India as an international arbitration hub will remain a distant dream if we don't tackle 2 issues: Justice AK Sikri

India's arbitration system has structural problems that no amount of legislation has been able to fix. In the second episode ofArbitration After the Bench, JusticeAK Sikrioffers no comfort. He offers candour.

Justice Sikri speaks withBar & Bench's Debayan Royin a conversation that moves from the philosophical foundations of arbitration to the government's retreat from arbitration clauses, from theGayatri Balasamyjudgment to geopolitical shocks now flooding international tribunals with force majeure claims. And he says, without hesitation, that making India an international arbitration hub will remain a distant dream.

Justice Sikri retired from the Supreme Court of India in March 2019. Within months, he was sworn in as an international judge of the Singapore International Commercial Court (SICC), where he has sat for six years alongside judges from England, France, the United States, Germany, China, Japan and Hong Kong. He simultaneously maintains an active arbitration practice, presiding over domestic and international disputes.

Debayan Roy [DR]: Your career has taken you across three worlds that rarely speak to each other: the bench of the Supreme Court of India, the SICC and the arbitration room. What does each teach you that the other two cannot?

Justice AK Sikri:The Supreme Court vests you with powers to decide constitutional issues, social justice matters and questions of governance where there is enormous judicial discretion, including under Article 142. Those tools are simply not available in arbitration. The arbitral tribunal is a creature of the arbitration agreement. Its jurisdiction is derived from that agreement alone. Section 28(2) of the Arbitration Act specifically excludes the principles of equity. You go strictly by the contract.

SICC is a unique system. It is an international court where judges are drawn from both common law and civil law jurisdictions. That fusion of jurisprudence allows us to create a different kind of international commercial law, adopting best practices from both systems. It is also a flexible court: parties have considerably more say in procedural matters than in an ordinary domestic commercial court.

DR:Most Supreme Court judges who retire and enter arbitration have spent their careers hearing appeals, deciding on principles of law. Very few have had trial court experience. Arbitration at its heart is a trial. Are retired appellate judges actually equipped for it?

Justice Sikri:Many judges from High Courts with original side jurisdiction do have trial experience. I practised simultaneously in the trial court and High Court when I joined the profession. But you are right that judges from states without original side jurisdiction may not. And in most arbitration, the cases are fact-heavy. How to record evidence, marshal facts, analyse expert testimony on construction delays or quantum damages - these require real expertise.

Even if you lack that expertise, you must try to acquire it, through training if needed. One should not feel shy. There are many who think that 20 or 25 years on the bench makes them competent for arbitration. That should not be the approach. Every day, you learn. That applies to arbitration also.

The primary reason [why former judges are chosen as arbitrators] is faith. Litigants and business houses feel that retired judges will be more impartial, more rigorous. A survey by FICCI or ICA about seven or eight years ago found that almost 65 to 70 percent of respondents said they want retired judges. But I agree that it should not be only judges or senior lawyers. Anyone can be an arbitrator. Particularly in technically complex cases, a retired engineer may be far better placed than a judge to analyse construction delays or quantify damages. I have been the presiding arbitrator in cases where a technical member was on the tribunal and the assistance on technical matters was a great relief.

In England and Singapore, there is also a talk of gender diversity, wanting more inclusion of women arbitrators...That is good for various reasons. The combination of legal and technical expertise is important...

DR: When a retired Supreme Court judge passes an award, it is reversed or set aside under Section 34 or Section 37 by a judicial magistrate or a district judge. Does this not expose a fundamental tension in how we have structured arbitration?

Justice Sikri:I do not think so. When you accept the role of arbitrator, you know your award is subject to challenge under Section 34 and depending on the jurisdiction, the matter can go to a district judge. You accept the role knowing this ecosystem. I have seen for these reasons that there are many judges who do not want to become chairpersons of these tribunals or do not want to accept arbitration work, saying why should I do the work and have my reasoning overturned.

To answer you candidly: when I sit writing an award, does the thought come that a district judge may set it aside? No. I write the award on what I believe is the correct position in law. I have to come to a correct conclusion on the facts in my wisdom, without bias and treat both parties fairly.

DR: You had authored theAyyasamyjudgment in 2016 where you drew a difference between fraud simpliciter and serious fraud.Vidya Droliain 2021 took the law further ahead. Now, when you see parties raising the ground of fraud as a ground to challenge the jurisdiction of an arbitrator, do you still applyAyyasamy?

Justice Sikri:The substratum remains. InAyyasamy, our main focus was that a mere allegation of fraud should not be sufficient to exclude a dispute from arbitration. Unless it is of an egregious nature meeting the penal definition of fraud, it should be arbitrable.Avitelfine-tuned this by adding a second test: whether the fraud has a public law element.

InDrolia, the emphasis shifted to procedure: should the court decide the fraud issue at the Section 8 or Section 11 stage?Droliasaid no. Apply only the eye of a needle test at that stage and leave the substantive question to the tribunal. When such cases come before me as an arbitrator, I apply the same two tests fromAyyasamyandAvitel.

DR: In December 2018, the Government of India had nominated you to the Commonwealth Secretariat Arbitral Tribunal in London while you were still a Supreme Court judge. When the matter became public, you withdrew your nomination. Has India resolved this issue of post-retirement judicial appointments or have we just ignored it?

One good solution was suggested by Arun Jaitley when he was in opposition: increase the retirement age to 70 and send judges on deputation to these tribunals while they are still sitting judges. That can solve the problem

Justice Sikri:It is a very tricky situation. It is always talked about and it is said that judges should normally not accept any such positions after retirement. The perception is that in their last months or maybe last one year before retirement, in order to get some good assignment, they may start deciding cases in favour of the government...maybe in some cases it has happened also.

First, let me clarify: that was not an arbitration position. It involved deciding employment disputes of Commonwealth Secretariat staff. There was no remuneration. I was even reluctant when it was offered. The controversy that arose was totally unrelated to the nature of the appointment. When I saw what people were thinking, I immediately said I should not be given this and withdrew.

The broader issue has always remained and it is tricky. Many tribunals and quasi-judicial bodies, under statute, must be headed by retired judges. If these positions must be filled by former judges, how can you say judges should not accept post-retirement appointments? One good solution was suggested by Arun Jaitley when he was in opposition: increase the retirement age to 70 and send judges on deputation to these tribunals while they are still sitting judges. That can solve the problem. Otherwise, any appointment will always be scrutinised for which judgments the judge gave in favour of the government before retirement. Unfortunately, there have been some appointments in these tribunals also of those persons whom people call pro-government in their approach.

DR: The government has removed arbitration clauses from infrastructure and public procurement contracts worth ₹10 crore or more. However, under the MSME Act, arbitration is statutorily mandated and the government cannot opt out. Are we adopting arbitration only when the outcome suits us?

On one hand, we speak of ease of doing business and India as an arbitration hub. On the other, because some high-value awards came against the government, you remove the clause. ₹10 crores today is nothing

Justice Sikri:I would say it is a knee-jerk reaction. On one hand, we speak of ease of doing business and India as an arbitration hub. On the other, because some high-value awards came against the government, you remove the clause. ₹10 crores today is nothing. Any significant contract dispute now goes to court, which foreign investors will not accept.

The real problem is internal. Government officers know that a contractor is entitled to something. But they will not recommend settlement because tomorrow someone may ask why they recommended it. The fear of CAG, CVC and vigilance inquiry is so paralysing that the matter goes to arbitration instead. The contractor who might have accepted 60 or 70 rupees for a legitimate 100-rupee claim now files for 500 rupees. Interest runs for five, seven, ten years. And then the government complains about large awards.

I must add that not necessarily every time are awards given against the government. Many times, we have rejected the claims totally and allowed the counterclaims of the government...I may add here very frankly that there is an issue of arbitrators' bias. There are issues about the impartiality and integrity of some arbitrators also. Those should be taken up at a different level. Party autonomy gives you the power to appoint a person, so appoint a person of impeccable integrity. Many times, I have seen awards given against the government by those who were earlier in the government itself.

DR: Section 34 courts continue to revisit arbitral merits under the language of patent illegality and public policy, despite decades of Supreme Court corrections. Is the problem the law or the culture?

By and large, the Supreme Court has sent very clear signals in judgments over the last 10-15 years that courts will interfere in the least possible manner. But some cases come where it happens and those send a wrong signal

Justice Sikri:The law is not the problem. Section 34 is clear: awards cannot be reviewed on merits. The Section 34 court is not a court of appeal. Even interpretation of a contract clause given by the tribunal is binding. The grounds are very limited.

Lord Mustill, in his foreword to OP Malhotra's book on arbitration, captured this very well. He said that when a very bad award comes before a court, the judge's instinct is to do justice. But how? The judge then reaches for patent illegality as the legal hook. In doing so, to correct a genuine error in one case, a proposition of law is laid down which in future is misused or misapplied in routine cases where there was nothing wrong with the award. Bad cases always lead to bad law. By and large, the Supreme Court has sent very clear signals in judgments over the last 10-15 years that courts will interfere in the least possible manner. But some cases come where it happens and those send a wrong signal.

DR: in April 2025, a Constitution Bench held that the courts have a limited power to modify arbitral awards. However, Justice Viswanathan in his dissenting judgment said that it leads to judicial legislation. Does the pragmatism of the majority comfort you or does the dissent alarm you more?

Justice Sikri:I would lean in favour of Justice Viswanathan's dissent. The pragmatism o