Changing trends in the field of Alternate Dispute Resolution

Emergence of Online Alternate Dispute Resolution (ADR)

Prerna Khatri, Research Associate

Arbitration and conciliation as a means of alternate dispute resolution have been serving as an effective means of resolving dispute rather than resorting to the rather stringent and tedious litigation procedure. It serves as a means of peaceful and harmonious settlement between the conflicting parties by submitting the dispute to a neutral and unbiased person commonly known as the arbitrator/mediator/conciliator. This method proved to save time, money and effort and became hugely prevalent in all sectors such that it drove the legislators to amend the redundant 1940 enactment to mould it to suit the needs of the current society. The Act of 1996 incorporated international commercial arbitration to keep up with the globalisation of trade and commerce and economic liberalisation. The Act of 1996 paved way to resort disputes of an international nature. Considering that ‘trade’ was not merely restricted within the borders of a country, the enactment formulated rules for international commercial arbitration.

Though the term ‘commercial’ has not been expressly defined in the Act, it can be understood as, ‘Any activity or service in which modern business would be lubricant for the wheels of commerce is commercial.’1The Act has merely dealt with the immediate changes in the field, however, with the growth of technology and e-commerce, everything is gradually shifting to an online portal. The technology has developed so swiftly, that everything is now possible sitting in one place and available at our doorsteps. Not only is it restricted to shopping or other services, but also, there seems to be a paradigm shift with respect to online alternate dispute resolution. Various portals have already begun providing such services whereby the conflicting parties can choose their own arbitrator from a list provided, upload the relevant documents online, conduct the proceedings online as well as even record the proceedings for their future transactions.

This paper is an attempt to explore the changes in the field of alternative dispute resolution with the emergence of online dispute resolution; the laws that play an important role and the possible changes that will be required in the existing laws.

CONCEPT OF E-COMMERCE

First, it is essential to understand what is meant by e-commerce. It is a type of industry which uses computer networks to enter into transactions of buying and selling. The idea behind using internet as a business tool is to make services available to people at the click of a finger. People are largely dependent on the internet and making services such as clothes, books, food, cosmetics etc available at one’s doorstep, have increased the dependency of people on their online portals. Websites such as Flipkart, Myntra, Jabong, Makemytrip, Amazon, Redbus etc have been instrumental in causing an immense growth in the field of e-commerce.

Online means of dispute resolution has largely been unexplored in India mainly because of the existing mechanisms of judicial practice, issues of jurisdiction and enforcement. It can be seen slowly emerging but is yet to formulate rules and principles governing it. The following content aims to understand the growth of online dispute resolution and the current laws in picture.

GROWTH OF ONLINE ALTERNATE DISPUTE RESOLUTION IN INDIA

The concept of online dispute resolution in India is still taking its baby steps. It has entered the market and is growing prominence day by day. The idea has been adopted by the one followed in the European Union and the major reasons why conflicting parties are resorting to online dispute resolution is mainly because it is faster and much more cost effective. Since international trade is on the rise and most of the communication and legal formalities are complied with through the internet, communication in person has taken a backseat; to the extent that contracts are also drafted and signed online. When everything is done online, it would be easier to resolving the dispute by the same means.

This concept was recognized by the Supreme Court in Shakti Bhog V. Kola Shipping Ltd2. and Trimex International V. Vedanta Aluminium Ltd3. wherein it observed that online dispute resolution can arise out of either,

i)                    An online arbitration clause in a normal contract; or

ii)                  By means of an electronic contract (e-contract)

Considering these two alternatives, the laws that would immediately come into picture are, The Arbitration and Conciliation Act, 1996 to govern the arbitration proceedings and The Information Technology Act, 2000 to deal with the technological aspects. It is extremely important that the parties completely understand the nature of such agreement mainly because in arbitration and conciliation proceedings, what is laid down in the agreement will standing binding. It is only from the agreement do the arbitrators derive authority and this will apply only to the extent of what is contained in it4  

METHODS OF ONLINE DISPUTE RESOLUTION

There are mainly two methods of online dispute resolution complied in general by countries worldwide, they are categorised into

I)    Consensual

           i.      Automated Negotiation

         ii.      Assisted Negotiation

II)    Adjudicative

CONSENSUAL

i)                    Automated Negotiation

According to this method, technology takes over most parts of negotiation. It is also called the Blind Bidding system which follows the pattern of an auction which is designed to settle economic disputes. It has two forms,

  1. a.      Double Blind Bidding –  Where a single monetary issue is discussed between two parties
  2. b.      Visual Blind Bidding- Which can be applied to negotiations between any number of parties and issues

This kind of negotiation is useful mainly in the starting stages of a business or probably when the disputes are between insurance companies where the dispute involves money and the conflicting parties find it rather easier to settle it through a means which is faster and cost effective.

ii)                  Assisted Negotiation

As the term suggests, in this method, the technology merely acts as a mediator. It assists the negotiation and processes information so as to provide advice. They are operated in such a manner so as to provide assistance to the parties by means of a third party or software. The major advantage of such process is that it is fast, user friendly and informal.

ADJUDICATIVE – ONLINE ARBITRATION

It is necessary to understand that such method of dispute resolution through an online portal is not forbidden by law. It merely provides a user friendly and less expensive means of arbitration by letting technology come into play. The only thing that is relevant here is to draft a strict regulatory framework whereby the benefit is derived to the fullest and the dispute between the conflicting parties is actually settled rather than prolonging it. Technologies such as Skype or Google Hangouts are very common in this regard. Here, documents are uploaded online, proceedings are conducted by means of a video conference and to the extent that the parties can even obtain a recorded footage of the same. The world is shrinking with technology and dispute resolution is not far behind.

PURPOSE OF ONLINE DISPUTE RESOLUTION

As per the most recent statistics by the Law Commission there are 57,179 pending cases in the Supreme Court as on 30th June 2011 and 42, 17,903 pending cases in the High Court as on 30.09.20105. The position in subordinate and lower courts is even worse where there is an estimated of 2 crore backlog of cases and the expected time to clear them off would be at least 25-30 years which is a delay by at least a minimum of 20 years to the filing of the case which proves this saying right, ‘Justice delayed is justice denied.’

The sole purpose of introducing the concept of alternative dispute resolution such as arbitration, conciliation, mediation and negotiation was to reduce the backlog of cases and provide speedier, effective and less expensive remedies. According to the reports of the Department of Justice, United States, there was 69% success rate in ADR cases in 2012, 73% in 2011 and 77% in 20106. It has shown a vast difference in the costs incurred by traditional courts in comparison to the alternative dispute resolution methods. It not only saves money but also saves a lot of time since the cases are disposed faster and the award by an arbitral tribunal is final and not subject to appeal. It can only be set aside on the grounds laid down under the Act7. Moreover, an award passed by an arbitral tribunal is binding and has standing before the Court of Law.

ADVANTAGES OF ONLINE DISPUTE RESOLUTION

Considering the current scenario in India and its increased dependency upon e-commerce, the prevalence of online dispute resolution is most apt. It will serve as an important medium to resolve disputes effectively as well reduce costs. It will act as a saviour to reduce the tremendous backlog of cases. The advantages of this method have been listed below:

  • Existence of strong bases such as AAA and ICC – In India, there is a strong base previously established. Institutions such as AAA and ICC have established ground rules which have paved a smooth path for the growth of online dispute resolution.
  • Cost effective – The idea is to make dispute resolution cheaper and online dispute resolution is definitely much cheaper than the traditional means of dispute resolution.
  • Time effective – Compared to the traditional means of dispute resolution, where each dispute takes years and years to be resolved, this method would make it speedy and faster.
  • Reachable – The technology used for the purpose of online dispute resolution is by means of video conferencing via Skype and Google Hangouts and the like. This makes it reachable and affordable as well. Parties can sit at the convenience of their houses or offices and still resolve the dispute conveniently.

DISADVANTAGES

Every coin has two sides and thus, the down side for online dispute resolution would definitely be the lack of a regulatory framework and insufficiency in the existing laws. Despite the fact that there exists The Arbitration and Conciliation Act, 1996 and the Information Technology Act, 2000, yet, the two Acts have not been framed keeping in mind the changes that may occur in the technological sphere.

  • It lacks in terms of infrastructure as well as human institutions to conduct such proceedings.
  • Technological disadvantage – for those who are not equipped with technology, no knowledge with use of technology etc.
  • Frivolous complaints and unnecessary adjournments. Lawyers should ensure that each complaint is disposed of quickly without any backlog.

Despite its drawbacks, it seems like an effective key to resolve disputes which concerns B2B – Business to Business and B2C – Business to Customer. India is yet developing in this sphere and requires assistance from those countries which practice this more frequently. It definitely has a massive role to play in current scenario in India.

THE MODRIA EXAMPLE – EXISTENCE OF ONLINE PLATFORM FOR DISPUTE RESOLUTION

Speaking of online dispute resolution, the largest investment in this field was granted to Modria, a start-up, started by the Online Dispute Resolution Head of EBay8. This start-up based upon the European Commission on ODR Regulation allows parties to place complaints online and the model is based upon understanding the needs of the client and addressing their issues by means of arbitration, mediation and negotiation before it enters litigation. It allows the parties to choose their arbitrators, upload documents as well as conduct proceedings all through a virtual platform. The technology adopted by Modria involves a client interface which provides the different dispute settlement options based upon the dispute and clients could use customized versions such as presenting of questionnaires, transparent discussions, uploading online “evidence” etc to make their claims. It is completely user-friendly and informal and the parties can decide what’s best for them. This idea has been so successful that it has expanded to countries in the European Union and is not merely restricted to any particular field, and has claims even in the sector of tax, real estate etc. it is considered as one of the most advanced means of dispute resolution and is widely used in The United States of America and Canada especially for tax related issues. Other existing online platforms include SquareTrade, www.virtualcourthouse.com and many others.

In a country like India, this technology could be extremely useful in settling disputes not only to reduce costs and save time but also reduce the backlog of pending cases.

RELEVANT LAWS

From a broad perspective, the two laws that play an important role with respect to online dispute resolution are:

  1. The Arbitration and Conciliation Act, 1996
  2. The Information Technology Act, 2000

The traditional rules of dispute resolution will be followed as per those provisions laid down in The Arbitration and Conciliation Act, 1996. Once again, the arbitration agreement will play an extremely major role even when it concerns online dispute resolution. An online dispute resolution will be initiated either by formally having an online resolution clause in a normal agreement or by enacting an electronic contract (e-contract). The bottom line of the transaction will be governed on the principles laid down in the agreement. The arbitrators thus appointed would derive their authority only from the agreement.

The other important enactment would be The Information Technology Act, 2000 merely because the transaction and the proceedings will be conducted through an online portal. It is necessary that a strict regulatory and enforcement mechanism be drafted in order to face the challenges that might arise. The International Chamber of Commerce has laid down certain guidelines to be followed while laying down an online alternative dispute resolution model9. Here, the guidelines discuss that if electronic documents be admissible in law10then, a similar interface can be used to resolve disputes by means of an alternate dispute. Some of the guidelines include:

a) File names should always be given a unique name/identifier for each electronic document so as to identify the originator, class of document and place of arbitration.

b) The same form of file naming system should be used throughout the arbitration for all electronic documents.

c) The file name and the date of the original document (e.g. the date shown on a letter that is submitted as evidence) shall appear on the first page of the electronic document, either at the top right corner or at the bottom.

d) If data loss occurs and the affected participant cannot itself reconstitute the lost electronic documents, the other participants shall help to reconstitute the electronic file(s) by providing copies of the pertinent files that they control.

e) A uniform method of mode of transmission and storage of emails should be practiced.

f) Whether any confirmation of receipt of email has to be given should be mentioned beforehand.

g) File format for sending attachments, like. PDF, Doc, HTML, ASCII should be generally followed unless specifically mentioned otherwise.

For audio and video conferencing during online arbitration ICC has stated that the arbitral tribunal, in consultation with the parties, will issue directions giving details for the conference, such as:

  • Day and hour and applicable time zone;
  • Places where a conference front-end is required;
  • Who shall participate and number of persons at each front-end;
  • special requirements, such as visualization of documents;
  • any other requirements.

These are the basic guidelines which need to be complied with while conducting an online dispute resolution as prescribed by the International Chamber of Commerce (ICC). Besides these, the other procedural guidelines laid down in the Act11need to be strictly complied with including the rules of natural justice, good conscience and equity.

The purpose of resolving disputes by means other than the regular court proceedings is to ensure that justice be done, faster and effectively. Hence, to implement online dispute resolution effectively and properly, it is necessary to clearly lay down all the guidelines and ensure that justice is done.

CONCLUSION

In the kind words of Abraham Lincoln he believed,

“Discourage litigation. Persuade your neighbours to compromise whenever you can. Point out to them how the nominal winner is often the real loser — in fees, and expenses, and waste of time. As a peace-maker the lawyer has a superior opportunity of being a good man. There will still be business enough.”

The purpose of alternative means of dispute resolution is to ensure that there is harmonious settlement of disputes between parties and that justice is achieved in a speedy manner. To cope up with the changing trends in the society with respect to technology, online dispute resolution is emerging at a large scale. Using the medium of the internet and the like, disputes are resolved and it is slowly paving its way in the India as well. The need of the hour is to establish the law and lay down ground rules to ensure that the fullest benefit is derived from it. Justice should not only seem to be but also must be done in its truest sense.

It is necessary to amend, mould and frame the guidelines to streamline it in such manner that the disputes are resolved harmoniously and effectively. Considering that technology has made everything affordable and reachable, justice should not be far away. Online means of dispute resolution, if regulated and enforced properly, would be the light in changing the modifying the justice deliverance system in India. It not only will reduce the backlog of cases but will also go a long way in restoring the faith of the people in the justice deliverance system of the country.

  1. Fateh Chand V. State of Maharashtra AIR 1977 SC 1825 ; R.M. Investment & Trading Co. V. Boeing Co., AIR 1994 SC 1136 []
  2. AIR 2009 SC 12 []
  3. [2010] 3 SCC 1 []
  4. Chauthmal V. Bhagwan Das AIR 1973 Bom. 337 []
  5. Available at http://pib.nic.in/newsite/erelease.aspx?relid=73624 []
  6. http://www.justice.gov/olp/adr/doj-statistics.htm []
  7. Section 34, The Arbitration and Conciliation Act, 1996 – Application for setting aside Arbitral Award []
  8. See http://www.modria.com/ []
  9. Guidelines passed on March 25th, 2004 titled ‘Operating Standards for using IT in International Arbitration’ []
  10. Section 4 and 5, Information Technology Act, 2000 read with Section 65-B, The Evidence Act, 1872 []
  11. Section 18 – 27, The Arbitration and Conciliation Act, 1996 []

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