Whalesbook
What Happened
At the London International Disputes Week (LIDW) 2026, Mahesh Agarwal, Managing Partner of Agarwal Law Associates, shared a critical perspective on the current state of India’s dispute resolution system. Agarwal argued that India is not yet ready for success-based fee arrangements for lawyers—where a lawyer’s pay depends on winning the case—citing concerns about professional integrity. He also raised significant concerns about the credibility of arbitration in India, suggesting that it has lost the respect it once held in the commercial sector.
Why This Matters For Investors
For stock market investors, litigation is more than just a legal matter; it is a direct risk to a company’s financial health. When a company is involved in a long-standing court case, it faces uncertainty, potential loss of capital, and recurring legal expenses. Agarwal highlighted that India’s legal system often struggles with a large backlog of cases. He pointed to the common practice of 'no order as to costs,' where even if a company wins a case, it may not get its legal fees back from the other party. This encourages parties to file frivolous lawsuits, knowing that the financial risk of losing is minimal. If legal reforms lead to stricter rules where losers pay the costs, it could reduce unnecessary litigation and protect shareholder value.
Arbitration vs. Foreign Judgments
One of the key takeaways for companies with international operations is Agarwal’s stance on cross-border disputes. He advised that when dealing with Indian assets or parties, it is often more practical to aim for arbitration rather than relying on the enforcement of foreign court judgments. This is because enforcing foreign judgments in India can be slow and difficult, sometimes forcing companies to settle for significantly lower amounts—often just half of what they were awarded. For investors, this insight is crucial when evaluating companies with global contracts or international joint ventures.
The Shift Toward Mediation
Agarwal suggested that mediation might emerge as a more viable path for commercial disputes in India, especially given the challenges faced by the current arbitration framework. As the government continues to promote the Mediation Act to unclog the court system, companies that adopt mediation early might resolve disputes faster and cheaper. This could eventually improve operational efficiency for businesses that frequently engage in legal conflicts.
What Investors Should Track
Investors looking at corporate governance and risk management should monitor a few key areas. First, keep an eye on how companies report their 'contingent liabilities'—the money they might have to pay if they lose ongoing court cases. A reduction in these liabilities or a shift toward faster dispute resolution via mediation is a positive sign. Second, watch for legislative changes or court rulings that implement stricter 'cost regimes' in India. If the legal system starts forcing losing parties to pay the full legal costs of the winner, it could serve as a major deterrent for frivolous litigation, which is a positive factor for long-term business stability.