India Must Board the Online Dispute Resolution Bus

Why in News?

• At the Delhi Arbitration weekend in February 2023, Union Law Minister emphasised the need for institutional arbitration to improve the ease of doing business.
• India may have missed the opportunity to become an International Arbitration Hub, however, India can still catch up with Online Dispute Redressal (ODR) mechanism.

 

What is International Arbitration?

• International arbitration is a method of dispute resolution whereby parties agree to have their disputes resolved by one or more private individuals i.e., arbitrators rather than by a court of law.
• When India was opening its economy for the world in 1990s, international arbitration was growing everywhere else.

 

Why is India called an Arbitration Unfriendly Country?

• India struggles to enforce contracts: According to the World Bank’s Ease of Doing Business report, India has gone up from 142nd rank among 190 countries in 2014 to 63rd in 2019.
  • While in ‘Enforcing Contracts', India's ranked at 163rd position which is a very minuscule improvement from the 186th rank in 2015.
  • The report says it takes almost four years and 31% of the cost of the claim to enforce a contract in India.
  • In contrast, it takes just over two years and costs 22% of the claim value in Brazil. In Mexico, it is 341 days and 33% of the claim value, and in Vietnam 400 days, and 29% of the claim value.
• In 2017, Srikrishna Committee listed some reasons:
  • Lack of preference for institutional arbitration over ad hoc arbitration. With more countries entering into bilateral investment treaties, institutional arbitration became the preferred choice.
  • Frequent intervention by the judiciary from the appointment of arbitrators to the enforcement of awards.
  • And setting aside arbitral awards on grounds of ‘public policy’.

 

Steps taken to set things right

• The Arbitration and Conciliation Act, 1996 (ACA), which was amended in 2015 and 2019, and some judicial decisions have put India on the right path.
• The 2015 Amendments to the ACA were aimed at facilitating the speedy and efficacious resolution of disputes through arbitration.
• Using ‘public policy’ as a ground for setting aside awards has been narrowed and there is a focus on prioritising institutional arbitration.
• Yet, India is not a preferred arbitration destination, even for disputes between Indian businesses.

 

Best Practice:

• Singapore, which opened its International Arbitration Centre - the Singapore International Arbitration Centre (in the 1990s), has since emerged as a global arbitration hub and is ranked first in terms of ‘Enforcing Contracts’.
• Indian companies are among its top users.

 

Steps to be considered by India

 ODR mechanism

• ODR is about resolving disputes in the virtual medium and it has several advantages such as it can reduce the burden on courts, save time and costs and provide effective solutions.
• ODR uses the integration of tools such as multi-channel communication, case management systems, automated case flows, digital signatures and stamping, and even the application of advanced technologies such as blockchain, AI, machine learning, etc.
• During the Covid-19 pandemic, India used its vast digital infrastructure and Judiciary led the way with online hearings.
• Private platforms in India are already resolving lakhs of disputes through ODR. Many corporates have also migrated to ODR to resolve small-value disputes.
• The Reserve Bank of India, the National Payments Corporation of India, the Open Network for Digital Commerce, etc., have led the way by incorporating ODR mechanisms into several of their initiatives.
• However, these initiatives should be exercised on a broad scale. For this, the legislature, the executive, and the judiciary must work together.

 

How to ensure cooperation and collaboration between 3 branches of government?

• By incentivising the use of ODR: The first step in this direction is to
  • set up ODR as a default dispute resolution tool for categories of disputes arising out of online transactions,
  • fast-track enforcement of ODR outcomes, and
  • exempt or reduce stamp duty and court fees.
• By optimising existing setups: Such as Aadhar Kendra to function as ODR kiosks. This process can solve many existing challenges such as infrastructure, and the digital divide and it can accelerate the use of ODR.
• Proactive use of ODR by government entities
  • Government departments should explore ODR as a grievance redress mechanism.
  • It will increase trust in the process and ensure that citizens have access to a convenient and cost-effective means of resolving disputes with the government.

 

Conclusion

At a time when the Indian judiciary is facing challenges in delivering timely justice due to the pendency of cases, ODR mechanism has the potential to ensure justice for all and also change India’s image from an Arbitration unfriendly to an Arbitration friendly country.

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Q) What is The Arbitration and Conciliation Act, 1996 (ACA)? 

The Arbitration and Conciliation Act, 1996 ("Arbitration Act") has been enacted in order to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation. 

 

Q) What is Institutional Arbitration? 

Institutional Arbitration is a method of arbitration where the whole arbitration is conducted byan established arbitral institution.

 

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Source: The Hindu