Finance Ministry’s Arbitration Memo Under Scrutiny
During the Singapore International Arbitration Centre (SIAC) Symposium 2026, Senior Advocate Darius Khambata expressed critical views on the Finance Ministry’s 2024 memorandum, which advised against the routine inclusion of arbitration clauses in government contracts. According to Khambata, the memo resembled a ‘plaintive cry of a disgruntled litigant’ rather than a reflection of serious policy change.
Panel Discussion Highlights
Khambata’s comments were made during a panel discussion titled ‘Cross-Border Disputes across China, India, and the US: Strategy, Enforcement and Risk.’ Moderated by Kabir Singh, a partner at Clifford Chance, the panel also included insights from Luke Sobota, founding partner at Three Crowns, Li Jieyun, Head of Dispute Resolution and Regulatory Investigations at Alibaba Group, and Hazel Tang, head of Hui Zhong Law Firm in Singapore.
India’s Need for Arbitration
Responding to questions about whether governments are moving away from arbitration in favor of domestic courts, Khambata asserted that India could not afford such a shift. He emphasized that Indian courts are already overburdened with constitutional, service, and social litigation and lack the capacity to handle commercial disputes effectively. As a result, arbitration has become the preferred method for resolving commercial disputes in India over the past two decades.
Analysis of the Finance Ministry’s 2024 Memorandum
The controversial memorandum was issued by a Deputy Secretary from the Finance Ministry’s Procurement Policy Division. Khambata argued that such a document should not be mistaken for a significant government policy shift. “That’s not how the government signals policy shifts,” he stated, pointing out that such announcements should, at a minimum, emanate from the Law Ministry.
Khambata further noted that the memorandum seemed to reflect dissatisfaction with arbitration outcomes rather than a genuine policy intention. He highlighted that the government, as India’s largest litigant, often engages in protracted legal battles through multiple forums.
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Positive Aspects and Lack of Impact
Despite its critical tone, the memorandum also contained constructive recommendations, such as discouraging meritless challenges to arbitral awards and supporting institutional arbitration. Nevertheless, Khambata remarked that the memo had not led to any substantial changes since its issuance two years ago.
He remarked, “It has had no impact. It’s two years down the line, things have not changed. It’s much ado about nothing, actually.” Khambata pointed to proposed amendments to the Arbitration and Conciliation Act as a more accurate reflection of India’s commitment to arbitration, which aims to recognize emergency arbitration and bolster institutional arbitration.
Global Perspectives on Arbitration
Luke Sobota highlighted that while commercial arbitration remains well-regarded in the United States, there is growing resistance against investor-State arbitration and multilateral investment agreements. Moreover, parties are increasingly cautious about neutrality, governing laws, and enforcement when selecting an arbitral seat.
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In China, Hazel Tang noted a positive trend in the enforcement of arbitral awards, though practical difficulties arise during payment and foreign-exchange controls. Li Jieyun emphasized the importance of considering the arbitral seat, with in-house legal teams playing a more active role in selecting arbitrators based on experience and neutrality in China-related disputes.
