In this blog post, Meghana Balan, a Bangalore-based Lawyer with an Independent Practice and a student pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses and compares the hierarchy of ADR in India with that of the US.

INTRODUCTION

Alternate Dispute Resolution, as the name suggests, is a means of dispute resolution different from the conventional methods. Historically, disputes and specifically commercial disputes have been referred to an impartial entity. This is either a person in authority or entities with experience and expertise in the relevant subject matter. The course of time has established a formal judicial system in most parts of the world. Although the formal judicial system is still the most largely preferred mode of dispute resolution, there is a small but growing section of commerce that is utilizing the alternate means of dispute resolution for speedy if not economical remedies.

When one refers to ADR, one usually thinks of arbitration. However, ADR actually includes other methods like negotiation, conciliation and mediation.

ADR IN INDIA

ADR is not a new concept in India and the first legislation regarding this subject matter was the Arbitration Act of 1940 which has since been replaced with the Arbitration and Conciliation Act of 1996 in order to include the mandates of the UNCITRAL. While Part I of the Act deals with Arbitration in India, Part II deals with the enforcement of certain foreign awards.

ADR in India can be divided into mediation, conciliation, arbitration and the lok adalats (the concept being unique to India). Each of these methods of alternate dispute resolution has their own pro and cons, depending on the specific dispute which may either be more effective in resolving the dispute.

Arbitration is one of the most formal means of ADR. In order for parties to use arbitration as a means of dispute resolution, certain requirements need to be met.[1] The primary being a written arbitration agreement between the parties to the dispute. This may either be in the form of a separate arbitration agreement or included as an arbitration clause or section of a valid agreement. An arbitration agreement may be inferred even by the exchange of letters, telefax, telegrams or other means of telecommunication.[2] Although the High Courts and the Supreme Court, in some cases, may provide interim relief, the arbitration process does not involve the formal judiciary. The arbitral award may only be set aside in certain cases[3], subject to section 34, an arbitral award is binding upon the parties and can be enforced in the same manner as if it were a decree of the court.[4]

Conciliation is a less formal means of dispute resolution. Unlike arbitration, conciliation does not require a prior written agreement. Parties to a dispute may at any time choose conciliation as a means of dispute resolution. Either party may initiate a conciliation proceeding by sending a written invitation to the other to conciliate. However, if the other party rejects the invitation then no conciliation proceeding may take place. The Act prefers one conciliator but permits two or three as well. In the case of more than one conciliator, the Act requires them to act jointly. The Conciliator may be appointed with the help of institutions when the conciliator is required to have a certain expertise. Conciliation as a process requires the parties to submit statements, but the conciliator may require additional information or statements from the parties, may meet them, and may draw up the terms settlement. If the parties agree and sign the terms of the settlement, it would be final and binding on them. This settlement agreement shall have the same effect as if it were an arbitral award[5].

It is important to note that conciliation proceeding and the final agreed settlement agreements are confidential[6].

Mediation is a completely informal type of dispute resolution and the role of the mediator is more that of a facilitator of dispute resolution rather than an active participant in the process of dispute resolution. Although this method of dispute resolution is gaining popularity and there are a few institutions currently in India that have been established to facilitate mediation, it is still in the nascent stage. The terms of a mediated settlement are written and signed and form a binding contract and are required to be enforced like any other contract.

However, if any case is pending in Court regarding the same matter and the parties have reached a mediated settlement, the said settlement terms can be filed in the Court. A decree passed by the court on the basis of the settlement terms will be final and non-appealable.

Lok Adalat. When speaking about ADR in India one must mention lok adalat or the people’s court. A form of dispute resolution used by large sections of the rural India. Although the lok adalat is conducted by the government, it is a very informal process, has no court fee or rigid procedures with regard to evidence. When a settlement is reached between the parties, the lok adalat passes an award which is binding and is enforced as a decree of a civil court. Therefore, the proceedings of the lok adalat are considered judicial proceedings.

ADR IN THE UNITED STATES OF AMERICA

The American Arbitration Association or AAA formed in 1926 is one of the oldest organization promoting alternate dispute resolution methods. In the US alternate dispute resolution ranges from quasi-judicial to completely informal proceedings.

Arbitration in the U.S may result in a binding, non-binding or advisory decision. Although arbitration is mostly used as an alternative to judicial proceedings due the expediency, in more recent times, we find that arbitration is the preferred mode of dispute resolution when the subject matter of dispute is highly technical or requires the adjudicator to have expertise in a certain field which may not be the case in a formal judicial proceeding.

The parties to a dispute may enter into an arbitration agreement prospectively, even after the dispute has arisen. An award by an arbitrator or arbitration panel is required to be “confirmed” in a court of law, only when the award is confirmed, is it an enforceable judgment. This confirmation is required to be done within one year, while any objection to an award must be challenged by the losing party within three months.

Mediation as an alternative means of dispute resolution is less formal than an arbitration and in the US, is largely used to resolve family disputes. The mediator assists the parties to resolve the dispute by generating options for settlement. Most mediators in the US are lawyers and mediation is currently the primary ADR process in federal district courts.

Conciliation in the US is a very informal process even though it is similar to mediation, it may even be conducted on the telephone. A conciliation process is considered as a means of dispute resolution when the parties have pretty much agreed in principle on the solution and the details of the matter are to be finalized.

THE HIERARCHY OF ADR IN INDIA IN CONTRAST WITH THE US

The contrasts between the hierarchy of ADR in India and the US are obvious from the above description of the various processes. To highlight a few major points:

• Arbitration in India is possible only if the arbitration agreement pre-exists the dispute, while this is not the case in the US. Parties may choose arbitration as a means of dispute resolution even after the dispute has arisen.
• Arbitral awards in India are always binding (subject to some exclusions based on the principle of natural justice) whereas the arbitral award in the US will be considered binding only if they are confirmed in court within the stipulated timeline.
• When conciliation proceedings, although informal in India, result in a settlement agreement, it has the same enforceability as an arbitral award whereas conciliation proceedings in the US are completely informal and the settlement is treated like a regular contract between the parties (and may further result in dispute) as opposed to a binding judicial decree.
• Mediation in India is the least formal ADR and is similar to conciliation in the US. The settlement agreement between the parties is a binding contract and can have the enforceability of a court decree only if the dispute is the subject matter of a litigation and the settlement agreement is entered in the court by the parties.

CONCLUSION

Based on the discussion above, one can conclude that, although ADR has had a formal sanction in the US longer than in India, the Arbitration and Conciliation Act, 1996 has given teeth to the alternate forms of dispute resolution in India that the process lacks somewhat in the US due to the need of the arbitral award in the US to be confirmed by the court of law. Even though the American Arbitration Association or AAA is one of the oldest institutions advocating ADR with tried and tested rules and regulations, the fact that the final award of the arbitration requires being confirmed by a court of law somewhat defeats the purpose of ADR. In terms of hierarchy of ADR in India, arbitration is the most formal followed by conciliation and mediation whereas the hierarchy of ADR in the US is arbitration followed by mediation and lastly conciliation.

[1] Section 7 of the Arbitration and Conciliation Act, 1996

[2] Section 7 (4)(b)

[3] Section 34

[4] Section 35 and Section 36

[5] Section 74.

[6] Section 75