Does Arbitration Hinder the Growth of Common Law Jurisprudence?

Arbitration can hinder the growth of common law jurisprudence when important disputes are decided privately, awards remain confidential and courts receive fewer opportunities to create binding precedents. However, arbitration does not completely prevent legal development. Courts continue to interpret arbitration laws and decide important legal questions. The real issue is therefore finding a balance between party autonomy, arbitral finality and the public development of common law.

What Is the Connection Between Arbitration and Common Law?

The debate over arbitration and common law jurisprudence arises because the two systems perform different functions.

Add LawBhoomi as your preferred source on Google.

Add Now →

Common law develops significantly through judicial decisions. When courts decide disputes, they interpret legal principles, apply them to new facts and create precedents that may guide future courts. Over time, these decisions help clarify areas such as contract law, commercial law, insurance law, shipping law and other branches of private law.

Arbitration, on the other hand, is a private dispute resolution mechanism. Parties agree to submit their dispute to one or more arbitrators rather than having it finally determined through ordinary court litigation.

An arbitral tribunal normally decides the rights and liabilities of the parties before it. Its award is binding on those parties, but ordinarily does not create a precedent comparable to a judgment of a superior court.

This creates the central question: if more commercial disputes move from courts to private arbitration, will courts have fewer opportunities to develop common law?

This concern has received particular attention in England, where commercial litigation has historically played a major role in developing common law principles.

Why Does Common Law Depend on Judicial Decisions?

Common law is strongly associated with the doctrine of stare decisis.

Under this system, legal principles developed by higher courts guide lower courts when similar legal issues arise. A judicial precedent therefore performs functions extending far beyond the resolution of the individual dispute before the court.

Court judgments can:

• Clarify uncertain legal principles: Courts explain how existing principles should apply when the law is unclear or competing interpretations exist. These interpretations can later guide judges, lawyers and parties dealing with similar questions.
• Adapt law to new circumstances: New commercial practices, technologies and transactions can raise questions that older legal rules did not specifically address. Judicial interpretation allows established principles to develop in response to changing social and commercial circumstances.
• Promote consistency: Published precedents provide guidance on how similar disputes are likely to be resolved. This contributes to predictability and stability within the legal system.
• Create public legal knowledge: Judicial reasoning is normally accessible for examination, criticism and further development by courts, practitioners, researchers and students.
• Identify gaps in law: Judicial decisions may expose ambiguities or deficiencies in existing laws and, in some circumstances, indicate areas where legislative reform may be necessary.

An important part of precedent is identifying the rule actually established by a judgment. The distinction between ratio decidendi and obiter dicta helps determine which part of a judicial decision has binding authority.

The ability of courts to decide a continuing stream of significant disputes is therefore an important part of the development of common law jurisprudence.

How Can Arbitration Hinder the Growth of Common Law Jurisprudence?

The argument that arbitration can hinder common law development rests mainly on the movement of important disputes away from public courts.

One of the best-known judicial arguments on the issue was advanced by Lord Thomas, former Lord Chief Justice of England and Wales, in his 2016 BAILII Lecture on the relationship between commercial courts and arbitration. He raised concerns that widespread reliance on arbitration in certain commercial sectors could reduce the opportunities available to courts for developing commercial law.

Several factors explain this concern.

Fewer Important Cases Reach Courts

The first and most fundamental problem is simple: courts cannot develop precedent from cases they never decide.

Commercial agreements frequently contain an arbitration agreement. When a dispute covered by that agreement arises, the parties may be required to proceed before an arbitral tribunal rather than seeking final determination of the merits through ordinary litigation.

If arbitration becomes particularly dominant within an industry, a substantial proportion of disputes involving that industry’s contracts and commercial practices may disappear from the publicly reported judicial system.

The effect may be especially significant in sectors such as:

• shipping and maritime commerce;
• construction and infrastructure;
• international trade;
• insurance;
• energy;
• banking and finance; and
• complex corporate transactions.

For example, maritime arbitration is particularly significant because shipping disputes frequently involve sophisticated commercial agreements, international parties and specialised industry practices.

Such sectors continuously produce difficult questions involving contractual interpretation, allocation of commercial risks and evolving business practices. When these disputes are decided by courts, they can generate principles applicable far beyond the parties involved.

When they remain within arbitration, that opportunity may be reduced.

Do Arbitral Awards Create Judicial Precedent?

Generally, arbitral awards do not create binding judicial precedent in the same manner as court judgments.

An arbitral award represents the tribunal’s determination of the dispute submitted to arbitration. The authority of the tribunal principally arises from the arbitration agreement and the applicable law.

A superior court, by contrast, operates within an established judicial hierarchy. Its interpretation of a legal rule may bind subordinate courts and influence future cases involving similar questions.

Different types of arbitral awards may determine different aspects of disputes, but their binding effect principally operates between the parties concerned.

An arbitral tribunal may consider earlier judicial decisions, previous awards and established commercial principles. However, an earlier arbitral award ordinarily does not bind another tribunal merely because a similar issue subsequently arises.

This creates an important distinction between resolving disputes and developing law.

An arbitral award may contain sophisticated and persuasive legal reasoning. Yet if that reasoning remains private and lacks precedential authority, its capacity to contribute directly to the wider body of common law remains limited.

How Does Confidentiality in Arbitration Affect Common Law Development?

Confidentiality is one of the most important factors in the debate over arbitration and common law jurisprudence.

Privacy is one of the reasons commercial parties may prefer arbitration over litigation. Commercial disputes can involve trade secrets, internal communications, pricing arrangements, corporate information and commercially sensitive contractual relationships.

From the perspective of the parties, confidentiality may therefore be a significant advantage.

From the perspective of legal development, however, confidentiality can create difficulties.

If arbitral awards are not publicly available:

• Courts cannot regularly examine arbitral reasoning: A tribunal may have decided an important legal question, but that reasoning may never become part of publicly available jurisprudence.
• Lawyers may not know how similar issues have previously been resolved: This can reduce consistency between separately constituted arbitral tribunals.
• Academics cannot systematically analyse developments: Public judgments contribute to legal scholarship because their reasoning can be examined, criticised and compared.
• Businesses may receive less public guidance: A judicial judgment interpreting a commonly used contractual provision can guide an entire industry. A confidential award generally cannot perform that function.
• Important legal reasoning may remain inaccessible: Even a carefully reasoned award addressing a novel legal question may have little influence beyond the dispute concerned.

The very feature that makes arbitration commercially attractive can therefore restrict its contribution to public jurisprudence.

What Is the Position on Confidentiality in India?

The Indian statutory framework expressly recognises confidentiality in arbitration.

Section 42A of the Arbitration and Conciliation Act, 1996 requires the arbitrator, arbitral institution and parties to maintain confidentiality of arbitral proceedings, subject to the statutory exception relating to disclosure of an award where necessary for its implementation and enforcement.

The broader Arbitration and Conciliation Act, 1996 framework seeks to create an effective system for domestic arbitration, international commercial arbitration, enforcement of awards and conciliation.

Confidentiality serves legitimate commercial purposes. However, from the perspective of jurisprudential development, it also means that numerous awards interpreting contracts and commercial laws may never become part of publicly accessible legal reasoning.

The concern is therefore not that confidentiality itself is undesirable. The problem lies in the unavoidable tension between private dispute resolution and public legal development.

Does Limited Judicial Intervention Reduce the Development of Law?

Another important feature of modern arbitration is the principle of minimal judicial intervention.

In India, Section 5 of the Arbitration and Conciliation Act, 1996 limits the circumstances in which judicial authorities can intervene in matters governed by the relevant part of the Act.

The extent of judicial intervention in arbitration has been an important subject of Indian arbitration jurisprudence. Modern arbitration law generally seeks to prevent unnecessary court interference while preserving judicial assistance and supervision where statutorily permitted.

This principle is fundamental to effective arbitration.

If courts could routinely reconsider every procedural or substantive decision made by an arbitral tribunal, arbitration could effectively become merely another stage before litigation.

However, limited judicial intervention also has consequences for legal development.

A tribunal may decide an important question concerning:

• interpretation of a contractual provision;
• allocation of commercial risk;
• validity of a particular business arrangement;
• construction of an exclusion clause; or
• application of an established legal doctrine to a new commercial practice.

If that decision remains within arbitration and does not subsequently require judicial determination, no authoritative precedent may emerge.

The challenge is therefore structural.

The greater the autonomy and finality of arbitration, the fewer opportunities courts may receive to reconsider the underlying substantive legal questions.

Why Are Limited Challenges to Arbitral Awards Important?

Arbitration is intended to provide a substantial degree of finality.

Unlike ordinary litigation, an arbitral award is not generally subject to an unrestricted appeal on both facts and law.

In India, the principal mechanism for challenging an arbitral award is contained in Section 34 of the Arbitration and Conciliation Act, 1996.

Section 34 does not ordinarily operate as a complete merits appeal. Instead, it provides recognised statutory grounds on which an award can be challenged.

The law relating to the setting aside of arbitral awards therefore reflects the broader policy of preserving arbitral finality while permitting intervention in defined circumstances.

Section 37 separately provides appeals against specified orders under the Act. Even those appeals operate within the specialised statutory structure governing arbitration.

This limited review protects arbitration from becoming prolonged litigation.

However, it can also mean that an arbitrator’s interpretation of an important substantive legal question never receives consideration from an appellate court capable of laying down an authoritative precedent.

What Role Does Public Policy Play in Judicial Supervision of Arbitration?

Public policy creates an important point of interaction between courts and arbitration.

Indian arbitration law recognises public policy as a ground in challenges to arbitral awards. Courts may therefore be required to consider whether an award falls within the statutory limits governing interference.

Another related concept is patent illegality in arbitration, which has played an important role in determining the permissible scope of judicial scrutiny of certain domestic awards.

These doctrines illustrate an important feature of the arbitration-common law relationship.

Although the substantive dispute may have been privately determined, proceedings challenging the award can generate publicly available judicial decisions. Those decisions then contribute to arbitration jurisprudence and may clarify the limits of judicial intervention.

Does Arbitration Always Prevent Courts from Developing Law?

No. Arbitration does not remove courts completely from the legal system.

Even arbitration-friendly legal systems retain an important judicial role.

Courts may still determine questions relating to:

• existence and validity of arbitration agreements;
• appointment of arbitrators;
• jurisdiction of arbitral tribunals;
• interim measures;
• challenges to arbitral jurisdiction;
• procedural irregularities;
• setting aside of arbitral awards;
• recognition and enforcement of awards;
• arbitrability of particular disputes; and
• public policy considerations.

For example, Section 16 recognises the power of the arbitral tribunal to rule on its own jurisdiction. This is commonly associated with the principle of kompetenz-kompetenz. LawBhoomi’s detailed note on the jurisdiction of an arbitration tribunal explains the statutory relationship between the tribunal’s authority and the arbitration agreement.

Similarly, courts retain important supporting functions concerning interim measures and other issues. Questions concerning Sections 8, 9 and 11 have also produced significant litigation, including issues surrounding reference to arbitration, interim protection and appointment of arbitrators. The interaction of these provisions with territorial jurisdiction is examined in the analysis of Sections 8, 9, 11 and 42 of the Arbitration Act.

Consequently, arbitration may reduce judgments concerning the merits of substantive commercial disputes, while simultaneously generating considerable jurisprudence concerning arbitration law itself.

What Is the Counter-Argument in Favour of Arbitration?

The proposition that arbitration harms common law development is not universally accepted.

A major counter-argument is that private parties should not be expected to litigate disputes merely so that courts can produce precedents.

Parties generally choose arbitration because it provides specific advantages suitable to their commercial relationship.

Party Autonomy

Party autonomy lies at the heart of arbitration.

Parties can agree on important aspects of the dispute resolution process, including the method of appointing arbitrators, the seat of arbitration, procedural arrangements and, subject to applicable law, various other aspects of the proceedings.

Modern arbitration law gives substantial importance to respecting that agreement.

Expertise

Parties may appoint arbitrators possessing specialised knowledge of the relevant industry, commercial activity or legal field.

This can be particularly valuable in technically complex disputes where an understanding of industry practices is important.

Confidentiality

Private proceedings can protect commercially sensitive information from unnecessary public disclosure.

Although confidentiality can restrict the development of public jurisprudence, it remains a legitimate commercial reason for selecting arbitration.

Finality

Limited opportunities for challenging an award allow disputes to reach a final determination without passing through several levels of ordinary appellate litigation.

Finality contributes to commercial certainty.

International Enforceability

Arbitration is especially significant in cross-border disputes because an award may benefit from international mechanisms for recognition and enforcement.

The New York Convention and enforcement of foreign awards provide an important part of the international framework supporting commercial arbitration.

These advantages cannot simply be sacrificed for the purpose of producing a larger number of judicial precedents.

Is Arbitration and Litigation a Zero-Sum Relationship?

It would be inaccurate to assume that every dispute resolved through arbitration represents an equivalent loss to the judicial system.

Arbitration and courts are interconnected institutions rather than entirely competing systems.

Arbitration depends upon courts in several respects. Courts enforce arbitration agreements, provide supporting relief where permitted, examine challenges to awards and facilitate enforcement.

Once an award reaches the enforcement stage, judicial mechanisms may again become relevant. The enforcement of arbitral awards under Indian law demonstrates this continuing relationship between private adjudication and public judicial authority.

At the same time, arbitration can reduce the number of disputes requiring complete determination through the court system.

The real question is therefore not whether arbitration should replace litigation or litigation should replace arbitration.

The issue is how the two systems should coexist while preserving both effective private dispute resolution and healthy legal development.

Is the Effect Greater in Commercial Law?

The concern about arbitration hindering common law jurisprudence is strongest in commercial law.

Commercial law frequently develops through disputes involving new contractual structures, changing business practices and evolving commercial risks.

Courts may need to decide questions concerning:

• interpretation of sophisticated commercial contracts;
• allocation of risk between contracting parties;
• implied contractual obligations;
• exclusion and limitation clauses;
• emerging financial transactions;
• insurance arrangements;
• international trade practices; and
• consequences of technological developments in commerce.

When such disputes reach courts, a single judgment may provide guidance to an entire sector.

When the same dispute is privately arbitrated, its immediate resolution serves the parties but may produce little publicly available guidance for others.

The concern is therefore not simply that fewer judgments are being delivered. It is that some of the disputes most capable of helping commercial law evolve may increasingly be resolved outside public courts.

Can Arbitration Develop Its Own Jurisprudence?

Arbitration can produce a form of jurisprudence, although it differs significantly from traditional judicial precedent.

Experienced arbitrators regularly rely upon legislation, court judgments, established doctrines and recognised commercial principles.

Previous arbitral awards may sometimes also carry persuasive influence, particularly where awards are available and deal with recurring questions within specialised areas of international arbitration.

However, important structural limitations remain.

No Formal Hierarchy of Arbitral Tribunals

Ordinary courts operate within an established hierarchy. Lower courts may be bound by principles laid down by superior courts.

Arbitral tribunals do not generally function within such a hierarchy.

No General Doctrine of Binding Arbitral Precedent

A tribunal deciding a dispute today is generally not legally bound merely because another arbitral tribunal decided a similar question in a particular manner.

Limited Publication of Awards

Where awards remain confidential, even persuasive reliance on earlier awards becomes difficult.

Tribunals Are Created for Particular Disputes

An arbitral tribunal is generally constituted to resolve the dispute submitted by particular parties. It does not exercise the wider institutional role performed by constitutional courts and ordinary judicial systems.

Consequently, arbitral jurisprudence generally cannot reproduce the same structured system of precedent through which common law traditionally develops.

What Is the Conflict Between Private Justice and Public Law?

The debate ultimately reflects a deeper conflict between private justice and the public function of adjudication.

Private Interest

Commercial parties may reasonably prefer:

• confidentiality;
• expert decision-makers;
• neutrality;
• procedural flexibility;
• finality;
• international enforceability; and
• greater control over dispute resolution.

Public Interest

The legal system benefits from:

• published judgments;
• transparent reasoning;
• authoritative interpretation;
• consistency;
• judicial precedent;
• public scrutiny; and
• continuous development of legal principles.

Neither interest can automatically be treated as superior in every situation.

Making all arbitration proceedings public would undermine one of the principal characteristics that can make arbitration attractive.

At the same time, allowing every commercially significant legal question to remain permanently within confidential proceedings could reduce the material from which public jurisprudence develops.

This is why the debate involves balancing competing institutional interests rather than choosing arbitration or litigation absolutely.

Should Courts Interfere More in Arbitration to Develop Common Law?

Greater judicial intervention is not necessarily the correct solution.

If arbitral awards became routinely appealable on questions of fact and law, arbitration could lose much of its distinct character. Proceedings could become longer, more expensive and less final.

Indian arbitration law has consequently moved towards limiting unnecessary intervention. This approach is also connected with the principles underlying the UNCITRAL Model Law and Indian arbitration law.

A more balanced approach would distinguish between ordinary private disputes and questions having substantial importance for the wider legal system.

Possible measures may include:

• Carefully controlled judicial consideration of significant questions of law: Courts could retain opportunities to address questions whose importance extends materially beyond the immediate parties.
• Meaningful but limited supervisory jurisdiction: Judicial supervision should protect basic legality and procedural fairness without converting a challenge into a complete rehearing of the dispute.
• Publication of anonymised awards where suitable: Removing identifying or commercially sensitive information may allow important legal reasoning to become available without destroying confidentiality entirely.
• Institutional publication of selected decisions: Arbitral institutions may facilitate access to significant awards or extracts where the applicable rules and parties permit publication.
• Maintaining a strong court-arbitration relationship: Arbitration should remain autonomous, but it should not become completely isolated from the judicial institutions responsible for authoritative legal interpretation.

The objective should not be to turn arbitration into litigation. It should be to preserve sufficient interaction between courts and arbitral tribunals so that both can perform their respective functions effectively.

How Is the Indian Position Different?

India is primarily a statutory legal system with a strong common law tradition. Judicial precedent remains central to legal interpretation.

Article 141 of the Constitution provides that the law declared by the Supreme Court is binding on all courts within the territory of India. The relationship between Supreme Court decisions and binding authority is explained through the doctrine of precedent under Article 141.

At the same time, modern Indian arbitration law strongly supports arbitral autonomy and restricted judicial intervention.

Important provisions of the Arbitration and Conciliation Act, 1996 include:

• Section 5: limits judicial intervention in arbitration matters except where permitted by the Act.
• Section 16: empowers an arbitral tribunal to rule on its own jurisdiction, reflecting the principle of kompetenz-kompetenz.
• Section 34: provides the statutory framework for challenging and setting aside arbitral awards.
• Section 37: provides appeals against specified orders under the Act.
• Section 42A: protects the confidentiality of arbitral proceedings, subject to its statutory qualification.

The continuing importance of courts can also be seen when awards require execution. The law relating to the stay of enforcement of arbitral awards illustrates another area in which courts and arbitration interact.

International arbitration creates an additional dimension. The enforcement of foreign arbitral awards in India requires courts to apply statutory and treaty-based principles while respecting the finality of international arbitration.

These examples demonstrate that arbitration does not eliminate judicial jurisprudence. Instead, it changes the kinds of questions that reach courts.

Does Arbitration Ultimately Hinder Common Law Jurisprudence?

The answer is partly, but not absolutely.

Arbitration can hinder the growth of common law jurisprudence when large numbers of legally significant disputes move from public courts into confidential proceedings.

The problem becomes especially important where three circumstances occur together:

1. A sector depends heavily on arbitration: This can substantially reduce the number of substantive disputes reaching courts.
2. Arbitral awards remain confidential or unpublished: Important legal reasoning therefore remains unavailable to the wider legal community.
3. Judicial review is narrowly restricted: The substantive question decided by an arbitrator may never reach a court capable of establishing an authoritative precedent.

However, arbitration does not stop legal development.

Courts continue to develop jurisprudence concerning arbitration agreements, appointment and jurisdiction of arbitrators, interim measures, arbitrability, challenges to awards, public policy, enforcement and interpretation of arbitration legislation.

Arbitration itself is also part of the broader system of alternative dispute resolution mechanisms, which performs an important role in providing alternatives to conventional court adjudication.

Therefore, the proper question is not whether arbitration is harmful to common law in every situation. The question is whether a legal system has maintained an appropriate balance between effective private adjudication and the continuing public development of law.

Conclusion

Arbitration does not inherently prevent the growth of common law, but widespread private arbitration can reduce the number of judicial decisions through which common law traditionally evolves. Confidentiality, the absence of binding arbitral precedent and restricted opportunities for judicial review make the concern particularly significant in commercial disputes.

At the same time, excessive judicial intervention would undermine party autonomy, confidentiality, efficiency and finality—the very characteristics that make arbitration valuable.

The preferable approach is therefore not to weaken arbitration merely to produce more judgments. A balanced relationship is required in which arbitration remains an effective private dispute resolution mechanism while genuinely important questions of law continue to receive sufficient judicial consideration.

Arbitration and common law jurisprudence need not compete. The challenge lies in ensuring that the growth of private adjudication does not deprive the public legal system of the important disputes through which legal principles are clarified, tested and developed.

Note: This article was originally written by Sharon Sood and Krutamana Pisipati (Jindal Global Law School, Sonipat) and published on 17 April 2020. It was subsequently updated by the LawBhoomi team on 19 Aug 2026.