Ad Hoc and Institutional Arbitration Compared

The difference is one of administration, not of substance. In an ad hoc reference the parties and the tribunal supply everything themselves: the rules, the timetable, the fees and the logistics. In an institutional reference an arbitral institution administers the proceedings under its published rules, which the parties adopt by naming it in the clause. Section 2(1)(a) confirms that the Act applies to both, and Section 2(6) confirms that a freedom the parties have may be exercised through an institution. Indian practice remains overwhelmingly ad hoc, and the reform effort since 2017 has been directed at changing that.

The questions that decide which model suits a contract, and where the cost difference lies

1. The Comparison

Basis	Ad hoc	Institutional
Rules of procedure	Agreed by the parties or settled by the tribunal under Section 19	The institution's rules, adopted by naming it
Constituting the tribunal	By the parties; on failure, an application to the court under Section 11	By the institution under its appointment rules, usually within a fixed period
Challenge to an arbitrator	Decided by the tribunal itself under Section 13	Decided by the institution under its rules
Fees	Negotiated with the tribunal; the Fourth Schedule applies where the High Court has framed rules	A published schedule, collected by the institution
Secretariat and logistics	Arranged case by case	Case manager, hearing rooms, transcription and records
Timetable	Section 29A supplies the outer limit; nothing enforces the steps within it	Monitored by the institution, which may intervene on delay
Emergency and expedited routes	None, unless the parties construct them	Provided by the rules
Scrutiny of the award	None	Provided by some institutions before the award is released
Suitability	Two cooperative parties, a narrow dispute, an experienced sole arbitrator	Uncooperative or unequal parties, several contracts, cross-border relationships

2. Where the Difference Is Felt

At the threshold. The commonest failure of an ad hoc clause is that the respondent does not nominate, or the two nominees cannot agree on a presiding arbitrator. The remedy is an application under Section 11, which consumes months even though the court's examination is now confined to the prima facie existence of an agreement. An institution appoints under its own rules and the reference proceeds.
Over fees. In an ad hoc reference the tribunal must settle its own remuneration with the parties, which is awkward and is a recurring source of dispute in references conducted on a per-sitting basis. The Fourth Schedule supplies a model fee structure, but it operates only where the High Court concerned has framed rules for the purpose.
Over delay. Section 29A fixes twelve months from the completion of pleadings, but nothing within that period keeps the individual steps moving. An institutional case manager does, and several institutions now shorten the period further through expedited or streamlined tracks.
At the award stage. Institutional scrutiny catches internal inconsistency, omitted issues and arithmetical error before the award is issued, which reduces the risk of a challenge under Section 34 succeeding on a curable defect.

⚠ Why Indian practice stayed ad hoc

The pattern was set by public sector contracts, in which a departmental officer was named as arbitrator and no institution was involved. It survived because ad hoc references appeared cheaper, there being no administrative charge, and because domestic institutions were few. The Srikrishna Committee in 2017 identified this as the central weakness of Indian arbitration, attributing to it much of the cost, delay and unpredictability that drove parties to foreign seats. Two lines of legislation followed, the Amendment Act of 2019 and the statute establishing the India International Arbitration Centre, and the first has not become operative because the Arbitration Council of India has not been constituted.

3. The Statutory Framework for the Institutional Model

Section 2(1)(a) provides that arbitration means any arbitration whether or not administered by a permanent arbitral institution, so nothing in the Act turns on the presence of an institution.
Section 2(6) provides that where the parties are free to determine a certain issue, that freedom includes the right to authorise any person, including an institution, to determine it.
Section 2(8) provides that a reference to an arbitration agreement includes the arbitration rules referred to in it, which is how institutional rules become part of the bargain.
Section 11, as amended in 2019, contemplates appointment by arbitral institutions designated by the Supreme Court and the High Courts from among institutions graded by the Arbitration Council of India. Since no grading exists, appointments continue to be made by the courts.
Section 6 permits administrative assistance by an institution or person without converting an ad hoc reference into an institutional one, which is a useful middle course.

4. Drafting

Name the institution accurately and adopt its rules, preferably using its published model clause; a misdescribed institution is a common pathology.
State the seat separately: the institution's headquarters is not the seat.
State the number of arbitrators, the language and the governing law.
Consider whether to adopt or exclude an expedited or streamlined procedure, since several sets of rules now apply one automatically below a threshold.
For an ad hoc clause, supply what the institution would otherwise provide: a workable appointment mechanism with a default appointing authority, a fee basis, and a timetable.
In either case, avoid an appointment procedure that gives one party control, which is invalid where the seat is in India.

5. Related Topics and Provisions

Topic or provision	Connection
Institutional ADR vs Ad Hoc ADR	The two models across dispute resolution generally
Institutional International Arbitration	The ICC, SIAC, LCIA and the India International Arbitration Centre
The Arbitration Council of India: Part IA	Grading and accreditation, and why they are not yet operative
Sections 2(1)(a), 2(6), 2(8), 6, 11 and 29A, A&C Act, 1996	The provisions through which the choice operates
Fourth Schedule, A&C Act, 1996	Model fees in an ad hoc reference