What Does an Arbitration in India Actually Cost?

On 30 August 2022, a three-judge bench of the Supreme Court decided a dispute that had nothing to do with the original contract. The case was ONGC v. Afcons Gunanusa JV, and the fight was over how much the arbitrators themselves should be paid. The tribunal had revised its own fees partway through the proceedings. One party objected, and the question went all the way up.

That a fee dispute needed the Supreme Court tells you something. Most businesses go into arbitration with a rough idea of what their lawyers will charge and very little idea of the rest. So what does the full bill look like?

Arbitrator Fees

This is usually the largest line after legal fees, and it is the one people think about least. In an ad hoc arbitration, the parties can agree on the fees, often in the arbitration clause itself. Where they have not, the Fourth Schedule to the Arbitration and Conciliation Act sets out a model fee scale linked to the amount in dispute.

The ONGC ruling cleared up a few things. The court held that arbitrators do not have the power to fix their own fees on their own. It said the fees should be settled at the start, ideally in terms of reference agreed between the parties and the tribunal, and that the tribunal cannot change them later without the parties agreeing. It also read the Fourth Schedule’s ceiling of ₹30 lakh as applying to each arbitrator, not to the tribunal as a whole. In practice, a three-member tribunal can cost close to three times what a sole arbitrator would.

Institutional arbitration works differently, because the institution publishes its own fee schedule and usually adds an administrative fee on top. You pay more to the institution. In return you get a secretariat that handles the paperwork and chases deadlines.

The Costs Nobody Budgets For

Then come the smaller items that add up. A hearing venue has to be booked, sometimes for several days at a stretch. Transcription services charge by the day. Expert witnesses charge for their reports and again for their time in the witness box. And if the parties, their counsel and the tribunal are based in different cities, every hearing means flights, hotels and lost working days for senior people who would rather be running the business.

None of this shows up in the contract. It shows up in the accounts six months later.

Who Pays at the End?

Section 31A, added to the Act in 2015, gives the tribunal wide discretion over costs. The general rule is that the losing party pays the costs of the winning party, though the tribunal can depart from it if it records its reasons. The tribunal can look at how each side conducted itself, whether one party partly succeeded, and whether anyone refused a reasonable settlement offer. That last point matters more than many parties realise. Refusing to settle when you had the chance can cost you later.

Where You Can Actually Save

Some costs are fixed by the size of the dispute. Others are not. Agreeing early on a sole arbitrator, a tight procedural timetable and a limit on the number of hearing days trims a surprising amount. So does deciding which hearings genuinely need people in the same room.

Document exchange, case management conferences and many witness examinations can now run over video without losing much. Parties weighing this often start by looking at how an online arbitration platform in India handles filings, hearings and record-keeping, and then decide which stages to move online. The savings on travel and venue hire alone can be real, especially in smaller disputes where those costs eat a bigger share of what is at stake.

Will that make arbitration cheap? Not always. A complex construction or infrastructure dispute will stay expensive however it is run, because the expense lies in the experts and the volume of evidence. But knowing where the money goes before the first hearing gives you a fair chance of controlling some of it.

And if nothing else, settle the arbitrators’ fees on day one. The Supreme Court has already shown what happens when nobody does.

 

About The Author

Aditya Aryan is a lawyer and mediator. He is currently building marketing at Sama, India’s leading online dispute resolution institution.