This article has been written by Ishaan Banerjee, studying in Vivekananda Institute of Professional Studies, affiliated to Guru Gobind Singh Indraprastha University. This article gives a brief introduction to alternative dispute resolution and its pros and cons, along with exploring the different types of dispute resolution methods.
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Today’s world has become globalised and commercial with the advent of technology. People can now contact each other and settle business deals and disputes when they are sitting at the opposite ends of the world. Most people no longer have the time to go and file papers at the courts and then wait long periods for a hearing. We are rapidly approaching a stage where litigation is being replaced with alternative dispute resolution (ADR), due to the inefficiencies and drawbacks of litigation. India hasn’t quite reached a stage where litigation has been completely displaced by ADR methods, but the legal system is beginning to see the benefits of ADR. This article shall be helpful to give you an overview of the ADR methods and how it is beneficial.
What is alternative dispute resolution?
Alternative dispute resolution (ADR) refers to a range of dispute settlement methods which help the parties in the dispute to come to a settlement without going to court, or without litigating on the said matter. These methods usually involve a third party, who helps them in settling the disputes. In many cases, ADR methods are used alongside the litigation process as well through court authorisation.
How did the concept of ADR arise?
As stated in the 222nd Report of the Law Commission of India, the Constitution has guaranteed access to justice for all, primarily through Article 39A, which states that everyone must have an equal opportunity of getting justice and this must not be denied to any citizen by reason of economic or other sort of disabilities.
The report further states that ‘access to justice’ for the common masses in India means access to the courts of law. But even that has been hindered, due to factors like poverty, illiteracy, ignorance, social and political backwardness etc.
In a developing country like India, many people still live in poverty. When their rights get violated, they often do not have the money to fight long battles in the Court. They do not have the money to afford a lawyer. They do not know the legal system and procedures. Therefore, they often think that the court system is an inconvenience.
These kinds of inefficiencies are shared reasons among many countries, which is why ADR is being explored. The courts also have too many pending cases and these cases keep going on for many years which is a tremendous burden to the courts.
These reasons prompted the Indian Government to enact Section 89 of the Code of Civil Procedure, 1908 and replace the earlier Arbitration Act,1940 with The Arbitration and Conciliation Act 1996, in accordance with the mandates of the United Nations Commission on International Trade Law (UNCITRAL).
Pros and cons of ADR
Pros of ADR
- It is less expensive.
- It is less time consuming.
- It is free from the technicalities that are present in the court system.
- The parties are free to differ in their opinion and can discuss their opinions with each other, without any fear of disclosure of this fact before the courts.
- There is no feeling of enmity between the parties as there is no winning and losing side. They also get their grievances redressed and their relationship remains as it was before, therefore, they can conduct future business deals with each other.
- ADR is more suitable for multi party disputes, as all the parties can put forward their opinions at the same place and in one go, rather than going to court again and again. Also, it provides for a wider perspective of the dispute.
- The parties often have the choice of the ADR method to be used. They sometimes also have the choice to select the individuals or bodies who will settle the dispute.
- The process is also very flexible, according to what suits the parties.
- The parties also have the option of being confidential. The ADR system also enables the parties to put focus on practical solutions.
- A wider range of issues are considered and shared future interests of the parties are protected.
- ADR system also allows for risk management.
Cons of ADR
- ADR is not helpful where a dispute is to be decided on the basis of a precedent.
- When there is a need for court and interim orders, ADR would not be useful.
- ADR is less suitable when there is a need for enforcement.
- When there is a need for live and expert evidence and analysis in a case, then ADR would not be useful.
- When there is an imbalance of power, between the parties in the dispute, then ADR would not work.
- If the case is of a complex nature, then the adjudicating body must look into minor details and may need expert advice and suggestions. Here, ADR would probably not work.
Types of ADR methods
There are various ADR methods, but they differ from country to country. This article shall look at the main ADR methods used, with special focus on India.
Arbitration in India is governed by The Arbitration and Conciliation Act, 1996. It is a form of dispute resolution where one or more parties are appointed to adjudicate the dispute. They act as third parties. This third party should be neutral and this party is referred to as an ’arbitrator’ while the decision of the arbitrator, which is essentially a determination of merits in the case, is known as ‘arbitration award’.
The arbitration process is informal and this process allows the dispute to be resolved amicably and efficiently as it takes less time and involves lesser costs for the parties. Therefore, parties frequently choose to arbitrate when disputes arise, especially in the business world. Big corporations would rather settle disputes quickly, rather than fighting long cases in the courts.
Before the arbitration process begins, an arbitration agreement is required to be formed. This agreement lays down the terms and conditions on which the arbitration process is carried out. It is determined through this agreement as to how the process will be made cheaper, efficient and and how the rules of evidence would be applied etc. This agreement should be valid as per The Indian Contract Act 1972 and the parties must have the capacity to contract under Sections 11 and 12 of the same Act.
Arbitral decisions are final and binding on the parties, who have limited scope of objecting to the decisions. Non binding arbitrations also exist wherein the party can request a trial if it is not satisfied with the arbitrator’s decision.
Main Types of arbitral proceedings
Ad Hoc Arbitration
Under ad hoc arbitration , the parties involved in the dispute determine the conduct of the arbitration proceedings themselves, without going to an arbitral institution. In case if the parties are not able to settle on one arbitrator, or one of the parties is reluctant to appoint that particular arbitrator, then Section 11 of The Arbitration and Conciliation Act 1996 will be invoked by the other party. Under Section 11 of the Act, the arbitrator for that dispute will be appointed by either the Chief Justice of the Supreme Court or his designate or the Chief Justice of the High Court or his designate.
- If it is a domestic arbitration, then the Chief Justice of the High Court or his designate will appoint the arbitrator.
- If it is international commercial arbitration, then the Chief Justice of India or his designate will appoint the arbitrator. In ad hoc arbitration, the fee of the arbitrator is decided mutually by the parties and the arbitrator.
In this kind of arbitration, the parties decide in the agreement itself, that an arbitration institution will administer the arbitration. The Indian institutions are International Centre for Alternative Dispute Resolution and the Indian Council of Arbitration. These institutions formulate the rules for arbitration owing to their experience in observing arbitral procedures and situations, therefore they are prepared for all possible situations that may arise in future arbitration cases.
In mediation, a third neutral party aims to assist two or more disputants in reaching a settlement. This third party is referred to as the mediator. The mediator needs to properly communicate with both the parties and use proper negotiation techniques, in order to make one party fully aware of the other party’s perspective, through empathy and dialogue. This process is controlled by the parties.
One of the characteristics of this type of dispute resolution is that the mediator is not allowed to give an outcome of the dispute. The solution is given mutually, and the agreements are generally non binding. Parties are in significant control of the mediation process and it is strictly confidential. The parties can even go for litigation if they are not satisfied with the mediation process.
It must be observed that the main aim of the mediation process is to build relationships, and not to make a decision. It is more of an amicable resolution of differences with potential form future business between the parties.
Negotiation is also a form of dispute resolution, but there is no third party to adjudicate the matter, therefore the parties work together to find a mutually acceptable solution or a compromise. The parties may choose to be represented by their attorneys during their negotiations. Negotiation is not statutorily recognized in India. There are no set rules for conducting a negotiation.
Essentials of negotiation-
- It is a process of communication which helps to resolve conflicts.
- It can be entered into voluntarily and its outcome is non-binding.
- The parties are benefitted here as they have control over the outcome and procedure and the process is carried out keeping their interests in mind.
In conciliation, the third party, who is called the conciliator, talks to the parties involved separately so that the parties can arrive at a mutually acceptable solution through facilitating talks between the parties. Conciliation is also governed in India under The Arbitration and Conciliation Act, 1996. Under Section 61, conciliation is provided for disputes arising out of legal relationships, whether they are contractual or not.
Difference between mediation and conciliation
In mediation, the mediator plays a more active role in the the process by proposing compromise solutions after hearing all parties while in the case of conciliation, the conciliator has to bring the parties into such a state of mind as to facilitate the parties to come to an acceptable compromise.
In a country like India where there are many illiterate people, the concept of Lok Adalats is a necessity. This was first introduced in 1982 in Gujarat. This concept mainly focused on reducing the burden of pending cases on the Courts and has incorporated the concept keeping in mind various factors like social justice.
Lok Adalats are governed under The Legal Services Authorities Act,1987. Sections 19, 20, 21 and 22 specifically deal with Lok Adalats. They have been organised by the State Legal Aid and Advice Boards with the aid of District Legal Aid and Advice Committees. These have helped poor people to avoid the inefficiencies of litigation. The aim of The Legal Services Authorities Act was to provide access to justice for all, whether he be poor or rich. Since the poor masses of the society were not being delivered on this promise, this Act was formed. This access has been further strengthened by judgements of various courts, such as the Delhi High Court, in the case of Abul Hasan and National Legal Service Authority v. Delhi Vidyut Board & Ors. AIR 1999 Del 88, where it gave an order for setting up permanent Lok Adalats. Further, the decision given by the Lok Adalat is binding and shall be treated akin to the order of a civil court., thereby increasing poor people’s access to justice.
There are many other dispute resolution methods, like med-arb, mini trial, summary jury trial etc. But arbitration, mediation and Lok Adalats etc are the most commonly used techniques of ADR in India. Throughout the world, ADR has been slowly becoming the favored choice for parties, but India still relies a lot on litigation. However, with the development of these ADR methods, and in an effort to improve access to justice, ADR is being seen as a necessity. Legal recognition should be given to all ADR methods including negotiation as they are viable and convenient., and it would help to ease the burden of the courts.