ODR and E-Commerce in India

- By Pankhudi  Khandelwal  and Samarth Singh

Abstract

The concept of Online Dispute Resolution (ODR) has been emerging in various jurisdictions due to globalization and success of Alternative Dispute Resolution (ADR). The manifold advantages of ADR include less time-consuming, speedy, less expensive and more convenient. ‘Online Dispute Resolution’ has been defined to mean utilizing information technology to carry out alternative dispute resolution in India. There are two main issues which characterize the nature of ODR: use of Information and Communication Technology (ICT) and lack of face-to-face meetings. This research paper seeks to lay down the various aspects related to the Online Dispute Resolution processes including the types of ODR and the issue of ‘Trust’. It analyses the steps taken by various countries towards introducing schemes which allow consumers to resolve their disputes online. It then goes on to examine the position of Indian law on the same under the Arbitration and Conciliation Act, 1996, Information Technology Act, 2000 along with the proposed amendments to the Consumer Protection Act, 1986 under the Consumer Protection Bill, 2015.

Keywords: Online Dispute Resolution, Information and Communication Technology, Trust, Arbitration and Conciliation Act, 1996, Consumer Protection Bill, 2015.

Introduction

The concept of Online Dispute Resolution (ODR) has been emerging in various jurisdictions due to globalization and success of ADR. The manifold advantages of ADR include less time-consuming, speedy, less expensive and more convenient. These advantages are what make it more lucrative over traditional methods like litigation. Due to the insufficiency of proper e-commerce laws, time-consuming litigation process and overburdened Indian courts, ODR is a more convenient way to deal with the disputes relating to e-commerce in India including consumer grievances.

‘Online Dispute Resolution (ODR)’ has been defined to mean utilizing information technology to carry out alternative dispute resolution.[1] ODR is a means of dispute settlement whether through conciliation or arbitration, which implies the use of online technologies to facilitate the resolution of disputes between parties. It has similarities with offline conciliation and arbitration but the information management and communication tools which are used during the proceedings, and may apply to all or part of the proceedings, also have an impact on the methods by which the disputes are being solved.[2]

ODR draws its main themes and concepts from Alternative Dispute Resolution (ADR) processes.[3] There are two main issues which characterise the nature of ODR: use of Information and Communication Technology (ICT) and lack of face-to-face meetings.[4] The complainant begins the ODR process by registering the complaint online with an ODR provider. The ODR provider will then contact the other party using the information provided, and invite that other party to participate in the ODR process. If the other party accepts the invitation, he or she will file a response to the complaint.[5]

This research paper seeks to lay down the various aspects related to the Online Dispute Resolution processes including the types of ODR and the issue of ‘Trust’ in these processes. It analyses the steps taken by various countries towards introducing schemes which allow consumers to resolve their disputes online. It then goes on to examine the position of Indian law on the same under the Arbitration and Conciliation Act, 1996, Information Technology Act, 2000 along with the proposed amendments to the Consumer Protection Act, 1986 under the Consumer Protection Bill, 2015.

Types of Online Dispute Resolution

ODR can involve varied methods of dispute resolution including Negotiation, Conciliation , Mediation, Arbitration and hybrid mechanisms including Last offer arbitration, Medola, Mini trial[6], Med Arb[7], Neutral Evaluation[8] and Rent a Judge[9].

ODR may adopt either adjudicatory (where the award is binding) or non-adjudicatory process (where the award is not binding).[10] The communication modes that can be used include e-mail, discussion boards, instant messaging, audio and video conferencing etc.[11]

An institutional set up offering ODR services having features such as proper administrative infrastructure, technically updated and user-friendly computer interface and a panel of impartial and independent arbitrators, mediators etc is required to ensure successful ODR system. ODR is not limited to only online disputes but also to offline disputes. In case of any dispute, the parties can contact the ODR institution through its website services, submit its disputes, choose the method for solving disputes and proceed further. [12]

An example of a successful ODR policy can be seen under WIPO Guide to the Uniform Domain Name Dispute Resolution Policy (UDRP). The five basic stages in UDRP are:

  • The filing of a Complaint,
  • The filing of a Response by the person or entity against whom the Complaint was made,
  • The appointment by the chosen dispute resolution service provider of an Administrative Panel of one or three persons who will decide the dispute,
  • The issuance of the Administrative Panel's decision and the notification of all relevant parties and
  • The implementation of the Administrative Panel's decision by the registrar(s) concerned should there be a decision that the domain name(s) in question be cancelled or transferred.[13]

Online Dispute Resolution and Technology

Online dispute resolution constitutes an implementation of existing forms of ADR that enables its use on the internet. The main assumption of alternative methods of dispute resolution – that is, the presence of a third party during the process of reaching an agreement – remains unchanged. However, this has attained a different character because of the use of modern forms of communication.

There are indirect ways of submitting requests or evidence, as well as of carrying out a full online process together with issuing a judgement at the end of proceedings. ODR systems may be divided according to the forms of communication. Entities may communicate with each other in real time by using Messenger or Skype or the communication may not be conducted at the same time – via e-mail, for example. [14]

Trust in Online Dispute Resolution

Apart from the legal base, the other key issues involved in ODR are trust, privacy, shadow of law and compliance. Trust is a key issue since it is important for the consumer filing a case in ODR system to have the idea of how the system works. It is essential that the system is reliable and is part of a service of a renowned and/or certified organisation.

According to the OECD Recommendations on Consumer Protection in E-commerce[15], online dispute resolution should be designed to provide dispute resolution on an objective, impartial, and consistent basis, with individual outcomes independent of influence by those providing financial or other support.

ODR providers should be accredited by third-party accreditation associations or national consumer agencies applying a universal set of criteria. ODR providers should provide sellers and buyers with sufficient information to allow an informed choice about participating in ODR, including the methods of dispute resolution used, the scope of the provider’s authority, any fees the parties will have to pay, available remedies, the criteria against which the dispute will be evaluated (e.g., codes of conduct, legal principles, equity), significant differences from court procedures, a statement of the precise dispute or type(s) of dispute to which the consent to participate applies, how to access the process and how to obtain a copy of the applicable dispute resolution procedures, expected time frames for the completion of each different method and whether the complainant will be giving up the right to go to court if not satisfied with the resolution.[16]

To generate e-confidence, it is necessary that transparent and adequate means of providing information and minimum basic disclosures should be made. This should include terms and conditions, disclaimers, jurisdictional limitations, explanation of services/ADR processes, costs involved and the portion of the cost each party has to bear, steps required to ensure quick and complete enforcement of the awards rendered etc.[17]

Preserving confidentiality and privacy of negotiations is one of the paramount concerns of parties. Internet is still viewed as insecure media as cyber criminals may employ techniques to intercept data and communications between parties. Sophisticated techniques for enhancing internet security such as use of digital signatures, electronic signatures are being used to conduct ODR process. Use of cookies often breaches the privacy of individuals and raise security concerns. The electronic court house uses multiple security layers including sophisticated server, complex pass word and software which backs up complete data of its servers and stores information submitted by the parties in a protected environment. Many paralegal rights such as money back guarantees and buyer protection clauses and authentication seals are becoming popular on most e-commerce websites. This is only to generate more trust and bring consumer confidence in ODR practice.[18]

 

Whether Online Dispute Resolution can be binding?

An online merchant's terms and conditions for its services may require that all disputes arising from the transaction be submitted to binding arbitration.[19] An issue which arises is whether a pre-dispute arbitration agreement by a consumer should be enforceable. A pre-dispute agreement is contrasted with a post-dispute arbitration agreement, which does not create difficulty. A pre-dispute arbitration agreement is also to be distinguished from a pre-dispute agreement by the parties to refer any arising dispute to mediation, which does not raise as significant problems for the consumer, as no binding result can be achieved in that situation without the consumer's consent.[20]

Therefore, for invoking ODR process, the mutual consent of parties is essential, whether through an explicit clause in a contract or by mutual agreement between parties subsequent to a dispute which may have arisen. In the absence of such mutual consent, no decision rendered by an ODR service provider shall be legally valid or enforceable.[21] If the parties agree before the process that the award will be binding, then it can be enforced in a way similar to an arbitral award.

Online Dispute Resolution in various jurisdictions

Though the process of ODR is in nascent stage in most of the jurisdictions, there are some countries who have taken steps to introduce schemes which allow consumers to resolve their disputes online. The European Commission launched a new platform to help consumers and traders solve online disputes over a purchase made online on February 15th, 2016. The Online Dispute Resolution (ODR) platform offers a single point of entry that allows EU consumers and traders to settle their disputes for both domestic and cross-border online purchases.[22]

Article 5 of the ADR Directive[23] states that Member States shall facilitate access by consumers to ADR procedures and shall ensure that disputes covered by this Directive and which involve a trader established on their respective territories can be submitted to an ADR entity[24] which complies with the requirements set out in this Directive.

The person(s) in charge of ADR should possess the necessary expertise and should be independent and impartial. The ADR entities have to be transparent and have to make publicly available on their websites, clear and easily understandable information on their contact details, the person in charge of ADR, etc. It is further required that the ADR procedures should be effective and fair.[25] Further, the Commission Implementing Regulation on consumer ODR lays down the modalities for the electronic complaint form, the exercise of the functions of the ODR platform and the cooperation between the ODR contact points.[26]

The regulations under the Directive on Consumer ADR are implemented in UK as well. Apart from that, the UK Financial Ombudsman Service was established under Financial Services and Markets Act, 2000 as the ADR body in the financial services sector. Part XVI of the Act states that the function of the scheme is to resolve disputes between consumers and UK-based financial businesses quickly and with minimum formality by an independent person. However, this is only limited to financial services and not other types of disputes.

In Canada, the Civil Resolution Tribunal (CRT) is the first online tribunal for resolving strata and small claims disputes that started functioning as of July 13, 2016. It is a public scheme, regulated under the Civil Resolution Tribunal Act 2012. [27] The CRT offers new ways to resolve disputes and legal issues in a timely and cost-effective manner. The CRT is available 24 hours a day, seven days a week, from a computer or mobile device that has an internet connection. Interaction with the other participant(s) and/or the CRT can be done when it is convenient.[28]

In Australia, family disputes are required to undergo a mandatory mediation. In the United States, Federal Mediation and Conciliation Service is using ODR to settle labour disputes. Under the principles of e-governance, various governmental departments are using ODR to settle consumer grievances. [29] It can, therefore, be seen that there exist a background for the implementation of ODR mechanisms in most of the jurisdictions.

Online Dispute Resolution in India

In India, use of ADR techniques is explicitly encouraged through Nyaya Panchayat System, Lok Adalat, Arbitration and Conciliation Act, 1996 based on UNCITRAL Model law of arbitration, provision of statutory arbitration amongst other initiatives. The Indian legal framework supports ODR including Section 89 of Code of Civil Procedure, 1908 that promotes use of alternative dispute resolution between parties. Similarly, Order X Rule 1A confers powers on the court to direct the parties to a suit to choose any ADR method to settle its disputes. [30]

Recently, in State of Maharashtra v. Dr. Praful B. Desai[31], the Supreme Court of India established that the video conferencing is an acceptable method of recording evidence for witness testimony. In explaining the benefits of video-conferencing, the Court observed that:

“Virtual reality is a state where one is made to feel, hear or imagine what does not really exist. Video-conferencing has nothing to do with virtual reality. Video-conferencing is an advancement in science and technology which permits one to see, hear and talk with someone far away, with the same facility and ease as if he is present before you i.e. in your presence. This is not virtual reality, it is actual reality. In fact the accused may be able to see the witness better than he may have been able to if he was sitting in the dock in a crowded Court room. They can observe his or her demeanour. In fact the facility to play back would enable better observation of demeanour. They can hear and rehear the deposition of the witness.”[32]

In Grid Corporation of Orissa Ltd. vs. AES Corporation, the Supreme Court held-

“When an effective consultation can be achieved by resort to electronic media and remote conferencing, it is not necessary that the two persons required to act in consultation with each other must necessarily sit together at one place unless it is the requirement of law or of the ruling contract between the parties”. [33]

Thus, the legal framework as well as the precedents laid down by the Supreme Court of India support use of technology for dispute resolution and encourage use of ODR practices.

The practice of ODR is not entirely unknown in India. ODR has been recognised in India under the Banking Ombudsman Scheme, 2006 issued by the Reserve Bank of India wherein complaints were allowed to be made online to the Banking Ombudsman.[34] The provisions of the Information Technology Act, 2000[35] must be used for establishing an Information and Communication technology base that may be conducive for the development of ODR mechanism in India. The IT Act grants legal recognition to use of electronic signatures and electronic records.

A legal mechanism for ODR can be created by reading Indian Arbitration Act, 1996 with Information Technology Act, 2000. For example, section 7(3) of Arbitration Act provides that the agreement should be in writing. However, if the agreement is made online and referred to ODR, the same will be valid under Section 4 of the IT Act which states that where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then such requirement shall be deemed to have been satisfied if such information or matter is rendered or made available in an electronic form and accessible so as to be usable for a subsequent reference. Similarly, Section 31(1) of the Arbitration Act requires the arbitral award to be in writing and signed by members of arbitral tribunal. Both these requirements can be fulfilled under Section 4 and 5 of the IT Act which provide for legal recognition of electronic records and electronic signature respectively.[36] Both section 4 and 5 can help in building a legal base for ODR in India.

Consumer Protection Bill, 2015 (Draft Bill) has been introduced in Lok Sabha. The Statement of Objects and Reasons of the Bill states that the rapid development of e-commerce has provided new options and opportunities for consumers. Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices which require appropriate and swift executive interventions to prevent consumer detriment.

The Consumer Protection Bill, 2015 provides for option of electronic filing of complaints.[37] The Bill also introduces mediation as an alternative dispute resolution mechanism. It provides for the formation of Consumer Mediation Cells which will be established and attached to the redressal commissions at the district, state and national levels. Once the complaint is admitted and if it appears to the court that there exist an element of settlement, which may be acceptable to the parties, the court shall direct the parties for mediation as provided under the Bill. Therefore, in order to make ODR a success for dealing with online consumer grievances in India, necessary amendments will have to be made in IT Act, 2000 and the Consumer Protection Act so that both the acts read together can provide a conducive base for successful functioning of ODR mechanisms.

Jurisdiction issues related to an E-commerce entity

Indian courts on various occasions have dealt with the issue of determination of jurisdiction in e-commerce. However, these are limited to copyright and trademark infringement issues in cyberspace and do not extend to consumer disputes. Recently, Delhi High Court has in the matter of World Wrestling Entertainment, Inc. v. Reshma Collection[38], clarified the law in relation to territorial jurisdiction by relying on the Dhodha House v. S.K. Maingi[39] case. The Supreme Court has observed that:

Because of the advancements in technology and the rapid growth of new models of conducting business over the internet, it is possible for an entity to have a virtual presence in a place which is located at a distance from the place where it has a physical presence. The availability of transactions through the website at a particular place is virtually the same thing as a seller having shops in that place in the physical world. When the shop in the physical sense is replaced by the virtual shop because of the advancement of technology, it cannot be said that the appellant/ plaintiff would not carry on business in that place.

As per this case, the Plaintiff can institute the case where sales are made by it. Hence, the plaintiff now has the choice of forum if it makes sales across India. The application of this case is, however, limited to copyright and trademark infringement cases.

The Consumer Protection Act, 1986 provides that a complaint shall be instituted in a District Forum within the local limits of whose jurisdiction, — (a) the opposite party or each of the opposite parties, where there are more than one, at the time of the institution of the complaint, actually and voluntarily resides or carries on business or has a branch office or personally works for gain, or (b) the cause of action, wholly or in part, arises. An e-commerce website may have only a virtual place of business or it may be conducting business in more than one place. The Consumer Protection Bill, 2015 provides that a consumer can file a complaint in State Commission within the local limits of whose jurisdiction he resides or personally works for gain.[40]

It is a settled principle of law that in the event there are two or more courts, which will have appropriate jurisdiction in a matter, the parties can oust the jurisdiction of others in favour of one.[41] Many e-commerce portals provide for a standard form jurisdiction clause expressly providing the jurisdiction of a particular court under the agreement. This might create inconvenience to a consumer who did not contemplate such a situation while placing his order and has to bear the expenses of filing a suit in a place which the defendant has specified in the contract.

There is a pressing need for specific provisions relating to jurisdiction in online transactions where directly consumer is involved and which provides for filing of suit in the place where the plaintiff resides. A consumer can bring proceedings either in his own jurisdiction or in the place where the supplier is domiciled. This rule cannot be altered or waived by an agreement on jurisdiction between the parties.[42]

Other concerns

There are certain problems relating to ODR which are India-specific like digital divide, distrust of people in technology, dependency on lawyers unaware of such mechanisms etc. This can be avoided only by creating more digital awareness and making it technologically viable to opt for such mechanisms. Projects like Gyanadoot at Dhar (MP), Wired Village at Warna (Maharastra), Bhoomi in Karnataka, Information Village Research in Pondicherry, have proved how these innovative projects can facilitate in bridging the digital divide.[43]

Conclusion

With the unprecedented growth of e-commerce and facilitated global consumer transactions over the internet, a number of disputes occur which often involve parties from different jurisdictions. To resolve such disputes innovative mechanisms such as ODR using techniques like arbitration, mediation and the like methods can be extremely useful. Online dispute resolution in India is in its infancy stage but it is gaining prominence day by day.

With the enactment of Information Technology Act, 2000 in India, e-commerce and e-governance have been given a formal and legal recognition in India. Even the traditional arbitration law of India has been reformulated and now India has Arbitration and Conciliation Act, 1996 in place that is satisfying the harmonised standards of UNCITRAL Model. These laws can further be amended to provide for a successful ODR system thereby encouraging e-commerce and ensuring the timely resolution of disputes of an online consumer.

Since the entrance and participation of users is governed by contract, terms and conditions for participation in dispute resolution could be included in the contract. Though the Consumer Protection Bill, 2015 has included provisions for mediation, however, it will have to be seen that proper and impartial procedures are followed for the same. For effective implementation of such procedures, separate rules can be framed. This can be seen under the European Directive on ADR for consumer disputes under which the principles and procedures to be applied for solving consumer disputes through ADR are mentioned.

In the online environment, loss of time often causes loss of opportunities, and persons involved in electronic commerce or any type of online relationship will wish to resolve problems in the fastest possible way. It also ensures smoother functioning of the whole process. As a result, online ADR, employing increasingly sophisticated tools provided by the network, can be expected to be a resource of growing value and should be incentivised for its faster growth.

[1] Farah C, Critical analysis of online dispute resolution: optimist, realist and the bewildered, Computer Telecommunications Law Review, 11(4), 123-128.

[2] Possible future work on online dispute resolution in cross-border electronic commerce transactions, United Nations Commission on International Trade Law, Forty-third session, New York, 21 June-9 July 2010, A/CN.9/706.

[3] Maurice Schellekens and Leo van der Wees, ADR and ODR in Electronic Commerce, in Trust in E-commerce 277 (Prins, Ribbers, Tilborg, Veth, Wees eds, Kluwer Law International, 2012).

[4] Id, at 285.

[5] Ethan Katsh, Janet Rifkin, Alan Gaitenby, E-Commerce, E-Disputes, and E-Dispute Resolution: In the Shadow of “eBay Law”, Ohio State Journal On Dispute Resolution [Vol. 15:3 2000] available at: http://www.umass.edu/cyber/katsh.pdf (last accessed on 23-03-17).

[6] In Mini trial, the parties file summaries of their cases for assessing their cases on merits and negotiate a settlement with a neutral advisor which involves a non-binding procedure.

[7] In Med Arb, initially mediation is used and if unsuccessful, arbitration is used.

[8] In a Neutral listener agreement, the parties discuss their offers with a neutral third party in private and after the third party has heard both sides, he recommends the best offer for settlement.

[9] In Rent a Judge, the parties submit their dispute for adjudication before an appointed neutral Judge.

[10] Karnika Seth, Online Dispute Resolution (CIAC Conference paper), available at http://www.karnikaseth.com/wpcontent/uploads/ODR-CIAC/20conference%20paper.pdf (last accessed on 22-03-17). [Karnika Seth, ODR].

[11] S. K. Verma, Raman Mittal, Legal Dimensions in Cyberspace, 321 (Indian Law Institute, New Delhi, 2004). [S. K. Verma, Raman Mittal], at 312-314.

[12] Id, at 309.

[13] WIPO Guide to the Uniform Domain Name Dispute Resolution Policy (UDRP), available at http://www.wipo.int/amc/en/domains/guide/ (Last accessed on 25-03-17).

[14] Karolina Mania, Online dispute resolution: The future of justice, International Comparative Jurisprudence 1 (2015) 76–86, available at: http://www.sciencedirect.com/science/article/pii/S2351667415000074 (Last accessed on 25-03-17)

[15] Consumer Protection in E-commerce: OECD Recommendation, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264255258-en. (last accessed on 23-03-17).

[16] Possible future work on online dispute resolution in cross-border electronic commerce transactions, United Nations Commission on International Trade Law, Forty-third session, New York, 21 June-9 July 2010, A/CN.9/706.

[17] S. K. Verma, Raman Mittal, supra note 36, at 318-320.

[18] Karnika Seth, ODR, supra note 11.

[19] For example, Amazon.com's conditions of use, eBay's user agreement and Dell.com's terms of sale provide for such clauses.

[20] Ethan Katsh, Janet Rifkin, Alan Gaitenby, E-Commerce, E-Disputes, and E-Dispute Resolution: In the Shadow of “eBay Law”, Ohio State Journal On Dispute Resolution [Vol. 15:3 2000] available at: http://www.umass.edu/cyber/katsh.pdf (last accessed on 23-03-17).

[21] Karnika Seth, ODR supra note 11.

[22] European Commission - Press release, Solving disputes online: New platform for consumers and traders, http://europa.eu/rapid/press-release_IP-16-297_en.htm

[23] Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR).

[24] ‘ADR entity’ has been defined as any entity, however named or referred to, which is established on a durable basis and offers the resolution of a dispute through an ADR procedure and that is listed with the competent authority.

[25] Article 6, 7, 8 and 9 of the Directive on Consumer ADR, supra note 24.

[26] Commission Implementing Regulation (EU) 2015/1051 of 1 July 2015.

[27] Civil Justice Council, Online Dispute Resolution For Low Value Civil Claims, Online Dispute Resolution Advisory Group, February 2015, www.judiciary.gov.uk/reviews/online-dispute-resolution.

[28]Available at: http://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing/resolving-disputes/the-civil-resolution-tribunal, last accessed on 21-03-17.

[29] Md Nayem Alimul Hyder, Online Dispute Resolution: Scope and challenges, The Financial Express, 26 Feb 2017, Availablee at: http://www.thefinancialexpress-bd.com/2017/02/26/62812/Online-Dispute-Resolution:-Scope-and-challenges/print, last accessed on 28-03-17.

[30]Karnika Seth, supra note 11.

[31] Maharashtra v. Dr. Praful B. Desai (2003) 4SCC 601.

[32] ¶¶ 19-20 of the judgment.

[33] Grid Corporation of Orissa Ltd. v. AES Corporation 2002 AIR SC 3435, ¶ 23.

[34] The Banking Ombudsman Scheme 2006, Ref.RPCD.BOS.No.441/13.01.01/2005-06.

[35] Hereinafter referred to as the “IT Act”.

[36] S. K. Verma, Raman Mittal, supra note 12.

[37] Section 21(1) of the Draft Bill.

[38] World Wrestling Entertainment, Inc. v. Reshma Collection FAO(OS) No. 506/2013.

[39] Dhodha House v. S.K. Maingi 2006 (9) SCC 41.

[40] Section 40 of the Draft Bill.

[41] Swastik Gases v. Indian Oil Corporation Limited, (2013) 9 SCC 32.

[42] Article 15-17, Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

[43] Prof. T.P. Rama Rao, E-Commerce and Digital Divide: Impact on Consumers, Presented at the Regional Meeting for the Asia-Pacific: New Dimensions of Consumer Protection in the Era of Globalisation, Goa, India, 10-11 September 2001, Available at: https://web.iima.ac.in/egov/documents/ecommerce-and-digital-divide.pdf (last accessed on 26-03-17).