- 30-Sep-2025
- public international law
Arbitrability refers to whether a particular dispute or issue can be resolved through arbitration. Not all disputes are considered arbitrable, meaning some types of disputes are not permitted to be referred to arbitration, regardless of the parties’ agreement. The concept of arbitrability involves the intersection of public policy, the nature of the dispute, and the legal framework governing arbitration. Whether a dispute is arbitrable depends on the subject matter and the applicable law. In India, the concept is defined under the Indian Arbitration and Conciliation Act, 1996, and certain categories of disputes are expressly excluded from arbitration.
Arbitrability refers to whether a dispute is suitable or capable of being resolved by arbitration. In general, disputes that arise from contractual and commercial relationships are usually arbitrable. However, some disputes, particularly those that involve public policy, legal rights, or state sovereignty, may not be arbitrable.
The determination of whether a dispute is arbitrable depends on:
The Indian Arbitration and Conciliation Act, 1996 does not provide an exhaustive list of arbitrable disputes, but it outlines certain principles and includes specific exclusions under the concept of public policy.
Section 2(1)(f) of the Act defines a dispute that can be resolved by arbitration. As per Indian law, most commercial disputes, including contractual, trade, and investment disputes, are arbitrable.
Under Section 34(2)(b)(ii) of the Act, an arbitral award can be set aside if it is found to be in conflict with Indian public policy. This means that even if a dispute is arbitrable, an award related to the dispute can be challenged if it violates Indian public policy.
Public policy includes the interests of state sovereignty, national security, and the enforcement of fundamental rights.
Example: Disputes involving corruption, bribery, or violations of environmental laws may not be arbitrable under Indian law because they are considered to conflict with public policy.
Indian Courts can intervene in arbitration proceedings if a dispute is found to be non-arbitrable, either due to the subject matter being excluded from arbitration or because the dispute violates public policy.
If a party challenges the arbitrability of a dispute, the court must decide whether the dispute can indeed be referred to arbitration, considering the nature of the dispute and the applicable law.
Example: In the case of K.K. Verma v. Union of India (1954), the Supreme Court of India ruled that disputes involving governmental policy and sovereignty are non-arbitrable and cannot be referred to arbitration.
The concept of arbitrability is particularly significant in international arbitration, where international treaties and conventions like the New York Convention may also influence the types of disputes that can be arbitrated.
However, even in international arbitration, public policy restrictions may prevent certain disputes from being arbitrated, such as those involving family law or criminal issues.
Disputes that are non-arbitrable by nature must be dealt with by national courts rather than arbitration tribunals. Courts may assert jurisdiction over such disputes and ensure that matters involving public rights, state interests, or constitutional issues are adjudicated under national law.
Example: Indian courts have held that disputes related to intellectual property, such as patent rights, are arbitrable unless the dispute affects national interests, such as public health concerns.
With the globalization of trade and increasing use of alternative dispute resolution mechanisms, the concept of arbitrability is evolving. Certain jurisdictions may expand the scope of arbitrability to cover new types of disputes, while others may tighten their approach due to growing concerns about issues like national sovereignty and public policy.
ABC Ltd., an Indian company, enters into a commercial contract with XYZ Corp., a foreign entity, to supply goods. A dispute arises over the terms of delivery and payment, and XYZ Corp. initiates arbitration under the International Chamber of Commerce (ICC) rules.
The dispute pertains to a contractual issue, which is clearly arbitrable under Indian law, as it involves a commercial matter.
However, during the arbitration proceedings, XYZ Corp. seeks to enforce a penalty clause that violates Indian competition law, specifically provisions that prevent price-fixing agreements.
ABC Ltd. challenges the enforceability of the penalty clause, arguing that it violates Indian public policy and is therefore non-arbitrable.
The Indian court reviews the issue and agrees that the competition law violation renders the dispute non-arbitrable, refusing to enforce the arbitral award.
The concept of arbitrability determines which disputes can be resolved through arbitration. In general, commercial and contractual disputes are arbitrable, but issues related to public policy, criminal law, and state sovereignty are often considered non-arbitrable. In India, the Indian Arbitration and Conciliation Act, 1996 provides the legal framework for determining arbitrability, with the public policy exception playing a critical role. Courts may intervene in arbitration proceedings to determine whether a dispute is arbitrable, ensuring that only appropriate disputes are referred to arbitration.
Answer By Law4u Team
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