This article is written by Nabira Farman who is pursuing a Certificate Course in International Commercial Arbitration and Mediation from LawSikho.
Table of Contents
Introduction
The growing interest in pre-litigation arises as a result of the disappointment that litigation brings to the parties. Small disputes when taken to court go through the length of costs, delays, and sometimes unfavorable outcomes which step up the ladder of appeals. This is quite frustrating for parties whose lives are engrossed in frivolous lawsuits and this fight may even take a toll on their mental health. Whereas, pre-litigation offers a way for the parties to settle their disputes according to their suitable timings, costs, and procedures. The favorable outcome is usually a settlement between the parties. So, the dissatisfaction of decrees and decisions of the court does not arise. Because pre-litigation procedures vary across jurisdictions and there is no particular structure to be adopted and adhered to, its success rates in achieving a result acceptable to both parties are high. This article aims to navigate through the route India has adopted until now to establish the pre-litigation settlement regime. The author also makes an attempt to ascertain the process of pre-litigation in foreign countries, such as that of the United States of America, Italy, and the United Kingdom.
Evolution and jurisprudence behind pre-litigation in India
Ancient kings from small to big kingdoms often acted as mediators when it came to solving disputes among two subjects. We see in households when the eldest person in the family takes the role of resolving domestic issues. We have also seen panchayats providing community mediation. This shows the strong cultural bond of mediation rooted in India. Thus, the way societies addressed their divergences outside the courts appears to be the oldest and traditionally most powerful way.
The need for pre-litigation settlement arises because there is an excessive burden on the judiciary to try cases. Addressing an international meet based on the ‘Arbitration in the Era of Globalisation’, the former CJI, Justice Arvind Bobde, said that judging is indeed a hard job because judges do what everyone abstains from doing, that is to say, take decisions. When the conclusion is dissatisfactory to either of the parties, it leads to a hierarchy of appeals that cannot be prevented. He also added that it is the unenforceability of a settlement agreement reached through mediation that ensures efficiency besides minimizing the time pendency for all parties as well as the courts.
Last year, the Youth Bar Association of India filed a Public Interest Litigation (PIL) in the Supreme Court in the way of writ seeking certain directions or guidelines to establish pre-litigation mediation across the nation as a mandate rather than a mere option. The Supreme Court has now asked the Centre to respond whether it is contemplating upon framing legislation in this regard.
It is not under the court’s purview to try out cases in an unreasonably expeditious manner. Just as ‘Justice delayed is justice denied, similarly, ‘Justice hurried is justice buried. Our courts are designed to look into the intricacies of each case in detail which requires a number of hearings and since the courts are already laden with a huge junk of pending suits and trials, often these hearings take years to conclude.
Mediation as an alternative dispute redressal Process can be viewed to transform the status quo of the Indian judicial system in the future. The pre-contentious mediation idea thus resembles the cupboard cherry. Pre-litigation mediation can be understood as a consensus procedure, through which the complainant and the respondent come together, either with the assistance of a neutral adjudicator to resolve the matter in a friendly manner, before the institution, or even before submitting the notice to the court. In mediation, the adjuster is the party/parties’ choice, as opposed to an action where a judge is an adjuster.
Why is pre-litigation mediation settlement preferred over litigation?
The Thurston County Dispute Resolution Center listed ten key mediation reasons such as its affordability, fair and impartial character, time-saving, cost-effectiveness, confidentiality, fostering cooperation, improving communication, identifying underlying issues, allowing personalized solutions, and its success rate.
Dermot McEvoy, partner of the Eversheds law firm and Chairman of the Irish Commercial Mediation Association rightly said that in mediation, the procedure is managed by the parties involved such that the destiny of the conflict is in their hands, no outsiders make decisions.
Result of mediation
The outcome in mediation is not binding upon parties unless they sign the settlement agreement which is concluded only with their acceptance and without any prejudice to their rights. Also, after a settlement has arrived, there cannot arise a lawsuit against any of the parties regarding the same cause. In case of an unfavorable outcome, parties always have the option to litigate in case of non-settlement.
Consumption of time
Litigation may take years to finally come with a solution to the dispute which will demand more time from the parties. Further, appeals from lower courts to the higher ones made by parties dissatisfied with the results of the decision stretches the case too long.
Costs in mediation
Pre-litigation settlement is a cost-effective method to resolve the dispute since, unlike courts, the cost of filing, lawyers, and traveling is lowered to a great extent. Mediation, on the other hand, requires the parties to settle the matter without incurring heavy costs. In modern times, even e-mediation or online mediation mechanisms have further eased the process.
Emotional relief
Disputes can drain complainants very emotionally in highly emotional situations, such as marital disputes. Furthermore, the relationship between the parties will further deteriorate as the litigation continues. When litigation continues and tensions are raised, the conflict will become much more complex. Protracted litigation has an enormous adverse effect on family ties and on the life of the litigant in general.
Healthy relationships
Similarly, long-term business relationships become sour after going through the litigation process which is more like a fight rather than mediation which is more like talking it out. Disputes among partners or shareholders can be resolved through mediation, particularly through neutral pre-litigation intervention.
Various legislations that support pre-litigation settlement
- In 1988, a report by the 129th Law Commission based on Urban Litigation and Mediation as Alternative to Adjudication, also known as the Justice Malimath Committee’s report, was launched. In view of the backlog of Indian court proceedings, the Justice Malimath Committee Report recommended that the parties should be encouraged to refer their disputes to alternative dispute settlement structures. These guidelines finally paved the way for Section 89 of the Code of Civil Procedure (CPC), 1908, as amended by the Act of 1999. In accordance with Section 89 of CPC Order X Rule 1A, the Court shall guide the parties to the proceedings after recording admission and rejection of the documents to opt for any method of settlement, which is outside the court, as stated in Section 89(1) of the CPC, which is arbitration, conciliation, judicial settlement and settlement by the Lok Adalat or mediation.
- As referred to in Section 89(2) of the CPC, the Court shall refer the dispute, pursuant to the provisions of Section 20(1) of the Legal Services Authority Act, 1987 to Lok Adalat and, with regard to such dispute, all other provisions of the Act shall be applicable on the dispute as well. In accordance with Section 21 of the Act, a settlement arrived before a Lok Adalat is as enforceable as a court decree.
- In accordance with Section 14 (2) of the Hindu Marriage Act of 1955, the court when dealing with the disposal of any application pursuant to Section 14 for leave to present a petition for divorce, shall take account of the fair likelihood of reconciliation between the spouses before the expiration of one year from the date of marriage. The lawmakers also want the court to try to mediate between the parties in the first place.
- By an amendment in 2018, the Commercial Courts Act of 2015 was amended to include Chapter IIIA. Section 12A of the Act promotes pre-institution mediation and settlement. It states that a suit that does not require any immediate interim relief shall not be instituted unless the plaintiff, in compliance with rules prescribed by the Central Government, exhausts a remedy for pre-institutional mediation. Therefore, pre-litigation mediation is made mandatory upon the parties before initiating a suit.
Different approaches to pre-litigation mediation worldwide
Pre-litigation involves several kinds of processes. It differs according to various legislations across countries of the world but more particularly, upon the choice of parties. In some country’s mediation laws mandate mediation with positive effects by opting for different mechanisms. It reflects how mandatory mediation is not coercive in nature and adopts certain policies to offer parties a way out in case of failure of a resolution in the pre-litigation stage.
Pre-litigation mediation in the USA
Pre-litigation in the west particularly consists of settlement between parties with the help of attorneys on both sides. This process can be typically categorized in three steps as follows:
Step 1: Notice for pre-litigation settlement
When a party has a dispute with another party, a written notice from an attorney, sometimes in the form of a letter from the lawyer to the attorney of the other party, is the first step in the pre-litigation process. The pre-litigation notice sets out the issue and may also ask the other party for information if necessary.
Step 2: Investigation process
The next step is to investigate, as a civil litigant must know all relevant data about a case. This is where the lawyer collects all necessary and relevant details. The pre-litigation investigation phase is where the facts, documentation, records, or any other important details concerning the case are collected by the attorney. The lawyer is also entrusted with talking to and deposing witnesses.
Step 3: Formal demand for compensation to the injured party
Until the inquiry is carried out, the request for pre-litigation can be either a plain letter or a multipage document containing a copy of information collected by the lawyer during the inquiry. This final move includes an offer for settlement, counteroffer, or refusal.
Pre-litigation mediation in Italy
Italy has taken what is known as “opt-out” mandatory mediation, facing a high rate of pending proceedings. The legislation on pre-litigation mediation was passed in 2010 and 2013. In certain conflicts related to property such as partition and joint property ownership, mediation attempts were made obligatory before a court case was lodged.
This rule harmonizes the cooperative essence of the procedure requiring mandatory mediation at the same time. Parties on both sides of the dispute must attend one compulsory mediation session along with their lawyers. After the meeting, either one or more of the parties concerned can decide to opt-out of the mediation and the parties may take their case before the court. Parties that resolve their dispute and settle via mediation are granted tax credits.
This strategy results in encouraging results. Disputants have developed a value for mediation and continued the resolution process. This is because the procedure was understood in the first mandatory session. After a mediation session was tested, nearly 50% of those cases were resolved if the parties continued mediation. More strikingly, the filings of some classes of cases subject to compulsory mediation in Italy have dropped by 30-60%.
Pre-litigation in the UK
Mediation in the United Kingdom is well-known as an ADR method. Although parties going to court contemplating litigation does not have to necessarily mediate, they are duty-bound to examine whether ADR can resolve their conflict. There is a range of powers in the hands of the courts to encourage mediation. One such power is to impose costs upon a party who deliberately and unreasonably failed to attempt the mediating process. The reasonability standard is determined based on several factors such as the severity of the case of the party, the essence of the conflict, the mediation expenses, the risk of delaying the trial, and the probability of effective mediation.
Mediation in the wake of coronavirus pandemic
This pandemic has forced us to adapt to survival accepting the new way of life as normal. We are progressing slowly and steadily from conventional to creative and modern ways. Mediation offers a viable solution to resolve conflicts. It will be useful for all parties to cooperate rather than be adversarial under current conditions, as the opposing strategy may not always produce a positive outcome.
With the outbreak of the virus, lawyers contemplate the existence of a variety of disagreements about the interpretation of force majeure clauses, termination rules, and substantive adverse effect clauses. It is not apposite to knock at the doors of the courts to pursue justice, particularly if these main clauses are lacking or inadequately worded. There is therefore a change in the way commercial disputes are settled or are resolved with increased emphasis on mediation, while the courts are addressing the existing case backlog and limitations attributable to lock down and the fresh settlement of disputes resulting from the present scenario.
Some high courts in India, including that of Bombay, Delhi, and Kerala have already formulated rules on mediation. Internationally, institutions such as the Singapore International Arbitration Centre, the London Court of International Arbitration, and the International Chamber of Commerce have also chalked out are detailed and systematic which can be followed by parties in the context of mediation proceedings.
The Singapore International Mediation Centre saw an opportunity amidst the pandemic to encourage mediation and has brought about the SIMC COVID-19 Protocol. Businesses around the world can benefit from the expedited mediation process to resolve their conflicts. In coordination with Resolve and the support of the European Union and United Nations Development Program, a similar initiative has been initiated by the Georgian International Arbitration Centre, enabling parties to refer their conflict either to facilitation or mediation. These developments represent the readiness of different organizations to agree that mediation would bring the new dawn in the world of dispute resolution during and after the pandemic.
Conclusion
With the advent of the COVID-19 pandemic, numerous legislative limitations and amendments have been introduced that disrupt the operation of companies worldwide. Since the lockdown, India’s economy is steadily falling and it is struggling hard to come back on its feet. Individuals and companies are fending for themselves and striving to thrive. The current situation is considered by market leaders as a hub for conflicts. Speedy and economical solutions are needed for these new disputes. Following the current situation, mediation appears to be a feasible and efficient alternative to conventional conflict settlement approaches because it can bring about cost-effective and timely settlement of disputes, especially in commercial situations. Taking into account the pandemic and its effects, we intend to change the dispute practice through mediation. We need to be prepared for this change and it is therefore important to ensure that we receive the necessary training and the necessary skills to meet the changing demands. Mediation is the only dispute settlement platform we have where it is feasible to discuss the relational and business complexities of the many emerging disputes. If not all, in certain cases, we should expect mediation to be the “new trend” either in online or offline form. It is therefore important for Indian legislation to bring about a uniform mediation procedure for the whole nation. Lessons can be learned from the Italian model as the policy behind its mediation mechanism strikes a perfect balance between voluntariness and obligatoriness. On one hand, it effectively manages to reduce the load on the judicial arm of the government, whereas, on the other, it gives due regard to the choice of parties.
References
- Giuseppe Conte, The Italian Way of Mediation, 6 Y.B. Arb. & Mediation 180 (2014).
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