Using trade treaty policy to strengthen arbitration

1. At a Glance

• India's expanding Bilateral Investment Treaty (BIT) and Free Trade Agreement (FTA) network is being repositioned as a tool to strengthen commercial arbitration infrastructure, not just market access [4].
• The Arbitration and Conciliation Act, 1996 is India's core statutory framework covering domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards [1][4].
• Relevant for GS-II (International Relations, Governance) and GS-III (Economy — Investment, Ease of Doing Business) linkage questions on institutional/legal reform via trade diplomacy.

2. Why in the News

• Op-ed by Arun Chawla, Director General, Indian Council of Arbitration, published in The Hindu Business Line, 23 September 2026, argues India's recent treaty wins should be leveraged to build a stronger domestic arbitration ecosystem [4].
• Trigger: a cluster of newly concluded/entered-into-force treaties — India-UAE BIT, India-Israel BIT, India-Uzbekistan BIT, India-EFTA FTA, India-UK FTA, India-Oman FTA — has created momentum to examine treaty design's effect on dispute resolution [4].

3. Background & Evolution

• 1996: Arbitration and Conciliation Act enacted (Act No. 26 of 1996), consolidating law on domestic arbitration, international commercial arbitration, conciliation, and enforcement of foreign awards [1].
• 2015, 2019, 2021: Amendment Bills introduced — 2015 amendment aimed to make arbitration the preferred mode for commercial dispute settlement and position India as an international arbitration hub; later amendments dealt with arbitrator appointment timelines and the Arbitration Council of India [1][2].
• 2013: India-UAE Bilateral Investment Promotion and Protection Agreement (BIPPA), predecessor to the 2024 BIT [3].
• 2022: India-UAE Comprehensive Economic Partnership Agreement (CEPA) — precursor driving deeper investment flows [3].
• 10 March 2024: India-EFTA Trade and Economic Partnership Agreement (TEPA) signed [5][6].
• 13 February 2024: India-UAE BIT signed; entered into force 31 August 2024, replacing the 2013 BIPPA [3].
• 2024: India-Uzbekistan BIT signed [4].
• 2025: India-Israel BIT signed [4].
• 6 May 2025: India-UK FTA finalized; signed 24 July 2025 in London by PM Modi and PM Starmer [7].
• 1 October 2025: India-EFTA TEPA enters into force [5].
• December 2025: India-Oman FTA signed [4].
• April 2026: India-New Zealand FTA signed [4].

4. Core Static Facts

5. Multi-Dimensional Analysis

Economic

• FTAs like India-EFTA carry investment commitments ($100 billion pledge) directly linked to confidence in India's dispute-resolution predictability [6].
• A credible arbitration ecosystem lowers transaction/legal costs for foreign investors, complementing tariff and market-access gains from FTAs [4].

Legal / Constitutional

• India already has "basic statutory architecture" (1996 Act) — the policy question is whether treaty design (BIT/FTA dispute settlement chapters) reinforces or bypasses this domestic framework [4].
• Ongoing debate over investor-state dispute settlement (ISDS) mechanisms in FTAs — some agreements omit or restructure ISDS provisions [4].

Geopolitical / Strategic

• Treaty network diversification (Gulf, Central Asia, Europe, UK, Oceania) signals India's pivot toward comprehensive economic diplomacy beyond traditional partners [4].
• Choice of arbitration seat/institution in treaties affects India's positioning versus rival hubs (Singapore, London, Dubai).

Administrative / Governance

• Institutional strengthening (e.g., Indian Council of Arbitration, Arbitration Council of India) needs to keep pace with treaty commitments to ensure enforceability and India's reputation as arbitration-friendly [2][4].

6. Recent Developments (last 12-18 months)

• 24 July 2025: India-UK FTA signed in London [7].
• 1 October 2025: India-EFTA TEPA enters into force [5].
• December 2025: India-Oman FTA signed [4].
• April 2026: India-New Zealand FTA signed [4].
• 23 September 2026: Op-ed by Indian Council of Arbitration DG published urging treaty policy be used to strengthen commercial arbitration [4].

7. Prelims Hooks

• Arbitration and Conciliation Act enacted in 1996 (Act No. 26) [1].
• The Act covers domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards [1].
• 2015 amendment aimed to make India a hub of international commercial arbitration [1].
• Arbitration Council of India was established via the 2019 amendment [2].
• India-UAE BIT signed 13 February 2024, entered into force 31 August 2024 [3].
• India-UAE BIT replaced the 2013 BIPPA (Bilateral Investment Promotion and Protection Agreement) [3].
• India-EFTA TEPA signed 10 March 2024 in New Delhi [5].
• EFTA comprises Switzerland, Norway, Iceland, and Liechtenstein [5].
• India-EFTA TEPA entered into force on 1 October 2025 [5].
• EFTA pledged $100 billion investment into India over 15 years under TEPA [6].
• India-UK FTA signed on 24 July 2025 in London [7].
• India-UK FTA eliminates tariffs on 99% of Indian tariff lines [7].
• Both countries target bilateral trade of US$120 billion by 2030 under the UK FTA [7].
• Author of the reference op-ed: Arun Chawla, Director General, Indian Council of Arbitration [4].
• India also signed BITs with Israel (2025) and Uzbekistan (2024), and FTAs with Oman (Dec 2025) and New Zealand (April 2026) [4].

8. India Spent a Decade Tearing Up Its Old Treaties — That Is the Real Backdrop

• The new treaties are not an expansion. They are a rebuild after a demolition.
• India ended its older Bilateral Investment Treaties with 77 countries. Only 6 of the old treaties are still alive [8].
• Before 2015, India had signed such treaties with 83 countries, and 74 were in force [8].

• So the UAE, Israel, Uzbekistan and Oman deals are India refilling a hole it dug itself, not adding something new on top.

• Why India demolished it — foreign investors began suing India under those old treaties. 37 notices or letters of intent to bring a dispute against India were filed [8].

• Only 1 case ended with India actually paying an award, but the Standing Committee on External Affairs called even that a "significant cost to the exchequer" [8].

• Exam use: if a question asks about India's treaty "momentum", the honest answer starts in 2015-16 with mass termination, not in 2024 with new signings.

9. The Rule That Makes Investors Avoid Indian Arbitration

• India's own treaty template tells investors to go to Indian courts first — for years.
• Under the Model BIT, a foreign investor must first try India's domestic legal system for about five years before it may start international arbitration [9].
• Investors know Indian courts are slow. So a five-year waiting room reads to them as "no real remedy at all" [9].

• This is why several partners refused India's template, and why the treaty network shrank [8].

• India has already started bending this rule quietly.

• The India-UAE BIT cuts the waiting period from five years to three years [9].

• That is a real concession, and it shows the Model BIT's core defence clause is negotiable when India wants the money.

• The catch for the op-ed's argument — every year an investor is forced to sit in court is a year they are not using an Indian arbitral institution. India cannot ask treaties to feed its arbitration ecosystem while its own template pushes disputes into courts first [4][9].

10. Two Different Arbitrations Are Being Mixed Up Here

• Investor-State arbitration and commercial arbitration are not the same thing. Do not write them as one.
• Investor-State Dispute Settlement (ISDS) = a foreign company sues the Government of India over a policy or tax action. It sits in the BIT [4].
• Commercial arbitration = company versus company, run under the Arbitration and Conciliation Act, 1996 [1].

• The op-ed wants treaty policy to grow the second one [4]. But BIT chapters mainly govern the first.

• Why the mix-up matters for the answer you write

• An ISDS case against India is usually heard abroad, under institutions India does not control. Winning more of those does nothing for Indian arbitral institutions.
• What actually feeds Indian institutions is the Free Trade Agreement side — the ordinary buyer-seller contracts between Indian and foreign firms, where the parties choose the arbitration seat themselves.
• So the lever is not the ISDS chapter. It is getting Indian seats and Indian institutions written into the contracts that FTAs generate.

11. The Case Against Giving Investors Easier Arbitration — and What It Gets Right

• The strongest opposing view: easy investor arbitration lets foreign firms challenge India's tax and regulatory decisions before an outside tribunal, and the taxpayer pays when India loses.
• India has already paid one arbitral award, which the Standing Committee flagged as a real cost to the exchequer [8].

• 37 dispute notices had been raised against India — this is not a theoretical fear [8].

• What is right about it — the five-year local-remedies rule was a deliberate defence, not carelessness. A sovereign state should be able to test a claim in its own courts before facing a foreign tribunal.

• Where it still fails — the defence is too blunt.
• It protects India from cases, but also drives away the investment the same treaties are meant to attract [9].
• The Committee's own answer was not "keep the wall high". It asked for pre-arbitration consultation to settle disputes early, and for treaty text drafted with precision so arbitrators cannot read clauses too widely [8].
• That is the middle path: defend by writing better clauses, not by making the remedy unusable.

12. Who Must Do What Next

• Ministry of Commerce and Industry: write an Indian seat into FTA dispute clauses.
• Right now the choice of arbitration seat is left to the parties, so contracts drift to Singapore, London and Dubai.

• New FTAs like India-EFTA TEPA carry a $100 billion investment pledge over 15 years [5][6]. Each project spawns contracts. If the model contract language names an Indian seat, that work stays here.

• Ministry of External Affairs: finish the Permanent Court of Arbitration arrangement.

• The Standing Committee on External Affairs (2021) specifically asked the Ministry to ensure early implementation of the agreement with the Permanent Court of Arbitration, so that India becomes a hub for international arbitration [8].

• This is a named, existing, unfinished recommendation — the best single line to cite in a Mains answer.

• Ministry of Law and Justice: build the government's own lawyers.

• The Committee found India leans on expensive foreign counsel in these disputes and asked for panels of domestic legal expertise instead [8].

• A country that cannot argue its own cases cannot credibly sell itself as an arbitration hub.

• Arbitration Council of India: grade institutions fast.

• The Council was created by the 2019 amendment to grade arbitral institutions and accredit arbitrators [2].
• Grading is what lets a foreign counsel pick an Indian institution with confidence. Without it, treaty-driven demand simply flows to already-graded foreign institutions.

13. Anchors for Answers

• Data: India terminated BITs with 77 countries; only 6 old treaties remain in force [8]
• Data: 37 notices/letters of intent for disputes raised against India; 1 award actually paid [8]
• Data: $100 billion EFTA investment pledge over 15 years under TEPA [5][6]
• Report/Committee: Standing Committee on External Affairs (Chair: P.P. Chaudhary), report on India and Bilateral Investment Treaties, 10 September 2021 [8]
• Law: Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996); Arbitration Council of India created by the 2019 amendment [1][2]
• Comparison: India-UAE BIT cuts the local-remedies wait from the Model BIT's five years to three years [9]
• Institution: Permanent Court of Arbitration — Committee sought early implementation of India's agreement with it to build an arbitration hub [8]

14. Mains Relevance

• GS-II: International Relations — Bilateral/multilateral agreements affecting India's interests; treaty-making and institutional mechanisms.
• GS-III: Indian Economy — Effects of liberalization, investment models, and dispute resolution frameworks on growth and FDI.
• Possible question stems: 1. Discuss how India's recent Free Trade Agreements and Bilateral Investment Treaties can be leveraged to strengthen the domestic commercial arbitration ecosystem. (GS-III) 2. Examine the evolution of India's arbitration law framework since 1996 and assess its adequacy in the context of expanding trade treaty commitments. (GS-II/III) 3. Critically analyse the treatment of investor-state dispute settlement (ISDS) in India's recent trade agreements. (GS-II)

15. Related Topics to Study Next

• Arbitration Council of India — institutional body created to grade arbitral institutions, complements treaty-driven demand for arbitration capacity.
• India-UAE CEPA (2022) — precursor economic framework underlying the 2024 BIT.
• Investor-State Dispute Settlement (ISDS) — recurring contentious element in India's BIT negotiations.
• India's Model BIT (2016) — India's template text shaping recent treaties like UAE and Israel BITs.
• New York Convention, 1958 — international framework for enforcement of foreign arbitral awards, underlying the 1996 Act's Part II.
• India-EFTA TEPA — first FTA with developed European nations outside EU, useful comparative case.
• Ease of Doing Business rankings — link between dispute resolution efficiency and investment climate.
• Singapore/London as arbitration hubs — comparative institutional benchmarks India is competing against.

16. Common Errors / Trap Areas

• Confusing the Arbitration and Conciliation Act, 1996 with the Commercial Courts Act, 2015 — the latter deals with commercial court jurisdiction, not arbitration per se.
• Assuming all recent India FTAs include full ISDS chapters — the article notes some agreements show "omission thereof" regarding investor-state dispute mechanisms [4].
• Mixing up dates: India-UAE BIT (2024, investment) is distinct from India-UAE CEPA (2022, trade in goods/services).
• Misattributing India-EFTA TEPA's signing (10 March 2024) versus its entry into force (1 October 2025) — two different dates commonly confused.
• Treating "Indian Council of Arbitration" (an arbitral institution) as a statutory/government regulatory body — it is not the same as the government-created Arbitration Council of India.