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Legal Realm of Online Arbitration amid Coronavirus Pandemic

 > Business Laws  > Legal Realm of Online Arbitration amid Coronavirus Pandemic

Legal Realm of Online Arbitration amid Coronavirus Pandemic

The world is battling with the unprecedented Covid-19 pandemic, with many countries under a complete lockdown for more months now. It has not only disrupted the lives of many people but also hit hard on the world economy. With the current situation not improving in the near future, all the facets of our daily lives seemed to be effected including the Indian Judicial System including the Alternate Dispute Resolution (ADR) Mechanism.

An important aspect of the Alternate Dispute Settlement Resolution (ADR) is “Arbitration”. It is a way of settling disputes out of Court. Under arbitration, the dispute is adjudicated by an arbitrator who passes an arbitral award which is binding on the parties and enforceable in Court by virtue of Arbitration and Conciliation Act, 1996 (herein after referred to as ‘the act’)

In light of the complete lockdown present in India, it is not possible to carry out the arbitration proceedings physically. This situation leads to a problem under section 29A of the Act, which lays down a time frame of 12 months from the date of reference of the matter to arbitration, to pass the arbitral award, which can be extended for a maximum period of 6 months with the consent of the parties. Any further extension can only be granted by the competent Court having jurisdiction. Therefore, though the section lays a strict timeline for the arbitration proceeding, it provides with a saving grace that can be exploited in the current scenario.

Further, other timelines enumerated under the Act like the time limit under section 34 of the Act for approaching the Court for challenging arbitral award and under section 27 of the Act seeking Court’s assistance for evidence, also is rendered impossible in the present situation.

In order to deal with such situations, the Supreme Court of India taking suo moto cognizance of the situation which is creating difficulties to litigants, has passed an order dated 23rd March 2020 stating that the period of limitation in all proceeding before a Court or tribunal stands to be extended from March 15, 2020, until any further order.

However, what happens in case of urgent cases which requires arbitration to be conducted on urgent basis and waiting till the lockdown has been lifted will render the very purpose of the same irrelevant. This situation may turn out to bring into existence Online Dispute Settlement to the world of arbitration. Further, to ease out the pressure and the burden on arbitration centers post coronavirus, online arbitration could play a key role.

Section 19 of the Act confers the power on the parties to the arbitration to decide the procedure to be followed by the arbitral tribunal to conduct the arbitration proceedings and further, lays down that the Civil Procedure Code, 1908 and Evidence Act, 1872 to be not applicable on such proceedings. Therefore, section 19 empowers the arbitral tribunal to carry out the proceedings virtually, by the use of video conferencing.

Online arbitration is where all the proceedings are carried on online. The parties are heard through video conferencing and the documents to be used as evidence can be uploaded. Even the WIPO Arbitration and Mediation Center has developed an online, internet based mechanism for adjudicating the disputes. This online dispute resolution system and all associated information can be accesses by the parties through the Online Dispute Resolution pages of the Center’s website.

Advantages of conducting Online Arbitration

Cost Efficient: Online arbitration would be cost effective as it would reduce the cost of travelling that might sometimes include air fares, railway ticket etc., that the parties would have incurred to be physically present. Also, the cost of hiring a reputed arbitrator reduces as his personal presence is done away with.

Convenient: Online arbitration would remove geographical barriers, thereby ensuring higher quality and faster service between people spread in different corners of the country. Further, the parties would have higher variety of lawyers to choose from as people will be able to seek the services irrespective of the location of the office or the person.

Jurisdiction Issues: Online Arbitration would give a relief on the jurisdictional issues that would otherwise would have been there. This will allow the parties to lay down their own procedure which would encourage parties to settle disputes out of Court.

Disadvantages of conducting Online Arbitration

Accessibility Issues: In order to ensure proper functioning of Online Arbitration, all the involved people require computers and high internet bandwidth. However, in developing countries like India, not all people have access to facilities like computer and internet and even if they have access, they are not tech-savvy enough to ensure that the whole arbitral process can be carried on online smoothly.

Confidentiality Concerns: Arbitration process involves a lot of disclosure of highly confidential information and trade secrets, which are crucial for the negotiations. Therefore, disclosing such important information through the internet, which is so prone to cybercrime becomes a huge barrier in such cases. Therefore, there is a need to ensure proper security, so that the hackers are not able to access such information and the privacy of the parties are ensured.

Impersonal: Online Arbitration brings a sense of distance between the parties due to the lack of physical contact with the other party and the arbitrator. This would restrict the arbitrator from observing the body language of the disputing parties and from developing any personal relation with them. This is lead to a reduction in the value of the arbitrator in the whole process.

Caution for the Contesting Parties & Arbitrator

Technical Knowledge of the Parties: To ensure an effective proceeding, it is necessary that all the stake holders of the arbitral proceedings have the required hardware and software along with the know how to facilitate the process. Further, full internet security has to be ensured to protect the privacy of the parties. The measures that can be taken for using Information Technology in the arbitration proceedings can be understood clearly by going through the Report of the ICC Commission on Arbitration and ADR Task Force on the Use of Information Technology in International Arbitration (https://iccwbo.org/publication/information-technology-international-arbitration-report-icc-commission-arbitration-adr/)

Stage of the Arbitration Proceedings: The earlier the stage of the proceedings of arbitration, the more convenient is for the parties to carry it out via internet. Therefore, parties who are at the stage of appointment or submission of proceedings or the stage of RFA, are recommended to go for online arbitration.

Complexity of the Issue: While even the complex disputes can also be resolved through online arbitration, however, it would be more feasible for the sophisticated disputes that can be majorly based on documents. Various online platforms including the Indian Arbitral Institutions are coming up with the aim of catering to these aspects.

Therefore, one can appreciate the need to shift to online arbitration in light of the present situation. With the judiciary already overburdened with cases, the number will just increase to another level with the two months lockdown present in India. Hence, online arbitration could be a good step in order to control this issue by encouraging out of Court settlement. However, before going into the process of online arbitration, the parties should ensure that they are ready to carry out the procedure online and it should not lead to injustice in anyway whatsoever.
Authored By: Adv. Anant Sharma & Ananya Jain

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