Solicitor General Tushar Mehta Calls for Major Overhaul of India's Arbitration System, Citing Integrity Crisis - 2025-09-25

Solicitor General Tushar Mehta Calls for Major Overhaul of India's Arbitration System, Citing Integrity Crisis

AHMEDABAD – In a powerful critique that has sent ripples through the legal community, Solicitor General of India Tushar Mehta has called for significant legislative and systemic reforms to India's arbitration framework, citing a deep-seated "integrity crisis" that he argues has eroded confidence in the alternative dispute resolution mechanism. Speaking at a conference on arbitration law organised by the Gujarat High Court, Mehta delivered a candid assessment, warning that the current system is plagued by perceptions of bias, procedural inefficiencies, and emerging technological threats.

At the heart of his address was the explosive claim that the practice of party-appointed arbitrators has created an ecosystem where impartiality is compromised. Mehta asserted that the nexus between certain arbitrators, law firms, and their clients has become so transparent that it undermines the very foundation of arbitration.

“Those who are practicing in the field of arbitration tell me that from the name of certain arbitrators, you can find out the firm which must have engaged him and the litigant which must be the client of that firm,” Mehta stated, pointing to a critical issue of perceived allegiance that has long been a subject of concern within arbitration circles.

He argued that this lack of a level playing field is a key reason why government bodies and some corporations are increasingly wary of arbitration, preferring the perceived neutrality of traditional court litigation.

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Government's Waning Confidence and a Call for Transparency

To substantiate his claims about the erosion of trust, the Solicitor General pointed to a crucial 2020 policy decision by the Central government. The policy dictates that government contracts valued above ₹10 crore will no longer include arbitration clauses—a move Mehta described as an "alarming decision" that, irrespective of empirical data, "speaks volumes" about the state's confidence in the arbitral process. He confirmed that the government is already actively considering amendments to the Arbitration and Conciliation Act, 1996, to address these systemic issues.

As a potential remedy to the transparency deficit, Mehta proposed a bold legislative solution: a law mandating the publication of all arbitral awards on a unified, public platform. Such a repository, he argued, would act as a powerful check on the system.

"You will come to know which company engages which arbitrator very frequently and which lawyer represents that company before that arbitrator almost frequently. This would work as a check," he explained.

This move would expose patterns of appointments and outcomes, potentially deterring the formation of exclusive "circuits" of arbitrators and counsels, thereby fostering greater accountability and public trust.

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Procedural Delays and Vague Legislation

Beyond the fundamental question of integrity, Mehta also took aim at the procedural inefficiencies that bog down arbitral proceedings, undermining their primary advantage over litigation: speed. He sharply criticised the frequent and lengthy adjournments sought by and granted to overburdened arbitrators.

"Earlier, we had only one category of professionals whose dates were problematic and they were film stars. Now the second category is arbitrators," he remarked wryly. These delays, often stretching proceedings by months, frequently compel parties to seek extensions from courts under Section 29A of the Act, defeating the purpose of a swift resolution.

The Solicitor General also highlighted ambiguities within the legal framework itself, particularly Section 34 of the Arbitration and Conciliation Act, which governs the grounds for challenging an arbitral award. He argued that terms like 'patent illegality' and 'perversity' are inherently subjective and lack clear, objective criteria. This vagueness, he opined, leads to inconsistent judicial interpretations and prolonged legal battles over the finality of awards, effectively turning the courts into appellate forums for arbitration. While he floated the idea of a specialised tribunal to handle Section 34 challenges, he remained cautious, noting that "tribunalisation has not worked well in India so far."

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The Challenge of Artificial Intelligence in Arbitration

Looking to the future, Mehta raised a pressing concern regarding the integration of artificial intelligence in the arbitral process. He warned against the outsourcing of core judicial functions to AI tools like ChatGPT, referencing foreign instances where such technology was allegedly used to draft awards.

This practice, he contended, directly contravenes the statutory requirement of a "reasoned award."

“Arbitral award has to be a reasoned award and the word 'reasoned award' would necessarily mean reason of the arbitrator. If you outsource your core judicial function, the award suffers from patent illegality,” he warned.

His comments underscore a growing debate at the intersection of law and technology: how to leverage AI for efficiency without compromising fundamental legal principles like judicial application of mind and the integrity of the decision-making process.

Conclusion: A Call for a Cultural and Institutional Shift

The Solicitor General's comprehensive critique was not merely a list of grievances but a call to action for all stakeholders—legislators, judges, arbitrators, and practitioners. He stressed that while integrity cannot be legislated, the system can and must create robust safeguards to ensure fairness and impartiality.

His speech signals a potential inflection point for arbitration in India. As the country aims to establish itself as a global hub for international commercial arbitration, the issues of integrity, transparency, and efficiency are paramount. The proposed legislative amendments, coupled with a necessary cultural shift towards greater ethical accountability, will be crucial in determining whether arbitration can reclaim its status as a credible, efficient, and just alternative to conventional litigation. The legal community now watches keenly to see how these powerful observations will translate into concrete policy and legislative action.