ADR

This article is written by Revati Magaonkar, from Dayanand College of Law. This article is throwing a highlight on the recent development in the alternative dispute resolution (ADR) system.

Introduction 

Alternative dispute resolution is a system that indicates an optional legal mechanism for solving disputes outside the court. It is one of the most growing and developing industries in the legal sector. Many organizations, companies, unicorns, or new emerging startups are utilizing the alternative dispute resolution system for avoiding unnecessary suits in the court of law and also saving their time and money. Apart from going to court for minor issues, disputes which arise out of a transaction or relationship can be solved in a simple, straight, and time-saving way,  with the help of ADR. It deals with matters related to family, commercial contracts, negligence, partnerships, public disputes, etc.

Alternative dispute resolution 

Definition

Alternative dispute resolution (ADR) is a process by which disputes between the parties get resolved or are set to an amicable solution without the intervention of the judicial institution.

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Concept of alternative dispute resolution 

ADR can be used to settle a variety of issues, including civil, criminal, commercial, family, and industrial disputes. Where the parties do not want to resolve their dispute in the courts yet want to settle it, ADR may help them in resolving their dispute and finding a solution. It is an optional method of resolving disputes apart from the traditional methods. In ADR, a third party is used for solving the disputes between the parties, this third party helps the parties in having a good conversation, which may result in a successful resolution of the issues in a better way. The party also helps in discussing the differences arising between the opinions of the parties. It helps the individuals or the groups in solving the dispute while maintaining law and order with each other’s cooperation. 

As we can see in daily updates of courts there are several pending cases before all the respected courts which are taking years and years for being resolved. Here the ADR plays an important role in lowering the burden of the judiciary. It includes various techniques for solving disputes, such as arbitration, conciliation, negotiation, mediation, and Lok Adalat. 

ADR is also included in the Fundamental Rights under Article 14 and Article 21, which deals particularly with equality before the law and the right to life and liberty respectively. The motive of ADR is to give social, economic, and political justice and to maintain the integrity which has been mentioned in the preamble of the Constitution of India. Its main objective is to achieve free legal aid and justice to economically backward people. Article 39A of the Constitution provides the provision of free legal aid to poor people.

Recent developments

The ADR has been helping so many parties to resolve their disputes with the help of a third party, with the help of the various means of ADR. Due to the pandemic from last year, the court system has made a big revolution in its procedure of hearings. This revolution has been beneficial and helpful for so many but also not as much beneficial for some. ADR saves time, money, mental and physical disturbance which usually happens during court matters. ADR has been a big time-saver for all the parties as well as to the legal system. As it helps the parties in dispute and provides them resolution without going to court. 

Virtual ADR

  • The virtual ADR provides a hassle-free resolution to the parties and it doesn’t require any party or attorney to travel from one place to another.
  • Both parties can communicate with each other through video conferencing, which allows them both to hear and see each other. 
  • In the case of mediation, the mediator can easily communicate with parties separately using an easy method and can come to an agreeable settlement. 
  • Just like any new initiative faces so many challenges, virtual ADR will also face some troubleshooting in starting. But it is certainly a step in a great and right direction. 
  • ADR is now not an alternative platform for dispute resolution but it has become the first way to resolve disputes in a speedy, fast, and cost-effective way. 

However, it should be noted that as ADR is hassle-free and one of the money and time-saving mechanisms it also possesses some obstacles before it. It is not a big secret that lawyers have always been contrary to technology. However, in times like these, it is the need of the hour to learn and adopt technology but it’s sort of critical for some people as well as lawyers. It needs rigorous and continuous training for lawyers to transit from offline to online mode. It is one of the hard tasks to provide an internet connection to all the courts of India and some of the courts also have poor network issues. Adequate security protocols must be implemented to ensure that sensitive data is not compromised or tampered with in any way. 

Impact of COVID-19 on the alternative dispute resolution 

In the present circumstances where the spread of Coronavirus (COVID-19) has put everything on hold, it is important to address its impact on ADR.

COVID-19 has caused havoc on the global economy and corporate relationships, causing unprecedented disruptions. A large number of commercial conflicts are arising as parties struggle to fulfil their contractual obligations. Hence there is a great possibility that the crisis will increase litigation, delaying the resolution of pending court cases, which will consequently result in more burden over the judiciary, and this way the parties can steer towards ADR for a speedy resolution to the disputes raised. Hence because of this pandemic,  virtual hearing in ADR has come into existence. 

Amendment of 2021

One of the recent amendments in the Arbitration and Conciliation Act, 1996 is Arbitration and Conciliation (Amendment) Act 2021. This is the third time the Act of 1996 has been amended in the last six years, indicating the legislative intent to amend the Act of 1996 and make India a more arbitration-friendly country. The said amendment has made two major changes in the Act and those are: 

  • The first is to allow automatic stay on  awards in some cases where the court has prima facie evidence that the contract on which the award is based was tainted by “fraud” and “corruption.”
  • The other major change in the Act of 1996 is the omission of the 8th schedule from the main Act. It specifies the qualifications, experience, regulations, and norms that should be followed for accurate mediation of arbitrators. 

2021 Amendment’s effects on India’s arbitration 

The impact of the automatic stay on awards 

The amendment made in Section 34 of the main Act is the most substantial change done to the provision of Arbitration Awards in the Amendment Act of 2021. In the main statute in Section 34, it has been stated that a party can file an application before the court for setting the arbitration award aside. Hence, after the Amendment Act of 2015, it has been stated that an automatic stay would not be granted on the operation of awards only after mere filing of an application for setting aside the award. Now the Amendment of 2021 has introduced a material change by adding a provision under Section 36(3) so that the court can be assured that if the prima facie evidence shows that the case is based on either the arbitration contract or the agreement that forms the basis of the award, or that the award was formed or has been affected by fraud or corruption. It should have to stay the award completely pending the disposal of the challenge. It has a retrospective effect which will be deemed to effectuate from October 23 of 2015. 

In Parliament, the complete or unconditional stay has been criticized so many times during the introduction of the Bill in the Lok Sabha. Various experts have pointed out that this unconditional stay on awards is like a blanket stay that will plunge the efforts of India towards the pro-arbitration regime. Primarily this was said because the party will easily lose to alleged corruption and the automatic stay in the enforcement of arbitral awards. 

It has been also said that this will defeat the main purpose of alternate dispute mechanisms by bringing parties to the courts and by making this prone to litigation. The other important concern with this amendment is that the legislation does not define either corruption or fraud. It will automatically create an ambiguous situation where the defendant party may suffer the rigid procedure of litigation even if the party is right and it will also open the gate of courts for a high wave of litigations by overburdening the court system. 

Expanding the scope of qualification of the arbitrators

This area includes two amendments, including the Amendment of 2019 which is interlinked with the amendment of 2021. The amendment made in the original or main Act that added Section 43(j), stated the qualification, eligibility, and norms for accreditation. The said section further directed the 8th schedule of the Act, which provided an exhaustive list of qualifications for the persons who want to possess the position of arbitrator. The schedule included the minimum requirements of a person having the educational qualification at degree level including 10 years experience in technical or scientific stream. After the professional level qualification, the said schedule also provided the general norms which would apply to an arbitrator for reaching accreditation such as integrity, fairness, being impartial, neutral, etc. 

These qualifications and the general norms were broad that this section among the other things limited the qualified foreign lawyer’s ability from acting as an arbitrator within India. It seemed like a significant hurdle as compared to arbitration-friendly regions such as France etc. 

The 2021 Amendment has given substitution to Section 43(j) of the Act and also deleted the 8th schedule from the main Act. It stated that the parties can appoint the arbitrator regardless of their qualifications. The Lok Sabha appreciated the Bill by stating that it will attract eminent arbitrators from foreign countries and will also add to making India a global hub of International Arbitration. 

Views of Justice Chandrachud – decentralization of justice

The honourable Justice Chandrachud has mentioned in one of the events organized on Online Dispute Resolution (ODR) that the online hearings have made a great impact on the justice system in last year’s virtual hearing. They have made the process even more efficient due to various simple changes in the process such as the use of digital files by all the parties, the ability to make digital notes, and having all the files in one place. The future of Arbitration in India.

India is a global powerhouse of the economy and in the interest of incorporating with the business communities all over the globe, the laws of India have been always amended to keep up with the legal regime of other leading commercial law jurisdictions. Arbitration being one of the methods of dispute resolution has been there in working for a long time. The Arbitration and Conciliation Act, 1996 has been on the line of the United Nations Commission on International Trade Law (UNCITRAL) for the framework of the laws with the idea of modernization of Arbitration law in India, and for bringing it in a line with the leading global practices and also for making India a global centre for arbitration. 

Even though arbitration has taken the first place over litigation due to its speedy and simple process. It should be taken into account that most of the arbitration in India is ad hoc arbitration with institutional arbitration being a minor proportion of all arbitration performed. Hence presently, India is lacking in having institutions that can reach the level of some reputed nations institutions such as the International Court of Arbitration (ICC), London Court of International Arbitration (LCIA), Singapore International Arbitration Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC), etc. Oftentimes it has been seen that many companies making commercial transactions or contracts with India prefer foreign international arbitration centres. 

Emergency arbitration

The concept of emergency arbitration provides emergency arbitrators who can be utilized when urgent relief is needed and during the period of the pandemic, people used this provision. There has been uncertainty in India regarding the enforceability of the emergency awards and the orders for arbitrations that have taken place in India. The LCI (Law Commission of India) In Its 246th report has mentioned a recommendation by recognizing the concept of the emergency arbitrator by widening the definition of the arbitral tribunal under Section 2(d) of Arbitration and Conciliation Act for including emergency arbitrators. However, this recommendation was not incorporated in the 2015 amendment Act. 

The said issue again came into the lead during the earlier widely disclosed dispute in Future Retails v. Amazon, where the parties are Amazon, Future Group, and Reliance. In this Amazon managed to get the interim order from the Emergency Arbitrator under the rules of SIAC. It restrained Future Group from proceeding with a deal worth Rs. 24,700 crore for monetization of retail business. At that time the question was raised about whether the passing of interim order is enforceable in India or not. 

Hence, Reliance stated its intention publicly to go ahead with the sale. Currently, the position of emergency arbitration in India is that such orders of emergency arbitration cannot be passed against non-parties and the orders passed by emergency arbitrators especially in cases where the arbitration took place outside India cannot be enforced directly. However, except for only this limitation, the orders by emergency arbitrators have been quite famous and useful. 

In this case, Future Retails argued that the order of Emergency Arbitrator is not valid in India. Because the Arbitration and Conciliation Act doesn’t recognize Emergency Arbitrators. Hence the order given by EA doesn’t comply with Section 17(1) of the Act, making it unenforceable under Section 17(2) of the said Act. However, this point has been prosecuted before the High Court of Delhi, involving two different but interlinked cases Future Retails v. Amazon and Amazon v. Future Coupons. The court after observing the issues, the validity of the order/award given by EA, gave its decision in favour of recognizing emergency arbitrators as legitimate arbitrators under Indian law. 

Conclusion

ADR is one of the most important legal institutions that will succeed greatly in the future. As time changes, its form and mechanism are also developed in different ways to resolve disputes and make it easier for the parties to the dispute. Different emerging provisions in ADR help in the improvement of its facets. The new amendments have provided a broad framework and exposure to the mechanism of ADR so that the procedure can take place effectively. 

References

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