This article is written by Maaroof C H, a Final year Law student at the Faculty of Law, the University of Delhi pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute resolution from Lawsikho. This article has been edited by Ojuswi (Associate Lawsikho).
This article has been published by Sneha Mahawar.
In the majority of the countries, even in this modern era, people are still suffering from the lengthy procedure of litigation. People have been dissatisfied with the highly technical, time-consuming, complex, and expensive justice dispensation by courts across the globe. This has led towards the avenue of the ADR (or Alternative Dispute Resolution) system, which includes procedures such as negotiation, conciliation, mediation, arbitration, and a variety of hybrid procedures. The advancement of information and communication technology helps people to settle business deals and resolve their disputes while they’re sitting on opposite sides of the globe.
The ADR method aims to provide speedy and affordable justice by encouraging disputants to reach a negotiated agreement with minimal external assistance. It refers to a set of dispute resolution techniques that assist disputants in reaching an agreement without going to court or litigating the subject. These strategies frequently involve a third party who assists in the resolution of disagreements among the disputants. It provides alternate dispute resolution choices though it is not designed to replace litigation. This article provides a comparative study on the existing Alternate Dispute Resolution framework pertaining in Dubai and India and thereby attempting to substantiate the relevance of ADR in the present period where nuances of disputes ranging from human to commercial evolve to newer and more complex avenues at an unimaginable pace.
ADR and their significance
Litigation is a lengthy procedure and its functioning is not covered by confidentiality. Whereas there are many advantages to Alternate dispute resolution over litigation. Every party to the dispute seeks speedy relief and it can be delivered through ADR mechanisms. Moreover, it is a process that gives priority to creative, business-driven solutions. It helps to save substantial costs and gives access to trained neutral experts. Most of the time the verdict from the court’s side is often rigid, the ADR system offers flexibility to the parties to adopt the process of their needs, and the procedure employed is informal. Once a dispute is taken into court then it’s in Public and it always brings loss to the parties in dispute. Here the ADR system can ensure privacy and confidentiality.
Business relationships are preserved. Even after the conflict was resolved, this kind of dispute settlement maintained the disputants’’ pleasant connection. Co-existential justice has also been a big part of ADR approaches. It provides the Indian judiciary with scientifically designed tools that help to reduce the strain on the courts. Arbitration, conciliation, mediation, negotiation, and Lok Adalat are all forms of alternative dispute resolution. Negotiation is defined as self-counseling between parties to resolve a conflict, although it is not recognized by law in India.
The goal of ADR is to promote social, economic, and political justice while maintaining the society’s integrity, as stated in the preamble. Articles 14 and 21, of the constitution of India, deal with equality before the law and the right to life and personal liberty, respectively, which are also foundations of ADR. It also aims to promote equal justice and free legal aid under Article 39-A of the State Policy Directive Principles (DPSP). In the last three years, Lok Adalat has disposed of more than 50 lakh cases annually on average. However, there appears to be a dearth of understanding regarding these mechanisms’’ existence.
Types of ADR
The disagreement is brought before an arbitral tribunal, which renders a ruling (an “award”) that is mainly binding on the parties. It is less formal than a trial, and evidentiary rules are frequently eased. In most cases, an arbitrator’s ruling cannot be appealed. There is relatively little room for judicial intervention in the arbitration procedure, except for some interim remedies.
A non-binding technique in which the parties to a disagreement are assisted by an impartial third party, the conciliator, in finding a mutually satisfactory agreed settlement of the problem. Conciliation is a type of arbitration that is less formal. The parties have the option of accepting or rejecting the conciliator’s recommendations. However, if both parties approve the conciliator’s settlement instrument, it will be final and binding on both sides.
A neutral person known as a “Mediator” assists the parties in attempting to obtain a mutually agreeable resolution of the issue during mediation. The mediator does not decide the problem; instead, he or she assists the parties in communicating so that they can try to resolve it themselves. The parties retain control of the outcome in mediation.
A non-binding procedure in which the parties commence negotiations without the involvement of a third party to reach a negotiated settlement of the dispute. It is the most common method of Alternative Dispute Resolution that occurs in the workplace, in non-profit organizations, in government branches, in legal proceedings, between nations, and in personal issues such as marriage, divorce, parenting, and everyday life.
The establishment of voluntary agencies known as Lok Adalat’s (Peoples’’ Courts) is an interesting characteristic of the Indian judicial system. To encourage out-of-court settlements, the Legal Services Authorities Act was passed in 1987, and the new Arbitration and Conciliation Act was passed in 1996. Lok Adalat, or “People’s Court”, is an informal environment that allows bargaining in the presence of judicial authority and disburses cases without placing undue focus on legal details. The Lok-Adalat’s decision is final, and it is regarded as a civil court judgment that is binding on the parties to the dispute. The Lok-Adalat’s decision is not appealable in a court of law.
Evolution of ADR
Evolution and codification of ADR in India
The process of ADR is not new in India. It has always been practised since the ancient period. People in India believed that resolving disagreements within the four walls was an important aspect of maintaining their dignity and personality in society. Hence, ADR plays a major role in Indian Society to settle the disputes formally and informally.
In 1772 during the British rule in India, the courts were empowered to refer disputes to arbitration either at the request of the parties or at their discretion. In 1859 when The Code of Civil Procedure was enacted, Sections 312 to 327 of the act mentioned arbitration but in 1882 the sections relating to arbitration were repealed. In 1899 The Indian Arbitration Act, of 1899 was enacted to give effect to alternate dispute mechanisms in India. The act was based on English legislation. The CPC has then changed again in 1908, with section 89 of the second schedule giving courts broad powers to refer conflicts to ADR mechanisms. The Indian Arbitration Act of 1899 and section 89 of the Code of Civil Procedure, second schedule, were two effective pieces of law to deal with arbitration at the time.
Following that, India signed and adopted the Geneva Convention in 1937, and a corresponding law, The Arbitration (Protocol and Convention) Act, 1937, was enacted. The Indian Arbitration Act, 1899, and section 89 of the CPC’’s second schedule were repealed in 1940, and The Arbitration Act, 1940 took their place. Later on, India accepted and signed the UNCITRAL model law on international commercial arbitration in 1985. Finally, in 1996, the Arbitration (Protocol and Convention) Act, 1937, the Arbitration Act, 1940, and the Foreign Award (Recognition and Convention) Act, 1961 were repealed and consolidated into a single piece of legislation, the Arbitration and Conciliation Act, 1996, which followed the UNCITRAL model law to improve the effectiveness and efficiency of the Act in 2002, the CPC reintroduced Section 89 with Order X (Rules 1A to 1C). In 2015 and 2019, the 1996 Act was amended twice.
Evolution of ADR in U.A.E
The United Arab Emirates is a newly developing country that has shown the world its growth in a short period. Oil was discovered in the 1950s. and it has brought a drastic change in their economy which leads to disputes. Sheikh of Abu Dhabi vs. Petroleum Development Ltd  was the UAE’’s first international arbitration case. This dispute arises from a 75-year oil concession agreement between the Sheikh of Abu Dhabi and Petroleum Development Ltd. In the 1990s, the UAE began to concentrate on establishing a national infrastructure for arbitration. In 1992, the UAE Civil Procedure Code contained a short set of arbitration regulations (articles 203 to 218) that regulated and governed arbitration. The Abu Dhabi Commercial Conciliation and Arbitration Center was created in 1993 by the Abu Dhabi Chamber of Commerce and Industry. The Center for Commercial Conciliation and Arbitration was created by Dubai’s Chamber of Commerce in 1994.
The International Commercial Courts of Dubai International Financial Center (DIFC) were established in 2006. The DIFC courts are autonomous English-language common law courts, whereas Dubai courts are civil law courts. As a result, the DIFC is frequently referred to as a “common law island in a civil law ocean.” The DIFC is a financial-free zone in the United Arab Emirates where UAE civil and commercial law is not implemented. The DIFC has its own set of civil and commercial laws, as well as an arbitration statute. The DIFC arbitration law was passed in 2008 and is based on the UNCITRAL Model Law, which is not the same as the UAE’’s arbitration legislation.
As a result, where the seat is in the DIFC, the UAE Civil Procedure Code’s arbitration provisions do not apply. As a result of this momentous development, the UAE now has both a civil law “on-shore” and a common law “off-shore” court system. Arbitration centres can be found in both on-shore and off-shore nations. By that time the main arbitration institutions in the UAE were DIAC based in Dubai, ADCCAC based in Abu Dhabi, and the DIFC – LCIA (London Court of International Arbitration) based in DIFC.
The year 2021 will be remembered for significant changes in the arbitration sector, with a new decree designating the ‘Dubai International Arbitration Centre (DIAC) as the emirate’s sole arbitral chamber, effectively abolishing the Dubai International Financial Center-London Court of International Arbitration (DIFC-LCIA). The decree, which came into effect in September 2021, establishes the Dubai International Arbitration Center as the emirate’s sole dispute-resolution seat.
ADR framework in India
Arbitration and Conciliation Act, 1996
Arbitration and Conciliation Act, 1996 Section 2 (1) defines “arbitration” as any arbitration whether or not administered by a permanent arbitral institution and Section 7 provides “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
The Act provides an arbitral award which includes an interim award. An award is an instrument embodying the judgment pronounced by an arbitral tribunal on disputes submitted to it by parties, to an arbitration agreement for determination in a quasi-judicial manner. Section 2(1) (d) provides Arbitral tribunals as domestic tribunals constituted by the parties to an arbitration agreement for the resolution of disputes specifically agreed upon between them to be referred for adjudication by the particular arbitral tribunal. “An arbitrator is a judge of a private Court who gives a private judgment that is an award”. In practice, there are some types of arbitration which include Ad hoc arbitration, Institutional arbitration, statutory arbitration, and fast track arbitration.
In Arbitration and Conciliation Act, 1996 seeks to harmonize and update the law concerning Domestic arbitration, International commercial arbitration, enforcement of foreign arbitral awards, and the law relating to conciliation and related to the matters connected therewith. To begin the arbitration, the arbitration clause must be included in the contract or agreement between the parties. When a dispute emerges between the parties, an arbitration clause states that it must be addressed by arbitration. In the arbitration provision itself, the parties must state the seat and venue of the proceedings.
Then the Act states the provision of notice for commencement of the arbitration. Section 21 provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Once the respondent receives the notice from the applicant about the commencement of arbitration, both the parties will appoint an arbitrator in a manner that is stated in the arbitration clause. Section 11 states that a person of any nationality may be an arbitrator unless otherwise agreed by the parties. Then section 23 states that the claimant drafts a statement of claims that includes all papers they believe are relevant to the case, as well as all evidence supporting their allegations. In support of their position, the respondent may file a counterclaim or a statement of defence, which will be reviewed by the arbitral tribunal. Once it is done hearings will take place.
According to the provision given in section 24 of the said Act, the arbitral tribunal will hear both parties and examine the evidence. The Tribunal will determine whether the documents or evidence presented are legitimate and will then proceed with the case. The arbitrator will make a final award after hearing both parties and analysing all of the concerns. This award must be rendered in writing and signed by all of the Tribunal’s members. Both parties must accept this award as final and binding. Section 31 of the Act specifies the format and content of the arbitral award. Following the arbitral tribunal’s decision, the award must be carried out. Sections 35 and 36 contain provisions relating to the finality and execution of arbitral awards, respectively. However, while an appeal cannot be filed with the Arbitral Tribunal, the parties can challenge the arbitral ruling in a court of law under section 37 of the Arbitration and Conciliation Act, 1996.
ADR framework in Dubai
The Decree No. 34 of 2021 (the Decree) was released on September 14, 2021, signalling significant changes to Dubai’s dispute resolution landscape. The Dubai International Financial Center (DIFC) Arbitration Institute (DAI), which had operated the DIFC-LCIA Arbitration Center (DIFC-LCIA), the foremost MENA arbitral institution, through an agreement with the LCIA, was abolished as a result of this legislative surprise. The Decree went into force on September 24, 2021, the date it was gazetted. The reformed Dubai International Arbitration Center (DIAC) was founded as a single unified arbitration institution for Dubai. The Decree also establishes a new Statute for DIAC, which includes a Board of Directors, a Court of Arbitration, and an Administrative Body with a new organizational structure into a unified body. The decree lays forth clear and comprehensive principles and requirements for DIAC that are in line with international best practices.
Article 2 of the Statute of the Dubai International Arbitration Center aims to achieve several objectives mainly to consolidate the position of the Emirate as a reliable international centre for Dispute resolution through ADR Methods. Which will help them to enhance the position of the DIAC as one of the best options available to parties to Disputes for efficient and effective Dispute resolution, through adopting the international best practices in ADR Methods management. They also aim to promote recourse to ADR Methods to serve the best interest of the finance and business community in the Emirate.
Article 3 of the statute simplifies the functions of the DIAC. The duties and powers of the institution are laid down in this article. It provides the service of administrative supervision of arbitration at the DIAC by the arbitration rules adopted by the DIAC or those agreed upon by the parties to Disputes. It has allowed resolving disputes in various languages through ADR following the relevant rules adopted by the DIAC. For the DIAC to achieve its goals, it must coordinate, cooperate, and sign agreements and memorandums of understanding with specialized regional and worldwide arbitration organizations and centres. This includes exchanging expertise, lists of arbitrators and conciliators, and other resources.
DIAC should ensure that it concludes agreements and memorandums of understanding with competent courts, both inside and outside the Emirate on topics relating to the enforcement of arbitral awards and decisions made by DIAC arbitration tribunals. Then the approval of settlement agreements is mediated by conciliators who are members of the DIAC, following the procedures and standards adopted by the competent courts and as agreed upon with these courts in this regard. The institution should raise awareness of ADR methods through Organizing conferences, symposia, workshops, and training courses and issuing as well as print materials and publications specializing in ADR Methods. The institution should create a register of DIAC members and lists of arbitrators, experts, and conciliators, and a database of the decisions issued by the Arbitration Court on the recusal and removal of arbitrators, experts, and conciliators. The general public has to get to know the rules of arbitration and conciliation, as well as bylaws controlling the ADR Methods, in multiple languages, and make them available on the DIAC website and recognized digital channels. The institution is entitled to perform any other tasks or powers necessary for the DIAC’’s objectives to be met.
The DIAC will be having the Board of Directors, The Arbitration Court, and the administrative body it has been laid down in Article 5 of the statute. Article 10 of the statute lays down that within the DIAC, a court of arbitration will be constituted, consisting of a president, vice president, and other members. The total number of members must not exceed thirteen including the president and the vice president of the Arbitration Court.
The new DIAC ARBITRATION RULES 2022 (the “Rules”) came into effect on 21 March 2022. The Rules were approved at the meeting of DIAC’s Board of Directors on 25 February 2022. All new requests for arbitration submitted to DIAC after this date shall be governed by the Rules.
Article 4 of DIAC ARBITRATION RULES 2022, provides that the parties wishing to commence an arbitration under the Rules shall submit to the centre a request for arbitration with the credentials mentioned in the article. Within 30 days after the request has been notified to the respondent, the respondent shall submit to the centre an answer with certain credentials mentioned in Article 5 of the rules. Whereas Article 6 of the Rules gives power to the Tribunal to rule on its jurisdiction, including on any objections made concerning the existence, validity, scope, applicability, or interpretation of the agreement to arbitrate regardless of any allegation that the relevant underlying contract is non-existent, cancelled, rescinded, terminated and/or null and void. Then the representation can be made as per the choice of parties irrespective of their nationality or professional qualifications which are provided in Article 7 of the rules.
Article 20 specifies that the parties may agree in writing on the seat of the arbitration as per their choice. The language of the arbitration as mentioned in Article 21 can be unless otherwise agreed by the parties, the initial language of the arbitration shall be the language of the agreement to arbitrate. Article 23 of the rules provides that within 15 days after the transmission of the file to the tribunal, they should contact the parties to set the date for a preliminary meeting. Article 24 of the rules allows the claimant to submit its detailed statement of claim if they haven’t done with the request within such a time limit as determined by the tribunal after consultation with the parties. Article 25 of the rules laid down that each party shall have the burden of proving the facts relied on to support its claim or defence.
Article 26 of the rules provides for hearings of the parties, if either party requests a hearing or hearings for the presentation of evidence by witnesses or oral argument or both or, failing such request, the Tribunal decides that such hearing or hearings should take place, the Tribunal shall determine whether such hearing(s) shall be held in person, by telephone or through any other appropriate means of virtual communication including video conferencing. Article 34 of the rules specifies the general provisions of the “award”. Where the Tribunal may issue preliminary, interim, partial, final, additional, supplemental, or other awards as considered appropriate. Unless the provisions of Article 35 conflict with a mandatory provision of the procedural law applicable to the seat of the arbitration and subject to some other provisions in the rules the time limit within which the Tribunal must issue the Final Award is 6 months from the date of the transmission of the file to the Tribunal by the Center.
Commercial mediation in the UAE
The concept and application of mediation have grown in popularity in the United Arab Emirates. In the United Arab Emirates, mediation is widely accepted, and it is a legal subject that has been well investigated. Mediation requires that the decision not be formalized until the parties have reached an agreement unanimously. In a mediation process, all parties’’ interests are considered so that no one is harmed as a result of the conclusion.
The following stages of the mediation process, though they may vary, are included: initially, the mediator will introduce himself and the parties to the dispute, followed by a statement of objective. The disputants must then state the circumstances surrounding the conflict and how they have been affected. Following a conversation in which the parties have the opportunity to hear their opponents and address the issues at hand. Following that, the mediator summons each party for a private meeting, followed by a combined negotiation. Finally, there will be a conclusion reached between the parties, resulting in an amicable resolution of the disagreement.
Alternate dispute resolution has undoubtedly become the most effective dispute resolution mechanism in the corporate world for settling complex disputes amidst commercial transactions and deals in the business. It helps to settle the disputes amicably barring the hurdles of lengthy court procedures which benefit the widespread expansion of business. Moreover, this has been the most viable mode of resolving disputes among the general public. Considering the importance and impact of ADR from laymen to Corporates to settle disputes and develop business across the globe, it has also been duly regulated and implemented with sound statutory provisions in various countries.
Looking into the relevant statutory mechanism regulating ADR in Dubai and India, it can be concluded that, the ongoing deluge of changes brought by the Dubai Government in developing the ADR mechanism on par with the international standards, setting up of the Dubai International Arbitration Center is certainly a milestone step to consolidating Dubai’s position as a global hub for resolving disputes. With the position that Dubai currently plays in commerce and trade in the region and worldwide, it was natural to unify Dubai’s efforts to create a renowned international arbitration centre.
In India, as rightly pointed out by Honourable CJI N V Ramana, “The concept of alternative dispute resolution (ADR) has the potential to transform the Indian legal landscape by providing a platform for millions of people to settle their grievances,” the Arbitration and Conciliation Act 1996 has certainly developed the practice. With the recent legislative developments initiated by the Indian government introducing the mediation bill in the parliament is indeed a promising step since it will further revamp the existing ADR framework in adherence with the international standards and thereby facilitate the key objective of delivering justice promptly and expediently.
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