Indian government to end arbitration options for major road projects

India’s Ministry of Road Transport & Highways is to remove provisions for arbitration in contracts for disputes above ₹10 crore – around US$1.1 million – and replace them with mediation and, if no settlement is reached, onward referral to the civil courts instead.

It comes after the Ministry of Finance’s Office Memorandum of 3 June 2024 advised that arbitration should not routinely be used in government procurement and be restricted to disputes below ₹10 crore, with institutional arbitration preferred where used.

The move reflects growing caution around large‑value public‑sector arbitration in the country.

Reports in India had suggested almost 2,600 arbitration awards in the highways sector had been made over the last decade.

Mohammed Talib, a construction expert with Pinsent Masons, said the decision represented another step in an ongoing move by the Indian government away from arbitration

“For large, technically complex highway disputes, removing arbitration at ₹10 crore and above will likely push parties into lengthier litigation before non‑specialist tribunals, with cash flow, lock-up periods, project sequencing and bankability implications,” he said.

“Contractors should assume longer resolution cycles in high‑value disputes and sharpen both the front‑end risk allocation and the back‑end record‑keeping, and claim preparation, to withstand court scrutiny.”