Online Dispute Resolution in India: Feasibility, Challenges and the Future

Introduction

According to the United Nations Commission on International Trade Law (“UNCITRAL”), Online Dispute Resolution (“ODR”) is a mechanism for resolving disputes facilitated through the use of electronic communications and other information and communication technology. As alternative dispute mechanisms are increasingly becoming the most favored means for the resolution of disputes, especially with respect to business disputes such as Business to Business (“B2B”) and Business to Customer (“B2C”), ODR could prove to be a game-changer for Indian businesses, as not only it would help in reducing the costs of dispute resolution in the wake of rising cases, but it would also allow consumers in getting their concerns addressed through an independent third-party firm. Cost-effectiveness, speedy resolution of disputes, and usefulness in resolving cross-border disputes that may arise because of multiple jurisdictions, are some of the many advantages of ODR. Recently, a meeting on “Catalyzing Online Dispute Resolution in India” was organized by the NITI Aayog in association with Agami and Omidyar Network India, where the key stakeholders were brought together to work collaboratively to ensure efforts are taken to scale ODR in India. It was also discussed that ODR could enhance access to justice and ease of doing business as it would be essential in reviving the economy of the challenges posed by COVID-19. However, despite its numerous advantages, its effective implementation in India would involve certain challenges. The present article attempts to contemplate the feasibility, challenges and possible solutions for making ODR an efficient reality in India.

Legislative and Judicial Framework Available

Currently, as a consequence of adopting the UNCITRAL Model Law on Electronic Commerce in 1996 and the Model Law on Electronic Signatures in 2001, there exist provisions in the Indian legislative framework that have enabled the accommodation of online processes such as sharing of virtual documents and hearings which could be used for the practical implementation of ODR. Electronic evidence is recognized under Sections 65-A and 65-B of the Indian Evidence Act, 1872. Also, the Information Technology Act, 2000 (“IT Act”), under Sections 4, 5, 10-A and 11-15, recognizes digital signatures to validate online contracts.

Moreover, the Supreme Court of India, through its various decisions has played an integral role in setting a strong foundation for ODR in India. In M/S Meters and Instruments Pvt. Ltd. v. Kanchan Mehta, it was observed that there is a need to consider cases such as traffic challans and cheque bouncing, which can be partly or entirely held online, without requiring the physical presence of the parties involved. It was also observed that the use of technology is essential not only for paperless courts but also to reduce the overcrowding of courts. Further, in State of Maharashtra v. Praful Desai, where the validity of video conferencing as a mode for taking evidence and testimonies was upheld, the court also called virtual reality, the actual reality. Similarly, in Grid Corporation Orissa Ltd. v. AES Corporation, it was held that it is not necessary for people to sit with each other in the same physical space if consultation could be achieved through electronic media and remote conferencing. Moreover, both in Trimex International v. Vedanta Aluminium and Shakti Bhog v. Koala Shipping, the Court has recognized the validity of online arbitration by holding that as long as the required compliance is made with Sections 4 and 5 of the IT Act read with Section 65B of the Indian Evidence Act, 1872 as well as the Arbitration and Conciliation Act, 1996 (“A&C Act”), an online arbitration agreement would be valid.

Current Challenges for Effective Implementation in India

One of the biggest challenges with respect to the implementation of ODR in India is the lack of privacy and issues related to cybersecurity. In case the concerned network is not secured with adequate encryption, it could lead to sensitive information being misused or released publicly without due authorization. As confidentiality has been made a statutorily mandate except when it is necessary to publish the arbitral award, through the 2019 amendment to the A&C Act, sharing sensitive data to a third party can cause serious confidentiality concerns. Additionally, the impersonal nature of the arrangement and the lack of in-person interaction is another challenge that comes with the ODR process. Factors such as real-time emotional reflexes, body language and alike help in establishing the trust between the parties and play a significant role in changing the course of the proceedings, especially during a cross-examination, and ODR provides no opportunity for any such human embodiments.

Even though the law permits ODR, there is a need for sufficient infrastructure to support it. The availability of digital infrastructure and strong internet services is still lacking in India as even with more than 600 million internet users, the internet penetration rate remains to be around 50%. This is mainly because of lack of infrastructure, affordability and awareness. Due to the inadequate reach of technology among citizens, there also remains a lack of trust in technology. Moreover, as proceedings take place over the internet, challenges with respect to jurisdiction also arise and could lead to situations of forum shopping with respect to national arbitrations. As the seat of arbitration determines the substantive law, it would remain unclear and could cause inordinate delays in the process.

Furthermore, the ODR regime in India as it stands today, depends on independent service providers providing dispute resolution facilities, separate from the judicial system and without the requirement of registration. Due to their independence, there is no supervision of Courts over these proceedings and nor are they referred to by the Courts. Since the service provider itself appoints the arbitrators, it becomes difficult to ascertain the competence of arbitrators due to the absence of knowledge of their credentials. This also creates difficulties in assessing the authenticity of the existing ODR service providers. Therefore, the absence of an appropriate regulatory and governance mechanism makes the regime susceptible to corruption and exploitation.

Possible Solutions and the Way Forward

Foremost, it is extremely important to have an enforcement mechanism to make ODR a viable and efficient reality in India. As mentioned above, since the service providers are independent of the judicial system, it could lead to objections and questions regarding their binding nature and the enforcement of awards. In this regard, reference could be made to WIPO’s UDRP process which is one of the most famous ODR mechanisms in place, where not only do the parties consider it binding upon themselves but judicial enforcement is also facilitated across jurisdictions.

Furthermore, in order to address jurisdictional concerns, it is also important to create a uniform system of procedural and substantive rules governing ODR in India. Similar to the development of the A&C Act in India, reference could be made to the technical rules adopted by the UNCITRAL which provide suggestions for governing ODR at an international level. Moreover, in order to address the confidentiality issues, it should be ensured that there are guidelines and standards which mandate encryption of documents along with a stringent privacy policy, the details of which should be informed to the parties. Lastly, ODR platforms should also endeavor to make the process inclusive by providing for facilities such as user-friendly interfaces, translations in regional languages, special features for people with disabilities and alike.

According to the National Judicial Data Grid, India has a whopping 32 million pending cases with research indicating an average wait time of 17 years from start to finish. Due to an overburdened court machinery and a lack of conflict management creativity, India’s progress is being weighed down. Therefore, it becomes important to overcome the challenges that could reduce the efficiency of the ODR system in India. It is apparent that India already has the legislative and judicial backing for adopting ODR. What is required is an effective strategy for transformation that would cater to the immediate as well as long-term needs. Investing in ODR through the adoption of an advanced second-generation technology can help India progress towards a modern justice system. It is likely that these newer technologies, ones which not only employ legal principles but can also expand to better economic principles for settling civil disputes, will in all likelihood originate from the private sector. It will therefore, be important for the judiciary and the executive to partner with these capabilities and adopt them for the larger public use. The future of dispute resolution lies with technology and ODR can play an important role in this by evolving techniques for better neutral evaluation of legal relationships for early measures. This would not only speed up the disposal of cases due to the infusion of technology, but would also help in creating a conducive environment for domestic and foreign trade and investment, thereby making the country a suitable destination for businesses with a high rank in the ease of doing business index.