Arbitration reform must begin with the government: India’s arbitration system promises businesses a quicker alternative to lengthy court battles. That promise weakens when winning an award becomes the beginning of another round of litigation, especially against the government.
On November 2, the Supreme Court refused to interfere with the enforcement of foreign arbitral awards in favour of Vedanta and Ravva Oil, criticising the Centre’s prolonged resistance. The case exposes a weakness that legislative reform alone cannot repair. Arbitration is useful only when its outcome can be enforced within a reasonable time. A government that promotes India as an arbitration destination must also be prepared to accept legally sound awards against itself.
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Arbitration reform: The Ravva dispute’s long journey
The dispute arose from a production-sharing contract signed in October 1994 for the Ravva oil and gas field in the Krishna-Godavari basin. Differences over the treatment of costs led to arbitration in Kuala Lumpur. A partial award followed in October 2004, leaving quantification unresolved.
The government challenged the partial award in Malaysia, where it was ultimately upheld by the Federal Court in 2011. In July 2014, the government sought to recover approximately $99 million from the companies. A reconstituted tribunal delivered its final award in October 2016. That award, too, survived challenges in Malaysia.
The companies then sought enforcement in India. On July 1, 2026, the Delhi High Court rejected the government’s objections. The Supreme Court has now declined to interfere. More than two decades after the partial award, the parties were still litigating enforcement. The contract’s age should not be confused with the duration of the dispute, but the arbitration and court proceedings themselves provide ample evidence of delay.
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Government challenges crowd the courts
The problem extends beyond Ravva. A study published in Arbitration International examined 2,020 petitions filed before the Delhi High Court between 2021 and 2024 under Section 34 of the Arbitration and Conciliation Act, 1996. Government entities appeared in 1,258 cases, or 62.28% of the dataset. They were petitioners challenging awards in 825 cases and respondents defending them in 412; another 21 involved government entities on both sides.
These figures require care. A dataset of court challenges cannot establish what proportion of all government arbitral awards is challenged. Nor does the government’s large presence prove that every challenge is unwarranted: public procurement accounts for substantial commercial activity.
Even with those qualifications, the findings deserve attention. The study reported that government petitioners secured the setting aside or modification of awards in 50 of 341 disposed-of cases, a success rate of 14.66%. Departments should examine whether their decisions to litigate reflect a realistic assessment of the legal grounds and likely costs.
A distinction is also necessary between the cases. The study concerns Section 34 challenges to awards governed by the Act’s domestic framework. Ravva concerns enforcement of foreign awards under Section 48. The legal routes differ, although both can expose businesses to prolonged proceedings after arbitration.
The government has diagnosed its own problem
The Finance Ministry’s June 3, 2024 guidelines acknowledge that arbitration involving government entities has often failed to deliver the expected speed and finality. They recognise an administrative obstacle: accepting an adverse award before exhausting judicial remedies can be viewed unfavourably by scrutiny authorities.
The guidelines discourage the routine inclusion of arbitration clauses in domestic public procurement contracts, especially large ones. Where arbitration is included, the normal threshold is a dispute value below ₹10 crore, rather than a contract value below that amount. Clauses covering larger disputes require recorded reasons and approval at the prescribed senior level.
The ministry also encourages mediation and negotiated settlements, with high-level committees where appropriate. Crucially, it says adverse decisions should be challenged only where the case merits further proceedings and the chances of success are high.
That last instruction deserves greater administrative weight. Officials must protect public money. They should challenge awards where there are substantial legal grounds. But accountability becomes distorted if accepting a defensible award attracts more suspicion than pursuing an expensive, weak challenge.
An official may see litigation as the safer personal choice. The contractor bears the consequences through delayed recovery and continuing legal expenses. Public funds also pay for the government’s case. A system intended to protect the exchequer can therefore reward decisions that increase its costs.
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Enforcement needs administrative backing
Mediation can resolve disputes before positions harden and costs accumulate. It deserves support. Discouraging arbitration in large contracts, however, leaves unanswered what happens when settlement fails. Those disputes will still need a binding decision, often on technically complex questions involving substantial sums.
Frequent challenges and uncertain recovery can also influence how contractors price public projects. Businesses may build the expected cost of delay into bids, demand stronger payment protection or avoid contracts they consider too risky. The eventual burden can fall on the public authority procuring the work.
The law already contains safeguards for enforcement. Under Section 36, filing a challenge does not by itself make an award unenforceable; a separate stay order is required. For foreign awards, Section 48 specifies the grounds on which enforcement may be refused. The immediate task is to make those limits effective in practice, alongside prompt case management and resistance to attempts to reopen issues already decided.
Institutional reform also needs follow-through. In February 2026, the government told Parliament that the Arbitration Council of India, envisaged in the 2019 amendment, had still not been constituted. Its proposed responsibilities include grading arbitral institutions and recognising bodies that accredit arbitrators.
Government departments should require a reasoned assessment before challenging an award, with responsibility for reviewing whether continued litigation remains justified. They should also set payment deadlines where awards are accepted or challenges fail. Officials who accept awards on documented legal advice need protection from the presumption that an adverse outcome implies misconduct.
The public interest is poorly served when exhausting every legal avenue becomes an administrative duty. A department that pursues a weak challenge should have to justify the resulting expense and delay as rigorously as it would have to justify paying the award.