Technology & Arbitration: Considerations and proposals for the future

Introduction

Whenever there is a sudden and monumental change in society’s normal functioning, it becomes a necessity to make amendments to the laws and rules that govern it as well. The advent of Covid-19 and measures taken to stop the transmission of this possibly deadly virus has got everyone around the world locked-up in their homes. Nation-wide lockdowns and closing of international borders are a necessity. While there has been a temporary disruption in normal day-to-day activities, disputes keep arising as long as people or groups of people with difference of opinions exists.

With judicial proceedings, either on a stand-still or hearings done through video conferencing platforms, alternate dispute resolution methods continue to grow in popularity as an effective alternate means of dispute settlement. Online arbitration or e-arbitration is the process of arbitration proceedings conducted through virtual means where the physical presence of the parties are not required. Advantages of a virtually conducted arbitration proceeding includes being cost-effective due to cutting down travel costs, faster and efficient and flexible. However, in India and most jurisdictions, laws regarding arbitration were not formulated with the intention of it being fully online and therefore, lacunae exists. This article discusses whether the current laws and regulations allow virtual arbitration in the first place and if there a need to reconsider expanding and adding new rules regarding virtual proceedings.

India and e-arbitrations

The Indian Arbitration and Conciliation Act [1] (hereby referred to as the ‘Act’) governs domestic arbitrations and international commercial arbitrations seated in India. It is adopted after the UNCITRAL model law on international arbitration[2], which is the case for many other jurisdictions as well. Arbitration prioritizes party autonomy and consent. Therefore, arbitral proceedings conducted in an online mode through video conferencing is not a new concept and has been an option even before the pandemic restrictions forced to conduct virtual proceedings. However, the necessity of arbitration to be conducted in a completely virtual method without recourse to in person proceeds at all is not a mode which has been resorted to, very often and it becomes important to scrutinize existing laws in order to understand if they are in support of such proceedings or there is a need to update them.

Party invoking the arbitral proceedings is required to provide evidence of the existence of the arbitration agreement. Presentation of the written agreement is often the way about to prove its existence. However, question arises when electronic agreements come into picture. The form of arbitration agreement under S.7 of the Indian arbitration Act[3] contemplates that an arbitral agreement must be is the ‘written’ from[4]. Electronic communication during the time of formulation of the UNCITRAL model law was limited and therefore, ‘written’ form of the agreement was stressed upon. However, times have changes and technology has evolved and the 2006 amendment to the model law was introduced to conform to the standards of international practices[5].  S.7 (4) of the Act[6] provides conditions to be met for the arbitration agreement to be considered as a written from. This includes signature of both parties[7], communication of consent made by the parties in any electronic manner[8], and even when the claim of the existence of an arbitration agreement made by one party is not denied by the other[9]. The inclusion of the communication through electronic means was made after the 2015 amendment[10] and thereby clears up doubts regarding the acceptance of arbitration agreement in electronic format. Additionally, Section 4 of the Information Technology Act[11], provides legal recognition to documents in electronic form, provided that it is available in electric form and accessible to be used for subsequent reference. Section 5 of Information Technology Act[12], provides legal status to digital signatures. Thus, agreements of arbitration made in electrochromic format are considered as valid under section 7 of the Arbitration and Conciliation Act, 1996. Arbitral agreements where parties agree to online proceedings, it must be expressly mentioned in the contract. The agreement can always be amended to include recourse to virtual proceedings in case it wasn’t added the first time around.

In arbitration, party autonomy is of paramount importance and therefore, according to S. 19 of the Act[13], the rules of procedure in conduction arbitral proceedings are also left to be determined by the parties to the dispute, or the institutional rules of the arbitral institution that the parties have submitted themselves to or if the parties do not come to a consensus among themselves regarding the rules of procedure, the tribunal is given the authority to decide on the rules[14]. Filing of claim and counter claims has been made completely online through e-platforms. The only other hurdle which remains in terms of online procedure is the presentation of evidence and cross examination of witness.

In a completely virtual arbitral proceedings, an e-award will be delivered at the end, which would be signed digitally by the arbitral tribunal and emailed to the parties directly. Under S.31, part I of the Indian Arbitration Act[15] relating to domestic arbitrations, the award must be rendered in writing, signed by the arbitrator(s) and delivered to the parties to the arbitration[16]. As discussed earlier in the paper with regards to the form of arbitral agreement, a ‘written’ award does not actually means a physical document signed manually by the arbitrators. Although unlike in S.7, S.31 does not mention any electronic means of passing an arbitral award, it can be inferred logically that the same will be applicable for e-awards. The recognition of digital signature under the IT act is the reason behind such assumption. Therefore, an e-award can be considered equivalent to a traditional paper award required for enforcement or to be upheld at the seat. Now, the importance of arbitral awards becomes important for enforcing the decisions of the tribunal. Recently, an application was made under section 9 of The Arbitration & Conciliation Act for interim reliefs in the Andhra Pradesh HC in a post-award circumstance. In this case, the Petitioner had obtained an e-award under the I.C.C. Rules of Arbitration as the arbitration was conducted virtually, communicated to the parties by the I.C.C. through an official email. The Petitioner sought to attach some property of the respondent under section 9, to ensure security for enforcement of the e-award under section. The Andhra HC ordered the attachment of the said property as security for the Petitioner’s award-debt[17].

The Supreme Court and other High Courts have actively tried to make online proceedings simpler and easier to access. There is now greater reliance and indeed expectance on the use of e-courts, e-arbitrations, e-filings and virtual hearings. Justice D.Y. Chandrachud Chairperson of Supreme Court’s E-Committee during the e-inauguration of virtual courts highlighted the opportunity that the current pandemic has given to adapt to modern technology and infrastructures. He stressed on the idea that it is not a question of whether technology should be adopted or not but a question of how well the technology can be adopted, pointing out that we have no choice other than to take the virtual path[18]. However, there has been considerable resistance for the continuation of e-court proceedings with arguments ranging from right to access justice, equality before law etc.[19] To address such concerns, a hybrid model maybe be adopted even after the pandemic has subsided but at the current rate, it seems unlikely that court proceedings can take a completely online procedure like arbitration has, which again highlights the attraction of arbitration.

It is evident that virtual arbitration proceedings have been in existence for a long time and while there are no express provisions in the national legislation regarding conduction of online arbitral proceedings, there is no bar on it either, highlighted by its stress on guaranteed party autonomy whilst maintaining minimum standards to ensure due process requirements are complied with. It would be wrong to stop here and assume a more or less hassle free adjudication of disputes through arbitration. This is correct, but not really, at the same time. It is important to consider instances of court intervention that takes place in a majority of arbitrations. Even though efforts have been made and the Act under S.5[20] explicitly states minimal court intervention, the fact remains that tribunals do not have the means like the courts do and they are only consider to be quasi-judicial in nature.

A plea for independence of ADR proceedings

A lot of the arguments against online arbitration or anything to do with increased reliance on technology is always met with a lot of criticism. While the debate on video conferencing litigation- does it work or does it not, continues, I assert that arbitration or even ADR in general should not be clubbed together with court proceedings. It’s in the name- dispute resolution. Litigation is of course, also about dispute resolution however, many more people see it as a mechanism for the delivery of justice. Parties who agree to submit disputes to arbitration, are looking for an unbiased decision maker on their behalf and resolve their dispute. Some have criticized ADR as a private judicial system. I submit that ADR, if it did not come into being with that very purpose, it has certainly evolved along those line in present day and it is not necessarily a ground of criticism. In fact, statutory rules have been formulated in ways to encourage such evolution- priority given to party autonomy in majority of the steps of proceedings, ability to find solutions on their own and terminate arbitral proceedings etc., so as to make it as flexible as possible, in the interest of speedy resolution of disputes.

Online arbitration is not a recent phenomenon which came into being because of the onset of the pandemic but it is only due to the national and international restrictions on mobility of people imposed that we are being forced to think of arbitration proceedings in the way that we were supposed to think of, from the very beginning. Court intervention has time and time again been a restricted practice in arbitral proceedings and now it is becoming apparent that it must be re-evaluated again and permanently find solutions for absolute independence of arbitration tribunals and its proceedings. Some of the proposed changes for consider are as follows:

  • Giving arbitral tribunals the power to enforce arbitral awards and hold them to the same standards as that of a court order.
  • Establishment of appellate body for appeal against arbitral awards and close the judiciary’s doors in that regards. This is already in practice in India for other tribunals, for e.g., the NCLAT.

These changes will not only make online-arbitration a possibility but a fully-fledged efficient system of dispute resolution, encouraging more people to opt for it and therefore, helping to achieve the actual goals of the establishment of ADR.

International Arbitral Institutions and covid-19 guideline

In situation where parties have opted for institutional arbitrations, it is necessary for the institutions to formulate covid-19 specific guidelines to be followed during arbitral proceedings. Many international arbitral institutions have indeed already come out with such revised rules. For e.g., the International Chamber of Commerce (ICC) has published a guidance note on “Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic” for continuing to progress pending arbitrations[21]. Regular meetings are organized by the ICC to provide information about the new arbitral functioning and discuss possible ideas to make positive developments in arbitral proceedings in the future. Similarly, the London Court of International Arbitration (LCIA) along with other important institutions like the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) and Singapore International Arbitration Centre (SIAC) also provide guidelines to ensure continuity of proceedings without any delay during COVID-19 period also took steps to ensure that the arbitration proceedings proceed smoothly.

International Centre for Settlement of Investment Disputes (ICSID) released a message through the Centre’s website about the functioning of remote work and reminded that requests for arbitration and post-award applications as well as written pleadings should be filed online[22]. These institutes are also aiming to eliminate the difficulties that may be faced because of issues such as distance, time-zone and other challenges associated with the international hearings during Covid times.

Considering all these notes and guidelines, it can be concluded that during COVID-19 times arbitral institutions focus on online resources to ensure that proceedings continue on a fair, expeditious, and cost-effective basis. This shows the importance of technology and technological developments on arbitration. Institutions have to adapt these changes rapidly and become technology-friendly; this situation can be a chance for them to finish all the compliance process.

Smart contracts and block chain arbitration

This article would not be complete without talking about one of the most trending topics in arbitration in the present day. Although the talks of smart contracts and block chain arbitration did not start with the advent of the pandemic, it is a contemporary and recent phenomenon in consideration and becomes even more relevant in the era of Covid-19.

Indeed, as an alternative mechanism to resolve disputes, the aim should be to continually be on the lookout for new and innovative measures that keeps its pace with the developing and ever-changing world. Blockchain is a technology which stores information into small virtual ‘blocks’ using the methods of cryptography. Codes used in the method of cryptography not only ensures security of the information stored but also protecting the information stored but also time stamp the data for future reference. Therefore, it is essentially an automated system with the ability to protect information but also keep track of all changes or developments for future reference. It is mainly used in the exchange and dealing of cryptocurrency. Blockchain allows the storage of information in a number of computers which are synchronized. Any changes or additions made to the ledger are reflected and copied to all participants in a matter of seconds or minutes. This makes it almost impossible to hack and make any sort of changes to the information contained as it would require the changes to be made in every computer. This is the reason why use of Blockchain technology in arbitration matters is in consideration today. Confidentiality, one of the highlights of arbitration is strengthened. Usually in commercial arbitration, especially between big corporations, for example, a large number of written documents are exchanged, in the case of online arbitrations, the chances of third party access to confidential documents, without proper security, increases.

Blockchain arbitration can revolutionize arbitration in the years to come by making it fully automated, especially in instances of breach of smart contract. They are essentially a self-executing contract which gets triggered by the occurrence of certain events. Smart contracts therefore are at present, very simple agreements since it is to be made entirely on codes. Evolution into complex agreements will time for the evolution of small contracts, but not entirely impossible. Blockchain technology creates suitable conditions for the execution of smart contracts, since there is no requirement any human involvement. Either the arbitral decision might be registered on a blockchain permitting a self-executing arbitral decision or the arbitration process would even been integrated within the disputed smart contract so that an algorithm could resolve the dispute.

In India, use of blockchain is not new, several corporate organizations and banks have used it to establish supplier chain finance[23], an RBI agency in a published paper encouraged banks and other financial institutions to implement their own program using blockchain technology and Niti Ayog published a report discussing strategy to develop and make use of this technology further[24]. Smart contracts however, presents a muddles picture in the absence of a statutory set of rules for its regulation in India and distaste of the Indian govt. towards the trade of cryptocurrencies[25].

Opposition towards online arbitral proceedings

When all statutory rules governing arbitral proceedings are taken into account, it leaves no doubt that it could be and indeed was intended to be conducted in the simplest way possible which includes resort to online proceeding, if need be. Even then, one of the vehement objection to such use of technology for the speedy disposal of disputes is that it eliminates in person proceedings, especially those related to presentation of evidence, cross examination and oral arguments. The art of persuasion required in oral hearings is owed to the power of words and mannerism of the person delivering such words. As long as a person excels in that, it would be a futile argument to say that the same effect cannot be achieved during online proceedings. Especially when people are getting more and more comfortable with online etiquettes and understanding each other through remote conversations, as evidenced through the ongoing success of the work from home trend. Moreover, such a scenario has already been contemplated by the Indian Arbitration Act under S.24[26]which does away with oral arguments if agreed so between parties or if so decided by the tribunal. Regarding issues related to presentation of evidence and cross examination of witnesses, time and time again a wrong conception has been brought up- that of the analysis of the Indian Evidence Act in order to determine if the evidences do presented are in accordance with the statutory rules or not. However, people forget that application of the Indian Evidence Act is not at all required in arbitration matters and therefore, not necessarily required to consider. Other arguments for online proceedings include the fast development and updating of the online video calling application, already in use.

Scope of AI in arbitral proceedings

Artificial intelligence (AI) is a branch of computer science which makes computers being able to do activities which require human understanding such as “being able to understand, analyse and learn from the data through specially designed algorithms”[27]. Today growing interest and reliance on machines, AI has started to make its mark on all walks of life, for e.g., our smartphones. Therefore, this opens up the possibility of its consideration in the legal field and specifically arbitration as the topic of this paper. AI counsels or AI arbitrators may not be a possibility, at least with current levels of technological development, mostly because of the lack of human judgement skills, persuasion skills, emotions and consideration on a case-to-case basis, it risks the breach of principles of natural justice and therefore, the most prized due process system. While AI currently, is not at the stage to replace humans but it is not totally absurd to assume that such an instance is not too far away. Presently, it is excellent to use for research and analysis in order to greatly reduce human burden while coping with the stress of online case proceedings!


[1] Indian Arbitration and Conciliation Act 1996

[2] UNCITRAL model law

[3] Indian Arbitration and Conciliation Act 1996 ss 7(1)

[4] Indian Arbitration and Conciliation Act 1996 ss 7(3)

[5] ‘UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments adopted as of 2006’ (United Nationas Commission on International Trade Law) < https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_arbitration> accessed 3 June 2021

[6] Indian Arbitration and Conciliation Act 1996 ss 7(4)

[7] Indian Arbitration and Conciliation Act 1996 ss 7(4) (a)

[8] Indian Arbitration and Conciliation Act 1996 ss 7(4) (b)

[9] Indian Arbitration and Conciliation Act 1996 ss 7(4) (c)

[10] Indian Arbitration and Conciliation Act 2015 amendment

[11] Information Technology Act 2000 s 4

[12] Information Technology Act 2000 s 5

[13] Indian Arbitration and Conciliation Act 1996 ss 19(2)

[14] Indian Arbitration and Conciliation Act 1996 ss 19 (3)

[15] Indian Arbitration and Conciliation Act 1996 ss 31 (1)

[16] Indian Arbitration and Conciliation Act 1996 ss 31 (5)

[17] Sulphide Corporation v. New Way Vyapaar Pvt. Ltd., ICOMAOA No. 2 of 2020, High Court of Andhra Pradesh at Amaravati

[18] ‘Hybrid hearing will continue, Supreme court tells High Court Chief Justices’ The Hindu (9 June, 2021) < https://www.thehindu.com/news/national/hybrid-hearings-will-continue-supreme-court-tells-high-court-chief-justices/article34769457.ece>

[19] Return to open court after lockdown, lawyers urge CJI’ The Hindu (26 April, 2020) https://www.thehindu.com/news/national/return-to-open-court-after-lockdown-lawyers-urge-cji/article31434847.ece

[20] Indian Arbitration and Conciliation Act 1996 s 5

[21]‘ICC GuidanceNote on Possibel Measures Aimed at Mitigating the effects of the COVID-19Pandemic’International Chamber of Commerce < https://iccwbo.org/publication/icc-guidance-note-on-possible-measures-aimed-at-mitigating-the-effects-of-the-covid-19-pandemic/> accessed 3 June 2021

[22] ‘Message regarding covid-19 (update)’ International Centre for settlement of disputes https://icsid.worldbank.org/news-and-events/news-releases/message-regarding-covid-19-update?CID=361 accessed 3 June 2021

[23] It is a solution used by companies making purchases (buyers) to offer their suppliers early payment on their invoices. Unlike traditional factoring, in a supply chain finance arrangement, funding comes via the buyer’s bank at a rate based on the buyer’s credit rating. As such, suppliers can typically access funding at a more attractive cost than they can achieve independently.

[24] ‘Blockchain: The India Strategy’ NitiAyog https://niti.gov.in/sites/default/files/2020-01/Blockchain_The_India_Strategy_Part_I.pdf

[25] ‘India: the enforceability of smart contracts in India’ https://www.mondaq.com/india/contracts-and-commercial-law/874892/the-enforceability-of-smart-contracts-in-india accessed 3 June 2021

[26] Indian Arbitration and Conciliation Act 1996 s 24

https://www.mondaq.com/india/new-technology/1077030/artificial-intelligence–a-game-changer-in-the-legal-profession?type=related accessed 3 June 2021

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.