- Apprentice Lawyer
- Legal Jobs
By Laila Ollapally and G Aparna
The general consensus that the Arbitration and Conciliation (Amendment) Ordinance, 2015 could positively impact arbitration in India and the commercial world is cautiously encouraged. However, mediation in the country has been let down.
When the rest of the world has recognized mediation as one of the most effective dispute resolution mechanisms, the Arbitration and Conciliation Act, 1996, the quintessential legal instrument for ADR in commercial disputes in India, has failed to even mention it in its recent amendments.
Professional mediators in different parts of the commercially developed world enter the arena of commercial disputes and most often successfully resolve these disputes in minimum time and in a cost effective manner. They witness warring parties shake hands, and maybe even entering into a joint agreement for a continuing business relationship. These are favored outcomes for commercial enterprises that are impossible to achieve in any other adversarial dispute resolution forum.
Hence, every endeavor must be made to promote mediation.
In India, mediation has been introduced through the Court annexed mediation programs vide an amendment of the Civil Procedure Code in 2002. However, in order for mediation to be widely accessed, it should be available in the private space. Just as private hospitals undoubtedly complement and flourish in the health care system, private mediation can complement the Courts and provide holistic and comprehensive dispute resolution in the community.
The commercial sector in India needs private mediation for the following reasons:
Recent Research on the Effectiveness of Mediation
CEDR (Centre for Effective Dispute Resolution)
In a survey done with mediators (mostly private) by CEDR, a premier dispute resolution agency in UK in 2014, it was found that 86% of the cases that come in for mediation settle, 75% on the same day and 11% shortly afterwards. There has been a 9% increase in the use of ADR, year to year, from 2012.
It is estimated that there would be a further increase in the use of mediation.
The CEDR survey on in-house use of commercial mediation during the last 3 years found that the commercial sector resolved 72% of disputes at an in house level. Where such negotiations do not prove fruitful, mediation has the best outcome, even above arbitration and court decisions.
“…over 60% were settled by negotiation pre-litigation. A further 12% were settled by negotiation following commencement of litigation. The third most frequent outcome was settlement by mediation. This was higher than all other ADR processes combined at 6% (including arbitration, which alone was under 2%). Resolution by mediation was even higher than receiving judgements at court, 5%, whilst 9% of cases from this period were still on-going.”
Further 79% of the corporates interviewed used ADR clauses in their contract. The most popular clause was mediation cited by 62% of the respondents, followed by arbitration clause used by 50%.
The ICC (International Chamber of Commerce)
The ICC strongly supports its viability in resolving commercial disputes. Over the last decade, it was recognized that a vast majority of cases that came to the ICC were referred and settled through mediation.
Consequently, from January 1, 2014, it introduced ‘ICC Mediation Rules’ replacing ‘ICC ADR Rules’. Currently, ICC has Arbitration Rules and Mediation Rules. It also provides for mediation to be used in tandem with arbitration, whereby commercial disputes sent for arbitration may be mediated and the mediated settlement terms are passed as a consent award in arbitration.
Legislative Support for Private Mediation
Several countries have provided legislative support for private mediation.
USA & Canada
Private mediation is supported by each State formulating its own provisions to ensure confidentiality in any mediation proceeding and the enforceability of a mediated settlement.
A new law in 2015 establishes that parties to an agreement may provide for a mandatory mediation meeting if a dispute arises. Like an arbitration clause, this mediation clause will have a binding effect. If parties are sent for judicial mediation, they can ‘opt’ for private mediation.
European Union & the UK
The EU has issued a directive which states:
“In order to promote further the use of mediation and ensure that parties having recourse to mediation can rely on a predictable legal framework, it is necessary to introduce framework legislation addressing, in particular, key aspects of civil procedure”.
The main objectives of this directive which have been followed by most EU Member States are as below:
The European Union directives have been implemented by most EU states.
In the UK, parties frequently use renowned private mediators/institutions to resolve disputes. Private mediation institutions such as CEDR and the ADR Group have a good standing in the eyes of the public, and thus offer a viable alternative to the regular legal channels.
Common law principles protect mediator confidentiality and enforceability of mediated settlements. The UK has also implemented the EU Directives that provide for mediator impartiality, confidentiality of proceedings etc.
Section 89 of the Civil Procedure Code states that when a judge finds an element of settlement in a case, he could refer it to any of the named alternative disputes resolution mechanisms, including mediation. So far in India, this reference is normally only for mediation in a court annexed mediation program. Although there is no bar for referral of disputes to private mediation, it is very rarely done.
The Arbitration and Conciliation Act, 1996 is the legislation that supports ADR for the corporate sector, outside the Court system. Mediation finds a feeble mention in Section 30 of the Act. The mechanism suggested here is similar to ARb-med, where the arbitrator, in the course of arbitration could don the hat of a mediator as well.
ARB-MED is a unique application of skills of arbitration and mediation, by an expert in both processes. Unfortunately, the legislation has disregarded the specialised skills and training required for mediation. Arbitration being an adversarial process and mediation, a consensual process, are very different to each other. If the two are being performed by the same person, it must be done with extreme caution and care as otherwise it can severely prejudice the parties.
Oversight or lack of foresight?
The benefits of mediation in resolving most commercial disputes are being increasingly recognized. Many countries have found it important to give statutory recognition for private mediation so that the Courts are free to use the adversarial process of determining right and wrong for those cases that truly require such determination. Allowing cases that are fit for collaborative dispute resolution to go to mediation is critically needed in our over-burdened legal system.
The Indian experience to mediation as evidenced in the Court-annexed Mediation Programs established by the High Courts that took positive leadership to set it up has been very convincing. Thousands of cases have been resolved, with the mediation process lasting just 60 days. There is finality and high compliance to such a settlement. Experience has shown that at the Bangalore Mediation Centre, for example, less than 1% of mediated settlements reopen.
There is no doubt that mediation is an effective forum for dispute resolution. However, for this process to find ground in our legal system and obtain the support that it deserves from the commercial sector, statutory recognition for private mediation is imperative. When our laws clearly spell-out the ‘confidentiality’ of the mediation process and the ‘enforceability’ of a mediated settlement, the commercial sector will feel more confident to freely use private mediation.
Currently, in a private mediation, when parties seek additional enforceability beyond the fresh contract entered into by them through a settlement, the mediation is termed to be a ‘conciliation’ under the Act. The settlement agreement then becomes a ‘conciliator’s settlement agreement’ and is enforceable as an ‘arbitral award’ under Sec 74 of the Act. This is a workable back door entry to the Act for mediation. However, to keep abreast with international developments and to gain the whole hearted acceptance of the commercial world, mediation needs to get statutory recognition of its own. Although excessive legislation can hamper the flexibility and creativity of this voluntary process, ‘confidentiality’ and ‘enforceability’ of mediation must be statutorily provided for, as it has been provided for ‘conciliation’ under the Act.
To conclude, it is important to have a chapter for Mediation in the Arbitration and Conciliation Act and the Act re-named ‘The Arbitration, Mediation and Conciliation Act’.
It would be wise to take a leaf from ICC; we certainly would have less litigation and more ‘dispute-wise’ companies.