Skip to content

Arbitration, Mediation and Conciliation · Commercial Transactions

Domestic and International Commercial Arbitration under the Arbitration and Conciliation Act

Updated 11 October 2026 · Fact-checked

An arbitration is international commercial arbitration under Section 2(1)(f) if the dispute is commercial under Indian law and at least one party is a foreign national or resident, a foreign body corporate, a foreign-controlled association, or a foreign Government. Every other arbitration is not international. Check the parties, not the seat or the governing law.

Understand Domestic and International Commercial Arbitration

Arbitration under the Arbitration and Conciliation Act, 1996 is not one single kind. The Act treats two kinds differently: arbitration that is purely domestic and international commercial arbitration. The label decides which court you go to, how the tribunal picks the law for the dispute, and how the award is treated.

The test is in Section 2(1)(f). First, the dispute must arise out of a legal relationship, contractual or not, that is considered commercial under Indian law. Second, at least one party must be foreign in one of four ways. It can be an individual who is a national of, or habitually resident in, a country other than India. It can be a body corporate incorporated outside India. It can be an association or body of individuals whose central management and control is exercised outside India. Or it can be the Government of a foreign country.

Notice what the test does not ask. It does not ask where the arbitration sits. It does not ask which law governs the contract. It does not ask the language of the proceedings. Two Indian companies arbitrating in London are not an international commercial arbitration under this definition, because neither party is foreign. An Indian company and a Singapore company arbitrating in Mumbai are, because one party is foreign.

The word "company" was deleted from clause (iii) in 2015. A foreign company is still caught, because it is a body corporate under clause (ii). Clause (iii) now deals with associations and bodies of individuals, such as a partnership or a consortium, run from abroad. An Indian company managed from abroad is therefore not covered by clause (iii).

The difference then shows up in four places. The meaning of "Court" in Section 2(1)(e) differs. The law applied to the substance of the dispute under Section 28 differs. The Commercial Courts Act, 2015 sends applications to different forums. And Part I applies where the place of arbitration is in India, with limited extension for international arbitration seated abroad.

Key rules to remember

Test for international commercial arbitration (Section 2(1)(f))
Commercial legal relationship under Indian law AND at least one party is: foreign national or habitual resident, foreign body corporate, foreign-controlled association or body of individuals, or foreign Government
Both limbs are needed. Look at the nature of the parties, not the seat.
Court in domestic arbitration (Section 2(1)(e)(i))
Principal Civil Court of original jurisdiction in a district, or High Court exercising ordinary original civil jurisdiction
Excludes civil courts of inferior grade and Courts of Small Causes.
Court in international commercial arbitration (Section 2(1)(e)(ii))
High Court exercising ordinary original civil jurisdiction; in other cases, a High Court with appellate jurisdiction over subordinate courts
The District Court is not the Court here.
Applicable law in India-seated arbitration (Section 28(1))
Domestic: substantive law in force in India. International: rules of law designated by parties, else rules the tribunal considers appropriate
In both cases the tribunal must take into account the contract terms and trade usages (Section 28(3)).
Part I application (Section 2(2))
Part I applies where the place of arbitration is in India. Sections 9, 27 and 37(1)(a), 37(3) also apply to international commercial arbitration seated abroad, unless the parties agree otherwise
The extension applies only if the award is enforceable and recognised under Part II.
Award under Part I (Section 2(7))
An award made under Part I is a domestic award
This holds even if the arbitration is an international commercial arbitration seated in India.

How to solve Domestic and International Commercial Arbitration questions

Use this method for any question that asks you to classify an arbitration or state its consequences.

  1. 1Read the facts and list every party with its nationality, residence, place of incorporation or place of central management and control.
  2. 2Check whether the dispute arises from a legal relationship considered commercial under Indian law.
  3. 3Match each party against clauses (i) to (iv) of Section 2(1)(f). One foreign party is enough.
  4. 4Ignore the seat, the governing law and the language for the classification. Note them separately for later steps.
  5. 5State the classification. Then apply the consequences: the meaning of Court in Section 2(1)(e), the law under Section 28, and the forum under the Commercial Courts Act, 2015.
  6. 6If the seat is outside India, add Section 2(2) and its proviso. Part I generally does not apply, except the listed sections for international commercial arbitration.
  7. 7Conclude clearly in one line, as the paper expects provision, analysis and conclusion.

Quickest way: Party-first classification

When to use it: Use when the question gives a short fact pattern and asks whether the arbitration is international.

  1. Underline each party and tag it Indian or foreign.
  2. If any tag is foreign in the sense of Section 2(1)(f), and the dispute is commercial, write international commercial arbitration.
  3. If all parties are Indian, write domestic, even if the seat or law is foreign.
  4. Add one line each on Court, Section 28 law and forum.

Common mistakes in Domestic and International Commercial Arbitration

  • Treating an arbitration seated abroad between two Indian parties as international commercial arbitration.

    Students link the word international with the place of arbitration.

    Fix: Section 2(1)(f) looks only at the parties and the commercial nature. Two Indian parties means it is not international under the definition.

  • Saying an Indian company controlled from abroad falls under clause (iii).

    Students remember the central management and control test but forget the 2015 deletion of the words a company or.

    Fix: Clause (iii) covers only an association or body of individuals. A foreign-incorporated company is caught by clause (ii).

  • Calling an award in an India-seated international commercial arbitration a foreign award.

    Students mix up the nature of the dispute with the nature of the award.

    Fix: Under Section 2(7), an award made under Part I is a domestic award. A foreign award is defined in Section 44 under Part II.

  • Naming the District Court as the Court for an international commercial arbitration.

    The domestic rule is learnt first and applied everywhere.

    Fix: Section 2(1)(e)(ii) points to the High Court. Apply the clause that matches the classification.

  • Forgetting the commercial requirement.

    The foreign party limb feels like the whole test.

    Fix: Always state both limbs. A relationship not considered commercial under Indian law fails the test.

Worked examples

Example 1

Sunrise Textiles Pvt Ltd, incorporated in India, and Hanoi Fabrics Co, incorporated in Vietnam, have a supply contract. A dispute arises and they arbitrate in Mumbai. Is it an international commercial arbitration? Which court hears applications under the Act?

Show the solution
  1. Provision: Section 2(1)(f) requires a commercial relationship and at least one party that is a body corporate incorporated outside India (clause (ii)), among other limbs.
  2. Analysis: a supply contract is a commercial relationship. Hanoi Fabrics Co is incorporated in Vietnam, so it is a foreign body corporate.
  3. The seat in Mumbai does not change the classification. It only means Part I applies under Section 2(2).
  4. Court: under Section 2(1)(e)(ii), it is the High Court exercising ordinary original civil jurisdiction with jurisdiction over the subject-matter, or in other cases a High Court with appellate jurisdiction over the subordinate courts.
  5. Section 10(1) of the Commercial Courts Act, 2015 sends applications of a Specified Value to the Commercial Division, where constituted.

Answer: Yes, it is an international commercial arbitration because one party is a body corporate incorporated outside India. Applications go to the High Court, heard by its Commercial Division if the dispute is of Specified Value and such a Division exists.

Example 2

Ashoka Pharma Ltd and Bharat Chemicals Ltd, both incorporated in India with management in India, agree to arbitrate in London under English law. Is this an international commercial arbitration under the Act?

Show the solution
  1. Provision: Section 2(1)(f) tests the parties. Clauses (i) to (iv) need a foreign individual, body corporate, controlled association or foreign Government.
  2. Analysis: both parties are Indian companies managed in India. None of the four clauses applies.
  3. The London seat and English governing law are not part of the test.
  4. Conclusion: the arbitration is not an international commercial arbitration under Section 2(1)(f).
  5. Under Section 2(2), Part I applies where the place of arbitration is in India. The seat is outside India, so Part I generally does not apply, and the proviso extending Sections 9, 27 and 37(1)(a), 37(3) is limited to international commercial arbitration.

Answer: It is not an international commercial arbitration, because both parties are Indian. The foreign seat does not alter this, and the Part I provisions extended by the proviso to Section 2(2) do not apply.

Exam tips

  • Start every answer with the Section 2(1)(f) test, then apply it to the named parties. Examiners reward the provision, analysis, conclusion order.
  • Quote the four clauses accurately, especially the central management and control wording in clause (iii).
  • Show a consequence table in sentences: Court under Section 2(1)(e), law under Section 28, and forum under Section 10 of the Commercial Courts Act, 2015.
  • Do not mix Part I and Part II. Section 44 defines a foreign award, while Section 2(7) makes an award under Part I a domestic award.
  • In case-based questions, spot traps: foreign seat with Indian parties, or an Indian company with a foreign parent.

Practice questions from Commercial Transactions

Domestic and International Commercial Arbitration: frequently asked questions

What is the definition of international commercial arbitration in the Arbitration and Conciliation Act, 1996?

Section 2(1)(f) defines it as arbitration of disputes from a legal relationship, contractual or not, considered commercial under Indian law, where at least one party is a foreign individual, body corporate, controlled association or body of individuals, or foreign Government. The foreign status is judged by nationality or habitual residence, incorporation, or place of central management and control.

Does a foreign seat make an arbitration international?

No. The definition in Section 2(1)(f) turns on the parties and the commercial nature of the dispute. Two Indian parties arbitrating abroad do not have an international commercial arbitration under the definition.

Which court handles international commercial arbitration matters?

Under Section 2(1)(e)(ii), the Court is the High Court. Section 10(1) of the Commercial Courts Act, 2015 sends applications and appeals on commercial disputes of Specified Value to the Commercial Division of that High Court, where constituted.

Is an award in an international commercial arbitration seated in India a foreign award?

No. Section 2(7) says an award made under Part I is a domestic award. A foreign award under Section 44 is one made in a notified Convention territory and enforced under Part II.