[This article is authored by Aryan Babele, a law graduate from RGNUL, Patiala.]
Keywords: International Technology Disputes, Arbitration, Litigation.
Technology based enterprises are becoming the leaders of the global market in almost every aspect. No industry has experienced such an explosive growth as has been experienced by the industry of technology-based enterprises; especially in the context of globalization of the economy and the complementary expansion in international trade in recent years. The technology industry is indeed an international sphere due to its components, viz international supplying and distributing networks, that have enabled manufacturers to provide their technology products/services to consumers at a global scale. For instance, Biotechnology is high in demand at a global scale due to its influence in multiple spheres such as medical, environmental, industrial, etc. which are facilitated by processes such as manufacturing, licensing, and distributing. The global economy has given a significant boost to the demand for flexible dispute resolution, including international arbitration, as a means for resolving technology business disputes. This characteristic of technology business has become one of the main driving forces to the technology industry progressively adopting arbitration as a dispute resolution method for international transactions where the base of its customers, suppliers and resources is established across multiple jurisdictions. As the competition to become a leader for the proper seat of technology arbitration is becoming stiffer among nations, it is interesting to note why arbitration is better than litigation for technology disputes. Further, considering India’s huge information technology industry, it is important to analyze the preparedness of the arbitration law in India to handle international technology arbitrations.
In the technology industry, the contracts between two parties are most often based on the objective to provide services such as to acquire, sell or finance a high-tech business or project; manufacture, distribute and/or deliver; license patents or other Intellectual Property Rights ("IPRs"); and purchase insurance policies covering risks associated with the production or operation of high-tech assets. Therefore, the difficulty with litigation in technology disputes, that arises out of a contract is that it involves multi-faceted issues related to different rights including acquisition, patent, know-how, trade secrets, and alike. Fulfilling the liabilities established by such rights needs certain assurances from the national law regarding neutrality, speedy and flexible procedures, fulfillment of intentions and needs of the parties, confidentiality protection, experts’ decision, etc.
Disadvantages of Litigation in International Technology Disputes
In litigation, a major disadvantage to the parties in a technology dispute is the decision by an inexpert, unable to appreciate the technicalities of a scientific testimony with little or no knowledge of relevant legislations and regulations. Players in fast-paced technology markets cannot afford to have the progress stalled for lengthy and expensive litigation due to unexpected adjournments and options of appeal to higher courts[i]. The public nature of judicial proceedings makes the preservation of confidentiality a problematic task in litigation, which is extremely significant for technology-based enterprises. In litigation there are situations where legal actions for a dispute are submitted across multiple jurisdictions simultaneously, leading to uncertain and risky results. Even the litigators face inconveniences litigating abroad, surrounded by unfamiliar foreign laws, regulations, customs, and language. Therefore, given the risks, it is not reasonable for technology-based enterprises to always opt for litigation in order to get the international business disputes resolved.
Arbitration: A Suitable Dispute Resolution Mechanism
As litigation is not always the best resolution method for disputes which involve technology-based enterprises, there is a need to explore an alternative dispute resolution mechanism. In an international dispute, the greatest concern for both parties is the favorability of the substantive and procedural laws of a particular jurisdiction to one or the other party. International arbitration provides autonomy to the parties to decide the law and the forum which will govern the procedural and substantive aspects of the dispute resolution. As the pace of settling a dispute is given major consideration in commercial disputes, especially for technology business, the inherent characteristic of arbitration being a cheaper and quicker process makes it an attractive approach to resolve disputes. Further, as there is no appeal on the merits in arbitration, it makes it a swifter process than litigation. In case there is an appeal to the Courts for the enforcement of the final award, there is a streamlined process with time limits on the decision. Arbitration, in contrast to the litigation, assures the confidentiality privilege pursuant to the agreement as it is a private procedure. Further, the availability of uniform rules for international commercial arbitration better meets the requirement of parties in the context of international technology disputes. For example, the success of the New York Convention, 1958, which has been ratified by 145 nations, boosts the confidence of the parties to afford international arbitration as a mechanism for dispute resolution. Therefore, it is amply clear that all the usual advantages of arbitration in commercial disputes are applicable to technology disputes, making it a more efficient and effective dispute resolution alternative to litigation.
Analyzing the Arbitration and Conciliation Act, 1996 in the Context of International Technology Disputes
After a lot of serious bureaucratic deliberations and political-intellectual debates, a comprehensive overhauling of the Arbitration Act of 1940 resulted in the enactment of the Arbitration and Conciliation Act, 1996 (“the Act”). With recent amendments in 2015, considering judgments of the Apex Court of India in cases of Bhatia International v. Bulk Trading and BALCO v. Kaiser Aluminium, it consolidated the domestic as well as international law of arbitration to make it suitable to the international commercial disputes in a better way than ever before. It further reflects the standards of the UNCITRAL Model Law on international commercial arbitration to promote neutral and independent arbitral proceedings in India. Almost every provision of the Act takes into consideration the intent of the parties in one form or another. It also stresses on the significance of an arbitration agreement providing a means for the parties to choose the expert decision makers and their powers as arbitrator in the arbitral proceedings.
Privacy is a major concern for the technology disputes and constant interference of the national courts in arbitral proceedings subject it to broader public scrutiny, due to which not only confidentiality, but also flexibility, procedural predictability, and informality of an arbitral proceeding gets fragmented. The Act provides very limited number of circumstances in which national courts can intervene in arbitral proceedings, allowing arbitrations to take place according to its natural flow. The Act considers the principle of "party autonomy" as the essence of arbitration. It provides for an arbitral tribunal with the power to rule on its own jurisdiction and determine the rules of proceedings, in order to ensure proper and expeditious conduct of the arbitration between parties, preserving the party autonomy. It further excludes the intervention of national courts by allowing the continuation of arbitral proceedings and declaration of final awards, thereby eliminating the prospects for delay. To keep parties responsible for the arbitral proceedings, the tribunal has powers to further delineate procedural duties on each party that comes with certain obligations such as security for costs and dismissal of the claim, in order to avoid any inordinate delays.
In technology disputes, one of the most sought-after reliefs are interim reliefs as most disputes arise from contracts/license agreements. In such disputes, during any deadlock, it is the aim of the licensor to pause the exploitation of technology and trade secrets. The Act has given the power to the tribunal to order such relief on a provisional basis but that is highly subjected to the scrutiny of national courts. Also, it provides power to the tribunal to make an interim arbitral award at any time of the proceedings. For technology arbitrations, there is a requirement for more specific and clearer provisions. The Act is supposed to confer such power on the arbitral tribunal with more substantiated provisions elaborating on the situations and conditions in which the tribunal can grant such injunctive reliefs.
Furthermore, the Act is also required to make broader provisions regarding the protection of privacy and confidentiality of the details of parties and the subject of the arbitral proceedings. It is certainly a big requirement for technology disputes that there be a provision related to blanket cover for issues of protecting confidentiality. Therefore, particularly in relation to international technology disputes, the Act is needed to provide greater assurance and discretion to the parties in terms of the choice of an arbitration institution, choice of expert for arbitration (especially expertise in Telecommunication, Media and Technology laws and IP infringement disputes).
Technology based enterprises drive the major transformations of the world by providing solutions to some of the greatest conventional anomalies. As there will be more and more research and development in technologies, they would result in more commercial contracts. Following the same path, there would soon be a separate pile-up of technology disputes in national courts. Hence, it is the need of the hour for parties to consider other dispute resolution mechanisms that are more expeditious and flexible.
Technology companies are themselves starting to anticipate this and increasingly choosing arbitration to resolve the international disputes, as stated by SVAMC as well. Western nations and developed nations from the Pacific Rim have also understood the significance of resolving technology disputes in a speedier manner and have already taken specific actions for rectifying the concerns.
For India, there is stiff competition ahead to stand as a center for arbitration in international technology disputes. There is no doubt that the Arbitration and Conciliation Act, 1996 provides an attractive framework for the resolution of international commercial disputes; but for technology disputes, there is a need to take a step ahead and to incorporate in the Act broader provisions relevant to interim reliefs, more flexible confidentiality clauses, e-case managements, efficient e-disclosure review and alike. Given India’s established law of arbitration in place and a booming IT industry, there is a great opportunity for India to play a leader’s role in resolving international technology disputes.
[i] Sandra J. Franklin, “Arbitrating Technology Cases—Why Arbitration May Be More Effective than Litigation When Dealing with Technology Issues,”  Mich. Bar J. 31, 32.