7 PM Editorial | COVID lockdown: When you can’t litigate and arbitrate | 7th May 2020

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COVID lockdown: When you can’t litigate and arbitrate

What has happened?

As with most sectors, the legal fraternity too has been reeling under the impact of the corona pandemic and the resultant lockdown, searching for ways to surmount the difficulties that lie ahead. Indian courts have adapted to the new situation by introducing video conferencing to hear urgent matters, where parties cannot wait for regular courts to resume seeking relief.

However, this is a solution only for a tiny fraction of cases, and with the pandemic unlikely to retreat for a while, traditional litigation has hit a roadblock for an uncertain period. There is another mode of dispute resolution that has dealt with the constraints of present times with relative ease-arbitration.

This brings us to the questions of arbitration and its importance and issues. In this article we will discuss the following:

1. What is judicial Process?
2. What is Alternative Dispute Resolution?
3. What are the different types of Alternative Dispute Resolution mechanism?
4. What is the historical background of Arbitration in India?
5. In what way the process of Arbitration works?
6. What are the inherent benefits of arbitration in situation like COVID-19?
7. What kind of issues facing by Arbitration in India?
8. Way Forward
9. Conclusion

Normally disputes between two parties (Either Individuals, organizations or between Individual and State, or between Organization and State) are settled through Judicial Process and Alternative dispute resolution process or methods.

What is judicial Process?

• Judicial process is basically “whole complex phenomenon of court working”. Everything done by the Judges in the process of delivery of Justice is called Judicial Process.
• Judicial process is an adjudicatory process where a third party (Judge/other authority) decides the outcome. Procedure and decision are governed, restricted, and controlled by the Provisions of the Relevant Statutes.
• In Judicial Process the Judges are called upon to decide contentious issues between the parties strictly in accordance with law and the Constitution.

What is Alternative Dispute Resolution?

• Alternative Dispute Resolution (ADR) is the procedure for settling disputes without litigation, such as arbitration, mediation, or negotiation.
• ADR procedures are usually less costly and more expeditious. They are increasingly being utilized in disputes that would otherwise result in litigation, including high-profile labor disputes, divorce actions, and personal injury claims.

What are the different types of Alternative Dispute Resolution (ADR) mechanism?

There are different types of ADR mechanisms, such as arbitration, mediation, conciliation and negotiation. The difference between all these “alternate dispute resolution mechanisms” lies in the process and mode of resolving the dispute. These are listed below:

• Arbitration:Broadly, in arbitration, the arbitrator hears evidence and makes a decision. Arbitration is like the court process, where parties provide testimony and give evidence, as in a trial. However, it is usually less formal.
• Mediation:In mediation, on the other hand, the process is a negotiation with the assistance of a neutral third party where mediators do not issue orders. Instead they help parties reach a share opinion and reach settlement.
• Conciliation:is another dispute resolution process that involves building a positive relationship between the parties to the dispute. Conciliation tries to individualize the optimal solution and direct parties towards a satisfactory common agreement. Although this sounds strikingly similar to mediation, the conciliator plays a relatively direct role in the actual resolution of a dispute and even advises the parties on certain solutions by making proposals for settlement.
• Negotiation:The fourth mode of ADR, i.e negotiation, is a process where parties (or their attorneys) can try to work out a solution that they are both satisfied with, often giving offers and counter-offers without legal counsel.

What is the historical background of Arbitration in India?

• India has had a long tradition of arbitration. The settlement of differences by tribunals chosen by the parties themselves was well known in ancient India.
• There were in fact, different grades of arbitrators with provisions for appeals in certain cases from the award of a lower grade of arbitrators to arbitrators of the higher grade.
• Ancient texts of Yajnavalka and Narada refer to three types of popular courts (Puga, Sreni, Kula). Besides at the village level, Panchayats have also been a prevalent form of alternate dispute resolution.

In what way the process of Arbitration works?

• While entering a contract, parties agree that in case of a conflict the matter would be sought to be resolved by an arbitrator.
• Often the name of the potential arbitrator, agreed upon by both the parties, is mentioned in the contract itself.
• In case a dispute arises, the first step is issuing of an arbitration notice by either of the parties. This is followed by response by the other party and subsequently appointment of an arbitrator, decision on rules and procedures, place of arbitration and language.
• Once the arbitration proceedings commence, there are formal hearings and written proceedings. The arbitrator, if the matter so requires, issues interim reliefs followed by a final award which is binding on both parties.
• The tricky part arises if either of the parties, unhappy with the award, challenges it before the court. This can be before the appellate court or the Supreme Court depending upon the matter.

What are the inherent benefits of arbitration in situation like COVID-19?

Arbitration was increasingly becoming a preferred mechanism of dispute resolution. While arbitral procedures have continued to be conducted largely unhindered, even these are not completely immune to the impact of the global lockdowns.

• Flexibility and party autonomy:
  • Arbitration’s key feature, parties’ ability to mould the arbitral procedure based on their agreement, is most suitable to resolve disputes in the times of Covid-19.
  • For instance, the parties may now agree to a documents-only arbitration or have all hearings by video conferencing. If the parties don’t agree, the arbitrator has the power to conduct the proceedings as they deem appropriate.
• E-filings:
  • All pleadings in arbitration, from the notice invoking arbitration to the statement of claim and witness affidavits to written submissions, are filed by email.
  • Voluminous documents are uploaded on a file share link, which is sent to the opposing party and the arbitral tribunal.
  • Equally convenient is the fact that communications with the opposite party, arbitral tribunal, or the arbitral institution is through email.
• Videoconference hearings:
  • One of the biggest advantages of arbitration is that all hearings can be conducted by video conferencing. This has become particularly relevant now due to the travel restrictions.
  • The courts have also started holding hearings through video conferencing, but these are still restricted only to certain matters. Moreover, the judiciary may face teething issues as judges may find it difficult to cope with the technology, which they may overcome with time. Seasoned arbitrators are more likely to be familiar and comfortable with the technology.
• Interim relief provisions:
  • Under section 9 of the Arbitration & Conciliation Act, 1996, during arbitration proceedings, a party may approach the tribunal for any interim relief.
  • Interim relief is usually granted if the claimant is able to prove that they will suffer irreparable harm without such relief—for example, the respondents’ assets being dissipated, bank guarantees being invoked, etc. Given the nature of the relief, these petitions are being heard by courts even during the lockdown.

What kind of issues facing by Arbitration in India?

• Delays:
  • Section 29A provides that the arbitral tribunal must enter the award within 12 months from the date the tribunal entered reference with the option to extend the time period by a further 6 months with the mutual consent of all parties.
  • However, after the expiry of that 18-month period, parties seeking a further extension would have to apply to the Indian courts, which may grant such an extension on such terms and conditions as it may impose if it finds that there is sufficient cause.
  • Section 29-A of the Arbitration Act which has been subject to debate and varying viewpoints particularly in complex international cases where the arbitral proceedings become lengthy.
• Appointment of Arbitrators by the Courts:
  • Arbitration clauses usually contain a party-agreed procedure to appoint the arbitral tribunal, which are often unsuccessful due to parties’ inability to reach a mutual consensus after disputes have arisen.
  • In such situations, in an ad hoc arbitration, parties have to approach the court under section 11 of the Arbitration Act for appointment of an arbitrator. In the current scenario, this will pose an issue as it is unlikely that courts will consider an application for appointing an arbitrator as ‘extremely urgent’.

Way Forward:

• Effective use of Technology such as e-filing, creating database of cases, big data analytics, Online Dispute Resolution, video conferencing needs to be scaled up and be put to extensive use in the process of arbitration.
• One example being video conferencing as no adjournment would be required, cases can be registered online, voluminous papers can be instantly transmitted, and testimony of experts can be recorded through video conferencing.
• It has been argued that though routine matters can be completed within the prescribed time frame, the question of extension may be considered in cases of international arbitration. But it has also been argued that the introduction of this provision has brought in accountability in arbitrators which in turn brings discipline and accountability in lawyers as well as litigants.

Conclusion:

India is on the track of establishing confidence in its legal system which is the fundamental condition for any country to become an international arbitration venue. The present need is reforms in the implementation of the legislative changes by the judiciary along with building of institutional capacity in the country. Despite the roadblocks, it is apparent that arbitration is no longer just an “alternative” dispute resolution mechanism, but for, many parties, should be the primary choice for adjudicating their disputes.

Source: Covid lockdown: When you can’t litigate and arbitrate

Mains Practice Question:

What is alternative dispute resolution mechanism? How arbitration is helpful in solving the pending cases amid COVID-19?             (250 Words)