---
title: "Detailed Note on Guidelines for Arbitration and Mediation in Contracts of Domestic Public Procurement – Government moving away from arbitration?  "
date: 2024-06-07
author: "King Stubb & Kasiva"
url: https://ksandk.com/newsletter/detailed-note-on-guidelines-for-arbitration-and-mediation-in-contracts-of-domestic-public-procurement-government-moving-away-from-arbitration/
---

# Detailed Note on Guidelines for Arbitration and Mediation in Contracts of Domestic Public Procurement – Government moving away from arbitration?  

Posted On - 7 June, 2024 • By - King Stubb & Kasiva

[[1]](#_ftn1)Scope: Applies to contracts of domestic procurement by the Government and its entities, including Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSBs), and Government companies.[[2]](#_ftn2)

## Key Guidelines:

1. Routine Exclusion of Arbitration:

-     Arbitration should not be routinely or automatically included in procurement contracts/tenders, especially in large contracts.

2. Value-based Restriction on Arbitration:

-      Arbitration (if included) should generally be limited to disputes valued under Rs. 10 crore.
-     This value pertains to the dispute amount, not the total contract value.
-     Contracts should specifically state that arbitration will not be used for disputes exceeding this value.

3. Approval for High-Value Arbitration Clauses:

-     Inclusion of arbitration for disputes over Rs. 10 crore requires:
-     Careful consideration and documented reasons.
-       Approval from:

        – Government Ministries/Departments: Secretary or delegated Joint Secretary.

        – CPSEs/PSBs/Financial Institutions: Managing Director.

4. Preference for Institutional Arbitration:

-  Institutional arbitration should be preferred where suitable, considering the cost relative to the dispute’s value.

5. Guidance on Legal Challenges:

-  Follow the General Instructions on Procurement and Project Management dated October 29, 2021.
-  Decisions to challenge or appeal arbitration/court rulings against the government should be based on merit and high success probability, not routine.

6. Amicable Dispute Settlement:

-  Aim to avoid or amicably settle disputes using contract mechanisms.
-  Decisions should prioritize long-term public interest, legal, and practical realities, and not avoid responsibility or deny genuine claims.

7. Encouragement of Mediation:

- Adopt mediation under the Mediation Act, 2023.
- For high-value matters, consider forming a High-Level Committee (HLC) for dispute resolution, potentially including:

      – A retired judge.

      – A retired high-ranking officer and/or technical expert.

-     Dispute resolution through HLC may involve:

      – Direct negotiation and proposal submission to HLC.

      – Mediation followed by HLC review.

      – Using HLC as the mediator.

8. HLC Role in Decision Making:

-     HLC enables scrutiny and promotes fair decisions, independent of the regular decision-making structure.

9. Renegotiation in Long-Term Contracts:

- For unforeseen major events in long-term contracts, renegotiation may be necessary.
-  Terms of renegotiated contracts should be reviewed by an HLC before approval.

10. Final Solution Approval:

- Obtain approval from the appropriate authority for final solutions.
- Section 49 of the Mediation Act, 2023 is relevant.

11. Mediation Agreement Clauses:

- Mediation agreements should not be automatic in contracts.
-  Absence of a mediation clause does not prevent pre-litigation mediation.
-  Include mediation clauses only if consciously decided.

12. Court Adjudication for Unresolved Disputes:

-    Disputes not covered by arbitration clauses and unresolved by other methods should be settled by courts.

---

[[1]](#_ftnref1) Issued by:

Ministry of Finance, Department of Expenditure, Procurement Policy Division

Date: June 3, 2024

Office Memorandum No.: F. 11212024-PPD

[[2]](#_ftnref2) https://ksandk.com/wp-content/uploads/Guidelines_for_Arbitration_and_Mediation_in_Contracts_of_Domestic-1.pdf

---

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