In this blog post, Aakansha Bansal, a student pursuing her Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the emerging trends in online arbitration.

What is Arbitration?

To resolve a conflict, parties have two options. They can either opt for litigation or for arbitration.

As compared to arbitration, litigation is more time consuming and a costlier process. Arbitration, on the other hand, is a speedier and a parties-friendly mechanism for dispute settlement. Arbitration means hearing and settling of dispute outside the courts. In this, a dispute is referred to an impartial third person as decided by the parties to the dispute in the arbitration agreement.

The Need For Arbitration

The conventional litigation methods of dispute settlement are not appropriate for commercial disputes. Therefore, there arose the necessity for alternative dispute resolution (ADR) mechanisms, one of which is Arbitration.

Nowadays, arbitration has emerged as one of the most dominant and widely accepted form of ADR. Since the Indian judiciary has failed to deliver justice swiftly, arbitration is openly welcomed. The lack of formality and absence of long procedure makes arbitration hassle free and easy.

Therefore, considering all the factors, there is a dire need for prompt action of the courts to participate and put in their efforts for effective implementation of arbitration.

Online Arbitration In India

With the boom of e-commerce, a need was felt to redress the disputes of the consumers online. As the name suggests, online arbitration means settlement of disputes with the aid of technological related laws. This however does not mean that it has parted away with the provisions of the Arbitration and Conciliation Act 1996. Both the conventional Arbitration Act as well as the technology laws is applicable to the online arbitration.

Agreements wherein the parties agree to resolve the matter in dispute through emails is considered to be valid as well as enforceable as the validity of such agreements have been upheld by the Supreme court of India in the suit of “ Shakti Bhog foods Ltd VS. Kola Shipping Ltd.” and “ Trimex International FZE Ltd. VS. Vedanta Aluminium Ltd.”. Moreover, such agreements are admissible as evidence as per section 5 of the Information Technology Act, 2000.

Components Of Online Arbitration

1. The Arbitration agreement
2. The Arbitral proceedings
3. The Arbitral award

 

• ARBITRATION AGREEMENT needs to be in writing and can be made via exchange of letters, telex, telegrams or any other means of telecommunication. As per the Information Technology Act, 2000 the requirement of statutory recognition to electronic records and digital signatures need to be complied with.

• ARBITRAL PROCEEDINGS can be either Institutional or Ad-hoc depending upon the will of the parties. The parties have to clearly spell out the rules in their agreement if they want to opt for Online Arbitration. The principles governing the arbitral proceedings have to be expressly agreed by both the parties. In Online Arbitration, the hearing and cross examination of the parties or witnesses takes place through video conferencing.

• ARBITRAL AWARD can be issued through email by sending scanned copies online and the arbitrator can put in his digital signature to sign the award. The award must spell out the reasons for giving such a decision. This requirement can however be done away with if the parties decides so. As far as the enforcement of Arbitral award is concerned, the copy of it received through post, can be filed in the courts.

 

Emerging Trends In Online Arbitration

Over few years, India has been blessed with greater technology development and thereby the number of e-commerce companies is multiplying day by day.  However, it is not hidden that a company and disputes related to it are inseparable. With the growth of e-commerce companies, consumer disputes are also growing at great pace which needs to be addressed as soon as possible to avoid any interference in the working of such companies. Also, the increase use of technology and internet besides several of pending cases in the court rooms, it is logical, practical as well as favorable to tilt towards Online Arbitration. Considering its advantage over litigation and conventional arbitration, it has been opted by various companies to resolve their dispute.

However, it is disheartening to admit that in India, people are not much aware of their digital rights. Therefore, India should take initiative to make the people aware of their rights and also to establish dispute resolution forums for such digital claims. The Indian legal regime completely recognizes Online Arbitration but the barrier in its successful implementation is its adoption by the parties to the dispute.

Advantages Of Online Arbitration

1. It is a swift convenient procedure- as against litigation, arbitration is a swift process. In online proceedings, face to face communication is not demanded and the parties are not required to be assembled at one place. They can take part in the proceedings at their own convenience and are also relieved from the long dates given in the litigation process.
2. Cost saving- it provides substantial savings when compared from conventional litigation. Those who cannot afford much or can’t afford long distance travelling expenses can, with no worries, opt for online arbitration.
3. No Jurisdictional issues- this is one of the main and highlight advantage of online arbitration. Parties don’t have to bother themselves in deciding which court they are required to go in.
4. Other advantages- parties to online arbitration also enjoy certain other benefits as it provides round the availability and accessibility and a more efficient case management. It has a flexible approach and affords greater party control. Also, it deals with both B2B and B2C disputes.

Challenges In Online Arbitration

Besides being a boom in the dispute settlement system, it comes with its own challenges and difficulties. Online Arbitration faces challenges in relation to-

1. Power or system failure and potential inaccessibility-   For some individuals, access to computers and internet may be a great challenge. Even after gaining access to a computer and internet, they might not be comfortable in using it. The proceedings may last for hours and the requirement of continuous internet access may pose a threat for those having limited access.
2. Place of arbitration-   determination of seat of arbitration is one of the greatest difficulty faced in online arbitration. It is important to decide the place of arbitration as it will determine the jurisdiction of courts for setting aside the award. The place of the arbitration can be decided by the parties. In case parties fail to decide the issue, this is decided by the arbitrator.
3. Confidentiality  issue-  since online mediation creates an electronic record, this may pose a great threat to privacy and confidentiality. This could enable a party to print out and distribute e-mail communications without the knowledge of the other party.
4. Less effective- any dispute can be redressed more effectively if the parties to the dispute are personally and physically present before the arbitrator. Moreover, online communications do not express the pitch, tone and volume of the participants.  
5. Limited scope- Online dispute typically concern small sums of money. It has a limited range of disputes. It handles only those issues where the amount of settlement is the only undetermined issue.

Essentials Of An Effective Online Arbitration

Following are the conditions to make online arbitration successful-

 

• Legislative framework- any dispute resolution mechanism must a legal framework which facilitates alternative disputes solving system.

• Faith among users- trust, faith and confidence among the users are the key factors which makes any dispute settlement proceedings successful.

• Cost effective- one of the main reasons of entering into online arbitration is that it is cost effective. Had there been a high cost, people would not have moved towards this mechanism.

• Use of multiple languages- since online arbitration is not place oriented and is not only a domestic dispute settlement system, multi language will therefore assist in making online arbitration more successful.

• Security issues- this is one of the key concern in any of the dispute settlement mechanism. To ensure confidentiality and security, following measures need to be adopted- (a) measures to differentiate original from a copy, (b) identification of the author of the message, (c) protecting stored information from others, (d) deleting all the information of the case once it has been decided.

• In- house facilities- the companies should install in- house online dispute resolution system as it will undoubtedly decrease the cost and would obviously be more time saving.

 

Conclusion

Online arbitration is still unexplored in India. For its effective and successful implementation, the court has to give weight to the arbitral award and should interpret the scope and ambit of such arbitration.

Considering its advantages, it can really prove to be a progress especially for a country like India which has enormous population and heaps of pending cases. Its time efficiency and cost effectiveness will surely be of great importance to the parties to the agreement. Therefore, it should be a preferred way of dispute settlement.

To sum up, online arbitration seems to be quite promising as with the rapid expansion commercial transactions and globalization, disputes need to be resolved as soon as possible as online arbitration is one such mechanism to be relied on for swift and inexpensive dispute settlement.