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Anuroop Omkar and Kritika Krishnamurthy
It is our personal opinion that to truly understand mediation, we need to first re-learn the anatomy of disputes. A dispute is like an abstract painting where each party sees different aspects, angles and facets and each party thinks what they see is absolute, unlike connoisseurs of art. While the most logical conclusion to a dispute ought to be a viable solution, with the passage of time, it has branched out into other conclusions such as proving one is right and setting a precedent.
Accordingly, the means by which we resolve disputes have also become restricted to adversarial methods which help us achieve these end results. If you recall the last few civil disputes you have seen or experienced, you will realize that the majority of them are disagreements on terms of a relationship, transaction or document. They may also be misunderstandings on a personal level spilling over to disputes on property and business.
Ideally in such civil disputes, the parties can attempt to confront their differences on table, identify their core interests and goals, and come up with their own feasible solutions. They can go ahead and implement their solution and the dispute will be resolved without recourse to a court of law.
But, if this was so easy and parties could do it on their own, they would have never resorted to an adversarial method! Well, our answer is this: It is important for us to understand that a dispute also, has many decibels. Beyond a certain volume, the dispute becomes difficult to resolve without third party intervention or in this case, facilitation.
Adversarial methods like litigation and arbitration, of course, have immense benefits when it comes to setting a precedent in law and development of the dynamic principles of justice. But in the process, the parties fight a legal battle against each other to be declared as a legal victor, a winner.
At an early stage of a conflict, when dispute emerges, parties seek the services of a lawyer. The lawyer is trained to fight in the adversarial mode and this mindset starts to operate. The parties entrench themselves in the one-versus-the-other approach. The language is one of assertion of rights, the need to prevail over the other. The communication ceases or becomes increasingly hostile.
The relationship, already weakened by the conflict deteriorates sharply as the process unfolds. A difference of opinion escalates to a disagreement, and with time, a disagreement escalates to a dispute.
To come to a solution, a dispute needs to be de-escalated back to a difference of opinion where doors of constructive communication are opened again. While, adversarial processes only escalate the conflict further and communication comes to a dead-end, this is where mediation comes handy.
In mediation, a third, impartial and neutral party manages the interaction between the disputing parties. This neutral party is known as a mediator. The facilitation of negotiation between disputing parties by the mediator ensures constructive negotiation between the disputing parties and helps them agree on a resolution that is fair, durable, and workable.
It is the disputants and not the mediator who create and finally agree on how the dispute needs to be resolved. In a way, it is nothing but the use of negotiation to resolve a dispute outside the traditional dispute resolution framework.
During the process, the mediator communicates with both parties and tries to unearth their actual underlying interests in the dispute. The mediator does not take evidence or hear pleadings because he is not the decision maker. He helps the parties streamline their key disputed issues and encourages them to devise commercially feasible solutions which will meet not just immediate interests of the parties but also provide long lasting solutions.
The outcome of mediation is a settlement agreement which the disputing parties execute. Some schools of thought also propagate converting the settlement into an arbitration or conciliation award. In such a case, the possibility of appeal is very low since the parties have voluntarily agreed to the terms of the award. However, this dilutes the confidentiality of the terms of settlement.
In addition to dispute resolution, mediation allows building stronger relationships between the parties and focuses on people more than the actual problem. The mediator has to use psychological and communication skills in order to understand the parties and influence them to agree on a single solution.
The process may be initiated by the disputing parties by appointing one or more individual private mediators chosen mutually by the disputants or by referring the matter to a mediation service provider. While direct appointment is generally referred to as private mediation, referring the dispute to a service provider is known as institutional mediation.
There is no law on pre-litigation mediation in India. However, the numbers of the process are very low and no statistical data is available to analyse its impact. Based on international experience, pre-litigation mediation is the most likely to result in a settlement.
Post-litigation mediation is governed by Section 89 of Code of Civil Procedure, 1908. The parties may obtain stay of court proceedings during the term of the mediation proceedings. Sometimes, the court suo moto refers civil disputes to mediation. In such cases, the disputes are usually referred to the court annexed mediation centres.
In the event of settlement of a dispute, the court fees paid by parties is refunded. Section 442 of Companies Act, 2013 now provides for mediation of corporate disputes with effect from April 1, 2014.
1. Mediation is Contempt of Court
Since mediation is provided for under Section 89 of Code of Civil Procedure, it does not lead to contempt of court under Contempt of Courts Act, 1971. We do agree that the definitions of civil and criminal contempt in the legislation are wide but so long as an application is filed with the court informing of mediation proceedings underway, there shall be no problem. However, when a court has reserved the matter for judgment, mediation cannot be undertaken.
2. Appointment of Mediator Tribunal
When parties in a private mediation are given the option to appoint mediators, a common mode suggested is that each party should appoint one mediator and the two mediators should appoint a third mediator. This way, the entire ‘panel of mediators’ becomes ‘neutral’.
The job of a mediator is to reduce the white noise in communication between the parties. Often this white noise is in the form of misconceptions, distorted view of the ground reality, perceptions, cultural misunderstandings and miscommunication. Once the cobwebs are cleaned, the mediator backs out and the parties decide on their own terms of settlement. When it comes to cleaning a room, maybe three cleaners do a better job than one. But in mediation, generally, one effective mediator may do the work of all three put together.
In arbitration, this system of appointment of arbitrators is important because the arbitral tribunal decides who is right, who is wrong and who will pay whom. The arbitrators do the reasoning and coming to conclusion for the disputants. So, three heads are better than one.
But in mediation, no matter how many mediators you appoint, you will not come to a settlement till you yourself have reasoned and come to a conclusion with the other party. You make the decisions for yourself. Adopting the appointment practice of arbitration in mediation may make it seem more familiar but it will not necessarily make it more effective or ‘neutral’.
The neutrality of a mediator, however, can be questioned on their previous relation with the disputing parties or if the outcome of the dispute will affect the mediator’s interest. And of course, to clarify as a matter of abundant caution, this does not stop disputants from appointing more than one mediator. Mediation is flexible and in the spirit of mediation, do not be judgmental.
3. Law on Mediation
Many requests to mediate a pre-litigation dispute are responded back with the reply that there is no law governing mediation in India and hence, a dispute cannot be mediated before it reaches the court.
Many jurisdictions of the world such as United States of America, Singapore, Japan, Italy, Spain, France, Germany and most other countries of the European Union promote pre-litigation mediation. Most of these countries have pre-litigation mediation since a long time. The settlement agreements arising out of such mediations are lawful.
However, most of these jurisdictions did not have a written law on mediation till very recently. For example, Singapore has passed its law on mediation in 2016 and many states of USA still do not have a written law on mediation.
Yet, pre-litigation mediation is very much a lawful process. Let us go back to the basics and remember: what is not expressly forbidden is allowed.
4. Enforcement of Settlements
There is a high perception among disputants in India that mediation will not work because the settlement agreements do not have the enforceability of an arbitral award or a judicial order.
Now, let us look at it from another angle. In mediation, there is no compulsion to participate or settle. Any party can walk out of the process anytime if they think the process is not working out for them. The parties execute a settlement agreement only if they are completely sure that they wish to settle the dispute. If a party does not intend to settle the dispute and wishes to delay conclusion, they will refuse to settle the dispute and as a consequence, refuse to execute the settlement agreement.
We need an enforcement mechanism for decisions that are imposed on us by a third party. When we ourselves are convinced that a dispute can be resolved through settlement, we are more likely to do what is written in the settlement agreement.
It is true that if a party does not comply with the terms of settlement, you will have to approach a commercial court or civil court, depending on your jurisdiction, to enforce the contract. But do you forever stop driving your car because you had an accident? You cannot stop settling all your disputes through mediation just because one party defaulted on the settlement terms.
Model Mediation Clause
If you wish to include a mediation clause in your contract, please feel free to use this clause:
“The parties agree that any and all disputes, claims or controversies arising out of or relating to this Agreement shall be submitted to [Name of mediator/Mediation service provider] for mediation.
Either party may commence mediation by providing to [Name of mediator/Mediation service provider] and the other party a written request for mediation, setting forth the subject of the dispute and the relief requested.
The parties will cooperate with one another in selecting a mediator and in scheduling the mediation proceedings. The parties agree that they will participate in the mediation in good faith and that they will share equally in its costs.
All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the ‘mediator or any of the mediator’s employees, are confidential, privileged and inadmissible for any purpose in any arbitration or other proceeding involving the parties, provided that evidence that is otherwise admissible shall not be rendered inadmissible as a result of its use in the mediation.”
Please note that this mediation clause is only suggestive and not exhaustive or absolute. Feel free to modify it as per your requirements or draft your own clause. Be flexible, be open to new possibilities.
The authors Anuroop Omkar and Kritika Krishnamurthy are ADR Neutrals and Advocates. They are partners with AK & Partners and are expert consultants on mediation to the Indian Institute of Corporate Affairs, a think-tank of the Ministry of Corporate Affairs. To know more about the mediation training please visit www.mediationiica.in