For years, arbitration clauses were treated as boilerplate. Most contracts simply copied standard government or institutional templates without much thought, and now, in 2026, that approach is no longer safe. One of the biggest legal risks today is not the dispute itself, but the arbitration clause governing it. Practically, what we have seen is that even well-fought arbitrations collapse at the enforcement stage because the clause itself is legally defective.
The shift has become more pronounced after 2024, especially with the strengthening of jurisprudence culminating in Bhadra International (India) (P) Ltd. v. Airports Authority of India, 2026 SCC OnLine SC 7, and its application in cases like M/S. M.V. Omni Projects (India) Ltd v. Union of India.
Pre-2024 Position: Broad Acceptance of Contractual Autonomy
Before 2024, Indian arbitration law had already started restricting unilateral appointments, but there was still some practical flexibility in interpretation. The turning point began with TRF Ltd. v. Energo Engineering Projects Ltd (2017) 8 SCC 377, where the Supreme Court held that an ineligible arbitrator cannot nominate another arbitrator. This was followed by Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760, which extended the principle to interested parties. However, despite these rulings, many arbitration clauses continued to survive in practice. Courts occasionally leaned on conduct, participation, or commercial realities.
In Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, the Supreme Court emphasized neutrality but still allowed panels curated by one party, provided they ensured independence. Similarly, in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), (2020) 14 SCC 712, the Court upheld a panel-based appointment mechanism, which gave some comfort to government entities. This created a grey zone where unilateral or semi-unilateral mechanisms continued to function.
Post-2024 Position: Absolute Strictness on Appointment Validity
Post-2024, the legal position has hardened significantly. The Supreme Court in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), (2025) 4 SCC 641, revisited earlier jurisprudence and emphasized stricter adherence to neutrality principles.
The most decisive shift came with Bhadra, where the Court clarified that:
- Unilateral appointments are void ab initio
- Participation cannot cure defects
- Waiver must be express and in writing
The Delhi High Court in the Omni Projects case applied this principle without dilution and set aside an award solely on the ground of invalid appointment.
The message is clear. The courts are no longer willing to tolerate even technical deviations. A common mistake clients make is continuing to use legacy arbitration clauses from old contracts or government formats.
These clauses typically include provisions where:
- One party appoints the sole arbitrator
- A departmental authority nominates the arbitrator
- Arbitration is conditional on such an appointment
Under current law, these clauses are not just risky. They are legally vulnerable and, in our experience, even when both parties proceed without objection, the losing party invariably raises a Section 34 challenge citing invalid appointment, and courts are now consistently accepting this ground.
What a Valid Arbitration Clause Should Contain Today
Practically, arbitration clauses must now be drafted with litigation survival in mind. They should ensure neutrality at the appointment stage and avoid any unilateral control.
The safest approaches include:
- Use of institutional arbitration where the appointment is handled by a neutral body.
- Mutual consent mechanisms where both parties have equal participation.
- Fallback to court appointment in case of disagreement.
Importantly, any attempt to rely on a waiver must be carefully documented after disputes arise.
Real-World Impact on Commercial Contracts
In our experience, this shift is particularly critical for infrastructure, construction, and government contracts. Many ongoing contracts still operate under outdated clauses.
This creates a situation where disputes may already be in arbitration under legally vulnerable frameworks. Practically, what we have seen is that proactive correction at the dispute stage, such as seeking court appointment or executing a written waiver, can prevent future challenges. Waiting until the award stage is often too late.
Conclusion
Arbitration clause drafting in India has entered a new era. The distinction between pre-2024 and post-2024 law is stark. Earlier, there was room for interpretation. Today, the law is rigid and unforgiving. In our experience, businesses must treat arbitration clauses as strategic legal tools rather than standard templates. Because in the current legal landscape, a poorly drafted clause does not just create inconvenience. It can destroy the enforceability of your arbitration outcome.
