By: Ishika Chauhan and Yash Bhatnagar
Online Dispute Resolution (hereinafter, “ODR”) is an ever-rising tool in Alternative Dispute Resolution, especially after the onset of the COVID-19 pandemic. With courts and dispute resolution institutes going virtual or ‘online,’ the question arises of the flexibility and sustainability of the concept itself. Moreover, there have been concerns regarding the legality of online arbitration and mediation sessions. This piece explores and tries to answer these from an analytical aspect.
Furthermore, it dives into an extension on the Conundrum of determining Seat-Venue for arbitration suits, especially in an online setting, while addressing principles and various jurisprudential questions for this niche branch of law.
Rise of Online Dispute Resolution
ODR emerged in the 1990s in tandem with the proliferation of e-commerce. The online forum was particularly well-suited for addressing the issue of distance between buyers and sellers who were often thousands of miles and many time zones apart. ODR was also appropriate for the size of the disputes: most of the issues at stake were relatively small in terms of the total value. A quick, easy, low-cost process was essential to the economic model. Initial ODR platforms were meant to help two private individuals resolve a dispute and achieve a fair outcome. Primarily used by large companies such as eBay, Amazon, and others, ODR was most valuable if the system could guide the parties to a resolution.
Timeline of Online Dispute Resolution Development
Phase I (1997 – 1999): ODR developed dynamically, and the first commercial web portals that offered services in this area were established. For example, eBay was the first e-commerce company to introduce a dispute redressal mechanism online where customers can file their complaints and get an eBay executive to solve them while setting up a convenient communication line between the buyer and the seller of the product.
Phase II (1999 – 2000): The next phase (business) ran from 1999 to 2000. Given the favorable period of economic development, especially in IT services, many companies-initiated projects based on electronic dispute resolution, but a large number no longer operate on the market.
Phase III (2001 and beyond): The year 2001 marked the beginning of an institutional phase, during which ODR techniques were introduced into institutions such as the courts and administration authorities
Legality and Reliance
Section 89 of the Code of Civil Procedure, 1908, the Indian legal framework, promotes the use of alternative dispute resolution between parties. Additionally, Order X Rule 1A provides powers on the court to direct the parties to a suit to choose any Alternative Dispute Resolution (hereinafter, “ADR”) method to settle disputes. This can include ODR as well. ODR follows the Information Technology Act of 2000 and the Arbitration and Conciliation Act 1996.
The first and foremost necessity for ODR is that the parties must unequivocally decide that they will resolve their disputes online. The Arbitration & Conciliation Act 1996 (hereinafter, “the Act”) specifies that the parties are free to choose where the hearing would take place, which could be online. The Information Technology Act 2000 enumerates that electronic records and signatures can be introduced as evidence and given legal recognition under the Indian legal system ( S. 4, 5 & 65-B of the Indian Evidence Act). In the State of Maharashtra v Dr. Praful B. Desai (2003 4 SCC 601), the Supreme Court acknowledged using video conferencing to record witness statements. Therefore, the submissions and the proceedings can take place online.
There have been instances where the parties have decided upon arbitration through emails (Shakti Bhog Foods Ltd. v Kola Shipping Ltd., (AIR 2009 SC 12). ODR is even being used currently by the National Internet Exchange of India for domain name dispute resolution.
This tool is being relied upon by arbitrators and mediators across the globe as swift, transparent, and accessible and is more cost-effective than the ADR mechanism.
Conundrum of Seat and Venue
One of the elements commonly found in arbitration agreements is the place or the seat of arbitration. It determines the substantive aspects of an arbitral proceeding, like interference of courts, the arbitrator’s appointment, grounds for challenging an award, etc. The place of arbitration should be distinguished from the place of hearings. The former is a legal fiction designed to submit arbitration to a particular jurisdiction. The location specified as the place of arbitration only indicates that jurisdiction. The latter refers to an actual physical location where hearings are held.
Lex Arbitri: The choice of the place of arbitration has far-reaching implications for the parties in a dispute since it identifies a lex arbitri, i.e., a law governing the arbitral proceedings. The lex arbitri will apply whether meetings occur physically in a geographical location or do not occur at all, whether parties and arbitrators hold a hearing in an electronic environment or over the telephone. Likewise, case management conferences are often held over the phone or through the internet and not at the geographical place of arbitration. The same is the case in emergency arbitrations.
UNICTRAL Model Law
Article 20 of the UNICTRAL Model Law states that the parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties, and that the arbitral tribunal may meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of goods, other property or documents.
In other words, determining the place of arbitration as being in a particular city or country in an arbitration agreement is not equal to the parties agreeing that the place of hearings should be that city or country.
Condition: Place of Hearing Specified
United States district court in Legaspy v Fin. Indus. Regulatory Auth., Inc held a virtual hearing located at the parties’, witnesses’, and arbitrators’ locations. However, this is only valid in the context of domestic arbitration and not in the case of international arbitration. In international arbitration, the participants are scattered across the world. As a result, a virtual hearing cannot be considered as having a single location, which is contrary to arbitration agreements specifying the place of hearings.
Russian Arbitration Centre or Shenzhen Court of International Arbitration (SCIA) has a set of rules for online arbitration, and they do not have a specific rule on the seat of online arbitration. Whereas, the International Economic and Trade Arbitration Commission of China (hereinafter, “CIETAC”) Online Arbitration Rules give precedence to the parties’ agreement that if the parties fail to reach an agreement, the seat of online arbitration is considered to be the location of the CIETAC.
With the rise of ODR and Jurisprudence around it, the seat-venue determination conundrum also has an extensive discussion list to cater to. Institutions around the world are hence making robust guidelines and agreements to sustain the need for an online setup while India is releasing thesis and documentation on how effectively ODR can be implemented across the country as we progress in an era of technological advancement with greater scope for expansion in the field of Arbitration, Mediation and Conciliation laws and practices.