Online Arbitration in India

By: Ananya Pratap Singh & Lauv Kumar


INTRODUCTION

With the advent of e-commerce worldwide, India has proved to be a lucrative market for Multinational Corporations (or MNCs) for commencing businesses. Consumers in India are not much aware of their digital rights. Moreover, India also lacks dispute resolution forums for such digital claims. In this scenario, there is an impending need for Online Arbitration (hereinafter ‘OA’) in India.

OA is a branch of dispute resolution, which uses technology to facilitate the resolution of disputes between the parties. Online arbitration is also termed as cyber-arbitration, cybitration, cyberspace arbitration, virtual arbitration, electronic arbitration or arbitration online techniques. It has attracted the interest of legal scholars since the middle of the nineties. However, we feel that with the increase in the number of consumer-seller disputes across the globe, the imminent need of this form of dispute resolution cannot be discarded.

ARBITRATION AGREEMENT           

In traditional arbitrations, the arbitration agreement should be in writing. Under the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act’), for an agreement to have a valid ‘online arbitration’ clause, it must be in tune with section 7 of the Act. According to this provision, the arbitration agreement needs to be in ‘writing’ form, where ‘writing’ is equivalent to an exchange of letters, telex, telegrams or ‘other means of telecommunication’ which proves the assent of contracting parties.

In addition, under Section 4 of the Information Technology Act, 2000 (hereinafter, IT Act) the requirement of an arbitration agreement in writing is deemed to be satisfied if the agreement is in electronic form and is accessible to be used for a subsequent reference. Section 5 of the IT Act further provides statutory recognition to electronic records and digital signatures as that of physical signatures authenticated by affixing the signature by that person. Therefore, the existing statutory framework permits the authenticity of an arbitration agreement arrived or entered into by electronic communication and can be made effective with further compliance with the necessary legal guidelines. 

ARBITRAL PROCEEDING

Similar to conventional arbitration, OA can also be conducted either way i.e. Ad-hoc or Institutional. In general, the principles that would govern the arbitration proceedings are to be explicitly set out and agreed to by the contracting parties. The fundamental concept underlining arbitration laws is ‘party autonomy’.[1] Therefore, the parties may agree that the whole or part of the arbitration proceedings is conducted online or they may otherwise expressly exclude electronic means.

The party submitting for arbitration has to submit Statements of Claim pursuant to section 23(1) of the Act within the agreed time frame or within the time determined by the arbitral tribunal or forum. The other party is then required to submit its defence. These documents are required to be submitted physically but the IT (Amendment) Act, 2008 provides as an option for online arbitration. Under sections 4 and 5 of the amended IT Act read with section 65B of the Evidence Act, the Statements of Claim and defence can be transmitted in electronic form without losing their legal sanctity.

Thus, it would be appropriate to infer that the Act does not expressly bar online arbitration and parties may conduct online arbitration, taking reference from freedom of autonomy provided in the Act and other applicable laws.

PLACE OF ARBITRATION

One of the major problems in online arbitration is the determination of the seat of arbitration. The place of arbitration constitutes the seat of arbitration.[2] The seat of the arbitration is important because it determines the nationality of the award and the jurisdiction of local courts for setting aside the award.[3]

Under other modern arbitration laws, the seat is determined by designation so that the geographical place of hearings or proceedings or the lack of such a place is completely irrelevant. Thus, deciding a place of online arbitration can be achieved through unanimous decision either of parties directly or by reference to the arbitration rules or by arbitrators if the rules are silent or if parties fail to decide the same unanimously.

ARBITRAL AWARD

In online arbitration, the issue that will raise concern for the winning party is its enforceability. It is most obvious for such a party to press the enforceability of arbitral award in local court. At this stage, the role of the national court comes into play. But due to limitless boundaries of the internet, the first and foremost thing to consider will be affirming the location of the award.

Section 31 of the Act relates to the form and contents of the arbitral award. This section, inter-alia, states that the arbitral award must be in writing, duly signed by the arbitral tribunal. A signed copy of the arbitral award shall be delivered to each party after making the award pursuant to section 31(5).

This requirement can be fulfilled under sections 3, 5, and 15 of IT Act. The arbitrators can digitally sign the copy of the arbitral award. Such digital signatures shall be deemed to have been affixed physically by the arbitrators in the light of section 5 of IT Act. It can be inferred from the combined reading of sections 15 and 11 of IT Act that a secure digital signature can be attributed to the originator of such signature. Thus, if the arbitrator digitally signs an award then it can be deemed to have been signed by him.

CONCLUSION

The potential of OA is still unexplored in India. The vast use of information technology makes it a more viable, time-saving and effective mean of dispute resolution. It would also prove to be cost and resource-effective for the parties, and avoid the hassles associated with conventional modes of alternative dispute resolution. The Indian legal regime completely recognizes OA and the only impediment in its success would be adoption by parties to the agreement. For the implementation of OA in India, the courts have to interpret the ambit of crucial aspects such as the proper law of such arbitration, determination of seat, the status of the award as between domestic or foreign, application of sections 34 and 48 of the Act, and enforceability under Part I or Part II.

[1] Lew J, Comparative International Commercial Arbitration (Kluwer Law International 2003).

[2] Redfern A and others, Law and Practice of International Commercial Arbitration (4th edn, Sweet & Maxwell 2004) 159.

[3] Witt N, ‘Online International Arbitration: Nine Issues Crucial To Its Success’ (2001) 12 The American Review of International Arbitration 441, 451.


(Ananya is Founder-Editor at Careertoran.com.)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s