India must board the Online Dispute Resolution bus | 13th April 2023 | UPSC Daily Editorial Analysis

What's the article about?

• It talks about India’s opportunity to become the leader in the Online Dispute Redressal (ODR).

Relevance:

• GS3: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth;
• Essay;
• Prelims

Context:

• The economies across the globe are integrating at a rapid pace. The number of MNCs has increased tremendously.
• This also increased the cross-border dispute between the MNCs and the local governments.
• These disputes are generally taken to arbitration centres instead of traditional courts. Some nations (e.g., Singapore) have become the global hub for such international arbitration.
• India also aspires to become the hub for international arbitration. But due to various reasons. India has missed the opportunity to become the global hub for international arbitration.
• But now India has an opportunity to become the leader in the Online Dispute Redressal (ODR).

What is arbitration?

• Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute.
• In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.
• Arbitration ensures timely and effective enforcement of contracts.

What is international arbitration?

• International arbitration is arbitration between companies or individuals in different states, usually by including a provision for future disputes in a contract.
• Arbitration agreements and arbitral awards are enforced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the “New York Convention”).

What is Online Dispute Redressal (ODR)?

• ODR is the resolution of disputes, particularly small- and medium-value cases, using digital technology and techniques of Alternative Dispute Resolutions, such as arbitration, conciliation and mediation.
• ODR is often simplistically understood to mean e-ADR or ADR that is enabled
  through technology.

Analysis:

• Poor status of enforcing contracts in India:
  • India has shown tremendous improvement in the World Bank’s Ease of Doing Business report, rising from the 142nd rank among 190 countries in 2014 to 63rd in 2019.
  • However, India is ranked 163rd, in ‘Enforcing Contracts’, which is a marginal improvement from the 186th rank in 2015 and 173rd in 2006.
  • The report says it takes almost four years and 31% of the cost of the claim to enforce a contract in India; in contrast, it takes just over two years and costs 22% of the claim value in Brazil. In Mexico it is 341 days and 33% of claim value, and Vietnam 400 days, and 29% of claim value.
  • Thus, there is an urgent need for institutional arbitration to enhance the ease of doing business.
• Arbitration-unfriendly – India:
  • Despite having legislation on arbitration and conciliation in place, India has acquired a reputation of being ‘arbitration-unfriendly. (Srikrishna Committee, 2017).
  • Reasons include— lack of preference for institutional arbitration over ad hoc arbitration, frequent interference from the judiciary from the appointment of arbitrators to the enforcement of awards, and setting aside of arbitral awards on grounds of ‘public policy’.
• Setting right path:
  • The amendments of 2015 and 2019 and a few recent judicial decisions have put India on the right path.
  • The scope for using ‘public policy’ as a ground for setting aside awards has been narrowed, and there is a focus on prioritising institutional arbitration.
  • Yet, India is not a preferred arbitration destination, even for disputes between Indian businesses.
  • Many still seek arbitration abroad, even when the dispute is with another Indian entity.
    Singapore, which opened its International Arbitration Centre (the Singapore International Arbitration Centre) in the 1990s when India was opening up for foreign investment, has since emerged as a global arbitration hub and is ranked first in terms of ‘Enforcing Contracts’. Indian companies are among its top users.
• Leveraging technology to become ODR leader:
  • India can still make use of its strengths in technology and emerge a frontrunner in ODR, thanks to the almost universal dissemination of online technology during the COVID-19 pandemic, when the judiciary led the way with online hearings.
  • ODR, which is about resolving disputes in a virtual environment, has several advantages.
  • It can reduce the burden on the courts, save time and costs, and provide effective resolutions.
  • ODR involves more than just audio/video conferencing. It encompasses the integration of tools such as multi-channel communication, case management systems, automated case flows, digital signatures and stamping, and even the application of advanced technologies such as blockchain, natural language processing, artificial intelligence, and machine learning.
  • NITI Aayog has rightly claimed that India is “uniquely positioned to emerge as the epicentre for the developments in ODR” due to the need for an efficient dispute resolution system and advancements in technology.
    To facilitate this, the legislature, the executive, and the judiciary must work together.
  • The Reserve Bank of India, the National Payments Corporation of India, and the Open Network for Digital Commerce and a few other institutions have led the way by incorporating ODR mechanisms into several of their initiatives. The need now is to disseminate these at a mass scale.

Way Forward:

• Three key measures can be considered.
  • One, incentivise use of ODR by way of legislative measures such as setting ODR as a default dispute resolution tool for categories of disputes arising out of online transactions, fast-tracking enforcement of ODR outcomes, and exempting or reducing stamp duty and court fees.
  • Two, solve infrastructural challenges, curb the digital divide, and catalyse ODR’s growth by optimising existing setups such as Aadhaar kendras to also function as ODR kiosks.
    • Each court can have an ODR cell along with supplemental technical and administrative support.
    • On the lines of the Finance Minister allocating ₹7,000 crore for the third phase of the e-Courts project in the Union Budget 2023 (aimed at digitising the justice system), a dedicated fund must be set up for furthering ODR.
  • Three, government departments should explore ODR as a grievance redress mechanism.
    • Proactive use of ODR by government entities will not only increase trust in the process but also ensure that citizens have access to a convenient and cost-effective means of resolving disputes with the government.
• At a time when pendency is gnawing into the very administration of justice, ODR has the potential to ensure justice for all, at everyone’s fingertips. India may have missed the bus to become an arbitration hub, but it can still catch up and overtake them all — all online.