Online Dispute Resolution and Arbitration: Is India ready for change?

- Raghav Bhargava, Rhea Sampat[1]




Online Dispute Resolution (“ODR”) is a mechanism that primarily focuses on resolving disputes online, through the use of technology. The advent of ODR began in the early 2000s, wherein it was primarily used to address disputes arising out of e-commerce. However, with the onset of COVID-19, ODR has become a focal question in legal regimes across the globe. One such important aspect is the use of ODR in arbitration. At the outset, it is imperative to clarify that ODR does not refer to holding virtual hearings but rather looks at moving the entire arbitral process online. This article aims to first analyze prominent ODR mechanisms across the globe. Second, address issues in India and finally recommend changes to make it more lucrative within the country.


ODR around the world


European Union (“EU”)– EU’s reliance on ODR was first witnessed in its E-Commerce Directive of 2000, wherein it included a clause that stated, “to amend any legislation which is liable to hamper the use of schemes for the out-of-court settlement of disputes through electronic channels”.[2] This clause was the beginning point for ODR in the EU. The growing popularity of ODR led to the enactment of the Directive for Consumer ODR, 2016.[3]


The highlight of the directive is the establishment of an ‘ODR Platform’ that facilitates the independent, impartial, effective, fast and fair out-of-court resolution of disputes between consumers and traders online. Additionally, it provides a platform to file a complaint through an ODR entity that shall offer a solution and shall mediate between the two parties. The Directive has gone one step ahead in ensuring the protection of personal data and confidentiality by prescribing various thresholds to be met by all parties involved.


United Nations Commission on International Trade Law (“UNCITRAL”)– UNCITRAL had recognized the possibility of including online dispute resolution in its future work programme[4] as early as 2000. Since then, the Commission over multiple sessions from 2010 through 2016, considered the working of ODR and in 2017, published the ‘UNCITRAL Technical Notes on Online Dispute Resolution’ (“Notes”).[5] Although non-binding, the Notes are comprehensive and lay down the scope, stages, roles and responsibilities during an ODR process, which act as a stepping stone for nations to build on and enact. Transparency, independence, expertise and consent are the principles identified by the UNCITRAL in conducting ODR proceedings. Based on the EU and the UNCITRAL model, various jurisdictions across the world such as Mexico[6], British Columbia[7], Philippines[8] and Netherlands[9] have sanctioned the use of ODR for quick resolution of disputes.


Current Status in India


The majority of dispute resolution in India occurs in courts and offline alternative mechanisms. However, the ODR process has begun to evolve with various online and institutional frameworks having been established to facilitate the process. The most notable one is the Centre for Online Dispute Resolution (“CODR”)[10] which was established as an institution that aims at providing a fast, cheap and fair way of dispute resolution. As of January 2020, CODR had managed to resolve over 30 disputes, within a mere time frame of 25-30 days! Similarly, another platform providing this service is Legal Referee[11]. The Construction Industry Arbitration Council[12] also has a provision for online settlement of construction disputes.


Unfortunately, there is currently no government regulated ODR mechanism. Recently, the Vice President of India had termed ODR as a ‘laudable initiative’ which saves time and effort and must be promoted more. Additionally, the Department of Justice has released a circular[13] permitting individuals to choose from a set of ODR contact points for dispute settlement, including State Legal Service Commissions.


Problems


The primary problem with arbitration through ODR is the existing economic and technological divide within the country. The divide places an undue advantage over a particular strata. Further, a greater emphasis is placed on face-to-face legal proceedings. Thus, a lack of trust and faith in the online regime exists.


Another key issue arising from ODR proceedings is that of jurisdiction. Proceedings take place over the internet thus, challenging the traditional notions of jurisdiction. For national arbitration, issues of court’s jurisdiction would lead to situations of forum shopping or delays in the conclusion of proceedings. The seat of the arbitration that determines the substantive law would remain unclear causing further delays in the resolution process.


Moreover, arbitral proceedings are premised on the confidentiality and secrecy of proceedings. The 2019 amendment to The Arbitration and Conciliation Act, 1996 has made confidentiality statutorily mandated except when it is necessary to publish the arbitral award. In such circumstances, sharing data over the internet to other parties via third-party websites causes serious confidentiality concerns. Lack of protection of sensitive information and confidential documents shared to supplement claims of parties, often privileged communication also undermines the process.


The current ODR regime in India hinges on independent entities providing a dispute resolution facility with no relation to the judicial system. There is no registration process required for these service providers. Additionally, they function in a paradigm that is devoid of any checks and balances. Ergo, there is a lack of authenticity and accountability of the existing ODR providers. The ODR medium determines who the arbitrator is, as a result, often there is lack of knowledge of the credentials of the arbitrator and competence, hence adding further apprehensions.


Lastly, but most importantly is the issue with the current mechanism in itself. By virtue of being independent bodies/institutions, the existing ODR providers are self-regulated. The parties availing such services are mandated to follow their rules and regulations. With no governing body regulating them, there is a clear absence of due process and fairness in the proceedings. Often, these arbitral proceedings are not referred to by courts nor is there any supervision of courts over these arbitral proceedings. This makes the system susceptible to exploitation, corruption and biasness. No further recourse is available for parties thereafter.

Recommendations


i. National ODR Governing Body


In order to make ODR more lucrative and efficient in India, first and foremost, it is essential to create a national body governing ODR proceedings. It is recommended this body be multi-functional. First, this body should serve as an accreditation provider to ODR platforms. This will supplement in distinguishing between bodies whose work is legitimate and recognized from those acting independently. Second, this body must enable the creation of a uniform system of procedural and substantive rules governing ODR in India. In this regard, reference may be made to the Technical Notes adopted by UNCITRAL which outline suggestions to govern ODR on an international level. Third, this body would serve is providing credibility to the arbitral award. The award rendered would attain legitimacy and make it binding. Finally, the body will also help regulate all ODR proceedings and act as a bridge between alternative settlements and the judicial process. It would enable judicial recourse pre and during arbitral proceedings and post rendering of the award.


ii. Enforcement Mechanism


Another concern that needs to be addressed is with respect to the enforcement and the mandatory nature of the award. By virtue of being independent of the judicial system, questions would arise with respect to whether the parties would consider this mandatory and whether the successful party is able to enforce such an award? A curious example is WIPO’s UDRP Process[14] which is one of the most famous existing ODR mechanisms. The parties not only consider it binding upon themselves, judicial enforcement across jurisdictions is also provided to the parties. This could serve as a reference point while drafting regulations. Thus, an impending need arises for a central legislation to govern this mechanism.


iii. Definition of ODR


Finally, the starting point for any change whether it be a central governing body or legislation would be a standard definition of what ODR would entail in India and the rules and regulations that would govern it. This would be quintessential to ensure that further litigation does not arise challenging the interpretations and contours of the ODR process. In a country like India where the pending number of cases in superior and subordinate judiciary goes over 3.5 crores, the growing popularity of ODR would only seem beneficial and go a long way in the timely resolution of disputes.


CONCLUSION


The purpose of arbitral proceedings is to not only de-stress courts but also to create a more litigant friendly regime leading to a quick resolution of disputes. Irrespective of a world with or without COVID-19, ODR has the potential to make arbitration more friendly, effective and efficient. However, at the same time is also essential to regulate is well to preemptively eradicate issues which may prove to be detrimental in the long run. It will be interesting to observe how the government takes this forward. Nevertheless, there is no doubt that ODR and arbitration must become focal points of legal policy in India.


[1] Raghav Bhargava is a final year student at Gujarat National Law University and can be contacted at bhargavaraghav700@gmail.com. Rhea Sampat is also a final year student at Gujarat National Law University and can be contacted at rheasampat.5@gmail.com [2] Clause 51 of the DIRECTIVE 2000/31/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce). [3] REGULATION (EU) No 524/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR). [4] Paragraph 390 of the Report of the United Nations Commission of International Trade Law, Thirty-third session held between 12 June and 7 July, 2000. [5] Technical Notes on Online Dispute Resolution, United Nations Commission on International Trade Law. [6] Concilianet, Government of Mexico. [7] Civil Resolution Tribunal, Government of British Columbia. [8] Alternative Dispute Resolution Services, Bureau of Legal Affairs, Republic of Philippines. [9] Online Dispute Resolution, European Consumer Centre, Netherlands. [10] Centre for Online Dispute Resolution, accessible at: https://www.codr.co.in/#/home. [11] Legal Referee Services, accessible at: http://legalreferee.com/pricing/. [12] Online Dispute Resolution is a laudable initiative and saves times and cost,Press Information Bureau, accessible at: https://pib.gov.in/PressReleasePage.aspx?PRID=1529821. [13] Online Dispute Resolution, Department of Justice, accessible at: https://doj.gov.in/page/online-dispute-resolution-through-mediation-arbitration-conciliation-etc. [14] WIPO Guide to Uniform Domain Name Dispute Resolution Policy, accessible at: https://www.wipo.int/amc/en/domains/guide/.


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