What is the Seat of Arbitration in an ODR?

The world is slowly moving towards an Alternative Dispute resolution (ADR) mechanism to replace the inefficient judicial system about which we in India have been shedding tears from time to time. After the passage of the Arbitration Amendment Act in India, there is a greater premium placed on timely and early completion of arbitration proceedings and reduction of Counter interventions to delay ongoing or concluded arbitration proceedings.

With this new found interest in ADR, the industry is also keenly watching the developments under the UNCITRAL Model Law on ODR which is ready to be released any time focussing the attention of the industry on online dispute resolution mechanisms which can contribute significantly to the speeding up of the ADR process.

India has already taken the first step towards this direction since the Amended Arbitration Act has made a specific reference to the use of Electronic Documents for the purpose of communication in the ADR process. Besides, India has through the Information Technology Act (ITA2000/8) unambiguously indicated that electronic documents are recognized as much as any paper documents whether it is in arbitration proceedings or otherwise. Courts in India have also used “Video Conferences” in a number of occasions to capture evidences and incorporate them in the court proceedings.

In this context the new initiatives that are surfacing in India in the form of Virtual ODR (as represented in odrglobal.in fortified with a Section 65B (Indian Evidence Act) certified electronic recording of the proceedings represent the future of ADR in India and elsewhere.

When a virtual ODR meeting takes place, one of the concerns that arbitrators of the yester-era would encounter is how we can interpret the “Seat of Arbitration”. After the Balco judgement of the Supreme Court, some are vary that if the seat of arbitration is ambiguous, that in itself can lead to a judicial intervention and delay the proceedings.

The concern is justified since any omission of the specific mention of the “Seat of Arbitration” in the arbitration contract can result in the arbitral proceedings becoming a subject of jurisdiction of the venue of the arbitration. Even though the governing law of the contract might have been determined in the contract, it is necessary that the Arbitration clause mentions the “Seat of arbitration” which can determine the jurisdiction of the Courts in a litigation on the arbitral proceedings.

While the “Venue” of an arbitration can be different from a “Seat”, if there is no mention of the “Seat” then “Venue” may be implied as the “Seat”.

While a specific mention to the effect “The Seat of the Arbitration shall be India” can remove any doubts in this regard, it is interesting to note that there is some concern when no such specific “Seat Clause” is included in the contract or the arbitration clause.

However, in India there is guidance in the ITA 2000/8 of how the intention of the parties is to be interpreted when a contract is consummated in cyber space.

In the case of a Virtual ODR, the arbitration is deemed to be held in Cyber Space. Cyber Space does not belong to any specific country since it is an “Imaginary transaction space created by binary documents”. If therefore a dispute on a cyber space transaction has to be adjudicated by the physical judicial authorities, we need to agree upon the appropriate method to choose the jurisdiction of the Courts.

Under ITA 2000/8, whenever an electronic communication is sent, it is deemed to be sent from the place of usual residence of the sender (unless there is an agreement to the contrary in the contract). If therefore we consider an electronic contract where an offer is sent and an acceptance is give, the place where the acceptance is given becomes the place where the contract is effectively consummated and becomes one of the factors that may determine the jurisdiction in the disputes arising out of the contract.

If therefore the “Virtual ODR” is set up based on a contract struck in India, it becomes a subject matter of Indian Courts. (Unless there is a contract to the contrary).

If therefore a virtual ODR is conducted on the platform such as odrglobal.in and the request is initiated by Mr X and responded to by Mr Y, the acceptance that concludes the contract may be the “Usual Place of Residence” of Mr Y subject to how the “Offer” is structured. If the “Offer” is structured with the prior condition that it shall be deemed to take place in India, then it obviously determines the seat of arbitration as India.

If however the parties want the seat of arbitration to be other than India, they are free to state so in the Arbitration Clause or in the correspondence while accepting the platform.

When the seat of arbitration is India, the procedures of ODR determined by the Indian company administering the ODR will automatically be subject to dispute resolution with the intervention of the Indian Courts. Then the acceptance of Section 65B certification should also be easy to presume.

However, when the seat of arbitration is outside India and the procedures of ODR are subjected to the scrutiny of a foreign country, then it becomes essential to refer to the laws in the specific countries which may determine the evidentiary value of the certified record of the proceedings or other regulations adopted by the ODR platform or the arbitral house using the ODR process.

It is in this context that the UNCITRAL Model Law on ODR becomes relevant to those using the ODR platform for international arbitrations. If the platform such as odrglobal.in is compliant with the UNICTRAL Model law, then the possibility of the ODR process being a subject matter of dispute is reduced or even eliminated. The arbitral house however needs to adopt its procedures which are unimpeachable from the view point of the law applicable to the seat of arbitration.

Apart from this, it may be noted that the Amended Arbitration Act provides under section 2, that

“… that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.”.

Section 9 refers to the interim measures in which a Court can intervene. Section 27 refers to assistance of court for taking evidence and section 37(1) and 37 (3) refers to appeals.

In view of the above, in a virtual ODR process, the parties are free to declare a specific seat of arbitration or proceed with the implied seat as India and if they do not do so, they may come under the jurisdiction of India by default irrespective of the Governing law.

I suppose this clears the concerns that some may have on the use of Virtual ODR which is otherwise considered as the “Future of ADR” and India is one of the first countries to have taken a decisive step in bringing the Virtual ODR service to a usable platform.