In this article, Sheetal Sharma of KIIT law school discusses Arbitration, Mediation and Conciliation in India. How effective are they?
“The richest love is that which submits to the arbitration in time” -Lawrence Durrell-
Introduction
Arbitration, mediation and conciliation are the main Alternative Dispute Resolution Mechanism which is generally adopted by the people to resolve their disputes in an informal manner. They try to reach a solution by settlement or negotiation with the assistance of a third neutral party and have turned out to be an effective alternative to the litigation process.
What is alternative dispute resolution?
When the method of resolution of the dispute chosen by the parties is other than the arbitration, in the form of mediation, negotiation, conciliation, Lok Adalat, online arbitration, then it is Alternative Dispute Resolution (herein referred to as ADR). ADR opens the way in the field of business and tends to solve the matter more efficiently and effectively. It is basically a dispute settlement through negotiations. In the arbitration, a dispute is decided by imposing an award, but ADR is more likely to find a solution to the dispute by negotiating between both the parties. The purpose of ADR is more than merely giving a remedy to the parties. It aims to ensure that the contract operates properly.
Arbitration as an effective mechanism for dispute resolution
Arbitration is a form of dispute resolution method in which the parties avoid the court proceedings and instead decide to resolve their dispute through appointing a third person, who is known as an arbitrator. An arbitrator is appointed in labour disputes, business and consumer disputes and family law matters.
“an arbitration is the reference of dispute or difference between not less than two parties, for determination after hearing both sides in a judicial manner by a person or persons other than a court of competent jurisdiction.”[1]
History of arbitration in India
Arbitration was practised in India from the ancient times through Puga, Sreni, Kula and Panchayat. These were the bodies who decided and resolved the disputes in the alternative of courts. After that many acts were passed to give arbitration a uniform meaning and to give it a statutory recognition. The recent act of arbitration was ‘The Arbitration and Conciliation Act, 1996’ which was amended in the year 2015, due to certain drawbacks in the said act.
The prospects of the arbitration or the reason due to which it is more preferable
- Expertise in technical matters: an arbitrator can easily deal with technical matters which is scientific in nature because arbitrators are appointed on the basis of their knowledge and skill in the particular field. So they can resolve the dispute more efficiently and effectively.
- The process of arbitration works more quickly and is more cost-effective than the courts.
- There is the convenience of the parties in arbitration as they are free to decide the venue and time of the proceedings.
- Privacy and confidentiality of the parties are maintained as there is no unnecessary publicity of the dispute.
- Arbitration is more flexible as compared to courts as they do not have to follow strict rules and regulations as that of court because of the rules set by the parties only.
Due to these advantages of the arbitration, parties prefer it over litigation. It gives party full authority to decide their own arbitrator, and in case of international arbitration, the venue, place or the country in which the arbitration proceedings will be held is also decided by the parties.
However, there are also certain challenges where the arbitration lacks or defaults in providing proper arbitral awards and claims. Everything with some advantages also has loopholes along with it.
Arbitration system faces some challenges which are briefly discussed
- If the parties, by agreement decide the arbitral award and decision to be final, then they waive their rights to access the courts.
- Sometimes the arbitrator acts biased, due to which the very essence of arbitration is lost.
- There is not always the case where the cost of the arbitration is cheaper. It can vary in complexities and may lead to a higher cost than the litigation. It can be seen in multiple parties, multiple arbitrators and complicated legal disputes.
- It is very difficult to appeal arbitral rulings. Sometimes a party can face unfair result and finds the difficulty in appealing to the courts.
Moreover, arbitration is preferable in the matters of commercial dispute and there is increased development in the arbitration law adopted in our country to make it more effective and reliable. No matter what is said, it will always be regarded as the usual method for resolving an international commercial dispute.
Conciliation as an ADR mechanism
Conciliation is a type of ADR where the settlement is made out of court. There is no involvement of the court in the whole arbitral proceedings. The dispute is settled by a neutral third party, who is the conciliator. The conciliation process is voluntary as it is on the mutual discretion of the parties to choose conciliation as a method of resolving their dispute with the assistance of the conciliator, also the proposal is not binding upon the parties. They are free to follow or not follow the proposal given by the conciliator. It presides over litigation because the parties do not have to go through the technical procedures and formalities of litigation, instead, conciliation allows parties for a friendly search to reach an amicable solution.
The adoption of conciliation process in India
The adoption of conciliation process was first recommended by the Law Commission of India in 77th and 131st report and in the conference of chief ministers and chief justices in their resolution of 1993. Whereas, the Himachal Pradesh High Court evolved pre-trial, in-trial and post-trial conciliation project in the subordinate court in Himachal Pradesh in the year 1984. The Calcutta resolution which was adopted in 1994, also stated the recommendation of conciliation courts to be constituted in the other states.
With the adoption of conciliation rules, 1980 by the UNCITRAL, the Parliament of India also find it expedient and enacted Arbitration and Conciliation Act, 1996 which gave statutory recognition to conciliation. With this, the post-litigation conciliation was recognised as ADR with the incorporation of section 89 of Code of Civil Procedure, 1908[2] providing an option for reference of sub judice matters to conciliation with the consent of the parties.
Issues in post-litigation conciliation
The main issue in post-litigation conciliation is the preference of judiciary towards mediation over conciliation. Since mediation and conciliation are almost the same, the publicity of mediation and its recognition as a mode of court-annexed mediation has been preferable than conciliation. Due to this, it is not utilized to its full potential. Under section 89 of the CPC, the courts can refer any dispute for judicial determination to any of the ADR mechanism namely, arbitration, conciliation, mediation etc. Among them, mediation and Lok Adalats are mostly used, which lacks chance for conciliation to grow potentially at the post-litigation stage.
Mediation in the dispute resolution mechanism
Mediation has grown as the most advanced form of ADR mechanism. It is one of the methods for handling human relationships in a positive manner, mainly for the good of the people involved and for the betterment of the community.[3]
Mediation encourages a search for the solution by the parties themselves, involved in the dispute. The basic motive of mediation is to provide opportunities to parties to negotiate and come to a final solution catering the needs of both sides. It is an assisted negotiation and an informal process in which parties are aided by a third impartial person, who is the mediator, possessing specialized skills, requisite training and sufficient experience necessary to assist the disputed parties for reaching a negotiated settlement.
Role of the mediator
The role of the mediator is only to assist the parties. He does not have to decide who is right or wrong and also does not have authority to impose a settlement on the parties. Instead, it provides a forum for principled negotiations. Parties come to recognise their true rights and needs, instead of reiteration of their rights and they also come to realise that solution can be reached by satisfying each other’s needs.
It is often said that mediation is the best way of imparting justice through self-mediation of the parties. Mediator empowers the parties to communicate and decide the outcome on their own by providing various options suitable as per the dispute and has to think of alternative solutions favouring a mix of benefits to both parties.
In brief, Mediation is all about facilitating or assisting negotiation between the parties. Mediation works between the parties because it gives chance to the parties to come to a settlement where both parties do not have to compromise their rights instead leads to a better solution.
Growth of mediation centres in India and Its impact on ADR mechanism
In India, mediation as a mode of ADR mechanism has been accepted in its fundamental and generic form. It has been widely utilized in Delhi, which has indeed been one of the pioneers in institutionalizing mediation. In India, mediation got legislative recognition for the first time in 1947, through Industrial Disputes Act,1947. The enactment of section 89 of CPC was focused by the judiciary to popularize and propagate mediation as an ADR mechanism.
In furtherance of this, the judiciary also prepared a “National Plan for Mediated Settlement of Dispute” for developing training of mediators, development of mediation manuals, setting up of mediation centres in court complexes and spreading awareness about mediation against litigants so as to popularize mediation.[4]
Also, various mediation centres have been established in Delhi for resolution of disputes in pending cases. The growth of mediation centres in Delhi can be seen through the institutional as well as ad-hoc private mediation in Delhi which is always available and open for the parties to take recourse to mediation for settlement of their disputes outside the court-annexed mediation centres before they invoke the jurisdiction of courts.
There are various institutions available in Delhi offering professional mediation services at the pre-litigation as well as the post-litigation stage. The Indian Legislature also enacted The Legal Services Authority Act, 1987 by constituting National Legal Service Authority as a central authority vesting with various duties like encouraging for the settlement of disputes by way of negotiation, arbitration and conciliation, etc.
Court-annexed mediation
When the cases are solved with the help of court accredited mediators, that is often referred to as court-annexed mediation. The mediation services are viewed as part and parcel of the same judicial system, instead of a separate court-referred mediation, where court refer the cases to private mediators so that no one would feel that the case is separated from the court system. ADR services under the control and guidance of judicial system would ensure smooth functioning, authenticity and acceptance from the public. It would ensure the mediation in coordination with the courts and not be viewed as competition to the courts.
How mediation is helpful for the courts?
With the cooperation of mediation services, courts can easily refer the cases to mediators and deal with the cases which are more important for public matter without wasting time on small petty cases, which can ensure in reducing the loads and pending of cases at a manageable level. And also, the mediators will have a positive feeling from the support of the judges and make the process more expeditious and harmonized. It would lead to faster settlements and public confidence and would ensure a feeling that the mediation is working hand in hand with the same system.
This is not as easy as we think because the general public is not always willing to accept the new change about which they are not properly aware of. It is a new idea which is introduced in India and we cannot in any circumstance expect from the public to adapt to the new change quickly. Here arises the problem for court annexed-mediation.
Obstacles in the implementation of this mechanism
- the unavailability of sufficient funds to introduce this machinery in the country.
- Second, in a country like India, where we have an established judicial system the court is seen as the place to go when disputes arise and cannot be viewed as a mechanism where it can be sorted out by the parties themselves.[5]
Thus, the public at large refuses to accept where the court is not directly involved. They only accept when they see that it has the stamp of approval of the court because then they do not have any fear as they are already accustomed to the court system.
Why you should choose mediation?
Mediation is confidential, non-binding and parties get to choose an alternative provided by the mediator. The mediator guides for reaching an amicable solution for both the parties. No strict procedures are followed by the parties which makes the whole proceedings more informal and comfortable.
Why is ADR preferred more than litigation?
ADR has gained a rapid popularity over the years. The business disputes are resolved more by the arbitration process than the litigation. The reason for acceptance of arbitration over litigation is due to many reasons.
- Arbitration is more cost-effective. The cost of the process involved in the dispute is much less than the cost involved in the litigation.
- The process is more informal as compared to the litigation process. There are no lengthy procedures as that is present in the court.
- ADR process is flexible. The parties can withdraw their case anytime they want which, is not possible in the court process.
- The dispute is resolved more quickly with the assistance of a third person, who advises the parties according to their needs and suitability. This is not same in the case of the court process. The judges do not give judgment according to the suitability of the parties.
- The resolution of the dispute is made faster. On the other hand, filing cases in the court take years and years to resolve one case.
- In ADR, an approach is made to balance the interest of both the parties. Whereas, in the litigation, the other party loses the case.
- Discussions of the proceedings in ADR is confidential and no public record is to be maintained. The discussions in the court involve knowledge of the public.
- The venue and schedule are according to the convenience of the parties as they have the power to choose the arbitrator, the place of the proceedings etc.
How arbitration, mediation and conciliation are different from each other?
Mediation and conciliation both are an informal process. Whereas, arbitration is more formal as compared to them. In mediation, the mediator generally sets out alternatives for the parties to reach out an agreement. The main advantage of the mediation is that the settlement is made by the parties themselves rather than a third party. It is not legally binding on the parties.
Arbitration is a process where the parties submit their case to a neutral third party who on the basis of discussion determine the dispute and comes to a solution.
Dispute resolution through conciliation involves the assistance of a neutral third party who plays an advisory role in reaching an agreement. The process adopted by all the three are different but, the main purpose is to resolve the dispute in a way where the interest of the parties is balanced.
Conclusion
Arbitration, mediation and conciliation are considered as the main alternative dispute resolution mechanism to litigation. Business people prefer these mechanisms more convenient because it does not require a lot of lengthy procedures like courts. Here, dispute resolution is more informal as compared to litigation in courts. Over the recent years, they have turned out to be more effective than the litigation process. Access to justice is there without the involvement of the court. Parties are more comfortable as they can freely express their own views, needs and interest.
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References
[1] Halsbury’s Laws of England para 501 (vol.2, 4th edition).
[2] Inserted by the Code of Civil Procedure (amendment) Act, 1999.
[3] DK Sampath, Mediation 8 (NLSUI, 1991).
[4] Justice K.G. Balakrishnan, former Chief Justice of India (Law Day address to the Nation on November 25, 2008).
[5] Sriram Panchu, Mediation Practice and Law, The path to successful dispute resolution, 255.
[6] https://www.tpsgc-pwgsc.gc.ca/gcc-bdm/differences-eng.html
