MSMEs: ADR = ODR
In May 2021, a legal tech start-up, launched the very first private digital court for alternate dispute resolution. In October 2021, the start-up launched this service exclusively for the MSME sector to address their issues digitally / virtually.
The objective is to provide a customized legal / court mechanism for micro, small and medium enterprises (MSME) to resolve their commercial disputes through alternate dispute redressal mechanism (ADR) – conciliation, negotiation, mediation, arbitration etc.
Private Digital Courts / ODR
- Private judicial court is a replica of the traditional judicial system. The entire judicial ecosystem is very much present. The only difference – all of this is present online and can be customized to the requirement of each case. Justice in a court is seen as a service and not in a physical courtroom place.
- As far as the private courts for MSME are concerned, the legal tech start up uses an end to end digital platform, Artificial intelligence (AI), machine learning (ML) and Block chain (BC) technology. It utilizes the block chain technology to receive, store and process confidential information and documentation – from rules and procedures, filings, notices to settlement, award. AI tools will analyze the dispute and the mechanism required. The end to end ultra-advanced digital platform will facilitate in ADR mechanism.
- ODR – online dispute resolution is a mechanism similar to alternate dispute redressal mechanism. Like alternate modes of dispute redressal, there are three stages – negotiation or mediation, conciliation and arbitration. It is an online process. ODR as a legal mechanism was recognized and adopted by the United Nations (UN) in 2016 to resolve mainly cross border transactions (irrespective of value of transaction) in a time saving and secure manner using AI and advanced technology.
- It is a zero contact approach (without any “person to person” interaction) to resolving legal disputes. This will save time and money.
Benefit to MSMEs
As of 2021, post the Covid19 pandemic, MSME’s account for almost 30% of India’s GDP. The MSME sector accounts for approximately 50% of the total exports. Most of the MSMEs being located near rural areas, it encourages employment besides development of such areas.
However, the biggest road block for the MSME sector has been sourcing working capital. Banks and lending institutions are wary of lending to small and mid-size entities due to lack of security offered by them. Such small and mid-level entities are strained further in the event of any disputes relating to payments.
The MSME sector was adversely affected due to the Covid19 pandemic. Disruption in supply chains from around the world brought operations to a halt. Payments have been severely affected. As a result the volume of disputes have increased.
It is believed that the online dispute redressal mechanism is more important now than ever especially for MSMEs. Since the cash strapped MSMEs will be put to further strain by investing in legal disputes, the digital courts are touted to be time, money and energy saving for the MSME sector. There is a significant increase in volume of cases pending before courts post the pandemic.
The effectiveness of online legal marketplace
ADR through ODR is seen as a time, energy and money saving mechanism. This will vastly be useful to the Covid hit MSME sector. Further, it will substantially reduce the burden on the already overburdened Indian judicial system. One has to wait and watch for the effective and efficient resolution of MSME related disputes through private digital courts. Only time will tell whether justice will be delivered effectively online.