Leveraging Trade Treaties to Strengthen Commercial Arbitration in India

Gist India is rapidly expanding its network of Free Trade Agreements FTAs and Bilateral Investment Treaties BITs , but negotiations have predominantly focused on market access and economic benefits. The strategic integration of domestic commercial arbitration into these treaties remains an underutilized tool. By making subtle adjustments to treaty language regarding dispute settlement and third-party funding, India can build foreign investor confidence, bridge the gap between sovereign interests and investor protection, and advance its ambition of becoming a premier global arbitration hub. Background Arbitration and Conciliation Act, 1996 is the statutory framework governing domestic arbitration, international commercial arbitration, and the enforcement of foreign arbitral awards in India. An Investor-State Dispute Settlement ISDS mechanism allows foreign investors to directly sue host states in international tribunals. India has actively minimized ISDS exposure in recent years to protect its sovereign right to regulate, following high-profile arbitral losses. Foreign investors historically prefer ISDS to avoid lengthy litigation in domestic courts, creating a standoff between state sovereignty and investor security. Domestic commercial arbitration serves as the vital middle ground: it keeps the dispute outside the…