Research & Articles

Why Businesses Choose International Arbitration Over Litigation: The Enforceability Case

Authored by R & D Law Chambers LLP | Practice led by Ravish Bhatt. Dual-qualified lawyer (India and England & Wales) | Bar Council of Gujarat, Enrolment G/504/2008 | SRA (non-practising) Registration No. 492 477 | ADIT, Chartered Institute of Taxation, London

Published: 6 August 2026 | Last reviewed: 6 August 2026 | Estimated reading time: 11 minutes

This article states the position under the Arbitration and Conciliation Act, 1996 and the Code of Civil Procedure, 1908. It deals with why arbitration is chosen, which turns on enforceability. The separate question of whether arbitration is faster is addressed in our companion article.

Short answer. Because a foreign court judgment is often unenforceable in India, while a foreign arbitral award is enforceable. Judgments from the United States, Canada, Australia, the EU member states, China and Japan cannot be executed directly in India, because those countries are not notified as reciprocating territories under section 44A of the Code of Civil Procedure. A creditor holding such a judgment must start a fresh suit in India. An award-holder does not.

Index of Topics

The reason that is rarely stated
The enforceability asymmetry, in detail
Which countries are reciprocating territories, and which are not
How a foreign award is enforced in India
The soft advantages, and how much weight they carry
When litigation is the better choice
What this means for drafting
Frequently asked questions
How R & D Law Chambers works on these matters

1. The Reason That Is Rarely Stated

Short answer. Published comparisons list neutrality, confidentiality, party autonomy, specialist tribunals and enforceability as parallel advantages. They are not parallel. For a business contracting with an Indian counterparty, enforceability is the reason and the others are features.

Ask why a New York fund, a German manufacturer or a London software company puts an arbitration clause into a contract with an Indian party, and the answer usually given is a list: neutral forum, confidentiality, choice of decision-maker, procedural flexibility, and enforceability at the end.

Every item on that list is true. But they are not of equal weight, and presenting them as a list obscures the one that decides the question. A business that values confidentiality and gets an unenforceable outcome has lost. A business that gets an enforceable outcome in a public process has won. Enforceability is not one advantage among several. It is the point.

The reason this is under-stated is that it requires explaining an unattractive feature of the alternative, which is that a judgment from most major commercial jurisdictions cannot be directly executed against Indian assets.

2. The Enforceability Asymmetry, in Detail

Short answer. India enforces foreign arbitral awards under Part II of the Arbitration and Conciliation Act, 1996, giving effect to the New York Convention, subject to the limited refusal grounds in section 48. India enforces foreign judgments under section 44A of the Code of Civil Procedure only where the judgment comes from a superior court in a country the Central Government has notified as a reciprocating territory. The list of notified territories is short.

The two regimes are not comparable in reach. The New York Convention has more than 150 contracting states, and India gives effect to it through Part II for awards made in territories notified under section 44(b) of the Act. The list of reciprocating territories under section 44A of the Code of Civil Procedure is, by contrast, in the region of a dozen countries.

Where a judgment comes from a country not on that list, section 44A is unavailable. The judgment creditor must institute a fresh civil suit in India, either on the foreign judgment or on the original cause of action, and the foreign judgment operates as evidence rather than as a decree capable of execution. Section 13 of the Code sets out the circumstances in which a foreign judgment is not conclusive, and those grounds are available to the defendant in that suit.

The practical effect is that a company which litigates in its home court, wins, and then discovers the defendant’s assets are all in India may find itself beginning again in India years after it thought the dispute had concluded. Limitation applies to that fresh suit. This is the risk the arbitration clause exists to remove.

3. Which Countries Are Reciprocating Territories, and Which Are Not

Short answer. Notified reciprocating territories include the United Kingdom, Singapore, Malaysia, Hong Kong, Bangladesh, the United Arab Emirates, New Zealand, Fiji, Trinidad and Tobago, Papua New Guinea, the Cook Islands and Aden. The United States, Canada, Australia, the EU member states, China and Japan are not notified.

The United Arab Emirates was notified on 17 January 2020, and the superior courts specified include the Federal Supreme Court, the Dubai Courts, the Abu Dhabi Judicial Department, the Ras Al Khaimah Judicial Department, and the courts of the Dubai International Financial Centre and the Abu Dhabi Global Market. A money decree of any of those courts can now be executed directly in India.

The significance of the list lies in what is missing from it. A business headquartered in New York, Toronto, Sydney, Frankfurt, Paris or Tokyo, contracting with an Indian party, cannot rely on its home courts to produce a decision executable against Indian assets. The absence is not an oversight to be corrected in negotiation; it is a feature of the legal landscape that the contract must be drafted around.

Route	Position in India
Foreign arbitral award, seat in a notified New York Convention territory	Enforceable under Part II of the Arbitration and Conciliation Act, 1996, subject to the limited refusal grounds in section 48. No rehearing on the merits.
Judgment of a superior court of a reciprocating territory (for example England, Singapore, the DIFC Courts)	Executable directly under section 44A of the Code of Civil Procedure, subject to section 13.
Judgment of a court in a non-notified country (for example the United States, Germany, Australia)	Not directly executable. A fresh civil suit must be filed in India on the judgment or the original cause of action, with section 13 grounds available to the defendant.

4. How a Foreign Award Is Enforced in India

Short answer. An award-holder applies to the appropriate court, which for international commercial arbitration is the High Court. The court examines the award against the grounds in section 48 and, if satisfied, the award is treated as a decree and executed. The court does not rehear the merits.

Two conditions determine whether this route is available at all, and both are fixed at the drafting stage rather than at enforcement.

The first is the seat. Part II applies to awards made in a territory notified by the Central Government under section 44(b). A seat that has not been notified produces an award outside the Part II machinery, and the commercial advantage the arbitration clause was meant to deliver is lost. This is the single most consequential and most overlooked drafting decision in a contract with an Indian party.

The second is the validity of the arbitration agreement itself, which is examined under section 48. A defective clause, one that is ambiguous about the institution, silent on the seat, or inconsistent between its jurisdiction and arbitration provisions, invites exactly the challenge the clause was included to avoid.

5. The Soft Advantages, and How Much Weight They Carry

Short answer. Neutrality, confidentiality, party autonomy and specialist tribunals are real and worth having. They are reasons to prefer arbitration once it has been chosen, rather than reasons that would justify choosing it on their own.

Neutrality

Where parties come from different legal systems, neither wants the other’s home court. A neutral seat and a neutral tribunal address a genuine commercial concern. This is the strongest of the soft advantages, and for many negotiations it is the one raised first.

Confidentiality

Under Indian law confidentiality is not merely a matter of institutional rules. Section 42A of the Act, inserted by the 2019 amendment, imposes a statutory obligation of confidentiality on the arbitrator, the institution and the parties, subject to disclosure where necessary for implementation and enforcement of the award. That is a stronger position than the usual formulation that arbitration is often confidential.

Party autonomy and specialist tribunals

Choice of institution, seat, language, number of arbitrators and procedure is genuinely valuable in complex commercial relationships, as is the ability to appoint arbitrators with industry expertise in construction, energy, shipping or technology matters. These improve the quality of the process. They do not, by themselves, determine whether an outcome can be turned into money.

6. When Litigation Is the Better Choice

Short answer. Where there is no valid arbitration agreement, where statutory or regulatory remedies are sought, where insolvency proceedings are the effective forum, where the dispute involves parties who never agreed to arbitrate, or where the counterparty and its assets sit in a reciprocating territory.

That last case deserves emphasis, because the enforceability argument cuts both ways. If the counterparty is English or Singaporean and its assets are in England or Singapore, a judgment of those courts is executable in India and an Indian decree is capable of recognition there. The asymmetry that drives the arbitration choice is absent, and the usual reasons to prefer court proceedings, including a right of appeal and established procedural law, may prevail.

Arbitration is also unsuited to disputes requiring the joinder of parties who are not signatories, to matters where a statutory authority has exclusive jurisdiction, and to situations where insolvency has intervened and the collective process under the Insolvency and Bankruptcy Code, 2016 has displaced individual remedies.

7. What This Means for Drafting

Short answer. Four provisions carry the enforceability case: the seat, chosen from a notified territory; the governing law of the arbitration agreement, stated separately from the law of the contract; the institution and appointment mechanism; and an express position on interim relief over Indian assets.

The seat must be in a territory notified under section 44(b) of the Act. This is not a drafting preference. It determines whether Part II is available at all.
The governing law of the arbitration agreement should be stated expressly and separately. Parties habitually state the governing law of the contract and assume it settles the arbitration agreement. It does not, and the gap is a recurring source of jurisdictional challenge.
The institution and the appointment mechanism should be named without ambiguity. A clause naming two institutions, or naming an institution that does not administer arbitrations, produces preliminary litigation about the clause itself.
Interim relief should be addressed expressly. Under the proviso to section 2(2) of the Act, sections 9, 27 and 37(1)(a) and 37(3) apply to a foreign-seated international commercial arbitration unless the parties agree otherwise. Where the counterparty’s assets are in India, that access is valuable and should be preserved deliberately rather than excluded by a boilerplate exclusion nobody read.

8. Frequently Asked Questions

Why do international businesses prefer arbitration for India-connected contracts?

Because a foreign arbitral award is enforceable in India under Part II of the Arbitration and Conciliation Act, 1996, while a foreign court judgment is directly executable only if it comes from a superior court in a country notified as a reciprocating territory under section 44A of the Code of Civil Procedure. Most major commercial jurisdictions are not notified.

Can a US court judgment be enforced in India?

Not directly. The United States is not notified as a reciprocating territory under section 44A of the Code of Civil Procedure. The judgment creditor must file a fresh civil suit in India, on the foreign judgment or on the original cause of action, with the grounds in section 13 of the Code available to the defendant.

Which countries are reciprocating territories for enforcement of judgments in India?

The notified territories include the United Kingdom, Singapore, Malaysia, Hong Kong, Bangladesh, the United Arab Emirates, New Zealand, Fiji, Trinidad and Tobago, Papua New Guinea, the Cook Islands and Aden. The UAE was notified on 17 January 2020, with the DIFC and ADGM Courts among its specified superior courts.

Is arbitration confidential under Indian law?

Yes, as a statutory matter. Section 42A of the Act, inserted by the 2019 amendment, imposes confidentiality on the arbitrator, the institution and the parties, subject to disclosure where necessary for implementation and enforcement of the award.

Does the seat of arbitration affect enforcement in India?

Decisively. Part II applies to awards made in a territory notified by the Central Government under section 44(b) of the Act. An award made in a seat that has not been notified falls outside that machinery and cannot be enforced through it.

When is litigation better than arbitration?

Where there is no valid arbitration agreement, where statutory or regulatory remedies are sought, where insolvency proceedings have displaced individual remedies, where non-signatories must be joined, or where the counterparty and its assets are located in a reciprocating territory so the enforceability asymmetry does not arise.

9. How R & D Law Chambers Works on These Matters

We advise on Indian law for businesses in India and internationally, wherever a matter has an India connection. On dispute resolution architecture, our starting question is where the assets are and what will be enforceable against them, because that determines the clause rather than the other way round.

We act in international and domestic arbitration and in enforcement proceedings before the Indian courts, including opposition to enforcement under section 48. Drafting recommendations in this article come from that work.