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.

In this blog post, Abhijna Ganesh Somashekhara, who is currently pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, describes patent illegality as a ground for setting aside of an arbital award. 

Introduction

Arbitration law stands on two platforms. Firstly, party autonomy and secondly, finality of award. They stand separate from judicial interpretation as otherwise, arbitration law will not be able to achieve its objective and will cease to be of importance. Indian Arbitration law first developed due to the undiscriminating judicial intervention, then formed into a legislation in the year 1961 and then to an Act based on Model Law which was adopted by the United Nations Convention of International Trade Law.

Arbitration has provided a clean and effective dispute settlement mechanism. Arbitration on national as well as international platforms have undertaken steps so as to reduce judicial intervention and judicial review. The Arbitration and Conciliation Act, 1996 was developed in order to reduce judicial intervention and finality of award. Public Policy is considered as an area important in Arbitration. It is of an indefinable nature. The courts have been flexible and have provided various interpretations of the same. It is axiomatic that arbitration laws in India are being expanded by way of judicial interpretation and it is contrary to legislative intention.

In the Ramesh Chander Arora v Kashmeer Saree Kendra , the courts did not look into the 1996 Act that is followed today but looked into the jurisprudence of India’s arbitration and utilized  the previous act, the 1940 Act and revived the debate as to whether “patent illegality” could be utilized to establish the exception of “public policy”.

The question that is prevailing is whether patent illegality is interpreted in the same way that the concept of public policy is interpreted. The Indian courts, keeping in mind the objective that have been put forward by the 1996 Act are adhered and implemented, hence, due to this fact, the courts have interpreted public policy in an extremely narrow manner. There are two landmark judgements that stand at the controversy between public policy and illegality of a patents as grounds, the cases are Renusagar Power Co Ltd v General Electric Co and Oil & Natural Gas Corporation Ltd v Saw Pipes Ltd.

The Renusagar case had widened the ambit of public policy. However, the Saw Pipes overruled and distinguished itself from the Renusagar case and reduced the scope of public policy. This change brought about many difficulties in arbitration law and challenged the very two pillars that arbitration law stood on, that is, finality of award and minimal judicial interpretation. Saw Pipes through its judgment, demonstrated that there is a prevailing section of the society actively supports the liberal interpretation. This has opened floodgates and have encouraged individuals to file cases even in trial matters. In Saw Pipes, the reinterpretation of Section 35(2)(b)(ii), which provided an extremely wide interpretation of the concept of public policy the concept of.

The Arbitration and Conciliation Act, 1996

The goal of the Parliament upon developing the said act was to increase autonomy, efficiency and effectiveness while reducing the scope of judicial intervention in the process of arbitration. Article 19(1) of the UNCITRAL Model Law on International Commercial Arbitration 1985 (‘Model Law’) states that, ‘subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.’ Moreover, Article 18 of Model Law portrays the commitment of the said law to work towards minimizing the scope of judicial intervention and strive towards achieving a large amount of autonomy.

This law serves a multitude of purposes, Firstly, it aims to bring together the numerous arbitration laws present in numerous jurisdiction with that of the Indian arbitration law. Secondly, to achieve an arbitration process in the country that is fair and not discriminatory in nature. Thirdly, it is a consolidation all previous act regarding arbitration and lastly, but most importantly, it provides the enforcement of awards as a means of decrees of the court of law.

However, the critics claim that despite the attempts of the Parliament, the Act passed has not had an impact on the system and makes it highly difficult to settle both international and domestic matters by the way of arbitration. The consequence due to the above, has resulted in parties taking their matters to participate in other dispute settling mechanisms outside the nation. Even though the Act has made changes, the stance in the court with regard to the arbitration remains the same.

Reforms and amendments, if enacted by Parliament can make the process effective and reliable. For instance, if Parliaments extends the authority and delegates certain powers to the arbitral tribunal, the scope and ambit of judicial intervention will stance to reduce. Powers could be such as, allowing the parties directly to file the cases and matters to the arbitral tribunal itself to review the claim of the parties instead of parties approaching the court and seeking interim measures. This would enable the arbitral tribunal to determine the requirement and need for judicial interpretation.

The 2003 Amendment Act to the 1996 Act

In the year 2003, a report was prepared by the law commission of India, highlighting the weaknesses and the discrepancies in the Arbitration and Conciliation Act, 1996. The Arbitration and Conciliation (Amendment) Bill 2003 was present to the Parliament. The Bill emphasized on a certain amendment to add a section to the prevailing Act, which allows the award to be set aside by the courts “on the additional ground that there is an error which is apparent on the face of the arbitral award giving rise to a substantial question of law” .

However, the Rajya Sabha withdrew the bill as it believed that it would overturn the parameters as set by the 1996 Act and by the judicial decisions of the court and would hence, increase the amendment if passed would increase the scope of judicial intervention in arbitration proceedings.

Public Policy as a ground for Judicial Intervention

Exploring the Limits of Judicial Legislation: The Renusagar and Saw Pipes Judgments

The judiciary has attempted to develop a structure to understand the concept of public policy and to determine as to what exactly falls under its purview. The two landmark judgments that have provided immense detail to the matter at hand are the Renusagar case and Saw Pipes case. Both these decisions challenged the two integral aspects of Arbitration law, that is, minimal court interference and the finality of the award. In the Renusagar case the court determined the parameters of Public Policy and contained it under three grounds. These three grounds are: (i) fundamental policy of the country, (ii) the interests of the nation and (iii) morality or justice.  This case however was decided prior to the year 1996 and the interpretation prevailing in the judgment was in accordance to the now repealed Foreign Awards (Recognition and Enforcement) Act 1961.

The principles as laid down in Renusagar were later on adopted by the Supreme Court in Saw Pipes and McDermott International Inc v Burn Standard Co Ltd. In addition to the narrow meaning established for public policy, a fourth ground, that is, the ground of “patently illegal” was inserted. Patently illegal’ or ‘blatant illegality’ or ‘error on the face of the record’ has a few definitions, it can mean: an error of law that goes to the root of the matter; or a violation of the constitution or a statutory provision; or it may be inconsistent with common law.

In Saw Pipes, the Court emphasized that the fourth ground was only applicable to domestic awards The Law Commission Report and the proposed Arbitration Act arbitration when dealing with the ground of ‘patently illegal.’ In the recent Constitutional Bench Supreme Court decision in Bharat Aluminium Co v Kaiser Aluminium Technical Service Inc, the Court held that it could not support the conclusion reached in Bhatia International v Bulk Trading SA and Venture Global Engineering v Satyam Computer Services Ltd that it would also apply to international arbitrations. However, in its judgment Ogilvy & Mather Pvt Ltd. v. Union of India, the Delhi High Court reinforced the dictum established and interpreted by Bhatia International and Venture Global Engineering that it will apply to international arbitrations as well.

Patently Illegal: Is a Separate Ground Necessary?

In Saw Pipes, as discussed above, it was observed that the concept of “public policy” was interpreted in accordance to the underlying principles as established in the 1996 Act. The court established that Public Policy concerns with matters relating to public good and public interest matters. Bearing this in mind the Supreme Court introduced the concept of Patent Illegality as a fourth ground under Public Policy that was determined in the Renusagar case. This meant that this ground could be utilized to set aside an award if contrary to law.

Despite all the criticisms faced by the decision of the Saw Pipes, the same judgment was followed by Justice Sinha in McDermott International case. However, it is believed that the ground of patently illegal under public policy goes against the spirit and basic foundation of the 1996 Act. It is said to be the same if the Parliament had decided to retain Section 30 of the 1940 Act. Moreover, while producing this judgment, the aspect of separation of power was pushed aside and was not taken into consideration. When initially the 1996 Act was enacted by the Parliament in accordance with the Model law it aimed to reduce the supervisory power of the courts whereas this patently illegal ground increases the ambit and purview of the court with respect to judicial intervention.

Conclusion

In conclusion, it can be established that the aims and objectives of the Arbitration and Conciliation Act of 1996 as implemented by the Parliament is of foremost importance, and the implementation of patently illegal as ground under public policy would be directly violating the basic structure of the said Act. It would destroy the two fundamental pillars of arbitration that is, finality of award and minimal judicial intervention. Moreover, it discourages the growth of Arbitration in the court and does not take the necessary steps to bring forward Dispute Settlement Mechanisms. Hence, the ground of Patently Illegal must not be applied and must be struck down by the court of law or the legislature.

In this blog post, Amit Halder, a Fourth-Year BA LLB student from Calcutta University and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the enforcement of foreign arbitral awards for an MNC situated in India.

ADR originated in USA  in order to find alternatives to the normal legal system, which was adversarial, costly, unpredictable, rigid, over-professionalised, harmful to relationships, and limited to some specific kinds of matters and issues. The American origins of the concept are not unexpected because Americans have always been good when it comes to their legal system and government. The picture of their litigation system has certain features such as: trials of civil actions by a jury, lawyers’ contingency fees, lack of application with the rule “the loser pays the costs”.

In 1898, Congress followed initiatives that began a few years earlier in Massachusetts and New York and authorized mediation for collective bargaining disputes. In the ensuing years, special mediation agencies, such as the Mediation Board and Conciliation for railway labour, (1913) (renamed the National Mediation Board in 1943), and the Federal Mediation and Conciliation Service (1947) were established and funded to carry out the mediation of collective bargaining disputes. Additional state labour mediation services followed.

The 1913 New lands Act and later legislation reflected the belief that stable industrial peace could be achieved through the settlement of collective bargaining disputes; settlement in turn could be advanced through conciliation, mediation, and voluntary arbitration.  In developing countries most people opt for litigation to solve their disputes that is why there are so many burdens on the judiciary and large number of pending cases which ultimately leads to complex situation for both the parties and courts.

“Justice delayed is justice denied” is a phrase which is popularly believed. The reason for backlog of cases, which is also known as “docket explosion”, cannot be blamed simply on the inefficiency of courts and the judiciary. To solve the problem of one lakh case by one court  sounds quite impossible. The reason being its non-implementation of ADR processes and opting litigation. ADR makes speedy process through which people in other countries are solving their disputes and accepting amicable settlement. Many countries like India, Bangladesh, and Sri Lanka have started accepting this process of resolving matters outside the courts to decrease hardship to both the parties. ADR today falls into two broad categories: court-annexed options and community-based dispute resolution mechanisms.

Arbitration is one of the effective way to solve disputes between parties with the help of a third neutral party. In this respect the arbitration and  Conciliation Act of 1996 has been made to regulate the matters relating to arbitration. The parties in dispute gets into an arbitration agreement beforehand which may arise in near future. It is more likely a contract between the parties which is in written form and signed by both the parties. When a matter is taken to the arbitral tribunal the parties are free to choose the number of arbitrators to solve the matter. The number of arbitrator must be in odd number and failing to which the tribunal will decide the sole arbitrator. The decisions make by the members of the tribunal will have binding effect on the parties. Such decisions made are known as arbitral award.

The section 44 of the Arbitration and Conciliation Act of 1996 specifies that foreign award means an arbitral award on difference between persons arising out of legal relationships, whether contractual or not, are considered as commercial under the law in force in India. The parties entering into such agreement are treated as bound for all and any purposes relating to the issues of disputes. The foreign awards are enforced and are deemed to be a decree of the court, the court may pass an interim order if it finds it necessary to protect the interest of the party applying for enforcement and execution of a foreign award. No party can refuse the enforcement of such award only if the party approaches with valid proof to the court that the subject matter of the agreement is invalid. In order to make a foreign award enforceable certain conditions are to be fulfilled:

• The agreement must be in accordance with the law.
• The award must be capable of settling the dispute concerning the subject matter.
• That the decision is made with differentiation and that it is being made in accordance with submission.
• The composition or the procedure is in accordance with the agreement.
• The procedure is in accordance with the law of the country where it take place.
• The award is entertained and is not suspended by any of the prevailing law of that country.
• The enforcement of the award is in accordance with the public policy of India.
• The award has been annulled in the country in which it was made.

The orders for enforcement will be treated as binding between the concerned parties.

The arbitration process still has its have pros and cons. The process of arbitration have more cons which are incurable. This leads to a lot of malpractice by the dispute parties. The process is informal and may sometime lead to violation of laws. At times, it leads to waste of money and time because if the case is not solved by an arbitrator then the parties have to approach a court of jurisdiction for justice. The arbitration system is a gratifying system, which already enunciated its roots within the numerous legal systems of the world, such that there’s a private international body governing the procedures of resolving disputes. It may be useful to conclude that the arbitration system is developing a lifetime of its own, one shall not stand surprised once s/he sees the quantity of unresolved disputes being narrowed to zero within the close to future.

PREFERENCE

• THE ARBITRATION AND CONCILIATION Act, 1996 by O.P VERMA.

In this blog post, Isha Singh,  a student pursuing her LL.B (5th year) Hons. from Rajiv Gandhi National University of Law, Patiala, Punjab and a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the prescription of a time limit for rendering of an Arbitral Award.

Introduction

The Arbitration Act was enacted in the year 1996, with the objective of sharing the burden with courts for dispute resolution through less-stringent methods of arbitration and conciliation. However, it has not been a smooth journey for the earlier legal regime, taking note of which the Law Commission of India submitted its 246th Report in the year 2014 recommending several changes to the arbitration law. On 23rd October 2015, the President of India promulgated the Arbitration Ordinance helping some recommendations be realised into amendments, which ultimately yielded to the Arbitration and Conciliation (Amendment) Act’2015 introducing several changes to the 1996 Act.

Apart from other glaring changes made, the Amendment Act has prescribed time limit for rendering of an arbitral award under Section 29A and fast track procedure under Section 29B. While this is a welcome move and complements the very idea of speedy justice, yet it might also be counter-productive. Let’s see how that works, in the following paragraphs.

Section 29A: Time limit for Arbitral Award

The Clause (1) stipulates that the award shall be made within a period of 12 months from the date on which the arbitral tribunal enters into reference, i.e., the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. The parties may extend this period of 12 months by way of consent, but not more than a period exceeding 6 months. However, if the award is made within 6 months only out of the 12-month timeframe allowed, then the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. But, if the award is not made within the time frame of 12 months or the extended period of 6 months taken together, the mandate of the arbitrator shall terminate unless the court has extended the period, either prior to or after the expiry of the prescribed period; conditioned on the fact that if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then it will order for the reduction of their fees by at most 5% for each month of delay.

The criteria for extension of time period is the pleading of a “sufficient cause” by way of an application by any one of the parties, based on such terms and conditions as the Court may impose. Such an application shall be expeditiously disposed off and endeavour be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party. Moreover, at the time of granting extension, it is Court’s autonomy to substitute one or all of the arbitrators, and in that case, the arbitral proceedings shall continue from the stage reached and on the basis of evidence and material on record. Whereas, if arbitrators are appointed in this section, the reconstituted arbitral tribunal shall be deemed to be a continuation of the hitherto appointed tribunal.

Section 29B: Fast Track Procedure

“Fast Track Procedure” is one where the parties agree on a dispute resolution regime that would consist of a sole arbitrator chosen by the parties. While there are more striking features about this procedure that does away with oral hearings and bases its award purely on written pleadings, documents and submissions filed by the parties, but the prime feature is that the award be made within 6 months of entering into reference. This stipulation triggers Section 29A and its rigorous time-abiding provisions.

Could it be counter-productive?!

Section 29A in its sweeping effect might create more problems than it seeks to solve. While the whole purpose of entering into an arbitration agreement is the maintenance of the party autonomy and their inter se decision to extend the arbitration proceedings until whenever they want, the stipulation of time limit just runs opposite to this, in the following manner:

By granting autonomy to the Court in the event the dispute remains undecided for 18 months, the Act has taken away party autonomy and restricted them from deciding between themselves the nature of the arbitration, as per their needs and more importantly per the dispute.

When the parties appear before the Court, they shall have to state on record the status of the arbitration and make public some facts, which might have hitherto been unknown keeping in consonance with their confidentially agreements.

The Section also stipulates that in the event the delay is attributable to the arbitral tribunal, the Court shall order reduction in their fee. However, the principles of natural justice would mandate that the relevant party be heard before any action could be taken against them, which would be the arbitral tribunal in this case. Therefore, a proceeding involving the tribunal would be problematic.

The expression “sufficient cause” in the application for grant of extension of time is nowhere been defined, coupled with the fact that the word “may” in the same letter of law would give the Court, a discretionary power, immensely wide in amplitude, which might result in lengthy proceedings ensuing as the parties lead large evidences, contend arguments to satiate the Court’s discretion in their favour. Nevertheless, such decisions being judicial decisions would be open to appeal and will further be a reason to sanction delay in the arbitration proceedings.