Why Arbitration Matters in 2025: The Role of the Arbitration and Conciliation Act

Dispute resolution has always been central to the functioning of any legal system. In India, where the backlog of cases in courts has reached staggering levels, arbitration has emerged as a preferred mechanism for resolving commercial disputes. The Arbitration and Conciliation Act, 1996, is the foundation of India's arbitration framework, providing a legal structure that supports efficient, cost-effective, and timely dispute resolution.

As of 2025, arbitration is no longer an alternative—it is a necessity. With global business expansion, cross-border contracts, and increasing domestic commercial transactions, arbitration plays a critical role in ensuring that commercial disputes do not stifle economic progress. This blog explores why arbitration matters more than ever in 2025, the evolving role of the Arbitration and Conciliation Act, and how legal resources like LexisNexis help professionals, scholars, and students navigate this vital area of law.

The Rise of Arbitration in India

Over the past two decades, India has witnessed a significant shift from traditional litigation to alternative dispute resolution (ADR) mechanisms, especially arbitration. The reasons are clear:

• Delay in court proceedings: With over 4.5 crore cases pending in Indian courts, litigation is time-consuming and costly.

• Specialized dispute resolution: Commercial matters require technical expertise, which arbitration often provides.

• Enforceability: Arbitral awards, both domestic and international, are enforceable under a structured legal regime.

India’s arbitration journey, however, has not been without challenges. Before the 1996 Act, arbitration was governed by outdated laws like the Arbitration Act of 1940. The 1996 legislation marked a decisive step toward modernization, aligning Indian law with the UNCITRAL Model Law and international best practices.

Arbitration and Conciliation Act: Foundation of Modern Arbitration in India

The Arbitration and Conciliation Act, 1996, is the key legislation governing arbitration and conciliation in India. Enacted to consolidate and amend the law related to domestic arbitration, international commercial arbitration, and enforcement of foreign awards, the Act is divided into four parts:

• Part I: Domestic arbitration and international commercial arbitration seated in India

• Part II: Enforcement of foreign awards under the New York and Geneva Conventions

• Part III: Conciliation

• Part IV: Supplementary provisions

Over time, several amendments were introduced to address practical challenges, most notably in 2015, 2019, and 2021. These reforms have improved the Act’s effectiveness and made India a more arbitration-friendly jurisdiction.

Why Arbitration Matters in 2025

1. Ease of Doing Business

In 2025, arbitration is seen not only as a legal necessity but also as an economic enabler. A transparent and efficient arbitration system fosters investor confidence and improves a country’s ease of doing business. The Arbitration and Conciliation Act, with its emphasis on timely awards, institutional arbitration, and judicial non-interference, plays a key role in this ecosystem.

India’s global business ties and trade relations necessitate quick resolution of commercial disputes. Arbitration, being time-bound and confidential, aligns well with corporate interests.

2. Technology-Driven Arbitration

Arbitration proceedings in 2025 are increasingly conducted online. Virtual hearings, e-filing of pleadings, digital submissions, and AI-assisted document review have become standard practices. The Arbitration and Conciliation Act, while silent on the mode of hearings, allows parties the freedom to choose procedures, enabling tech-driven dispute resolution.

Technology reduces logistical burdens, speeds up proceedings, and enables parties across jurisdictions to participate without physical presence. The flexibility offered by the Act supports this evolution.

3. Institutional Arbitration Gaining Ground

While ad hoc arbitration was once common in India, institutional arbitration is now preferred due to greater procedural rigor, administrative support, and neutrality. Institutions like the Mumbai Centre for International Arbitration (MCIA), Delhi International Arbitration Centre (DIAC), and International Arbitration and Mediation Centre (IAMC) Hyderabad are growing rapidly.

The 2019 Amendment to the Arbitration and Conciliation Act created the Arbitration Council of India (ACI) to promote institutional arbitration and grade arbitral institutions. In 2025, this reform is beginning to show results, with more parties opting for recognized institutional forums.

4. Time-Bound Dispute Resolution

One of the most important reforms came through Section 29A, introduced in the 2015 Amendment. It mandates that arbitral awards be made within 12 months from the completion of pleadings, with a possible 6-month extension.

Delays were one of the major criticisms of arbitration. The time-limit provision has helped make arbitration truly faster than litigation, making it more attractive in 2025 than ever before.

5. Global Enforceability of Awards

In an era of international trade and commerce, cross-border enforceability of arbitral awards is essential. Under Part II of the Act, India enforces foreign awards under the New York Convention and Geneva Convention. Indian courts have increasingly adopted a pro-enforcement approach.

For multinational corporations, arbitration under the Arbitration and Conciliation Act offers the assurance that awards passed in foreign jurisdictions will be recognized and enforced in India with minimal judicial interference.

Evolution Through Amendments: Strengthening the Act

The Arbitration and Conciliation Act has evolved through critical amendments that have addressed gaps and introduced global standards.

The 2015 Amendment

• Introduced Section 29A (time limits)

• Redefined public policy for setting aside awards

• Limited court intervention during arbitral proceedings

• Emphasized cost-efficiency and neutrality

The 2019 Amendment

• Established the Arbitration Council of India

• Promoted institutional arbitration

• Allowed parties to choose arbitrators from designated panels

• Empowered High Courts to designate arbitral institutions for appointments
  
  

The 2021 Amendment

• Removed the Eighth Schedule, allowing foreign professionals to be appointed as arbitrators

• Empowered courts to stay awards at enforcement stage if prima facie fraud or corruption is evident

Each amendment was designed to bring Indian arbitration law in line with global standards. By 2025, their cumulative impact has made arbitration under the Act significantly more credible and efficient.

Challenges and Criticisms

Despite its evolution, arbitration in India still faces challenges:

• Uncertainty in judicial interpretation of key provisions like “public policy”

• High costs associated with arbitration, especially in institutional settings

• Limited awareness among SMEs and startups

• Delays in enforcement due to interim challenges in courts

The success of arbitration in 2025 depends on consistent judicial support, wider adoption of institutional models, and continued refinement of procedural law.

The Role of LexisNexis in Understanding the Arbitration Framework

Navigating the complexities of the Arbitration and Conciliation Act—especially with evolving amendments and case law—requires access to accurate and authoritative legal resources. This is where LexisNexis serves as an invaluable tool.

Whether you are a student, a legal researcher, or a practicing advocate, LexisNexis provides clarity and depth in understanding arbitration law. Its reliable content ensures that users stay updated with the latest legislative and judicial developments.

Explore the latest editions of the Arbitration and Conciliation Act and associated commentaries on the LexisNexis India Bookstore.

Conclusion

In 2025, arbitration is not a luxury—it is a legal imperative. The Arbitration and Conciliation Act, through its modern structure and continuous reforms, offers a robust legal framework for resolving disputes in a time-bound and efficient manner. Its alignment with global standards, flexibility, and increasing institutional support have made arbitration a pillar of India’s legal and commercial system.

As India aspires to become a global economic powerhouse, a strong dispute resolution mechanism is essential. The role of arbitration—and the legal tools that support it—will only grow. For law professionals, businesses, students, and policymakers, understanding the Arbitration and Conciliation Act is no longer optional.