Case for creating a Cyber Disputes Mediation and Arbitration Center

The Cyber Appellate Tribunal (CyAT) which was envisaged under ITA 2000/8 as the national appeal authority over all the adjudication offices is finally confined to history.

Despite being in existence from 2000 upto 2017, the CyAT could not come to a single valid decision. The one decision in which CyAT was close to a decision was ICICI Bank Vs S Umashankar which was posted for judgement on July 3, 2011 when everybody know that the then Chair person was retiring on June 30, 2011. Since then, untill now, Governments could not find a Chair person and CyAT remained non functional.

Now with the passage of the Finance Act 2017, CyAT has been legally closed and merged with TDSAT. (Telecom Disputes Settlement Appellate Tribunal).  TDSAT  needs to formulate its procedures to hear the past cases which are pending before CyAT (Closed) and to take up future cases.

It is observed that while appeals from TDSAT in its current Telecom related disputes go to the Supreme Court, the appeals of CyAT cases will under Section 62 of ITA 2000/8 will go to the High Courts as in the past. Currently the Chair person of TDSAT is a ex-Supreme Court judge or at least a Chief Justice. How would he like his decision to be reviewed by the High Court without feeling uncomfortable?… is one of the several issues that we may need to resolve to ensure smooth transition of CyAT into TDSAT.

While the TDSAT and the Government sorts out these, it is time for Citizens and other Stakeholders to make their own efforts to ensure that the interests of the Cyber Crime victims are protected and there is a functional Cyber Judicial system in India accessible to all.

In this context, I would call upon interested persons to join hands in setting up a “Cyber Disputes Mediation and Arbitration Center” and try to provide an alternate mechanism of dispute resolutions outside the statutory bodies such as the “Adjudicator” and the “TDSAT”.

Obviously, if the mediation fails, the other alternatives including Adjudication remain open.

If the arbitration is agreed upon but later challenged, there is already a mechanism where by the High Court comes into the picture and the dispute resolution gets back on the statutory platform.

There would be some questions raised as to whether an “Arbitration Contract” would be ultra vires the Information Technology Act 2000/8. Section 61 of ITA 2000/8 bars the jurisdiction of the Courts. But “Compounding” is part of ITA 2000/8 and is available for all Civil disputes and most of the Criminal charges under the Act. Hence, an “Arbitration Contract” or a “Mediation Settlement” must be considered as being well within the provisions of the Act.

Keeping the tradition of Naavi in setting up services based on the concepts that are futuristic, Naavi now intends laying the foundation stone for a “Alternate Disputes Resolution Center” for Cyber Disputes. Presently, it will be developed under www.adr.ind.in  (under construction)

It is intended that it will use the services of odrglobal.in as a platform for online dispute resolutions and may also use physical meetings.

This is a concept being seeded now and it requires mentors and participants to make it take root and grow into a full grown tree that can provide shelter to the Cyber Crime victims.

The first set of participants to this endeavour that I am looking forward to are the Cyber Law experts who have the capability of being the “Mediators/Arbitrators” or helping the parties to the dispute as counsels. They can register themselves as “Counsellors” and offering their services for Mediation or Arbitration to the disputing parties.

Naavi will be the promoter and administrator who would like to develop this ADRC for Cyber Disputes as a Mediation cum Arbitration Council with its own set of model rules.  This will take time and also needs assistance from like minded persons.

ADR-C-FCD is intended to function as a “Not for Profit” organization, though ODRGlobal.in which is presently owned by Naavi will continue to be a commercial proposition providing its services at a cost.  This limited conflict is considered inevitable at this point of time.

Initially,  adr.ind.in will focus on spreading the ADR knowledge and function as an ADR Knowledge Center. This may remain the main activity of the Center until this concept which is revolutionary in certain respects gains acceptance of the community.

The acceptance will be visible when some of the “Intermediaries” such as Banks or Mobile Wallet service providers etc start accepting this Center as a part of their grievance redressal mechanism. I am prepared to wait for this to happen over a period of time.

I look forward as always for comments from other domain experts in the area of Cyber Law, ADR and Information Technology to nurse this thought further towards practical implementation.

Naavi

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Indian Institution of Technical Arbitrators holds an awareness workshop

The Indian Institution of Technical Arbitrators (IITARB), Bangalore had organized an awareness building lecture yesterday, the 3rd April, 2017, at the Association of Consulting Engineers, K R Circle.

The event was meant to build some awareness about “Arbitration” among the members of IITARB which mainly consisted of Civil Engineers who are engaged in consultancy based on their Civil Engineering Expertise.

The meeting was addressed by Mr C.N.Sundareshan, Secretary, ICADR, (International Center for Alternative Dispute Resolution, Bangalore) who explained the role of technical experts as “Arbitrators”.

The meeting was well attended by many consulting engineers many of whom are presently engaged as “Certified Valuers” of properties. A few senior Consultants had some experience in acting as mediators/adjudicators of dispute in their official capacity.

However, a large number of participants were new to the field of Arbitration and therefore it was a first exposure to this emerging field of practice where domain experts have a role to play in resolving disputes.

The event was a good effort on the part of IITARB, Bangalore to kindle the interest on Alternative Dispute Resolution among the members. The organization has a large number of members with Civil Engineering expertise and has a good potential to develop into an expert dispute resolution forum in due course.

Ujvala.in invites the members of IITARB to join the movement of ODR initiated by Naavi by participating in the online awareness exercise undertaken by Naavi through ujvala.in as well as Naavi.org.

Naavi

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Date of Applicability of the New Arbitration Act

The new Indian Arbitration and Conciliation Act (ACA-2016) which was notified on 1/1/2016 and made retrospectively effective from October 23, 2015 (The date when the related ordinance was notified) has changed the nature of Arbitration law in India to the extent that we need to look at all judicial precedence in the old Act with skepticism as to its applicability in the new regime.

Recently, the Delhi High Court had to adjudicate whether the amendments which are deemed to be effective from 23rd October 2015 apply to an award made prior to that date and lying before the Court on an appeal.

This was the case of Ardee Infrastructure Ltd V Bhatia. In this case the arbitration had been commenced before October 23, 2015 and an appeal had been preferred before the Court. In he old Act, when an appeal for setting aside of an arbitration award has been made under Section 34, it also operated as a stay on the arbitration award. In the amended act, “Stay” required an express granting of the “Stay” by the Court and a mere admission of the appeal was not considered as automatically granting a “Stay”.

The Single Judge of the Delhi High Court in an order dated May 31, 2016 ordered that the appellant (Ardee) had to deposit Rs 2.7 crores to the Court without considering the admission of the appeal as a “Stay”. The aggrieved party then had invoked a challenge before the Division Bench. The Division Bench set aside the order to the extent that it imposed a condition that the appellant had to pay Rs 2.7 crores on January 6, 2017.

The view was that the amendment did not apply to the current case since there was an “Accrued Right” under the Arbitration as per the old Act which could not be disturbed by the amendment.

According to the provisions of Section 26 of the Amendment Act,

“Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act”.

The Division Bench did recognize that there was an ambiguity in this respect as to the term “arbitral proceedings” is restricted to the proceedings before the Tribunal or extends to the proceedings before the Court also.

It however ruled not to interfere with the accrued right of the appellant and decided that the amended act is applicable only for arbitration commenced after October 23, 2015.

Naavi

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Seat of Arbitration in an ODR

One of the concerns of arbitrators intending to use ODR facilities is the doubt about how the Courts may interpret the “Seat of Arbitration” and apply relevant laws.

The applicable law in the case of an arbitration is relevant for seeking any interim relief during the process of arbitration as well as for appeals after the arbitration besides for interpreting the law related to the dispute.

The choice of the applicable law may depend on the residence of the disputing parties as well as the place where the underlying contract was performed. Ideally, the parties to a contract should chose the applicable law within their contract which will apply to interpretation of the legal issues involved in the performance of the contract.

This may however be insufficient to determine the law applicable to the conduct of the arbitration proceedings which is initiated as a dispute resolution mechanism.

Where no mention has been made about the applicable law for the arbitration proceeding, the convention has been to take the reference of the place where the arbitration is held as the basis for applying the procedural law regarding the conduct of the  arbitration. This is normally referred to as the “Seat of Arbitration”.

It is necessary for us to appreciate that the “Seat of Arbitration” may be different from the “Venue of the Arbitration” if the parties so chose to describe.It is possible that an arbitration proceeding can be held at multiple venues though the designated seat of arbitration could be the place where the Courts will apply their jurisdiction to the procedural aspects of the arbitration.

In India the law of arbitration has to be viewed as “Pre-Amendments of 2015” (Before Amendments or BA) and “Post amendments of 2015” (After Amendments or AA).

In the BA period, the guiding principle was the Supreme Court decision on BALCO Vs Kaiser Aluminium Technical Service Inc where it was held that ” the choice of another country as the Seat of Arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of Arbitrations will apply to the proceedings.”

According to this, if the Arbitration agreement was found or held to provide for a Seat / place of Arbitration outside India, then even if the contract specified that the Indian Arbitration Act shall govern the arbitration proceedings, Indian courts could not exercise supervisory jurisdiction over the Arbitration or the award.

It is an established principle of law (Delhi High Court, in the case of PCP International Limited (“Petitioner”) v. Lanco Infratech Limited (“Respondent”), OMP (I) No. 350/2015) that parties by consent cannot confer jurisdiction on a court which does not have jurisdiction. The choice of parties with respect to conferring exclusive jurisdiction on a particular court is limited to the courts that hold concurrent jurisdiction in accordance with the principles contained in Section 20 of the Code of Civil Procedure, 1908 (“CPC”).

The Delhi High Court in the above case of PCP International also held ” that the seat of arbitration refers to the legal localization of the arbitration whereas the venue refers to the appropriate or convenient geographical locality for hearings of the arbitration”. When the petition came up for review, the Court accepted the Supreme Court interpretation in the BALCO case, “concurrent jurisdiction vests in the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place”

Hence when parties use a Cyber Venue for arbitration like ODR on ODRGLOBAL.IN, it does not in anyway affect the “Seat of Arbitration” that may be agreed upon by the parties in any of the places where there is concurrent jurisdiction.

In the case of a Virtual ODR, the arbitration is deemed to be held in Cyber Space. Cyber Space does not belong to anybody 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 chose the jurisdiction of the Courts.

Since it is natural for parties to a contract to agree upon the “Seat of Arbitration” either as a part of the contract or when they try to fix a venue for an arbitration, the best option for parties accepting the virtual ODR process of dispute resolution is to state upfront in the contract whether the applicable jurisdiction will be that of the any one of the contracting parties.

Since ODRGLOBAL.IN is an Indian venture, the default jurisdiction by implication (if nothing else to the contrary is indicated), could be considered as India. As regards the domestic arbitration, there is no issue since all the contracting parties are in India and the difference of opinion if any is between one High Court or the other. In the case of any international arbitration, it is open to the parties to agree upon a non Indian country as the jurisdiction for any procedural disputes by stating that country as the seat of arbitration.

In India, the law that defines Cyber Transactions is contained in ITA 2000/8 (Information Technology Act 2000/8). The Arbitration Amendment Act of 2015 (Effective from 23rd October 2015) has specifically accepted “Electronic Communications” for formation of an Arbitration Contract [Section 4(b)] (Though it was always available by the interpretation of Section 4 of ITA 2000/8). Further ITA 2000/8 recognizes the “Place of Usual Residence” of a person sending an electronic communication as the “Place from which an electronic message is sent. Hence, an electronic message that forms a contract is deemed to have been executed from the place from which the acceptance is deemed to have been sent. Thus if the Virtual ODR room is set up under the instruction of the person who starts the ODR process, his place can be considered as the place in which the Cyber Facility gets established as a virtual place of arbitration. If the ODR is invoked by a person from a foreign country, it may therefore be possible to consider his country as the country defining 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.”.(Amendment effective from 23rd october 2015)”

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.

Virtual ODR process of Odrglobal.in also makes use of rendering a recording of the arbitration proceedings with a certification under Section 65B of Indian Evidence Act. In Indian Courts this should have automatic admissibility though in other countries it is open to the Court to admit it as submitted or ask for further affidavit etc.

Odrglobal.in however suggests that the “Arbitration Clause may itself be used to define the seat of arbitration if the virtual ODR facility is used”.

Since the Cyber space will be just another venue, parties are also free to use Virtual ODR of odrglobal.in for some hearings and physical hearings for some others. This will not adversely affect the validity of the proceedings.

Once the UNCITRAL Model Law on ODR is released in its final recommendatory form, ODRGLOBAL will be considered as an “ODR Administrator” and subject to the following of the prescriptions of the model law (Which Odrglobal.in is already following in substantive measure) and hence even in international arbitrations, the use of cyber space will become acceptable.

I suppose this clears the concerns that some may have on the use of Virtual ODR.

Naavi

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Finality of Arbitration Awards under the Amended Act

One of the important changes that the new Arbitration Act in India (Arbitration and Conciliation Act 1996 as amended in 2015 or ACA 1996/2015) has brought in is in the matters relating to the Finality of Arbitration Awards.

Under the replaced section 36 of the Act on “Enforcement”, it is now stated that

” Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.”

This provision means that unless a stay is specifically granted, mere filing of an application for setting aside an award shall not result in the arbitral award being enforced like a decree of a Court.

As a result of this provision, it becomes necessary for the objecting party to satisfy the Court that a stay is necessary and there is a substantial case under Section 34 for the award to be set aside.

Under Section 34 of the Act, an arbitral award can be set aside only if the party furnishes proof that

a) A party was under some incapacity

b) Arbitration agreement is not valid under law

c) Party was not given proper notice of of the  Appointment of the Arbitrator or of the Arbitral Proceedings or that he was otherwise unable to present his case

d) Arbitral award was beyond the scope of the submission to arbitration

e) Composition of the Arbitral tribunal was faulty

Readers will appreciate that the procedure adopted by ODR Global (www.odrglobal.in) for Virtual ODR, effectively captures evidence that can be used to prove or disprove any of the above points when a Court sits in judgement. In the absence of the CEAC certified recording that ODR Global provides, it would be difficult to prove only with the copy of the Award that the point such as “was unable to present the case” can be proved.

Another factor under which the award can be set aside under Section 34 is when the award is in conflict with the public policy of India. This is a clause which is subject to interpretation and debate and could be a difficult aspect to prove.

The points that constitute conflict with public policy are

a) award induced by fraud

b) award induced by corruption

c) award was in violation of Section 75 (Confidentiality clause in a conciliation)

d) award was in violation of Section 81 (Production of evidence used in a Conciliation)

In connection with the above, it must be pointed out that the Virtual ODR process includes a role for an intermediary and the protection of confidentiality of a Virtual Conciliation proceeding rests with the confidentiality agreement that the Administrator of the ODR (eg: ODR Global) signs with the parties to the conciliation.

This view is recognized by the UNCITRAL Draft law on ODR which is in the final stages of being approved by the UN which states that the ODR Administrator shall follow a “Code of Ethics and The ODR administrator should adopt and implement appropriate confidentiality measures”.

Also the application under Section 34 should be made within 3 months after the receipt of the award.

Further the application shall be made only after serving a notice to the other party.

With all these conditions, the Court is expected to dispose off the application within one year.

The above safeguards indicate that getting an arbitral award delayed or over turned is not easy in most cases. In genuine cases, where the award needs to be challenged, the evidence that supports any of the requirements of Section 34 is very important.

A further appeal of the setting aside or refusal to set aside an award under Section 34 can be appealed in a higher Court and could be a possible means of delaying the award by one of the parties. But in view of the fact that “Stay” is not a presumption, the decree can be enforced even if the appeal is being discussed in a higher Court.

Parties entering into Arbitration must be aware of the finality of an award and ensure that at every point of the arbitration such as appointment of the arbitrator, meeting the deadlines in notices, placing its claim or defense, providing evidences before the Tribunal, or pressing for oral hearings and arguments etc, sufficient care is exercised so that they donot lose an arbitration by virtue of the laxity of the disputing party or his counsel. This adds an extra sense of responsibility on the Counsel as well as the choice of the Counsel by the party.

Despite a long history of Arbitration in India, with the new Arbitration Act there is a need for all Arbitrators as well as Counsels to study the material changes that have occurred in the Act an ensure that they donot contribute to any fault or error in the award.

In this connection it is also necessary for the Counsels and Arbitrators not to be mis-led by past Case laws which might have been decided under the old Act and apply it blindly to the new Act. In this connection, we may recall the Sundaram Finance Ltd V NEPC India Ltd  judgement in Supreme Court where the Court observed,

“… The Act of 1996 is very different from the Arbitration Act of 1940. The provisions of the Act of 1996 have, therefore to be interpreted and construed independently and in fact reference to the 1940 Act may actually lead to  misconstruction…”.

The above words hold true in the context of Act of 2015 modifying the Act of 1996 rendering most of the Case laws of the past being rendered not applicable in the current context. Legal professionals by force of habit should not simply quote past decisions and assume that the precedence would be acceptable even under the new law.

It is for this reason that this website tries to discuss the new law in great detail so that we can understand the difference between what the advocates studied and practiced until last year and what they are now confronted with.

Naavi

Further Reference:

At Legalindia.com

At Lakshmisri.com

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Fees payable to Arbitrators under the Amended Act

One of the aspects of the Arbitration Amendment Act 2015 is on the reference to the “Regime For Costs” under Section 31A of the amended Act.

Some of the Judicial professionals have not been happy with the “Model Fee” as suggested in the fourth schedule which is reproduced here below.

THE Fourth SCHEDULE (See sections 11(14))

Sum in Dispute Model Fee
Up to Rs. 5,00,000 Rs. 45,000
Above Rs. 5,00,000 and up to Rs. 20,00,000 Rs. 45,000 plus 3.5 per cent. of the claim amount over and above Rs. 5,00,000
Above Rs. 20,00,000 and up to Rs. 1,00,00,000 Rs. 97,500 plus 3 per cent. of the claim amount over and above Rs. 20,00,000
Above Rs. 1,00,00,000 and up to Rs. 10,00,00,000 Rs. 3,37,500 plus 1 per cent. of the claim amount over and above Rs. 1,00,00,000
Above Rs. 10,00,00,000 and up to Rs. 20,00,00,000 Rs. 12,37,500 plus 0.75 per cent. of the claim amount over and above Rs. 1,00,00,000
Above Rs. 20,00,00,000 Rs. 19,87,500 plus 0. 5 per cent. of the claim amount over and above Rs. 20,00,00,000 with a ceiling of Rs. 30,00,000

Note:—
In the event, the arbitral tribunal is a sole arbitrator, he shall be entitled to an additional amount of twenty-five per cent on the fee  payable as per the table set out above

The above is a “Model” fee structure and the High Court may modify it to the extent required as indicated in the section as under:

(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.’’

However, it can be implied that without a specific enhancement granted by the Court, the schedule fee may be considered as the “Upper Limit” of what the law considers as “Reasonable”.

We may also note that the schedule mentions that if the Arbitral Tribunal is a sole arbitrator, he shall be entitled to an additional 25% of fees. This confirms that what the schedule represents is the total fees that has to be shared by all the members of the Arbitration Panel.

Some of the major Arbitral Instutions  in India used to specify a schedule of fees in their rules and indicate that the scheduled fees would be applicable to each of the members of the Arbitration Panel. This used to discourage the parties in going for multi member Arbitration Panel which is good to enhance the credibility of the Panel. Now that the schedule mentions that the fees mentioned in the schedule is for the total panel, it actually encourages setting up of a multi member panel for all arbitrations.

However, if any Arbitrator or an Arbitration panel decides to charge a fee lower than what is specified, there is no reason for any Court to object.

One should appreciate that today there may be some lawyers who charge lacks of rupees as fee for their appearance but Judges do function under a fixed salary basis. But the salary regime does not incentivise quick disposal of cases and few judges who quickly dispose off cases are actually frowned upon.  The Arbitration fee regime is however based on “Per Case” basis and if an arbitrator can handle multiple cases, he will make reasonable money as compared to a Judge. In case of small ticket arbitrations where the fee may be low, the arbitrator has to complete the arbitration in one or two sittings or without any oral hearing so that his remuneration would  more than compensate for the time, effort and expertise he brings into the proceedings.

It may also be noted that the amended act provides that Arbitrations should be completed within 1 year unless an extension is agreed upon by the parties (upto 6 m0nths)  or granted by a Court and if an arbitrator completes an arbitration within 6 months, he can claim an additional fee with the consent of the parties at the time of appointment.

Another interesting aspect of the Amendement is that if a Court is extending the time allocated for an Arbitration and the reasons for the delay is attributable to the Arbitrator/Panel of Arbitrators, the Court may reduce the remuneration by 5%.

Thus the Act now incorporates a fixed time for completion of arbitration and a possible incentive for early completion and a possible disincentive for delays caused by the Panel. This is superimposed with a model fee structure which could define an upper limit for the fees.

These measures have not been to the liking of some of the Arbitrators who are presently active but are considered as a “Consumer Friendly” move of the Government and reasonable in the context of reducing the cost of dispute resolution in general.

The business community should welcome these moves.

Naavi

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Procedural Flexibility for ADR

Alternate Dispute Resolution (ADR) focusses on delivery of justice free from the complexities caused by the age old processes under which “Litigation” system works in our Courts.

An attempt to improve the litigation process has always been at the heart of any judicial reforms. One example for such attempt is Information Technology Act 2000 (ITA 2000) which introduced the system of Adjudication, as an “Enquiry” process and both Adjudicator and the Cyber Appellate Tribunal were freed from the procedural binding of the Civil Procedure Code while conferring the powers of the Adjudicator and the Cyber Appellate Tribunal equivalent to a Civil Judge.

The system of ADR introduces a whole new paradigm of Dispute Resolution where all desirable innovations can be introduced by an Arbitrator or an Arbitral Institution. No doubt that even these innovations can be challenged, but such objections are difficult to sustain unless it was proved to unfair. In the light of the systems like ODRGLOBAL.IN where the proceedings are recorded and would be available for proving whether the proceedings were conducted in a fair manner or not, objections on the ground of unfair treatment of one of the parties would be almost impossible.

We can therefore say that ADR in general and the unique process used by entities such as ODRGLOBAL.IN in particular, provides for innovation on the party of the Arbitrator that is within the legal process but would provide better convenience, quicker completion and lower cost. The Arbitrator should however take care that the provisions of Arbitration and Conciliation Act 1996 as amended in 2015 (ACA-1996/2016) should be followed diligently. We shall therefore examine some of the key requirements of the Act as regarding the conduct of the proceedings.

The parties to an arbitration first agree on the choice of the Arbitrator (or an arbitral institution which may finally appoint an arbitrator) and a process for appointing them right in the agreement. Once an Arbitrator is appointed to the satisfaction of the parties, the responsibility for the fair conduct of the proceedings pass onto the Arbitrator.

According to section 18 of the ACA-1996/2015, it is the responsibility of the Arbitrator to treat all parties with equality and give full opportunity to present their case. The Arbitrator is neither bound by the Code of Civil Procedure 1908 nor even the Indian Evidence Act as long as the principle of fairness can be proved.

In order to avoid any charge of improper procedure it is desirable that the Arbitrator follows a structured procedure which is also made known to the parties. This is done by arbitral tribunals by developing a set of “Rules of Arbitration” which is applicable to all arbitrations conducted under the aegis of the tribunal by its members.

Such procedure includes the following principal issues

1. How Place of Arbitration is fixed
2. How notices are served and acknowledged
3. How Counsels participate
4. How documents are exchanged
5. How the hearings are held
6. How arguments are presented
7. How witnesses are produced
8. How costs are split
9. How much time is allocated
10. How the award is delivered etc.

Where the parties usually live in different places and the Arbitrator is located in a different place, the choice of the Place of arbitration itself can be a point of contention since it does impose an extra cost of time and money on outstation parties. Unless both parties are located in the same town or they adopt the neutral venue as in the case of an ODR (Online Dispute Resolution) process, the choice of any town is bound to add an element of cost.

Some times, “Experts” are sought to be brought in as “Witnesses” and “Expert Counsels” are sought to be appointed if the subject matter of dispute needs technical or subject matter expertise for satisfactory resolution. If such experts are to travel and stay in the place of arbitration, the party using their services have to meet such costs. In small ticket disputes, these influence directly on the delivery of justice and the ability of the parties to have a satisfactory resolution.

Similarly, the number of hearings in which different parties need to assemble at a particular place multiples the cost unless solutions are found to either rotate the place of hearings between cities convenient to different parties or use of ODR is resorted to.

Also the procedure by which notices are delivered without loss of time and integrity and without providing excuses to any parties to claim non receipt is also a point to be considered while designing the procedure.

While the Arbitrator may be neutral to the way the costs are split between the parties which is a matter to be settled in the contract, he may define his fees as well as the cost of administration, cost of the meeting place to be paid if it is hosted by the Arbitral Institution, cost of travel and stay of the Arbitrator etc. and load it first onto the person who invokes the Arbitration and later based on the award.

If an Arbitrator wants to act as an independent entity not affiliated to any Arbitral Institution, then he needs to develop his own set of Arbitration rules which are reasonable and suit both the convenience of the parties as well as the requirements of the ACA-1996/2015.

In this context, it may be of interest for readers to study the “Model Rules of ODR” that are being formulated by the Global Forum of ODR Professionals working with ODRGLOBAL.IN which needs to be not only in conformity with ACA-1996/2015 but also the Information Technology Act 2000/8 as also the principles of the UNCITRAL Model Law on Arbitrations under development.

The Arbitrators can make use of the Model Rules as a template and tweak them with modifications that they find it necessary for their own Arbitration proceedings. If properly constructed, conveyed to the parties and consent obtained, the risk of the awards being challenged can be substantially reduced and the objective of fair and quick justice delivery which is the core theme of ADR will be realized.

Naavi

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Are We Friends With Benefits?

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No need to step out of your house? No need to stand in long lines? Save time? Save money?

No, I am not talking about booking the movie ticket using the Bookmyshow website.
I am talking about resolving legal disputes online.

Online Dispute Resolution (ODR) treats the Indian Justice System the way it has never been treated before. It makes it less forbidding, easy and convenient.

But then most ODR websites in the world have failed.
Wonder why?

Simply put, they did not get enough disputes. They had to shut down. People did not come to them. They still preferred going to courts.

BUT why?

People did not have trust in this new system. Period.

Let me explain you in a much better way. Are you aware of the term called “friends with benefits”?
I know you are.

Anyway, a study in Journal Archives of Sexual Behaviour clearly noticed that friends with benefits can be convenient sources of comfort, but, and this is a big but, that convenience and comfort oftentimes comes at an extremely high cost. What’s the cost? We know that these kinds of relationships are not “secure” in nature.

There is a war between security and convenience.

Likewise, look at some initial questions which come to people’s minds when they think about ODR-

I have a parenting dispute and I am uploading my personal details. Is it safe?
I am uploading my legal documents. What if they are forged and manipulated? Is it safe?
Who is sitting there on the other side? Is he/she the real mediator? How can I verify the real identity?Is it safe?
All my confidential information is put in an online medium to resolve this dispute. What if it is hacked? Is it safe?

There is no denial that security in ODR is the most essential factor. Unless the system is secure, people will not have trust. Skepticism will prevail.
But do you want to enter into a long term secure relationship with ODR? Read further.

A) IDENTITY VERIFICATION – DIGITAL SIGNATURES

There are several trust-related problems where online transactions and online mediation is concerned. First of all, the identity of the person you are dealing with is not always clear. How can one be sure that the person one is dealing with is who he claims to be? Here digital signatures can play an important part.

Though the concept of digital signature is similar to traditional signatures but in practice they are more difficult to forge. A valid digital signature gives a recipient reason to believe that the message was created by a known sender (authentication), that the sender cannot deny having sent the message (non-repudiation), and that the message was not altered in transit (integrity). It enhances trust. The underlying concept is of public key cryptography and the working can be seen from the following image.

 

digital_signature

Working of Digital Signature

Also,  Information Technology act, 2000 gives a signature or record sent through cyberspace the same legal validity as a pen-and-paper document. There are certain organizations which can issue you the digital signature certificate. More on the procedure followed in India can be found here.

The problem of identity verification is solved

B) DATA SECURITY AND CONFIDENTIALITY – ENCRYPTION

For mediation procedure to be successful, confidentiality is essential. In offline mediation procedure confidentiality is not really a problem. Most communication is oral; transcripts of conversations are usually not made. Any written documents that do exist only circulate in a very small group of people. Though this doesn’t mean that leaks do not take place in the offline world.

This is different with online communication. First of all, the communication takes place in written form over insecure networks. To transfer the data over the Internet there are numerous temporary copies made along the way. This is inherent to the nature of the Internet.

The only way to protect data and to guarantee confidentiality is through encryption. It is the automated process of making data inaccessible to unauthorized people by means of an algorithm and a key. Decryption is the reverse process. A popular method to guarantee confidentiality is the so-called asymmetric crypto system: this system uses two different keys (a public and a private key) for encryption and decryption of data.

TLS (Transport layer security) is a highly recommended mode of encryption which provides multiple layers of security. One should also be aware of the current government standard of encryption.

 

Working of Public Cryptography.

Working of Public Cryptography

Simply put, it means that without the right key no one can read the message. The key, needed to read the message, is sent to the recipient separately from the message and reaches him by another route than the message itself. Thus, your data is safe.

STILL NOT CONVINCED?

Recently, Mediate BC society, which is an ODR service provider, conducted the third phase of online mediation in United Kingdom. The ICTs they used included telephones, web-conferencing & tele-conferencing platforms and emails. In the Practice Guidelines given to the mediators, emphasis was especially given on maintaining the confidentiality and security of the whole communication. They were asked to use the cookie technology to delete any existing data from the computers. Users were blocked from using the recording feature of videoconferencing platform. Documents were provided in “read only” format so they could not be edited. Efficient firewalls and Virtual Private networks (VPNs) were installed to prevent any hacks.

All possible measures were taken to reduce the risk of a data breach. But does it mean there was complete confidentiality and security?

You can simply find the answer by looking at these 2 clauses under the Agreement to Mediate signed by parties going for online mediation-

“v) Each party recognizes that, given the use of information and communication technology, it is not possible to ensure that all communications will be confidential

i) Each party commits to minimizing the chance of inappropriate disclosures, including protecting access to any e-mails, notes or other information relating to the mediation which may be stored in their computers or elsewhere, and to minimizing the consequences of any such disclosures should they occur.”

In today’s world with invent of new technologies every second, it will be ignorant to say that the one particular technology is completely safe. A 15-year-old computer hacker Jonathan James caused a 21-day shutdown of NASA computers that supported the international space station. There was a serious data breach in Sony Picture Studios last November affecting 47,000 employees. JP Morgan was also hacked last year in June affecting 76 million account holders. Various other big companies such as MCS, Kmart, Ebay, Staples etc have been victims of cybercrimes in the last decade.

 

Robert-Muller-Quote

 

If the question is which technology is perfectly safe, then the answer is none. Be doubtful but do not be dismissive. A common misconception that offline is safer than online no longer exists as a result of the massive security breaches that has hit the headlines over the past decade.

Last year in the Haryana, robbers tunnelled through 125 feet of earth and concrete to break into a Nationalised bank secured room and loot cash and valuables worth rores of rupees. The Aarushi Talwar case was in extreme controversies for tampering of the evidence by the CBI. Three correctional officers at the Jack Harwell Detention Center in the US were arrested after allegedly changing documents to make it appear they conducted headcounts following the investigation of a suicide that occurred in the jail. Target, one of the largest shopping retailers in the US, announced that personal information was stolen from as many as 70 million customer accounts between November 27th and December 15th, 2013. This November only large scale leakage of question papers of the Class IX Internal Assessment Examination 2015 happened in parts of Jaintia Hills, Shillong.

The reality is that security concerns exist whether you are online, offline, or on a mobile device. There is no such thing which can be termed as unhackable whether in the offline world or the online one. Whether its the risk of being run over by a mad driver when you step out of your house to the failure of the condom being used by a couple, there is no such thing like a foolproof solution.

 

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Condoms are not a 100 percent secure method for contraception

Now ask yourself.

Does it mean we will stop using them? Don’t we all pile our credit card details into an unproven (or at very least untested) Paytm digital wallet? Have we stopped using condoms? Isn’t online payments a regular part of our life now? Do these big companies such as Sony, JP Morgan shut down after these huge data breaches and stop their services? Have we stopped trusting the NASA?

The answer is No. Lessons were learnt. Damage control was done. It was made sure that such incidents were not repeated again. Better security measures were implemented, thereby reducing risks in the future.

Information leaks and tampering of documents and evidence also happen in the offline world. But with using the latest technologies and all the above mentioned security measures, ODR can be an extremely secure system. It is high time we put our apprehensions aside and think of ways for implementing this system. We do not have to compromise on the security because of the extreme convenience it provides.

One of the living examples of ODR success is Modria which has solved more than a million disputes in the United States of America. The 51 online disputesmediated by the Mediate BC society in the United Kingdom were successful. There was no issue of security.

If they can do it, why can’t we?

This is our chance to have a long term, permanent and secure relationshipwith the justice system. A relationship which is less forbidding, respectful of your rights, simpler and more convenient.

Give it a try and we will make sure you are safe.

P.S: This excellent article is credited to Mr Pranjal Sinha, Kolkata

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Why all Arbitrators cannot be Effective Mediators

Arbitration and Mediation are often spoken off in the same breath as if the two are closely related. Though Arbitration and Mediation belong to the family of “Alternate Dispute Resolution” (ADR), it is to be recognized that the processes are widely different and requires different skills. All Arbitrators donot make good Mediators and need to accept the situation and live with it.

Where as in a Mediation, the intervening neutral party namely the Mediator tries to bring about a settlement between the disputing parties by using his “Behavioural Analysis Skills”, without the legal authority to issue a mandatory order, an Arbitrator has the authority given to him by the parties themselves to issue a binding award.

There is a third type of ADR process called Conciliation which is similar to Mediation but where the Mediator is a person with some authority and respect and therefore can nudge the parties to come to a settlement though his legal authority is not more than that of a mediator.

An Arbitration is more suitable when the disputes are likely to have legal issues to be interpreted. Mediation/Conciliation is more suitable when the issues to be settled are technical in nature or involve emotional issues.

When a legal practitioner is called upon to assist in a Mediation process as a Counsel or act as a Mediator, the legal practitioner has to understand the nature of the dispute and whether he should accept a role in the resolution.

When we try to resolve an “Emotional” issue through a judgement of a Court, even if the judgement is given by an authoritative Court, the parties may end up dissatisfied. Similarly issues in which lot of technicalities are involved may easily be mis-interpreted even by experienced Judicial authorities.

If the objective of “Dispute Resolution” is to bring about an amicable settlement or what we call as a “Win-Win” outcome, there is a need to explore the Mediation and Conciliation options more than Arbitration and Litigation.

An advocate by nature is trained to look at issues from the point of view of a legal provision and earlier Court decisions. Similarly, when a Judge acting as an Arbitrator looks at a dispute, his primary focus again is on what the law says.

Mediation on the other hand works on bringing about a settlement between the disputing parties in a fair manner without any party being mislead about their rights or not being given a fair opportunity to assert their rights.
Some times a resolution which both disputants agree upon may not find a direct provision in law or it may even appear to be different from an earlier Court decision. A trained advocate would find it uncomfortable in accepting it as a proper resolution even when it is the informed choice of the parties.

The Mediator as well as any advocate who participate in Mediation to assist the parties should be able to fully digest this difference between the litigation and arbitration process on the one hand and Mediation on the other and discharge their responsibilities.

In behavioural science, there is a term called “Role Set”. It is a tendency to behave in a set role pattern even when the person has moved onto to a different role responsibility. In a simple example, when a subordinate “clerk” is promoted and pushed into a decision making “Officer” role, he often continues to behave more like the Clerk than an officer, He often is reluctant to take decisions, and expects some body else to take the decision which he may efficiently implement. This has nothing to do with inefficiency but because of a habit formed in the earlier role with which he is comfortable. But in an organizational environment, this “Role Set” behaviour is dysfunctional since any person promoted to a higher responsibility fails to get over his behavioural traits of the previous position and therefore becomes less effective than what he should otherwise be.

In the same manner when a good Judicial person or a Good lawyer moves into a Mediation room, they may have a tendency to replay their litigation experience and bring in the known CPC procedures and Case laws to settle the mediation. They may not realize that their role in the mediation should be only to maintain an informed decision making environment in which the disputing parties come to a settlement in a manner which will retain their friendly relationship with which they entered into the earlier contract so that they can move on in life after resolution as if the dispute is a thing of the past.

There is no doubt that this is difficult for established advocates to appreciate and accept that a “Win-Win” solution is better in mediation than a “Win-Lose” situation which is the average norm in litigations.

It is for this reason that subject experts and non advocates become more effective Mediators as we see in the field of “Marriage Dispute Resolution”. In an emotionally charged situation such as a “Divorce”, it is the spirit of reconciliation which is a better option to be invoked rather than what is the “right” under law. Successful divorce advocates are therefore more “Counsellors” than advocates and should be able to switch roles easily.

Though business disputes need not be as emotional as a divorce, Advocates and Mediators who engage in Mediation must consciously avoid the “Role Set” problem and be able to think differently.

Probably, Mediators or Advocates in Mediation need to undergo a “Behavioural Training” to understand the problems of “Role Set” and how to overcome them.

Naavi

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How Do I Benefit from Arbitration?

At a time when the pendency of Cases in Courts in India has crossed 3 crores and there is no end in sight to the number growing further, everybody who is directly or indirectly involved in business dispute management can appreciate that the ready solution to reduce pendency in Courts can come only from development of ADR or Alternate Dispute Resolution.

However, the existing number of arbitral institutions and the number of active members there in is miniscule to make any significant impact on the reduction of pending cases and lot of ground needs to be covered in the coming days. Also, the larger universe of the community including the advocates are yet to fully utilize the opportunities that the ADR presents for enhancing their career prospects both in terms of participating in ADR as counsels of parties and to act as Arbitrators themselves.

In this context, it is worth discussing according to the Arbitration and Mediation Act 1996 as amended on 31st December 2015, (AMA-1996/2016), who can be an arbitrator and what is the likely reward as also what the Advocates can themselves can do to expand the ADR market.

In order to make use of Arbitration, the first requirement is that a business contract which is in dispute needs to have an “Arbitration Clause” in the contract itself. However, if the contract has failed to include the clause and a dispute has arisen now, it is still open to the parties to now agree to settle the dispute through arbitration though one of the parties may feel it is beneficial for him not to agree and therefore refuse the request.

The first thing every advocate should do now is to review the contracts of all his/her clients and check if a proper arbitration clause has been included in the contract and if not suggest a supplementary contract for the purpose.

A normal arbitration clause would read as under:

“Any dispute arising out of or in connection with this contract, shall be referred to and resolved by arbitration as per the provisions of Indian Arbitration and Conciliation Act 1996.”

If the contracting parties want to use a specific Arbitral institution, they can add

“The arbitration shall take place under ……… Arbitration Council”

Additionally two other clauses one on the number of arbitrators and the seat of arbitration (place where the arbitration shall be held) can also be mentioned.

The AMA-1996/2016 has now enabled the arbitration agreement to be made with the use of e-mails. However, it is essential to ensure that the e-mail communication is in accordance with the authentication requirements under ITA2000/8 which requires the communication to be digitally signed or otherwise documented for legal acceptance. If the parties do not have digital signatures or even as a further assurance, parties may use the service of “Certified Delivery of E Mails” provided by agencies such as ODRGLOBAL.IN so that the existence of a valid arbitration agreement itself is not challenged.

The next decision that the Contract drawing parties need to determine is the choice of the Arbitrator. In this connection, it is open to the parties to choose a permanent arbitral institution. Once an arbitral institution is chosen, the rules of the institution automatically become applicable. The arbitrators can be chosen from among the members listed by the institution. If an advocate would like to act as an arbitrator, he needs to be a member of the institution.

It should however be remembered that no person can act as an arbitrator for a dispute where there could be a real or potential conflict of interest. The AMA-1996/2016 lists out the situations where conflicts of interest are deemed to exist and makes a person ineligible to be an arbitrator. This means that no advocate can be an arbitrator for a dispute in which he has been a consultant of some sort to one of the parties etc. or had direct or indirect relationship professional or otherwise, in the present or in the past. When there are multiple arbitrators in the panel, it is also necessary to ensure that there is no inter-se relationship between the arbitrators which creates a conflict of interest.

When the choice of the arbitrator is left to the discretion of the Arbitral institution, the advocate can examine the antecedents of the appointed arbitrator to raise an objection in case he perceives a conflict of interest so that the proceedings cannot be later challenged.

If an advocate wants to work as an arbitrator, he can opt to be a member of the arbitral institution and expect that he would be chosen by some party. However it is difficult for the parties to understand the expertise of individuals and hence they may leave the decision to the arbitral institution who may adopt their own criteria for selection which can be fair but does not necessarily mean that every young entrant to the role of an Arbitrator would get an equal opportunity or recognition of his expertise, unless like ODRGLOBAL.IN, the agency provides some useful information about the arbitrator that can help his choice without deeming it as an “advertisement”.

One of the expertise that would be required in the coming days is the ability of the arbitrator to use ODR (Online Dispute Resolution) and contracting parties may insist that they would designate only an arbitrator or arbitral institution that is conversant with and uses ODR.

Hence advocates wanting to harness the future growth of ADR business must train themselves not only in ADR but also on the mechanics of ODR.

Advocates drawing up the arbitration agreement can incorporate the requirements of expertise into the clause so that only such of the arbitrators who have the necessary qualifications can be appointed as arbitrators for their contract.

As regards the fees that can be charged by an arbitrator, normally the institution of arbitration would adopt a set of fees which applies to all the arbitrations carried on under its umbrella. The AMA-1996/2016 provides a model fee structure. This is however only a “Model” and arbitral institutions can draw their own fee structure. Ideally the fees adopted by the arbitrator/arbitral institution should be less than what is indicated in the Act.

The Act provides a table of model fee that starts with a fee of Rs 45000/- for disputes up to Rs 500,000. An arbitral institution is however having the liberty to bring down the fees further if it chooses to do so. If ADR needs to be encouraged, it is necessary to bring down the fees to say slabs of Rs 1 lakh and should not exceed the Court fee structure.

The potential to bring down costs and handle small ticket arbitration makes it necessary for the industry to develop arbitration infrastructure that is cost effective. In this context, the growth of ODR is inevitable. Since in an ODR, the time of the arbitrator can be more efficiently used, he can price his services at a level that is much less than what many of the arbitral institutions have fixed now.

Training of advocates for ADR/ ODR along with flexibilities to be introduced in fixing of price and the procedures for conducting arbitration (which I shall try to discuss in detail in another article) will go a long way in making ADR a success in India.

I strongly hold the view that India has the potential to become a global hub for ODR and the advocate community needs to work out a transformation path to make this possible.

Naavi

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