Validity of Unstamped Arbitration Agreements: A Scrutiny of Dissenting Opinions

A five-judge Bench of the Supreme Court comprising Justice K.M. Joseph, Justice Aniruddha Bose, Justice C.T. Ravikumar, Justice Hrishikesh Roy, and Justice Ajay Rastogi while deciding an appeal on 25th April 2023, held that an arbitration agreement in an unstamped contract which is liable to be stamped will not be considered valid in law. Until now, arbitration clauses were considered as separate agreements and this pronouncement will have a deep-rooted effect on the law of the land.

Introduction

Settling the long-standing debate around the validity and enforceability of an unstamped arbitration agreement and putting an end to contradictory judicial pronouncements surrounding the issue, the Apex Court delivered the judgment in N.N. Global Mercantile v. Indo Unique Ltd.[1] by a 3:2 majority, while Justice Ajay Rastogi and Justice Hrishikesh Roy dissented and were of the view that arbitration agreements are valid till the pre-referral stage. In this article, we analyse the majority and minority views while referring to the concepts of separability and Kompetenz-Kompetenz.

Background

The Petitioner and Respondent had entered into a subcontract which contained an arbitration clause. The case began when the Respondent approached the Commercial Court invoking arbitration proceedings against the Petitioner under Section 8 of the Arbitration and Conciliation Act, 1996 (the Act) when certain disputes arose between the two pertaining to the invocation of a bank guarantee furnished by the Petitioner. On rejection of the application by the Commercial Court, the Respondent filed a revision application before the Bombay High Court. Consequently, the Bombay High Court allowed the Respondent to withdraw the revision application and approach the Court by way of a writ petition[2], wherein the Court held that the Section 8 application was maintainable before it and the issue of unenforceability of the arbitration clause owing to the unstamped and unregistered subcontract can be raised before the Arbitral Tribunal under Section 11 of the Act. Aggrieved by the decision of the Bombay High Court, the Petitioner filed a Special Leave Petition before the Supreme Court which was heard by a three-judge Bench. When faced with this issue, the court, overturning the decision laid down in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co.[3] and Garware Wall Ropes Ltd. v. Coastal Marine Constructions and Engg. Ltd. held that the independence of the arbitration clause will be deemed supreme and will not be vitiated owing to the insufficient stamping and thus cannot be a ground for refusing the arbitrator’s appointment[4].

The bone of contention, however, persisted regarding the enforceability of the arbitration clause in the unstamped subcontract and the Supreme Court referred the matter to a five-judge bench for the very reason that in the case of Vidya Drolia v. Durga Trading Corpn[5], a co-ordinate bench held differently.

The Majority View

Fast forward to 2023, the five-judge Bench held arbitration agreements in unstamped contracts as invalid by a majority. The Supreme Court held that an instrument containing an arbitration clause which is bound to be stamped and registered but is not, does not fit within the definition of a contract under Section 2(h) of the Indian Contract Act, 1872 and hence cannot be enforceable in law. The majority view reasoned that the doctrine of arbitration will be followed and that in case of an original agreement being produced which is unstamped, the Court under a Section 11 application is bound by law to proceed as per Sections 33 and 35 of the Indian Stamp Act, 1899 and impound such an agreement and the Courts must follow the law as per due procedure to ultimately remove the defect.

Prior to NN Global, the Supreme Court while examining the same issue in SMS Tea Estates, held that an arbitration clause in an unstamped arbitration agreement cannot be acted upon for the appointment of an arbitrator owing to the rationale that an instrument which mandatorily needs to be registered and is chargeable under the Stamp Act cannot be admitted into evidence and loses credibility.

A two-judge bench in Garware Wall Ropes also upheld the rationale in SMS Tea Estates while adding that the introduction of Section 11 (6-A) does not alter the position of law and the existence of the arbitration clause will survive only if the contract is stamped and registered, being duly valid in law as the arbitration clause cannot be culled out of the main contract and be considered a separate entity[6]. Recently in 2021, a three-judge bench in Vidya Drolia also affirmed the findings in SMS tea estates and Garware wall ropes.

Merit in Dissent

The objective of the Indian Stamp Act, 1899 is primarily to generate revenue for the State. In this regard, Section 33 of the Act empowers the Authority to examine and ascertain whether the stamp duty on an instrument presented before them has been duly paid. In case of a situation to the contrary, the Authority is to impound the document and direct the parties to pay the stamp duty with or without levying a penalty.

A perusal of Section 35 further reveals that no instrument can be admitted in evidence which does not carry the requisite stamp duty the instrument is liable for. However, the proviso to said Section further provides a cure in case of this defect by allowing its admission into evidence after payment of the requisite stamp duty and the penalty. Thereby revealing that such a defect can be cured even at a later stage and that an unstamped or insufficiently stamped instrument can be turned valid in law by fulfilling the criteria laid out in the proviso to Section 35. Justice Rastogi, on similar lines, noted his dissent by opining that the Stamp Act is not rigid in making the instrument invalid in law and provides for a mechanism to rectify and fulfil the criteria prescribed under Section 35 even at a later stage. Following this scheme, Section 42 of the Stamp Act further envisages that in case of an impoundment under Section 33, such an instrument can be endorsed by the Collector so authorized and then be admitted in evidence. Hence, the law clearly provides for the admissibility of such instruments which may lack or suffer from insufficient stamp duty and nowhere envisions their complete invalidity in law.

Moving on to the Arbitration and Conciliation Act, 1996, he further held that the legislative intent behind the enactment of the Act was to avoid arduous litigation procedures and hasten the dispute resolution processes. A harmonious interpretation of the Indian Stamp Act, 1899 and the Arbitration and Conciliation Act, 1996 needs to be adopted to provide an interplay between the two to meet the ends of justice. The applicability of Section 33 and 35 of the Indian Stamp Act, 1899 to a Section 11 application under the Arbitration and Conciliation Act, 1996 which deals with the appointment of an arbitrator essentially defeats the purpose of speedy disposal of cases by focusing on procedural irregularities which can be cured. Section 11, following the doctrine of Kompetenz-Kompetenz, provides that the Court may restrict its interference only to the “existence” of an arbitration agreement and leave subsequent issues such as validity and scope for the tribunal to adjudicate. It can be inferred that impounding and invalidity of the arbitration agreement at the pre-referral stage will only create more roadblocks and increase interference by courts thereby defeating even the purpose of the Arbitration and Conciliation Act, 1996 and will have no effect on the existence of the arbitration agreement.

Justice Roy in his dissenting opinion was also of the view that a non-stamped or an insufficiently stamped instrument would still be enforceable for the appointment of arbitrators under Section 11 and courts should restrict their scrutiny only to the existence of the agreement to keep judicial interference in check in order to meet the objective of the 2015 amendment.

The Gordian Knot

While arriving at the decision in N.N. Global, the well-established principle of separability[7] in arbitration jurisprudence has not been considered which puts India in a precarious position in its quest to become a hub for Commercial Arbitration. The principle of separability acknowledges that an arbitration agreement is autonomous from the commercial contract it forms a part of[8]. This autonomy is based on the concepts of separability and kompetenz-kompetenz. This doctrine further implies that the invalidity or ineffectiveness of the underlying commercial contract will not vitiate the arbitration agreement. This has also been embodied in Section 16 of the UNICITRAL Model Law which allows the Arbitral Tribunal to rule upon its own jurisdiction including matters regarding existence and validity[9].

Conclusion

The authors believe that this landmark ruling will have far-fetched consequences. The principle of separability of the arbitration agreement will have to see a complete metamorphosis to align itself with the ruling. The question of stamping is not related to the jurisdiction of the Arbitral Tribunal, but it relates to the issue of admissibility. At the pre-arbitral stage, the dissent of N.N Global intrigues the way in which the discourse of arbitration “should be”. It would be axiomatic to state that the majority has set the law of the land by laying down a parameter to be checked in a Section 11 petition.

References:

[1] N.N. Global Mercantile v. Indo Unique ltd, 2023 SCC OnLine SC 495.

[2] Article 226, The Indian Constitution, 1950.

[3] SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (2011) 14 SCC 66.

[4] N.N. Global Mercantile v. Indo Unique ltd, 2021 SCC OnLine SC 13

[5] Vidya Drolia v. Durga Trading Corpn, (2021) 2 SCC 1.

[6] Garware Wall Ropes Ltd. v. Coastal Marine Constructions and Engg. Ltd, (2019) 9 SCC 209.

[7] Heyman v. Darwins Ltd. 1942 AC 356 (HL).

[8] Ibid.

[9] §16(1), United Nations Commission on International Trade Law, UNCITRAL Model Law on International Commercial Arbitration 1985: with amendments as adopted in 2006 (Vienna: United Nations, 2008), available at www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf.

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Photo by Motortion: https://www.canva.com/photos/MADqQhzGreg-arbitration-agreement-table-gavel-lying-on-sound-block-conflict-settlement/

While arriving at the decision in N.N. Global, the well-established principle of separability[7] in arbitration jurisprudence has not been considered which puts India in a precarious position in its quest to become a hub for Commercial Arbitration. The principle of separability acknowledges that an arbitration agreement is autonomous from the commercial contract it forms a part of[8]. This autonomy is based on the concepts of separability and kompetenz-kompetenz. This doctrine further implies that the invalidity or ineffectiveness of the underlying commercial contract will not vitiate the arbitration agreement. This has also been embodied in Section 16 of the UNICITRAL Model Law which allows the Arbitral Tribunal to rule upon its own jurisdiction including matters regarding existence and validity[9].

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Scope of Enquiry Under Section 11 of the Arbitration and Conciliation Act, 1996

In the recent case of M/S. Emaar India Ltd v. Tarun Aggarwal Projects LLP & Anr[1]., the Hon’ble Supreme Court has held and reaffirmed its earlier view that under a Section 11 petition in the Arbitration and Conciliation Act, 1996, the Court can determine whether or not a dispute is arbitrable by conducting a preliminary inquiry.

Brief Facts

 

The case concerns Tarun Aggarwal Projects LLP & ANR (Respondents) who entered into a collaboration agreement with Emaar India Ltd. (Appellant) for the development of residential colonies located in Gurugram, Sector 62 and 65. Both parties entered into an agreement on May 7, 2009. After this, both parties signed an Addendum Agreement on April 19, 2011. Soon a dispute arose between the parties and the Respondents stated that the Appellant had not followed the obligation specified under the Addendum Agreement. Thereafter, a legal notice was issued on behalf of the Respondents on December 11, 2019, demanding the physical possession of 5 plots measuring 2160 sq. yds. and claiming a sum of Rs. 10 crores for the losses/damages suffered by them. The Respondents contended that the dispute is arbitrable in nature as mentioned under clause 37 of the Addendum Agreement. Hence, they appointed an arbitrator who was a former judge of the Hon’ble High Court. The Appellant refused the appointment of the arbitrator following which a petition under Section 11 was filed by the Respondents before the Hon’ble High Court of Delhi.

At this stage, it would be important to refer to Clauses 36 and 37 of the Addendum Agreement, which read as follows:

Dispute Resolution & Jurisdiction

  1. “In case of any conflict or difference arising between the parties or in case the either party refused or neglects to perform its part of the obligations under this Addendum Collaboration Agreement, inter­alia as mentioned in Clauses 3, 6 & 9 hereinabove, then the other party shall have every right to get this agreement specifically enforced through the appropriate court of law”.
  2. Save & except clause 36 hereinabove mentioned, all or any dispute arising out of or touching upon or in relation to the terms of this Agreement including the interpretation and validity thereof, and the respective rights and obligations of the parties, shall be settled through under the provisions of Arbitration & Conciliation Act, 1996 wherein both the parties shall be entitled to appoint one Arbitrator each and the Arbitrators so appoint shall appoint a third Arbitrator or rank of Retired Judge of any High Court. The arbitration proceedings shall be governed by the provisions of Arbitration and Conciliation Act, 1996 or any statutory amendments/modification thereto for the time being in force. The arbitration proceedings shall be held at Delhi.”

Before the Hon’ble High Court, it was contended by the Appellant that the dispute relates to the breach of clauses 3, 6 and 9.  Therefore, it is only the Court which has the jurisdiction to entertain the dispute as per the terms of Clause 36 of the Addendum Agreement. The invocation of arbitration by the Respondents which was contended by the Appellant was thus not in alignment with the agreed terms. Alternatively, in the prayer, the Appellant suggested the nomination of their arbitrator. The Hon’ble High Court examined clauses 36 and 37 of the Addendum Agreement and held that conjoint reading of both the Clauses makes it clear that a party does have a right to seek enforcement of agreement before the Court of law, but it does not bar settlement of disputes through Arbitration and Conciliation Act, 1996. Moreover, Clause 37 also suggests how arbitration proceedings shall be conducted. On this ground, the Hon’ble High Court proceeded with the appointment of the third arbitrator. Aggrieved by the order of the Hon’ble High Court, the Appellant approached the Hon’ble Supreme Court.

 

Observations of the Supreme Court 

 

The seminal issue before the Hon’ble Supreme Court was whether the Hon’ble High Court has made a justified decision to appoint an arbitrator under Sec. 11(5) and 11(6) of the Arbitration Act without having a preliminary inquiry under Sec. 11 to decide the arbitrability of the dispute.

The Hon’ble Supreme Court looked at both clauses and determined that on a bare reading of Clause 36 of the Agreement, it is apparent that in the event of any dispute as mentioned in Clauses 3, 6 and 9, the other party shall have a right to get the Agreement specifically enforced through the appropriate court of law. As per Clause 37, save and except Clause 36, all or any dispute arising out of or touching upon or in relation to the terms of the addendum agreement shall be settled under the provisions of the Arbitration and Conciliation Act, 1996. Thus, with respect to any dispute as mentioned in Clauses 3, 6 & 9, such disputes are not arbitrable at all.

The Hon’ble Supreme court also cited Vidya Drolia and Ors. v. Durga Trading Corporation[2] and held that it is incumbent upon Courts to hold a preliminary enquiry under a Section 11 petition filed under the Arbitration and Conciliation Act, 1996. The Hon’ble Supreme Court noted that the Hon’ble High Court had erred in its decision and the matter was remitted back to the Hon’ble High Court to decide the petition and pass an appropriate order after having the preliminary inquiry on arbitrability of the dispute. The Hon’ble Supreme Court held that the objective of prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage.

 

Conclusion

 

It is important to note that under Section 11 of the Arbitration and Conciliation Act, 1996, the Courts will do a preliminary enquiry as to the arbitrability of the disputes. The law in this regard has been settled by the Hon’ble Supreme Court. The purpose of such an enquiry is limited to pruning of matters which would not fall in the category of arbitrable matters. The Supreme Court had in the case of Vidya Drolia and Others v Durga Trading Corporation  laid down a four-pronged test to determine when the subject matter of a dispute in an arbitration agreement is not arbitrable:

  • When the cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam arising from rights in rem.
  • When the cause of action and subject matter of the dispute affects third party rights; has erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;
  • When the cause of action and subject matter of the dispute relates to an inalienable sovereign and public interest functions of the State, hence mutual adjudication would be unenforceable;
  • When the subject matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s)

References:

[1] 2022 SCC OnLine SC 1328.

[2] (2021) 2 SCC 1.

Image Credit: Photo by EKATERINA BOLOVTSOVA

The Hon’ble Supreme Court held that the objective of prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage.

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Blockchain Arbitration: The Future of Dispute Resolution

The current buzzword- Blockchain has advanced from being a theoretical concept to reaching the sphere of technology where it is shaping today’s society and the legal profession. The field of legal technology has not only streamlined knowledge management requirements and operational aspects of a legal office, but also transformed the way lawyers practice law!

Smart contracts and blockchains have the potential to alter the way documentation and dispute resolution are approached. Hence the concepts need integration, implementation and recognition with arbitration for a more efficient, cost-effective and automated structure.

Smart Contracts, Blockchain and Arbitration

 

These self-executing, new generation contracts are geared towards the realization of predetermined conditions. With the help of smart contracts, Blockchain Arbitration can facilitate storing and verification of rules and automated execution (upon a particular event constituting a breach of the agreement) by invoking the arbitration clause incorporated in the smart contract.

In case of a dispute, the smart contract will notify the Arbitrator via a blockchain-based dispute resolution interface. A party can digitize the terms of an agreement, lock the funds into a smart contract, and condition the intelligent contract so that the task at hand is fulfilled and the funds will pass through. Upon completion of the process, the self-executable nature of the smart contract will automatically enforce the award and transfer the prescribed fee to the Arbitrator.

However, it is yet to be seen how smart contracts shall interact with data protection and privacy laws, intricacies of dispute resolution, and obligations and rights of the parties involved.

Blockchain Technology: An aid to Arbitration?

 

Arbitration aims to be a time-bound and specialized decision-making process. In this backdrop, Blockchain Arbitration theoretically promises to be an ideal structure for the trial process in the following ways:

  • Briefs, Transcriptions & Document Management: The tool in the blockchain system can quickly and efficiently provide synopsis and briefs of the record which would be beneficial not only to the Tribunal but to the parties.
  • Elimination of intermediaries and cost-effectiveness: There shall be no mechanism requiring approval and control at every stage, and the intermediary institutions are not included in the process. For instance, Banks, involved as intermediary institutions in legal and financial transactions, incur costs at every stage of the transaction and are time-intensive in nature.
  • Automation: A blockchain-based dispute resolution platform would exclude oral hearings and the Arbitrator’s decision and automate other aspects of filing of pleadings, filing of documentary evidence, correspondence with the Arbitral Tribunal.
  • Ease in making the Arbitral Award:  Blockchain tools can assist the Tribunals in preparing awards. The tools ensure that all necessary ingredients to make the arbitral award reasoned and enforceable have been taken care of.  The blockchain will continue to prepare the award from the beginning as the arbitration progresses.
  • Confidentiality / Security of Data: Blockchain is the safest way of storing information. Each block will be authenticated by the Arbitral Tribunal and the party to the proceedings. There is no provision for changing, altering or deleting the data unilaterally. It can only be done when it is authenticated by the Arbitral Tribunal and the party to the proceedings. Since third parties are entirely absent from the proceedings, the possibility of breach of data and information is negligible. Disputes arising out of smart contracts can be made confidential which will limit the exposure of the nature of dispute between the parties. Blockchain has a decentralized structure and the security of the system is protected by cryptography.
  • Removal of human error: The reliability and validity of a transaction depend upon the accuracy of the algorithm underlying the transaction. Since, each transaction is based on algorithms, which are mathematical models, it is free from human influence and intervention and, consequently, human error. 

Security and privacy of data are primary concerns in the conventional Arbitral process. In fact, as a specific case representing the flaws of the present model of international arbitration, in July 2015, the website of the Permanent Court of Arbitration was hacked during an essential hearing of maritime border arbitration between China and the Philippines, in the international arbitration of the “Republic of Philippines v. People’s Republic of China.”[1]  

As far as the credibility of blockchain technology in resolving such issues is concerned, the World Economic Forum, in its 2015 survey recognized that by 2025-27, about 10% of the global GDP would be stored in blockchains, owing to its efficient attributes of data security management. By 2025, even taxes are strongly probable to be collected by employing blockchain technology. Moreover,  in its research published in 2018, World Trade Organisation described at length the opportunities that lie ahead in the future, owing to the efficacy associated with the safeguard mechanisms of blockchains. 

Legal Recognition of Blockchain Arbitration and procedure to be adopted

The UNCITRAL Electronic Model Law on Electronic Commerce (1996 Convention) and the ‘UNCITRAL Convention on Electronic Communications in International Contracts (2007 Convention)’ are the primary legal instruments facilitating blockchain contracts.[3]

Articles 6 and 18 of the 2007 Convention assert the validity of on-chain arbitration by allowing for electronic data records and electronic transactions in the arbitration process, thereby providing legal recognition to on-chain arbitrations.

  1. Appointment of an Arbitrator

 Once the notice of arbitration has been sent, the appointment of an arbitrator can be done through blockchain. Thus, the exchange of documents, e-mails, and messages, etc. are all recorded automatically and replicated at all stakeholder’s computers without the involvement of any third party. The case management conference can be done online using a video conferencing facility of blockchain which is recorded and filed in the computers of all stakeholders in original and thereby removing manipulation.

  1. Pleadings

The pleadings including a statement of claim, statement of defense, counterclaims, and reply to counterclaims and further submissions can be submitted online and are automatically served to the parties & the Tribunal along with automated acknowledgment. This ensures timely submissions and helps in maintaining uniformity in the pleadings thus circulated. Any delay will also be penalized in terms of the penalty prescribed by the Tribunal or as agreed by the parties. The fear of ex-parte communication will also be mitigated when the procedural orders and communication by the Tribunal will be auto-delivered to both parties. 

  1. Interim Measures

Interim measures that are sought from courts can be executed on the blockchain if the judicial system of a particular jurisdiction allows for a seamless digital interface with the parties’ computers. In the case of an automated interface with the judicial system, the execution of court orders can also happen immediately provided the jurisdiction’s administrative machinery is using blockchain. 

  1. Recording of Evidence & Preparation of Award

 The efficiency of blockchain can be seen in evidence-taking and award preparation. Witness conferencing, cross-examination, and taking of oral evidence can be easily done using video conferencing suites, or even if hearings are done physically, they can still be transferred on blockchain and stacked for procedural integrity. Statements of expert witnesses, oral submission by experts, and expert communications can be recorded on the blockchain. 

  1. Security of Data

Blockchain is a secure way of storing information because each block is replicated and authenticated by all stakeholders. The provision to alter or delete any data does not exist until authenticated by all stakeholders. In the absence of intervention of a third party, there is no network administrator or supervisor making the possibility of data breach negligible. 

Globally, blockchain technology is being readily resorted to as an effective means of data storage, management, distribution, and transfer. Blockchain technology has immense potential to enhance the efficacy of Arbitral proceedings, especially owing to its mechanism of encryption, which helps secure data.

Contemporary issues in Blockchain Arbitration

The functioning of blockchain arbitration highlights various concerns. Firstly, in an on-chain arbitration, there would be no requirement for oral hearings which are integral to the current justice system and stand at a juxtaposition with the principles of natural justice.

Secondly, an essential principle of arbitration is the underlying idea of confidentiality. Despite the strong protection afforded by blockchain, data privacy can pose a significant concern when an independent third party gets involved as an oracle in dispute resolution. The General Data Protection Regulation (GDPR) provisions are not currently empowered enough to regulate the intricacies in the decentralized functioning of blockchain, which makes it difficult to impose liability on data controllers. Furthermore, the traceable feature of blockchain is again in conflict with the GDPR’s requirement of the “right to be forgotten“.

Thirdly, The New York Convention on the Enforcement of Foreign Arbitral Awards of 1958 (hereinafter referred to as “the New York Convention”) is the most prominent code on enforcing international arbitral awards with 166 contracting states to the Convention. According to Article II of the New York Convention, an arbitration agreement must be in “writing” and requires the parties’ signature. However, in a virtually operative blockchain arbitration, there is no scope for written agreements or signatures.[4]

Challenges in the enforceability of the Blockchain arbitration award in India

 

Lack of enforceability of the agreement itself under the New York Convention

One problem identified with the enforceability of blockchain arbitration awards is the lack of enforceability of the agreement itself under the New York Convention which requires such agreements to be in writing or through an exchange of telegrams/telefaxes.

Section 7 of the Arbitration and Conciliation Act, 1996 requires that a valid arbitration agreement should be in “writing”. However, unlike Article II of the New York Convention, Section 7 of the Arbitration and Conciliation Act, 1996 clarifies that an agreement would be considered as having been made in writing if it has been communicated through “electronic means”. The allowance for “electronic means” was introduced through the Arbitration and Conciliation (Amendment) Act, 2015, yet remains undefined.

Theoretically, it can be asserted that an award generated in a blockchain arbitration may fall within the ambit of the definition of an ‘electronic record’ under the Information Technology Act, 2000.

Difficulty in determining Awarding Country in a Blockchain Arbitration

India although is a signatory to the New York Convention, only foreign awards made in only certain Contracting States of the Convention (gazetted by the Central Government) can be enforced in view of India’s reciprocity reservation. India has gazetted less than 1/3rdof all of the Contracting States to the New York Convention.[5] 

In the working of a blockchain arbitration, Arbitrators are appointed by a blockchain-based dispute resolution platform. The award is generated on a blockchain and circulated to the parties before the Arbitrator. The parties may be in different countries and the origin/awarding country may be difficult to trace out. In the absence of details of an awarding country, the enforceability of such an award in India becomes a daunting task.

 

Enforcement of Arbitral Award

As per the Arbitration and Conciliation Act, 1996, an application for enforcement of an arbitral award shall be accompanied by an original arbitral award. In a blockchain arbitration, the award is circulated as an electronic record in the blockchain to the parties directly. The concept of a hard copy/original award is alien in blockchain arbitration.

 

Conclusion and Suggestion

A conspectus of the aforesaid facets of the blockchain system shows that the same needs multi-fold reforms before being set to use by the legal fraternity. Even though the blockchain assures, to a great extent, protection of data, but it cannot be forgotten that the hackers also keep updating their own skills and no technology is flawless. The blockchain system has to be made dynamic enough so as to keep abreast with the challenges of new advents in unethical hacking.

Secondly, it is also required that a proper training module is formulated for lawyers of the participating countries which shall ensure unimpeded use of the technology.

Lastly, the author strongly recommends that the use of blockchain should be limited only to procedural aspects in such cases where the dispute involves issues of interpretation of the clauses and or statutes including common law. This may be achieved by adopting a hybrid model of dispute resolution with embedded human intervention modules.

References: 

[1]Gargi Sahasrabudhe, Blockchain technology and arbitration, VIA Mediation & Arbitration Centre, (Nov. 3, 2021, 5:00pm), https://viamediationcentre.org/readnews/ODE1/Blockchain-technology-and-Arbitration

[2]Athul aravind, Blockchain arbitration: the future?, Law and Dispute resolution blog, (Nov. 3, 2021, 5:00pm), https://www.mappingadr.in/post/blockchain-arbitration-the-future

[3] Dena Givari, How does arbitration intersect with the blockchain technology that underlies cryptocurrencies, Kluwer Arbitration Blog, Wolters Kluwer, (Nov. 6, 2021, 8:00pm), http://arbitrationblog.kluwerarbitration.com/2018/05/05/scheduled-blockchain-arbitration-april-17-2018/

[4] Idil Gncosmanoglu, Blockchain-smart contract and arbitration, Mondaq, (Nov. 5, 2021, 5:00pm), https://www.mondaq.com/turkey/fin-tech/967452/blockchain-smart-contracts-and-arbitration.

[5] Ritika Bansal, Enforceability of awards from blockchain arbitrations in India, Kluwer arbitration Blog, http://arbitrationblog.kluwerarbitration.com/2019/08/21/enforceability-of-awards-from-blockchain-arbitrations-in-india/, (2019)

 

 

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Photo by Launchpresso on Unsplash

The use of blockchain should be limited only to procedural aspects in such cases where the dispute involves issues of interpretation of the clauses and or statutes including common law. This may be achieved by adopting a hybrid model of dispute resolution with embedded human intervention modules.

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