Has India missed the bus in terms of becoming an international arbitration hub? Even if it has, India can still play catch up with Online Dispute Redressal (ODR).
At the Delhi Arbitration Weekend in February 2023, Union Law Minister Kiren Rijiju emphasised the need for institutional arbitration to enhance the ease of doing business. 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.
India opened up its economy in the 1990s, which was the decade of growth for international arbitration. As more countries entered into bilateral investment treaties, institutional arbitration became the preferred choice of resolution.
Setting things right
Although India introduced its first piece of legislation on arbitration and conciliation by the middle of the decade, it acquired a reputation of being ‘arbitration-unfriendly’, as the Srikrishna Committee pointed out in 2017, for several reasons — 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’.
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.
Technology as advantage
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.
Private platforms in India are already resolving lakhs of disputes through ODR. Many corporates have migrated to ODR to resolve small-value disputes. 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.
Steps to consider
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.
Rajendran Nair Karakulam is the Senior Manager (Policy) at Presolv360, an online dispute resolution company. Sidharth Kapoor is the Manager (Legal Strategy and Policy) at Presolv360, an online dispute resolution company
