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This article is written by Dikshi Arora, a student from RGNUL, Patiala and Shivank Kumar, a student from Symbiosis Law School, Noida.

As stated by the Former Associate Justice of the Supreme Court of the United States, Sandra Day O’Connor, The courts of this country should not be the places where the resolution of disputes begins. They should be the places where the disputes end after alternative methods of resolving disputes have been considered and tried.”


In recent times, parties to a dispute look for alternatives for resolving disputes rather than the old and traditional ways for the attainment of legal resolution. Different methods of alternative dispute resolution such as mediation and arbitration are largely looked upon. In mediation, the third party (who is neutral) facilitates a dialogue between the two disputed parties, without resorting to the courts. It can also be labelled as a party-centred process as it primarily focuses on the requirements, rights, interests and needs of the parties. The essence of mediation is that it focuses on the interests and needs of the parties, provides flexible procedure, maintains privacy and confidentiality, provides full disclosure, and involves the disputed parties, unlike litigation. Mediation at one perception level is a medium to avoid the pitfalls of litigation. The vexing issues faced during the settlement of disputes by litigation are very well understood. These are, broadly (i) expense; (ii) delay; (iii) a reduction in the participatory role of parties, and (iv) rigidity of the procedures.

The article is driven in a manner to lay emphasis on measures to improvise the current situation of mediation while defining good faith negotiation and stressing upon its benefits. It also talks about the concept of mandatory pre-litigation mediation for seeking legal recourse in a smooth and convenient manner. Furthermore, the national and international developments in the compulsory pre-litigation mediation have been discussed coherently throughout the article to reach a firm conclusion. 

Induction of special clause in the contract  

Several contracts have special clauses which clarify the intention of the parties for opting for alternative dispute resolution mechanisms before opting for traditional ways. The clause offers to resolve the dispute amicably, by engaging the parties in friendly talks and undertaking the negotiation in good faith by mediation, before commencing the process of arbitration. These clauses have been a matter of debate for quite a long time. There has been much trouble while enforcing such clauses and the debate over the vagueness of these clauses is often seen. What “good faith negotiations” exactly are and how does a person get involved in friendly discussions and talks when a presumably rancorous dispute has already taken place between the parties?

Commercial Court Act and the Code of Criminal Procedure

Despite the so-called complexity, stratified and tiered clauses in dispute resolution, it has been made enforceable by the courts in many instances. There is a constant demand to amend legislations with a view of combating increasing pendency in courts by incorporating the provision of alternative dispute mechanisms. The Indian Commercial Courts, Commercial Division and Commercial Appellate Division of High Court Act, 2015 (CCA) was amended in 2018 to clarify that a lawsuit cannot be awarded an immediate interim relief, without the complainant having exhausted the arbitration and mediation i.e. the pre institutional remedies. A similar approach is also being followed in various other nations, including the United Kingdom, Greece, Turkey and Italy, where they have been successful in promoting mediation under the alternative dispute resolution mechanisms.

The opposing party or the defendant in a dispute has a right to refuse mediation under the CCA. In India, people prefer adjudication, which is a traditional way of settling disputes, over mediation. Under the Code of Civil Procedure 1908, Section 89 allows for the settlement of conflict outside the court, or the provisions for conciliation under the Arbitration and Conciliation Act, 1996. It has been claimed that the amendment to the CCA has a lack of attitudinal and institutional sufficiency reforms to encourage the parties meaningfully towards mediation. This shows a myopic impression of the processes of non-adversarial dispute settlement, in totality.

What is good faith negotiation?

Settling a dispute by the way of mediation, negotiations and dialogue has considerable advantages. The procedure is likely to be swifter, cost-efficient and more procedurally flexible than the traditional litigation or arbitration. Further, intimately knowing the facts of the case, the parties to the dispute are in the best position to achieve a satisfactory resolution that is commercially favourable to both parties.

While arbitral tribunals and courts are authorized to issue enforceable awards, the arbitration is increasingly getting popular at the tribunal that is well versed in the complexities and technicalities of commercial disputes. The fact remains the same that the judges and arbitrators are guided and constrained by legal principles rather than commercial considerations. On the other hand, the parties to the dispute are acquainted with their trade-offs and commercial goals which they desire to achieve. Also, parties involved are not limited to traditional judicial interventions but may come up with more innovative approaches that meet their practical needs.

Furthermore, in other respects, the closed-door negotiation process is likely to have a relatively low impact on the business relationship of the parties, as opposed to adversarial proceedings before an arbitral tribunal or the courts that are frequently publicised and drawn off. Settlement negotiations provide much more privacy than either litigation or arbitration. While parties may require to reveal sensitive information in settlement disputes to be meaningful, the upfront agreement that the negotiation should take place on a without prejudice basis may be considered helpful in avoiding any problem arising from such revelations.

Good faith negotiation would need a party to act in a manner that’s likely to yield a consensus. Inter alia initiating communications could be included in this promptly and responding within a reasonable time frame to the counterparties, sending negotiators with decision-taking power and not just to act as mere mouthpieces, and showing an intention to make reasonable concessions, like by seriously engaging with the proposals and making clear counter-proposals.

An approach towards negotiation through a collaborative process would also be important as opposed to a pure competitive process. Most conflicts include a range of negotiable issues, but they may be prioritised differently by different parties. As such, each party can integrate different sources of value through trade-offs based on their individual preferences. Incrementally, revealing information about the trade-offs that the party is prepared to make will be an indication of good faith and allow the counterparty to reciprocate similarly. Consensus on an objective standard to be used as the basis for negotiations – for example, industry standards or market practice, scientific evidence or legal precedent as may be suitable – may also provide a more objective standard against which to evaluate the stance of each party.

Making pre-litigation mediation mandatory in India

Today there exists no uniform legislation or law regarding the regulation of mediation in India. Even after the settlement of the dispute, the settled agreement is considered as of non-binding nature in the court. This results in a loss of significant time in mediation without any outcome or solution. The mediation or negotiation can result in an agreement but that settlement is not enforceable in itself. At the 3rd International Conference on Arbitration in the Era of Globalisation, organised by the Indian Council of Arbitration and the Federation of Indian Chambers of Commerce and Industry, CJI SA Bobde called for mandatory pre-litigation mediation to reduce the burden of court. There is a need to introduce a law to make settlement arrived after mediation is legally binding. Pre-litigation mediation will reduce the backlog of cases along with saving time of court and litigants. 

Commercial Court Act, 2015 has an exception where urgent relief is being sought such as an injunction. Under Section 12A, the party is required to undergo a mediation process before filing the suit. The section provides the parties to opt for the alternative means to resolve the dispute through negotiations and discussions with the help of a third-party (mediator).  Any commercial dispute of more than Rs. 3,00,000 is governed by this provision of the Act.

Such steps by the central government are appreciated and welcomed. This is going to further promote mediation. However, there is a need to ensure its success along with instilling the litigant confidence in this process by providing strong institutional support and infrastructure. The well-trained mediators are pre-requisite.  

Developing capacities and bringing reforms to make mediation socially viable 

Before the acceptance of mediation as an alternative, many crucial reforms are needed to be taken for making it socially viable. Imparting professional training for mediators is a crucial step towards boosting confidence in practice. Selecting men and women of integrity for the imparting needs of training has to be given emphasis. Mediation’s informality and flexibility has the potential for benefit, but shouldn’t be misused. Skills like active listening, neutral reframing of party’s positions, summarising, acknowledging, setting of the agendas, art of deferring, redirecting the process and choice of words are the key areas which are to be faced by any mediator.

Pre-litigation mediation: international perspective  

The International Chamber of Commerce (ICC) promotes the use of negotiated settlement through ways other than courts. ICC Rules of Arbitration offers a concession in fee if parties opt to resolve disputes through mediation (under the ICC Mediation Rules) prior to initiating the arbitration. ICC Rules of Arbitration also recommends several case management techniques such as informing and making the parties aware that they are free to resolve all or part of the dispute through any form of amicable dispute resolution mechanism, such as mediation under the ICC Mediation Rules. There is a trust deficit, given that the dispute is already present between the parties. The main challenge is to bring both the parties to the table and initiate the process of negotiation. Due to such mandatory and non-voluntary undertaking of mediation, it becomes important to judge the intention and willingness of both the parties to resolve the dispute in good faith. 

The Singapore International Arbitration Center (SIAC) along with the Singapore International Mediation Center (SIMC) has also taken the initiative on the same lines. SIAC offers an arb-med-arb procedure, wherein mediation is a prior and mandatory step before referring the matter to arbitration. If the parties were able to reach a settlement through mediation then the settlement is registered as a consent award, which is usually accepted and enforceable as an arbitral award. On failure to reach a settlement through mediation, the parties may proceed with the arbitration proceeding. Hence, this procedure formalises the attempt of undertaking post-dispute negotiations before approaching the court. 

A way forward 

Though the acceptability of multi-tiered dispute resolution clauses and attempts to increase the participation in pre-litigation negotiations is a positive move, it would be of no means for attempting a settlement without the bona fide efforts of the parties. These negotiations will simply be considered as a missed opportunity if good faith is absent.

However, there appears to have been the only superficial acceptance of such alternatives, with a mechanical approach being adapted to the implementation of tiered dispute resolution clauses as simply a pre-arbitral check-box to be ticked. Mediation has the considerable potential not just to ease the burden of arrears but more essentially to bring about a qualitative change in the focus of the legal system from adjudication to dispute settlement. The success of mediation would not merely rely on developing an appropriate regulatory and legal framework, but on addressing basic human resource development concerns. Inducing a framework to evolve from a litigation-oriented approach to a more proactive or curative approach requires much more than developing a law. Meeting the resistance to change, raising awareness and knowledge among the concerned parties or the stakeholders about its advantages and developing the capacities are key elements in the process’s success. Above all, confidence in the mediation mechanism will only be fostered if the mediator discharges, in positive terms, ethical issues of the procedure to which the mediator’s role is central.

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