In this blog post, Rebecca Furtado, an Instructional Analyst and a Lawyer practicing at the Bombay High Court and pursuing a Diploma in Entrepreneurship Administration and Business laws from NUJS, Kolkata, discusses the effectiveness of arbitration as a dispute resolution mechanism in e-commerce.

What is Arbitration?

Arbitration in simple layman terms is a consensual procedure wherein two parties in agreement bring or submit their grievance or dispute before a neutral arbitrator (third party person) or three arbitrators to make a decision on the dispute that is binding on both parties. [1]

It is pertinent to note that when the matter of the third party arbitrator arises, the two arbitrators, one each from both the parties, chooses a neutral arbitrator to help bring a binding decision on the parties to the dispute. Per se, this manner of sorting an issue without resorting to judicial proceedings is called Arbitration.

Types of Arbitration

Arbitration being a matter of protecting the interests of the parties in the dispute as well as having the opinion of a third-party is classified mainly into three types. These are:

• Commercial Arbitration: The parties in this dispute are two commercial entities.
• Consumer Arbitration: The parties in this dispute are a consumer of goods as well as a supplier of the disputed goods.
• Labor Arbitration: The parties in this dispute generally involve an employer and an employee.

Importance of Arbitration

Arbitration in this day and age is a much better alternative than a court/judicial proceeding.  Though arbitration may be a costly affair due to expensive arbitrator fees, it’s a generally much more favored medium of conciliation.  Arbitration helps ease the burden on courts while providing gratifying relief to the disputants to the arbitration.

Arbitration is helpful in the following cases:

• It is a consensual process as it requires the specific permission to both parties of the dispute.
• It is a confidential yet neutral procedure as it is protects the identity of the disputants, existence of the arbitration, disclosures made during the process and the award of the arbitration. Arbitration does not sympathize with any of the party involved; it is the product of mutual understanding of both the parties.
• Unlike in a court proceeding, the disputants in an arbitration process have the liberty to choose their arbitrator.
• The award to the dispute given by an arbitral tribunal is enforceable and final. These awards can be set aside or can be challenged only in exceptional situations.

Arbitration In India

The Arbitration and Conciliation Act, 1996 is roughly drawn on the lines of the 1985 UNICTRAL Model Law on International Commercial Arbitration and also from the UNICTRAL Arbitration Rules, 1976. The Act provides for domestic, international commercial arbitration as well as the enforcement of foreign awards. It also describes the process of conciliation and mediation.

With the paucity of legal officers in courts, Arbitration is quickly gaining a firm foot in dispute resolution mechanisms. [2]

What is e-commerce?

E-commerce or electronic commerce involves the buying and selling of services and goods, transmission of data or funds, through an electronic network, in this case, the internet.  Generally, this term is used in relation to electronic transactions while shopping online. Business transactions usually are carried out in the following four sections:

• Business-to-business
• Business-to-consumer
• Consumer-to-consumer
• Consumer-to-business

E-commerce in India

With the introduction of 100% FDI in the e-commerce retail sector the face of e-commerce in India is rapidly changing. More transactions are taking place in the online sphere then in public spaces.  Amitabh Kant who states, “To provide a level playing field to stakeholders, there is a move in the government to harmonize these varied policies”, has further emphasized on the 100% FDI move by the Government.

This move enables the domestic market, which is a storehouse of indigenous products to scale up and enhance the quality of their services and products, which would help them penetrate global markets.

However, despite many policies and programs that promote the e-commerce sector, there still seems to be a slump in this sector. One of the main reasons includes the lack of an effective and efficient online dispute resolution mechanism in the country. The ironic part is that despite the coming up of many “smart cities” the online world still lacks an efficient dispute resolution system that will cater to the ever growing needs of the online population.

Arbitration in E-commerce

The global market today attracts a lot of footfall by millions of people worldwide. This market is supported b e-commerce facilities that in turn may sometimes prove risky due to the failure of commercial contracts that lead to disputes. There arises a need for an arbitration clause while conducting business online.

The Thomson v. Handa Lopez, Inc.,[3]  case is a popular case that ascertains and provides the risk of doing business without a dispute resolution clause. It is necessary to protect the interests of both the parties as well as helps provide a solution to the aggrieved party in a dispute.

The E-commerce sector also is a viable market for class action suits. This sector allows enterprises reach customers instantly rather than wait for the growth of a market base of customers gradually. E-commerce sectors face the need for online arbitration mechanisms as facing judicial proceedings in a courthouse may be a costly affair. This is moreover true in terms where the e-commerce business does not cater to a particular party but caters world-wide.

Arbitration in E-commerce in India

Arbitration in E-commerce in India is still a small growing façade that will take time to reach its optimum level of growth. India feels the need for technology based legal amendments in law as current arbitration proceedings do not cater well to the e-commerce sector.

E-commerce Arbitration generally comes under the purview of international commercial arbitration in India. The disputants to the arbitration are generally parties from different global jurisdictions. A question of conflict of law arises in such situation. E-commerce resolutions can come only under the purview of Section 13 of the Civil Procedure Code but then again it is a debatable process.

Conclusion

This backstory is that India still has a long way to go in terms of Online Arbitration Proceedings. It’s a showstopper in these cases. Indian laws should be amended so that India can be a destination for international commercial arbitration in the world.

[1] http://www.wipo.int/amc/en/arbitration/what-is-arb.html

[2] http://www.ficci-arbitration.com/htm/arbiinindia.htm

[3] http://ubiquity.acm.org/article.cfm?id=339334