Arbitration Act Amendment opens doors for ODR

The Arbitration and Conciliation Act 1996 (ACA-1996) was amended on 31st December 2015 bringing in some major revisions that brings the Indian regulatory system of ADR (Alternate Dispute resolution) to global standards.

The first notable amendment is the amendment in Section 4 to “include Communication through Electronic means”  for creating an Arbitration agreement. Though this amendment was not required since the Information Technology Act 2000 amended in 2008  (ITA 2000/8) , again through Section 4 of that Act read along with Section 1 (4) and Section 10A, already enabled contract formation through electronic documents. However, by specially including this in the Arbitration Act doubts if any with some of the practitioners have been removed.

We must remember that while formation of Arbitration contracts can be through electronic documents, there is a need for appropriate authentication in the form of digital/electronic signatures.  Further, arbitration proceedings may some time contain associated documents some of which may fall under the excluded document category under ITA 2000/8. In such cases, the “Procedure” has to be suitably fine tuned to ensure that such of those documents which are not recognized in electronic form may be exchanged in physical form if they have to be considered as evidence. Since the “Procedure” needs to be defined by the Arbitrator, he can take care that electronic documents are used for quick exchange of information and evidence while physical documents can be taken on record through back up means.

One of the most important provisions of the Amendment is the insertion of the “Concept of Fast Track Arbitrations”. Fast tracking of the dispute resolution process is considered as a key requirement under which the country ranking under “Ease of Doing Business” is measured. In a Country where there are not less than 5 crore pending cases in Courts which languish for years, it is a priority to introduce ADR which can get quicker resolutions. According to the new section 29A introduced in the Act, Arbitral awards need to be completed within 12 months. Further if the award is made within 6 months, it is considered as a fast track process and the arbitral tribunal will be entitled to receive additional fees. This is an incentive for fast tracking.

At the same time, if the award is not completed within 1 year and an extension of 6 months that can be granted by a Court, the mandate of arbitration may be considered as closed and a substitute arbitrator can be appointed. In certain cases the delay may be condoned with a reduction in the fee of the arbitration institution.

Thus by an incentive and disincentive, the Act tries to get arbitration proceedings to be completed between 6 to 18 months. Even while granting the 6 month extension, the Court may consider changing the arbitrators if in its opinion it is necessary to get the proceedings completed within the extended time.

When a proceedings is fast tracked, there is always a pressure of time on the Tribunal. In such cases, they may consider dispensing with oral hearings unless specifically required.

It is in this context that the Virtual ODR system (check for details at odrglobal.in) becomes critical to compress the arbitration time without losing on the opportunity for parties to present their cases orally and through documents to their satisfaction.

India presents a special legal jurisdiction for conducting such Virtual ODR proceedings because of the ITA 2000/8 and the presence of Section 65B of Indian Evidence Act. As detailed by ODR Global, it is possible to create a video recording which is an admissible evidence if the proceedings are to be challenged further . Since the objective of ADR as a fast track tool of dispute resolution cannot compromise on the delivery of justice, some times, challenges of arbitral awards do happen and has to be entertained. But with the evidence of how the proceedings were conducted being on certified record, Courts would find it easier to take decisions on the appeals and this makes the proposed service a path breaker.

As regards International Arbitrations, UNCITRAL is in the process of creating a model law for arbitration which also includes electronic form of communication to be used. It appears that the Indian Arbitration Act is already in compliance with the proposed model law of UNCITRAL and with the availability of services for Virtual ODR, India appears to be ahead of other countries in implementing the fast track ADR process.

India was one of the early adopters of the UNCITRAL model law on E Commerce which became the famous Information Technology Act 2000. Now India has another opportunity to lead the globe by adopting ODR even while UNCITRAL is in the process of completing its recommendations since the Arbitration amendment act along with ITA 2000/8  is a powerful combination which makes India ready for UNCITRAL model law for ODR even before the rest of the world is. Good for projecting the Digital India readiness and better Ease of Doing business ranking next year. If properly used, India can be a global hub for ODR which in other words also means a global hub for ADR.

Everything depends however on the quickness with which the advocate community can adapt to the system of conducting proceedings online.

Na.Vijayashankar