ONLINE DISPUTE RESOLUTION: A Step Forward

-by Anwesha Singh & Alivya Sahay

The internet has brought about a radical change by revolutionizing technological inventions. In recent times, the different mechanisms of alternate dispute resolution (“ADR”) procedures have absorbed within it the system of Online Dispute Resolution (“ODR”). ODR in India is in its outset stage and is fast gaining importance.

Concept of Online Dispute Resolution:

ODR refers to “a wide class of alternate dispute resolution processes that take advantage of the availability and increasing development of internet technology.”It encompasses within itself negotiation, mediation and arbitration. This system works as an arrangement, wherein, there is a peaceful resolution of disputes between the parties via the internet. There are currently three ways to deal with ODR: the internet, non-adjudicative ADR, and arbitration. The first one places its reliance on the Internet and information technology (IT). The purpose of the same is to find better, quicker and less expensive approaches to resolve disputes with the aid of technology. The non-adjudicative ADR approach centres on negotiation and mediation, and how to improve both communications and relationships between parties. The third approach emphasizes the rights and applications of law to determine the dispute with the assistance of an arbitrator’s decision.

ODR systems use synchronous as well as asynchronous communication in the process of resolution. The online environment in ODR is essentially a set-up making use of technology and communication facilities. This form is bound to include the usage of telephone, fax, or e-mail facilities or any other mode available which can be beneficially used to solve disputes.

The Information Technology Act, 2002[i] read with the Indian Evidence Act, 1872[ii] lays down that electronic evidence can be conclusively presented and given legitimate recognition under the Indian legal framework. The usage of video conferencing to record the statement of witnesses, which satisfies the object of Section 273 of the CrPC, was duly recognised in the case of State of Maharashtra vs. Dr Praful B. Desai by the Apex Court. Even in the landmark cases of Tata Sons v. The Advanced Information Technology Association and Maruti Udyog Limited v. Maruti Software Pvt. Ltd., WIPO, the Arbitration and Mediation Centre was used to solve the ‘Domain Name’ dispute.

Blockchain Arbitration as a Facet of ODR:

A blockchain is a form of a digital ledger, a database, where public information (block) is stored while connecting it to a network (chain) of computers (nodes). A single block houses thousands of transactional data of multiple users with a unique identifying code of its own called a hash. This Distributed Ledger Technology decentralizes the stored digital asset, making it unalterable and transparent through cryptographic hashing. One of the several uses of this technology is witnessed in the form of ‘smart contracts’. Smart contracts are lines of codes or programs, stored on the blockchain, which automatically execute itself when the set terms and conditions are fully performed.

These computer coded agreements have three integral parts: 1) digital signatories, 2) subject of the agreement which is capable of functioning in a smart contract environment, and 3) specific and detailed terms and conditions. French multinational insurance firm AXA’s “smart-insurance” platform, Fizzy, is an example of a well-functioning smart contract.

Various efforts are being made to introduce blockchain arbitration through smart contracts. One method of carrying this out is through on-chain arbitration. Under this, the smart contract would be programmed in a way that in case a dispute is invoked, any identified assets of the parties would be transferred to a locked storage unit which would be accessible only by the adjudicator upon rendering the arbitral award. The submission of claims, counter-claims, evidence, etc. can be done by a basic user interface. The appointed arbitrator can then access the interface, review the documents submitted, and render a decision. Post this, the stored assets can be automatically transferred to the party concerned by an amendment in the smart contract. Another method is through off-chain arbitration, whereby, instead of the automatic recognition of awards, only certain procedural aspects of arbitration will be automated through the smart contract. Certain software companies like CodeLegit and Kleros are increasingly developing the blockchain technology to provide a better automatic ODR mechanism.

A Case Study of ODR in India:

ODR is not an alien concept in India with organisations such as Legalfree, Perry4Law Organization (PTLB), Department of Consumer Affairs, etc. providing such online services. These services, if appropriately implemented, can be utilized for all sorts of disputes ranging from commercial or consumer ones to employment or even family disputes.

Need for Appropriate Regulation

E-commerce websites should be mandated to either collaborate with some independent ODR platform or establish one of their own on the website itself to deal with the arising disputes. Ministry of Electronics and Information Technology or Telecom Regulatory Authority of India (TRAI) could take up the responsibility of e-commerce governance including ODR for uniform regulation of the same.

Measures for Effective Compliance

In order to ensure compliance with the decision given in ODR, a contractual agreement in this respect can be signed before commencing with the dispute resolution. Moreover, cyber courts for obtaining a binding resolution, and the threat of losing the good reputation and trust marks of ODR organisations on the e-commerce websites, are other ways to ensure adherence to the award.

Improvement in the Existing Apparatus

In addition to the standard online negotiation process by the use of chat rooms and video conferencing, blind bidding negotiation services could be discharged for the determination of the economic quantum in case of a settlement. Improved administration of ODR can be carried out by better facilities for teleconferencing, secured video conferencing, highly shielded and encrypted chat-rooms, complete digitization of signatures and records with high-end security, and an overall transparent process. Organisations should have an exhaustive privacy policy. A provision for communication in languages other than English should be made for these online services to successfully reach every corner of the country. Furthermore, courts also need to take active efforts to integrate ODR within itself for its widespread recognition. Courts could mandatorily allow the resolution of certain kinds of cases first through ODR, only, such as motor vehicle accident cases or small torts’ claims.

The entire ODR process needs to be as inexpensive as possible while also having a strict short time limit fixed for the redressal. Otherwise, by being no different than the present ADR processes, ODR will lose its momentum. The public has to be adequately made aware of the availability of these online facilities. Also, more funding for apposite training of the personnel is required. Uniform standards and rules for ODR should be meted out, along with stronger security mechanisms for its better implementation.

Status of Blockchain Technology in India

Though blockchain arbitration has not been developed in the country yet, the requisites for it are well in place. The technology of blockchain is increasingly being adopted by the government and private institutions alike. The blockchain-based coffee e-marketplace was activated in New Delhi in 2019.

A smart contract satisfies all the essential elements of a valid contract.[iii] It has also been explicitly recognised by the TRAI in one of its regulatory notifications of 2018. For instance, Bajaj Electricals has entered into a smart contract with Yes Bank for simplifying its elaborate and cumbersome payment system for vendors. The Supreme Court has lifted the ban on cryptocurrency trade imposed by the RBI, further legitimising the payment mechanism adopted by these contracts. Even if the system of cryptocurrency is disregarded due to lack of proper regulations, an alternative payment method of Prepaid Payment Instruments can be utilised which is adequately backed by law. Smart contracts can, thereby, be legally executed in India.

Administering Arbitration Through Blockchain

The Arbitration and Conciliation Act explicitly recognises an arbitration agreement[iv] in the electronic form which has also been affirmed by the Supreme Court in the Trimex case. Thus, an arbitration clause can be validly encoded in a smart contract. Post this stage, there can be a gradual shift from off-chain arbitration to on-chain arbitration, in accordance with the public response, technological knowledge and expertise available. Pre-programmed rules, steps and interactions can be used for cases involving an elementary determination of facts and simple awards.

Whereas, for more complex cases, the “Pause and send to Arbitrator” function can be initiated. Arbitral institutions are currently in the best position to kick off-blockchain arbitration and should be granted the necessary finances. A choice of an arbitrator can also be granted via coding in the smart contract itself. Arbitrators have to be adequately trained for dealing with smart contracts as well as in cyberspace norms and practices. The institutions should formulate extensive guidelines governing the entire procedure of the blockchain arbitration, its own privacy policy, the arbitrator’s roles and duties, the manner in which the award is to be rendered and the subsequent enforceability. In a time like now, with the pandemic putting everything to a halt, ODR is more relevant than ever.

Conclusion:

With pending cases running in thousands in India, alternative forums have to be mandatorily developed for speedy justice. ODR will annihilate the hurdles of the uncertainty of time, cost and location that cause delays in ADR mechanisms. Moreover, in light of the Digital India campaign ODR should be upgraded, as soon as possible, to integrate blockchain technology in its operation for faster and more convenient results. The future of dispute resolution in India seems brighter today, with more and more organisations providing such online services.

The views are personal.

Image Courtesy: ADRtoolbox.

ABOUT THE AUTHOR

Anwesha Singh is a fourth year law student at ILS Law College, Pune and Alivya Sahay is a third year law student at Chanakya National Law University, Patna.

[i] Information Technology Act, 2000, No. 21 of 2000, § 4,5,10-A,11-15, (2000).

[ii] Indian Evidence Act, 1872, No. 1 of 1872, § 65A, 65B (1872).

[iii] Indian Contract Act, 1872, No. 9 of 1872, § 10, (1872).

[iv]The Arbitration and Conciliation Act, 1996, No. 26 of 1996, §7(4)(b), (1996).

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