. Arbitration requires the parties' prior consent, most commonly recorded as a clause in the underlying contract. Parties can also agree to arbitrate an existing dispute after it arises, but this requires both sides to consent at that stage.

Source: Arbitration and Conciliation Act, 1996, Section 7

An award can be challenged under Section 34 of the Act on narrow grounds only — the arbitration agreement was invalid; a party was not given proper notice; the award deals with matters outside the scope of the agreement; or the award conflicts with India's public policy. Courts do not review the merits.

Source: Arbitration and Conciliation Act, 1996, Section 34

The Act requires domestic arbitrations to conclude within 12 months of the tribunal being constituted, extendable by 6 months by party consent. In practice, complex institutional arbitrations often run 18-24 months.

Source: Arbitration and Conciliation Act, 1996, Section 29A

Ad hoc arbitration is conducted under the Arbitration Act without an administering institution — the parties handle appointments and logistics themselves. Institutional arbitration is administered by a body such as IIAM or DIAC that provides procedural rules, a roster of arbitrators, and case management.

Yes, for awards made in countries that are signatories to the New York Convention. These are enforceable under Part II of the Arbitration and Conciliation Act, 1996, subject to limited grounds for refusal including conflict with Indian public policy.

Source: Arbitration and Conciliation Act, 1996, Sections 44-52

Arbitration costs include arbitrator fees (ranging from Rs 25,000 to several lakhs per day for experienced commercial arbitrators), institutional fees if applicable, and legal representation. A fully litigated domestic arbitration in a complex commercial dispute can run into several lakhs or more.

Yes. Parties are free to agree on the procedure for appointing the arbitrator, including directly appointing a sole arbitrator or each appointing one member of a three-member tribunal. Where parties cannot agree, the High Court can make the appointment under Section 11.

Source: Arbitration and Conciliation Act, 1996, Section 11