This article is written by Sneha Asthana, a student of Pedala Rama Reddi Law College, Telangana
Is Arbitration really in use?
India is known for the backlog of hundreds of thousands of court cases. Several authors have discussed in their papers, articles and study the various reasons for the massive number of pending cases. Such reasons range from lack of judges to corruption. A boon to the world, especially India, was the discovery of the practice of arbitration. Arbitration is one of the most effective methods of alternative dispute resolutions, which, because of their convenience, have become very hot in India. Arbitration is the forum in which parties, by an agreement between them, choose a forum other than the Court of law to resolve their disputes. Due to the global connectivity of several companies and trade organisations, the location of litigation during disputes remains ambiguous. The enforceability of foreign awards in different nations is quite confusing and is prone to further litigation and appeals. For these reasons, arbitration is widely used by companies having international partners. Arbitration comes to the rescue of people regarding several different problems in nature that people face in different countries. Even though companies are more familiar with litigation and have used it since times immemorial, arbitration seems to bag the award for dispute redressal methods. Studies have shown that companies have often opted for arbitration as a single dispute redressal method or in combination with mediation.
According to the survey done by PWC, which is represented in the graph above, it was found out that arbitration was the leading preference of dispute resolution. To explain the graph above, the survey aimed to understand which method of dispute redressal was most preferred by companies. It’s apparent that arbitration seems to have gained some loyal fans. In comparison to arbitration is litigation, which is the most common method of dispute redressal, mediation, which is yet another alternative dispute resolution and mainly focuses on a lesser formal way of negotiation and finally, there is expert determination which is to follow the decision given by an expert.
Why should I choose arbitration over my lovely old litigation?
There are several reasons for people and Companies to choose the different methods of arbitration these days. India has, since ancient times, more so specifically, since the British rule, witnessed and thoroughly practised third party settlements. However, it was further codified in law for the first time in the Arbitration Act, 1940, which was made to consolidate the already existing informal arbitration laws. After this, another Act by the name of the Arbitration Act, 1961 was drafted with similar objectives. However, both of these Acts were repealed and India adopted the United Nations Commission on International Trade Law model of arbitration since 1985. Regardless of how much attention was grabbed by the Court system, India could not let go of the rather informal and speedy methods of dispute redressal such as arbitration. According to a survey done by PWC, under the same study as mentioned above, results showed the reasons why people preferred arbitration.
The Graph above shows the various reasons why people choose arbitration. All of the above reasons such as speedy resolution, flexible procedures, privacy etc appear to be higher and better than the regular method of litigation thereby pushing people to pick arbitration.
Most contracts between companies prefer to have an inserted clause of arbitration. For example, the Hindustan Construction Company Limited which enters into large scale contracts with companies like National Highway Authority of India etc have such a clause in most of their contracts. Almost all the standard forms of contracts prefer arbitration for disputes as well. Just in the past week, a case between the Government of India and Vodafone regarding a tax dispute was decided through the method of international arbitration in favour of Vodafone. The rise of arbitration was sudden and great! People don’t want to go through the regular bumps of litigation anymore and more so over, they don’t want to wait for so long to get done with their disputes.
The frequent practice of arbitration was slightly hindered by the pandemic that hit the world. While arbitration is rather hassle free compared to litigation, it was still considered best for the parties to be physically present before a third party to resolve their disputes. Due to COVID –19, many companies face two severe problems, viz, incapacity to perform their contracts thereby leading to disputes and inability to resolve these disputes in the physical presence of each other. These problems appeared to have failed the belief of people in arbitration. However, thanks to the technological world we live in, such arbitration proceedings can be conducted online as well. Even though the dead-weights of arbitration exist and have a stronger effect when conducted online, the world needs to stick to it to resolve all their disputes.
What is Online Arbitration?
Globalization and growth of international commerce has led to a rise in cross border disputes which appear to be difficult in resolving due to the distance. However, arbitration is one such method of dispute redressal, inter alia, which is widely used.
Arbitration is an alternate method of redressal and as explained above, it’s a method in which both parties present their case before an arbitrator/tribunal, a practice generally agreed by them in their contracts. The usage of this method comes from a clause in the agreement or the consensus of both the parties. The arbitrator then decides an award for the case which is given the same status as that of a decree passed by a Court of Law. The only requirement present in arbitration is that its constitution should comprise of an odd number of arbitrators to follow the majority vote practice. In India, it is governed by the Arbitration and Conciliation Act, 1996.
One of the most efficient ways to put arbitration into use is through the means of the internet. While arbitration is rather simple when compared to regular litigation, arbitration also required the physical presence of the parties until now. However, while the world paces itself to become more web-friendly, arbitration can also be practiced through the web. A wonderful gateway to begin online arbitration has been brought by the unfortunate times of the COVID Era. It has become nearly impossible for people to physically mark their attendance in Courts or Tribunals. The uncertain reopening of the same forums brings about an anxiety people are not ready to deal with yet. Online/web arbitration could be the answer that raises the hope of certainty in such times.
Online Dispute Resolution is a method of alternative dispute redressal by itself these days. It consists of the several processes of alternative dispute redressal systems like arbitration, mediation and conciliation. All of these processes, when conducted through the means of the internet fall under Online Dispute Resolution. While these methods of dispute redressal have become quite hot in India, we haven’t been able to witness many cases being conducted online.
Online arbitration is one such dispute resolution conducted on the internet. It simply requires the parties to send notices through email, submit their documentation on an online portal, be virtually present and answer the questions asked by the arbitrators in all of its scheduled online sessions and receive the award through the same means. Unlike the traditional practice of arbitration, since online arbitration has the element of internet, it is not only governed by the Arbitration and Conciliation Act, 1996 but also the Information Technology Act, 2000. It’s a harmonious mixture of all rules and procedures of traditional arbitration with the touch of internet. It’s the simplest and the most convenient way of resolving disputes, especially during the COVID Era when parties can’t mark their attendance physically to deal with their legal disputes.
India needs to walk the path of online resolution for several reasons. While the people of India were successful in opting for the different alternative dispute redressal methods, resulting in a stop of increasing litigation in the Courts, faster delivery of justice and efficient resolutions, India has the capacity of putting a cherry on top of the its arbitration cake by resorting to online arbitration, especially during the times of COVID 19. Online arbitration has several benefits, viz.:
- While online dispute redressal follows the speedy disposal and fast track methods of dispute resolution, taking all of them together online on a portal will further increase the degree of benefit on such suits.
- Online arbitration is also cost effective as it helps to avoid ostentatious costs such as the exorbitant advocate fees, travel fees and charges for hiring good reputed institutions etc. Cutting down all these charges makes online arbitration a cost effective method of dispute resolution.
- Online arbitration also helps save time of the parties, arbitrators and everyone involved in the matter. There remains no need for people to wait for the physical presence of anybody involved in the issue thereby saving time and furthering speedy disposal of the matter.
- Since the dispute would be resolved on the internet which can be accessed at any time anywhere, there would remain no ambiguity in deciding the jurisdiction of the tribunal where the matter is to be heard and decided.
- Online arbitration would also ensure availability of arbitrators. Most arbitration proceedings witness delays because of the non-availability of the arbitrators but online arbitration would ensure that the arbitrator is scheduling a session only when they’re available which would prevent any wastage of time.
- Online arbitration could prove to be more flexible, simpler and informal when compared to physical arbitration. The proceedings would also be less confrontational thereby giving the parties a more flexible approach to the case. Since these proceedings can happen online, parties can have the discretion of following a more user-friendly approach to making it informal as well.
- Online arbitration would ensure maximum confidentiality when compared to any other platform.
- Online arbitration would also turn out to be more environment-friendly as it would help prevent the use of the millions of papers that go in documentation. ,
Because of all of the reasons mentioned above, online arbitration would be a great idea for India to implement, getting a head start during the times of Corona Virus.
What should I keep in mind before choosing Online Arbitration?
- Similar to the regular arbitration clause in contracts today, parties should be required to mutually agree and insert an online arbitration clause until the world normalises the use of it.
- The parties should be allowed the discretion of choosing online arbitration even after entering into the contract so as to avoid situations like a pandemic in the future.
- Provisions regarding online arbitration should be expressly specified by both parties so as to avoid any confusion on jurisdiction or to prevent situations of prejudice due to lack of know-how or facilities.
- The parties should be completely in touch with the new and rising service providers for online arbitration and decide for the same in consensus.
- The parties should be well aware of all cyber rules and laws to ensure the proceedings of one dispute don’t start other contempt disputes.
- The parties should also have a good knowledge of all their rights and obligations while in the process of online arbitration to avoid any delivery of injustice.
- The communication skills of parties must also be good since online arbitration would deprive parties of face to face interactions.
While the benefits of online arbitration have been discussed above, there’s no doubt that the provision of online arbitration comes with its own set of disadvantages like lack of digitalisation in India, lack of awareness, lack of security, excessive hacking making the documents easily accessible to strange parties etc. However, it seems like most of these disadvantages can be worked on to subdue the degree of its negative impact.
Will India use Online Arbitration?
After having discussed the several components that form the entire concept of Online
Arbitration, it’s quite clear that the need of the hour is online arbitration and that its positives seem to easily sideline its negatives. Online arbitration, by far, is the best mode of dispute resolution any legal system has seen thus far. It provides the ease of an amicable negotiation, it provides the convenience of time and place and for those sceptical old timers who believe in the basic idea and procedure of litigation but do not want to deal with its fuss, online arbitration also provides a slight resemblance to litigation through its call for evidence and documentation, its third party decider and the legal status and recognition of its award.
The world has reached the apparent brim of technology faster than the evolution of mankind has taken place. People work smart and not hard anymore; things happen in the blink of an eye, contracts are entered into by parties of different nationalities within a few seconds, postage mails have now become emails reaching you before you even confirm their arrival. Considering how fast the world is becoming and how globally connected we all are, we cannot stick to the old systems that require our physical presence, time and unnecessary effort for issues that could happen over a video call. Several cross border contracts are made every day thereby also increasing the rate of such disputes. Parties don’t have the time to wait for years together to come to a decision and settle their legal issues. There is no time for anyone to wait and matters have to be settled within months, even weeks or it could lead to major losses for either or both the parties due to in-operation or halt in activities. Luckily, India has also been privileged enough to run alongside and give solid competition to its fellow competitors (countries) in the race of globalisation and social connectivity. However, what one should remind themselves of is that most of India’s population is still deprived of internet facilities and barely even understand the importance of it. Expecting regular citizens to work through online arbitration for their disputes could be a far-fetched goal for India; however, since India has globalised greatly, laws can be enacted to make online arbitration mandatory for at least, issues with a certain pecuniary limit or certain subject matter of issues/disputes. While such arbitration could be considered to be a gray area, and the ambiguity of the words “place” or “seat” in arbitration hinder people’s belief in arbitration, if India understands and successfully enforces all the laws covering the ambit of online arbitration, India could definitely spark up a rise in the trending mode of dispute resolution. Last but not the least; online arbitration could significantly help reduce the pending cases of the Courts in India. Cases from the Courts could be diverted to online arbitration or any new fresh suits can be diverted to online arbitration, especially during the COVID Era, where not only are the disputes rising but the Courts are also indefinitely shut leaving the parties hanging with nowhere to go for settlement.
To conclude, I would like to mention there is no need to insist on the obvious importance of the internet anymore, and what India needs right now desperately is online arbitration because of all the positives it has attracted to itself. India had seemed reluctant to begin the online proceedings of the Court at the beginning of the COVID Era itself, so it would definitely take some time to consider online arbitration as a suitable method. However, just like the law is dynamic and changes according to time, the procedures of enforcing these laws also have to change, and people need to and will adapt to the same changes. There is no doubt that the beginning of online arbitration in India would require a lot of effort, capital and awareness, but once this stage is crossed, then the process of online arbitration will become as smooth as it can get.