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 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. 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 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 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.


Share Button

Leave a Reply

Your email address will not be published. Required fields are marked *