Most infrastructure and development contracts carry a dispute resolution clause copied from a precedent, negotiated last, and read for the first time when the relationship has already broken down. By then the clause has usually done one of two things wrong.
It has sent a dispute turning on critical path analysis, disruption cost and price escalation to a tribunal with no capacity to evaluate any of them without a full round of competing expert evidence — adding a year and a substantial cost to a proceeding governed by a twelve-month statutory timeline.
Or it has produced an award that is correct on liability and expensive on tax, because nobody drafting the clause considered how the sums awarded would be characterised for GST when the time came to enforce them.
The clauses below are drafted to address the first problem. The section that follows addresses the second.
Why arbitrator qualification belongs in the clause
Section 29A of the Arbitration and Conciliation Act, 1996 requires the award within twelve months of completion of pleadings, extendable by party consent for six months and thereafter only by the Court. In an EPC or development dispute, a tribunal without engineering and financial competence must acquire it through party-appointed experts: two sets of reports, two rounds of cross-examination, and often a tribunal expert as well. That process regularly consumes the entire statutory period before the tribunal reaches the merits.
Specifying arbitrator qualification at the drafting stage is the cheapest available intervention. It costs nothing to negotiate, it is enforceable, and it removes the largest single source of delay in technical arbitrations.
Draw the qualification by discipline, not by name. A clause naming a particular individual as arbitrator is routinely struck out in negotiation, cannot survive that person's unavailability, and — where the named person had any hand in the transaction — invites a challenge under Section 12 read with the Fifth and Seventh Schedules at the first opportunity. A clause that specifies what the arbitrator must be able to do achieves the same object and survives contact with the counterparty's counsel.
1. Ad hoc clause — technical and financial competence specified
"Any dispute, controversy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, performance, breach or termination, shall be referred to and finally resolved by arbitration in accordance with the Arbitration and Conciliation Act, 1996.
The tribunal shall consist of a sole arbitrator appointed by agreement between the Parties. Having regard to the engineering, scheduling, valuation and indirect tax matters likely to arise under this Agreement, the Parties agree that the sole arbitrator shall possess:
(a) a degree in engineering and demonstrable professional experience in the delivery or evaluation of construction or infrastructure projects; and
(b) demonstrable professional experience in the assessment or adjudication of Indian indirect tax or customs matters, or in the quantification of tax exposure in commercial disputes.
Failing agreement on the identity of the sole arbitrator within thirty days of a Party's written request, the appointment shall be made under Section 11 of the Act, and the Parties shall bring the qualifications specified above to the attention of the appointing authority.
The seat of arbitration shall be Mumbai, India. The venue shall be Mumbai unless otherwise agreed. The language of the arbitration shall be English."
2. Institutional clause
"Any dispute, controversy or claim arising out of or in connection with this Agreement shall be referred to and finally resolved by arbitration administered by [the institution] in accordance with its Arbitration Rules for the time being in force, which Rules are deemed incorporated by reference into this clause.
The tribunal shall consist of [a sole arbitrator / three arbitrators].
Having regard to the engineering, scheduling, valuation and indirect tax matters likely to arise under this Agreement, the Parties request that the [sole arbitrator / presiding arbitrator] appointed possess a degree in engineering together with demonstrable professional experience in Indian indirect tax or customs assessment or in the quantification of tax exposure in commercial disputes.
The seat of arbitration shall be Mumbai, India. The language of the proceedings shall be English."
3. The tax problem in the award itself
A dispute resolution clause is usually drafted without reference to what the eventual award will cost in tax. That is a mistake, and it is expensive at exactly the moment the successful party expects to be paid.
For contracts entered into before 1 July 2017, Section 142(2)(a) of the CGST Act is directly in point: where the price of goods or services supplied under a pre-appointed-day contract is revised upwards on or after that date, the supplier must issue a supplementary invoice or debit note, and it is deemed to be issued in respect of an outward supply under the Act. An arbitral award granting price escalation, revised rates or additional consideration on a legacy contract can therefore carry a GST consequence that neither party priced into the claim. Awards on legacy EPC and concession contracts are still being made, and this is a live exposure.
For contracts entered into after that date, the analysis is different and the transitional provision does not apply. What matters is whether the sum awarded is consideration for a supply — including under the deeming provision for agreeing to tolerate an act or a situation — or whether it is compensation for breach falling outside the charge. The CBIC's circular on liquidated damages, compensation and penalties is the starting point, and the characterisation turns on how the underlying contractual obligation is framed rather than on what the award calls the payment.
The practical consequence for drafting: how the contract characterises payments on breach, termination and delay will influence how an award of those sums is treated. Liquidated damages, prolongation cost, escalation and termination compensation each sit differently, and the labels used in the contract are the labels the tribunal will adopt.
Contract pre-audit
For joint ventures, concession agreements, HAM and EPC contracts, and cross-border investment documents, I review the dispute resolution architecture before it is executed:
Whether the clause will deliver a tribunal capable of deciding the disputes the contract will actually generate.
Whether the multi-tiered escalation provisions are workable, or will simply supply a jurisdictional objection later.
Seat, venue, governing law and institutional rules — and whether they are consistent with each other and with the enforcement you expect to need.
How payments on delay, breach and termination are characterised, and the tax consequence of an award in those terms.
Interaction with RERA, insolvency and enforcement regimes where the counterparty's solvency or the asset's status may be in question.
Independence. Where I have advised a party on a contract, I will not accept appointment as arbitrator in a dispute arising under it, and I will not accept appointment as expert for that party in such a dispute. This is a firm bar, not a matter for case-by-case assessment, and it is why the model clauses above name no individual. My full position is set out in the Disclosure and Independence Statement.
Pre-audit is a fixed-fee engagement scoped to the document. Fee and turnaround are quoted before work begins.
Book a Contract Stress-Test
Are you currently structuring a highly leveraged Joint Venture, Concession Agreement, or Cross-Border Investment?
Before locking in your dispute provisions, send your draft clauses for a forensic Ex-Revenue diagnostic. We will align your multi-tiered arbitration mechanisms with prevailing PMLA, RERA, and Indirect Tax frameworks to ensure your working capital is shielded.
Email me your Draft Clauses for a Diagnostic in your best interests and tax proofed.