Why Centre Should Not Junk Arbitration To Settle Disputes

On June 3, 2024, the Finance Ministry announced a stunning policy decision. After trying to promote India as a hub for arbitration for decades, the Government of India now suddenly feels that arbitrations do not work for them and that the arbitration clause should be dropped from all future government / government controlled entities contracts (except in relation to minor disputes of a value of Rs. 10 crores or less).

The new policy is set out in the form of an Office Memorandum and provides instead that the government departments/ entities/ agencies should, "..... amicably settle as many disputes as possible ...... in overall long-term public interest, keeping legal and practical realities in view, without shirking or avoiding responsibility or denying genuine claims of the other party."