THE INDIAN COUNCIL OF ARBITRATION
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Online Alternative Dispute Resolution
Devashish Bharuka
 
INTRODUCTION:

Alternative Dispute Resolution (ADR) has now been propagated and successfully implemented in the offline non-virtual world. It refers to the use of methods like arbitration, mediation, negotiation, med-arb, etc. to solve disputes rather than the traditional litigation way. Arbitration has been specially popular in international commercial transactions where the parties are able to decide on their choice of law by which they want to be governed and jurisdiction in which they want to take up the dispute. Since the jurisdiction has been a critical issue in resolution of online disputes, many online ADR agencies have sprung up in recent times providing such facilities to parties for quick and efficient dispute resolution. The general pattern is that of the grieving party to approach the ADR agency, which in turn will contact the defendant. Then, under the aegis of the agency, both the parties solve their disputes online through emails and video conferencing without the necessity of being physically present as in litigation or off-line ADR. Further, being able to decide online, they are not confronted with jurisdictional issues at all. Such a method is being characterized as both cost efficient and time-efficient and of course, the process being very much within the control of the parties.

Historical Background

Arbitration across the globe, over the years, witnessed a slow but sure movement of the players from the jurisdictional theory to the party autonomy concept. The former theory conceptualizes the process of adjudication by the national courts over the disputes essentially arising at the international levels. Where initially, the commercial disputes were engaged in and solved by the national courts, after the Second World War, there has been a drastic change in the manner of dispute-settlement. With the increase and growth of transnational commerce, trade and investment, simultaneously, there also arose the desire not to be assessed and decided upon by foreign judicial bodies. Thus, the concept of party autonomy gained importance. Parties were given more liberty not only to choose their own private fora for adjudication but also to decide the country of whose domestic law will be applicable in such arbitration proceedings.

The emergence of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in 1958 was a further step towards party autonomy. The Convention assures the recognition of not only the arbitration agreement by a member State but also the recognition and enforcement of foreign arbitral awards in the member State. In the coming years, United Nations Commission on International Trade Law, in an attempt to encourage uniform national arbitration laws across the globe, found it wise, in 1985, to propose the UNICTRAL Model Law on International Arbitration. Further, UNICTRAL Arbitration Rules were provided as guidance for arbitration. The International Chamber of Commerce provided its own Rules of Arbitration and Conciliation in 1998. Many other national and international arbitral institutions formed their own arbitration rules. These international documents contributed in making arbitration and conciliation a more positive and realistic approach to alternative dispute settlement across the globe. However, no system can be perfect and arbitration has its own drawbacks. ADR is no exception to this rule. It has its own obstacles and problems.

Arbitral Panel: The Foremost Challenge in the Arbitration Process

Among various problems arising, at the threshold, it is imperative that there should exist an arbitration agreement. It is necessary that either there should be an arbitration agreement or atleast an arbitration clause in any commercial agreement made between the contracting parties. Question, many and varied, arise. One of the most important questions which strikes at the very root of this process is the selection of the arbitral panel itself? Parties face right at the outset the question of choice of arbitrator(s). When it should be decided? Who should decide? Who should be the arbitrator(s)? How many arbitrators? What should be the qualification of the arbitrator(s)? Where would one find the arbitrator(s)? Are they neutral? Are they impartial? Are they independent? What should be their rights and responsibilities, their area of working, the limit of their functioning? These queries linger at the background as we try to develop our arbitration clauses.

Ad Hoc Arbitration and Institutional Arbitration:

For the purpose of constituting an arbitral panel, one can pursue one of the two paths available. One can go for ad hoc arbitration whereby the parties themselves constitute an arbitral panel and makes their own rules for arbitration. On the other hand, there is the option of institutional arbitration. Opting for institutonal arbitration gives the benefit of not only making use of the well-tested arbitration rules and procedures of the institution but also being assured of the presence of well-experienced and qualified arbitrators from the panel maintained by the institution. Further, in an institution, the professional staff is available to guide disputants through the arbitration process.

Among the prominent foreign arbitral institutions, mention can be made of American Arbitration Association (AAA) in USA, London Court of International Arbitration (LCIA) in United Kingdom, Stockholm Chamber of Commerce (SCC) in Sweden and Arbitral Center of the Federal Economic Chamber in Vienna. In India, we find institutions like the Indian Council of Arbitration, International Centre for ADR, which are offering similar arbitration and mediation facilities. However, all, but few, remained off-line arbitration and conciliation centers.

With the advent of the Internet as a globally recognized vehicle for information travel and exchange, the ADR was re-born both in terms of cost-efficiency and speed. We witnessed the birth of various online ADR websites. These websites function the same way as the arbitral institutions and provide similar services. The only difference being is that they do not have any restrictions as to physical space and are available at any moment of time at any given place where one might have Internet facilities available.

Functioning of the Online ADR System and Few Online Institutions Assessed:

An Online ADR service center functions somewhat like an offline arbitral institution. One can approach these institutions either ad hoc or on an agreement basis. Companies generally have a pre-arrangement for settlement of disputes, be it business to business (B2B) or business to consumer (B2C), under the aegis of such online arbitral institutions. Agreements are made out between the institution and the company as regards the method of initiating the process into action, kind of settlement to be pursued, the fee structure, goodwill and good faith of the parties, rights and responsibilities of the parties and the arbitral institution, the procedures to be followed, law applicable, confidentiality, security, etc. When a dispute arises, either the company or the consumer (who is preinformed as to the existence of such an arbitral institution to which the company is associated) approaches the institution. The other party is then contacted and depending upon the service provided or agreed for, negotiation, mediation, arbitration, conciliation, evaluation or any other service is pursued. This is an eagle's eye view of the whole arrangement. Let us take a few example to make the scenario clearer. I am picking up a few online ADR institutions presently providing services.

and depending upon the service provided or agreed for, negotiation, mediation, arbitration, conciliation, evaluation or any other service is pursued. This is an eagle's eye view of the whole arrangement. Let us take a few example to make the scenario clearer. I am picking up a few online ADR institutions presently providing services.

Better Business Bureau Online: www.bbbonline.com

The BBB Online is supported by 86 years of experience of the Better Business Bureau's involvement in self-regulation and alternative dispute resolution. It provides for online conciliation, mediation and arbitration.

In conciliation, the BBB collects information from both parties to a dispute and works to encourage open communication between them. BBB staff presents the customer's views to the business and offer the business' viewpoint to the customer in a neutral way. Many disputes can be ended simply and quickly this way.

In mediation, a professionally trained mediator helps the parties to work out their own mutually agreeable solution to the dispute. Mediation is confidential, elective, and is claimed to offer win/win solutions to difficult problems.

In arbitration, parties state their views, offer evidence at an arbitration hearing, and agree to let an impartial, professionally-trained arbitrator make a decision that will end the dispute.

The website further offers facility for a company to either commit itself in advance to settle all its disputes through BBB or to approach BBB on a case-by-case basis.

Clicknsettle.com

Providing online negotiation service, this website is a wholly owned subsidiary of NAM (National Arbitration and Mediation), a national provider of arbitration and mediation services and electronic case management software.

The website's negotiation service is particularly lucrative for monetary disputes. For initiating an online negotiation process, one has to fill in

The BBB Online is supported by 86 years of experience of the Better Business Bureau's involvement in self-regulation and alternative dispute resolution. It provides for online conciliation, mediation and arbitration.

In conciliation, the BBB collects information from both parties to a dispute and works to encourage open communication between them. BBB staff presents the customer's views to the business and offer the business' viewpoint to the customer in a neutral way. Many disputes can be ended simply and quickly this way.

In mediation, a professionally trained mediator helps the parties to work out their own mutually agreeable solution to the dispute. Mediation is confidential, elective, and is claimed to offer win/win solutions to difficult problems.

In arbitration, parties state their views, offer evidence at an arbitration hearing, and agree to let an impartial, professionally-trained arbitrator make a decision that will end the dispute.

The website further offers facility for a company to either commit itself in advance to settle all its disputes through BBB or to approach BBB on a case-by-case basis.

Clicknsettle.com

Providing online negotiation service, this website is a wholly owned subsidiary of NAM (National Arbitration and Mediation), a national provider of arbitration and mediation services and electronic case management software.

The website's negotiation service is particularly lucrative for monetary disputes. For initiating an online negotiation process, one has to fill in the online form describing the dispute and pay $15. Then, you provide an initial demand or offer to settle the dispute. The other party is then contacted and its demand/offer requested. Thereafter, parties keep proposing new demands/offers with certain procedural restrictions. The case is settled for the midpoint of the offer and the demand the point both are within 30% of each other.

In case the dispute is not settled by negotiation, one can go for arbitration. There is no fee for initial submission for arbitration. A form has to be filled with dispute details. Next, the party has to give in its three preferred Hearing Officers with the details of availability, etc. A dispute resolution professional will contact all parties involved to secure agreements for an arbitration or mediation proceeding. Upon consent, clicknsettle.com will arrange for a mutually-agreed upon Hearing Officer to hear the dispute at a date, time and location that is convenient for all parties. Both parties are given opportunity to present evidence and arguments. The Hearing Officer renders a binding decision within two to four weeks.

As we see, the emphasis is a lot on negotiation. A proprietary software has been developed to make the process simpler. In case negotiations fall, arbitration is opted for if the parties agree to it.

SquareTrade Online Dispute (ODR) Resolution Services: Squaretrade.com

SquareTrade, a San Francisco-based firm, provides the following services:

a. Direct Negotiation: Direct Negotiation allows you and the other party to address each other directly, using SquareTrade's system and process. If a resolution cannot be reached during this phase, the assistance of a SquareTrade mediator or arbitrator (collectively "SquareTrade Neutrais") can be requested.

b. Mediation: Either party to a dispute has access to SquareTrade's pool of neutral mediators using the Process to assist in reaching a mutually acceptable solution. Mediators do not make judgements or issue decisions. All communication that occurs between you and the mediator will be confidential.

c. Arbitration: Either party to a dispute has access to a pool of neutral arbitrators using the Process to assist in obtaining a decision. Arbitrators will make a decision about the dispute. The parties agree in advance if this decision will be binding.

Settleonline.com

Created by Resolute Systems Inc. for providing its services online, it is an innovative, internet based settlement tool that provides efficient, confidential dispute resolution online. With settle Online, disputing parties make offers and demands that are not revealed to the other side. Settle Online's programmed calculations match offers and demands to determine if a settlement is reached, removing personality conflicts and posturing between disputing parties. If the case does not settle, neither side is aware of the other party's numbers and either side can easily select other ADR procedures.

Eresolution.ca

Canada based online ADR institution, it offers four services. Primary function is to offer the Domain Name Dispute Platform. Eresolution.ca is an ICANN3 authorized platform for solving of domain name disputes. The parties present their respective views of a conflict to a neutral and impartial third party, the panel. The panel will hear the parties' claims in conformity with ICANN's Policy, ICANN's Rules, and eResolution's Supplemental Rules. After both parties have had a fair chance to make their case, the panel, after deliberation, will issue a decision that is binding on the parties. Other services include online mediation and arbitration.

wecansettle.com

This is UK's online settlement service with its office in Liverpool. The system enables two negotiating parties to make offers, which are called 'bids' being the amount at which they are prepared to settle a legal dispute or agree a figure in any other matter. One person enters the case on the system and makes a bid to settle. The other person is notified by email and invited to enter his own bid. Neither party ever sees what the other side has bid. Every time a bid is made, the systme compares the figure with the last bid from the other side. If the two bids are less than a predetermined percentage apart, which is set by default at 20%, the system splits the difference and declares a settlement at the mid point. The party starting the case has the choice of using the default percentage of 20% or using 10% or 30%

www.onlineresolution.com

Online Resolution (OR) provides for online mediation, arbitration, negotiation and expert evaluation. Working of these services are similar to those provided by other online institutions mentioned above. There is three-tier fee structure which increases proportionately with the value of the dispute. Once you have selected an OR dispute resolution method, register your dispute by completing the confidential information form. This form is seen only by you and the professional assigned to your dispute. Online instructions will guide you in completing the form, and tell you just what to expect from OR.

OR will contact the other participant(s) and seek their commitment to the online dipute resolution method you have selected. If the responding parties are willing to participate, they will also complete a confidential information form. Once all participants agree to an online process, an OR professional is assigned, and the process begins. If the responding parties do not want to participate, or if there is no response within 7 days, OR will contact you with this information.

Numerous more online ADR services are available. A discussion on all of them is beyond the scope of this paper. However, more or less, as is evident from the above analysis, they provide similar services coupled with idiosyncratic variations of procedural aspects. What is clear is not only the emrgence but also the wide-spread acceptance of such institutions which has encourgaed many more to come up.

Recent Development is in the World of Online ADR

Recent developments are quite important to understand better the impact of online ADR and realisation of its importance in the commercial world.

In a survey4 orgainsed in May 2001 by the American Arbitration Association involving Fortune 1000 companies on how disputes were being solved though the new medium, it was found that, even though the initial hype about e-commerce ventures may have fallen short, the reality is catching up with companies racing to preparing with their supply chains. Further, most of the companies are of the opinion that additional guidelines are necessary for handling B2B disputes.

A group of major multinational companies with significant Internet presence, recently unveiled its own proposed consumer protection guidelines that include the adoption of an international system of Online ADR. The guidelines were presented at a recent FTC workshop, and were proposed by industry leaders such as America Online, AT&T, Dell, IBM, Microsoft, Network Solutions and Time Warner ("the E-Commerce Group").5 Merchant are encourged to provide Consumers with internal mechanisms to resolve complaints and are encouraged to participant in third-party dispute resolution programs including online dispute resolution processes.6

International Chamber of Commrece (ICC) is developing an Internet-based system that will guide parties in e-commerce disputes toward an appropriate online dispute resolution provider. It has decided against having its own online ADR services because it "supports the idea of competition in the marketplace" and believes that "enough [online ADR] services exist already" to provide parties with the necessary redress mechanism for B2C disputes in e-commerce.7 In fact, ICC has plans to explore potential partnerships with international consumer groups and academic institutions to put together "a global facilitation system for online ADR". The proposed ICC system is "part of the ongoing building of a global infrastructure for widely available online ADR for consumers and others".8

American Arbitration Association, on the basis of the survey conducted in May 2001, finally decided to provide its own online ADR facilities to the world. It launched its new online dispute resolution Internet portal on July 12, 2001. It is designed to handle business-to-business disputes using newly developed online procedures and a specialized panel of neutrals. The Dispute Risk Management Portal will allow the general public to file online for resolution of B2B e-commerce disputes, use tools to manage the case online, and resolve disputes through "on-call mediation" and online document-only arbitration.

Above developments go a long way in pinpointing the increase in the recognition and importance of online ADR. Not only the present well-established arbitral instituions but also the major companies like the E-Commerce Group are taking deep interest in promoting and making use of the Internet as an effective and fast medium for solving of disputes.

Indian Setup and Online ADR

ADR in India, as compared to the western economy, is still at its initial stages. Though ADR is being gradually brought to use, litigation is still on the forefront and is made use of most of the times. One of the reasons is the inclination towards a right-based dispute resolution rather than interest-based. Right-based system prefers litigation whereas ADR is favoured by the preachers of interest-based dispute resolution system. With the beginning of technically more complicated disputes involving the Information Technology companies, use of ADR for IT disputes becomes inevitable.

In India, I feel, handling IT disputes through online institutions is quite an ideal solution for cost-efficient and fast dispute resolution. Litigation goes on for years and sometimes even without a clear knowledge and understanding of the parties as to the other side's position. I take the stand that not just the traditional ADR (which itself sometimes has proven to be a lengthy process) but online ADR is what should also be promoted and made use of by both the IT industry and the arbitral institutions. A few reasons to support my argument can be put forth.

(a) Existence of a well-established arbitral institution: If we trace back our steps to the successful online ADR institutions presently working and direction in which AAA and ICC are moving, we find that behind most of these online institutions exists already a well-established arbitral institution which is merely making its services now available online. E.g. BBBonline, clicknesttle.com, settleonline.com. It is necessary to build good will and consumer trust in case of online ADR. These institutions have already achieved that stage and they moved on to the medium of Internet merely for quicker and cheaper dispute resolution. This is why AAA went online, ICC is half-way through and European Union is testing its own Online Dispute Resolution Pilot Program on the lines of eResolution.com. I feel that Indian Council of Arbitration, with its own standing what it has today, has a big opportunity at hand to develop and promote an online dispute resolution system. This will be a welcome step for the IT industry.

(b) Cost Effective: Online ADR definitely costs much less. In any traditional ADR, not only one has to bear the expenses for the services provided by the arbitral institution but also such expenses as traveling, accommodation, etc. in case the parties are at different places. India being a big country, this is not a remote possibility. Conciliation, in such a situation, for IT disputes across the net through tele-talking or video conferencing can be a much more cost-effective alternative.

(c) Lack of Legal Knowledge: There is no dearth of laws, regulations, rules, notification, etc. in our country. Many a time, the parties are unaware of the law. Misunderstandings arise and there is no one really to guide them. Through online conciliation services, ICA can do a big service to the IT industry and its development. Parties can submit their dispute online and ICA, through its team of legal experts, can merely ascertain the legal standing of both the parties and indicate the probable decision in case of litigation. This in itself, I am sure, will prompt both the parties not to waste time and money in litigation but to settle the matter through ADR.

(d) Need for continuting relationship : The disputes in IT industry are mainly contractual in nature, maybe relating to hardware or software performance, or payment issues or relating to intellectual property right. However, common to almost all the disputes is the fact that both parties wish to continue their relationship. This being an important factor, parties would want to have a solution which not only looks into the future but is also helpful in restructuring the relationship. ADR is an ideal solution in such a situation. Online ADR goes a step further by providing not only the expected solution but providing it fast.

How can the Indian Council of Arbitration play a crucial role in online arbitration institutional setup?

Going through the ICA's website, I noticed that it provides lots of information regarding ADR. It can, I feel, with proper technical support set up an online ADR webpage. Concentrating specially on negotiation to settle liability issues and conciliation for contractual and performance disputes will be a boon to the IT industry. Facilities like tele-talking and video-conferencing can be provided. Already, ICA has an panel of respected, well-know arbitrators-mediators-conciliators. The purpose is to facilitate dispute resolution from a distance so that persons in dispute, just because of the distance, should not be deprived of arbitration facilities.

Many online ADR services failed not because they were not required or there was no market for it but because they were unable to genrate confidence and trust in the people. Merely having an online status will not ensure success. This was also the reason why many e-commerce dotcoms failed. But of course, when one has already earned consumer confidence, having an online presence contributes to that confidence. That is why online arbitral institutions like BBBonline or e-commerce websites like www.staples. com are doing well. ICA, I feel, will not face any trouble in this regard.

Support of IT Industry

Also, required in online ADR is the support and assistance of the IT industry itself. The industry should be willing and interested in such a dispute resolution system. It can provide for technical expertise. It can give suggestions for better services, may by even industry-specific standards and rules to be applied. This is the reason why (as mentioned above) the top Seven companies in USA who call themselves the E-Commerce Group recently in a Federal Trade Commission Workshop presented the "Guidelines for Merchant-to-Consumer Transaction". It includes the standard which the industry believes and expects will help in further growth and development. It also includes clauses relating to online ADR. This shows that not only the arbitral institution but also the industry has to contribute substantially for a successful online ADR. Continuing on these lines, the IT industry can also arrange with the arbitral institution for having their technical personnel to sit as arbitrator/conciliators. One of the drawbacks of the Indian IT Act, I feel, was the constitution of Cyber Tribunal consisting of only one Judge and no technical persons to assist him/her. With the increase in technical complexities in IT disputes, technical persons on the panel is a must. Lastly, the IT industry can co-operate with the arbitral institution by honouring the award/agreements made thereunder.

Conclusion

No developing country has benefited more from the digital revolution than India, whose software industry is expected to increase about eightfold, to $85 billion, by 2008 Indian companies have become world leaders in designing portals and web-based applications, and they have successfully sidestepped bureaucratic delays and outdated infrastructure by building their own telecommunications systems and beaming their software products by satelite around the world.9

With such recognition given by the Secretary General, United Nations, can we afford not to embrace such systems as will promote futher IT growth and development. As the IT industry grows, disputes will grow. Litigation, though an alternative, is a costly and time-taking affair. With globalization and international competition, disputes are bound to arise. The Indian IT industry has to find its own solutions to those disputes. Making use of ADR can be a step in the right direction. India is all set to be one of the IT super-power and providing a proper effective out-of-court dispute resolution system is what the IT industry requires. I think the present arbitral institutions in the country will do well in providing the same.

 
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