Against the Reflex: When the Arbitration Clause Is the Wrong Choice

There is a clause that finds its way into nearly every commercial contract I am asked to review, and it is almost always there by reflex rather than by reason: the arbitration clause. It promises a private tribunal, a swift hearing, a commercially-minded arbitrator, and freedom from the congestion of the courts. It is a beautiful promise. It is also, for a great many domestic disputes, no longer true.

The difficulty begins at the very first step. When a dispute arises and one party will not agree on an arbitrator, the other must approach the court for an appointment. That application — meant to be a brief, mechanical exercise — has itself become a queue. Months pass, sometimes longer, before a tribunal is even constituted. The litigation one hoped to avoid has already begun, only now it is a litigation about how to begin.

The promise, and the arithmetic

Suppose the tribunal is appointed. The advantages that justified the clause now meet their costs. The parties pay the arbitrators' fees, hire the venue, bear the administrative expense — outlays a court does not impose. Hearings are arranged around the convenience of three busy professionals and adjourn accordingly. And when an award finally arrives, the disappointed party may challenge it under Section 34, and appeal that outcome under Section 37 — proceedings heard, of course, by the very courts the clause was meant to bypass.

Arbitration was sold to us as an exit from the courts. For many domestic disputes it has become a long detour that returns to them.

None of this is an argument that arbitration has failed. It is an argument that it has been over-prescribed — written into contracts where it was never the right remedy, by parties who never paused to ask what they were actually buying.

What the State quietly built

While arbitration laboured under its own weight, the legislature built an alternative that deserves far more attention than it receives. The Commercial Courts Act, 2015 created dedicated commercial courts and divisions to hear commercial disputes above a pecuniary threshold, and it did not merely relabel the ordinary civil process — it re-engineered it:

• Case-management hearings that impose a timetable on the litigation and hold the parties to it.
• Summary judgment, allowing a claim or defence with no real prospect of success to be disposed of without a full trial.
• Tight timelines for written statements, disclosure and inspection, with real consequences for default.
• Mandatory pre-institution mediation for matters that seek no urgent relief — a genuine attempt at settlement before a single hearing.
• A specialist bench growing steadily more fluent in the commercial questions before it.

Read that list again and notice what it describes: speed, structure, commercial expertise and a serious push toward settlement — much of the very catalogue we once recited to justify the arbitration clause, now offered by a public forum, without arbitrators' fees and without a separate fight to constitute a tribunal.

So when should the clause stay?

I am not preaching abolition. Arbitration remains the right and sometimes the only sensible choice in defined circumstances, and the contract should reach for it deliberately when they apply:

• Cross-border contracts, where a neutral seat and the New York Convention make a foreign award far easier to enforce than a foreign judgment.
• Disputes where genuine confidentiality is essential to the commercial relationship.
• Technically specialised matters that benefit from an arbitrator chosen for domain expertise.
• Relationships where the parties truly value procedural autonomy and will resource it properly.

For the ordinary domestic commercial contract that fits none of these, my advice is heretical only because it is rarely given: consider leaving the arbitration clause out, and electing the commercial courts instead. Choose the forum because it suits the dispute you can foresee — not because the clause was already in the template. The reflex is comfortable. It is also, increasingly, the more expensive road to the same courthouse.

This commentary is provided for general informational purposes only. It reflects the author's view of the law at the time of writing, does not constitute legal advice, and should not be relied upon in any specific matter. The choice of dispute-resolution forum is highly fact- and contract-specific; for advice on a particular agreement, please consult a qualified advocate. Reading this note does not create a lawyer–client relationship with RDB Associates.