Mediation: The Future of Dispute Resolution

I. Introduction

For eons, Indians have been reliant on court-driven litigation and, more recently on arbitration for resolving commercial disputes. The significance and impact of mediation in amicable dispute resolution is vastly underrated and under appreciated as reliance on mediation has been restricted to only family disputes and other elementary matters. However, the advent of COVID-19 has forced the world, including the legal industry, to change the norms and to adapt and reform around the new normal and we believe that the insurgence of COVID-19 will give us an opportunity to re-discover the significance of mediation as an effective form of dispute resolution mechanism, especially in commercial matters.

II. Evolution of Mediation

Mediation was popular even before it found a place in the books of law. Ancient Greek civilisation had village elders resolving fights between the locals. In India, instances of mediation can be found in the village panchayat system, wherein, the village elders or ‘Panchs’ resort to mechanisms like mediation to amicably resolve family and land related disputes between the  locals.

Acknowledging the importance of mediation, the Indian legislature enacted the Legal Services Authorities Act, 1987[1], which introduced the Lok Adalat system. Lok Adalats provide a platform to resolve disputes in the pre-litigation stage by way of amicable settlement.

Thereafter, in 1988, the 129^th Law Commission Report on Urban Litigation and Mediation as Alternative to Adjudication and the Arrears Committee Report, also known as the Justice Malimath Committee Report was published. Considering the backlog of cases lying before the Indian courts, Justice Malimath Committee Report recommended that the parties be encouraged to refer their disputes to alternate dispute resolution mechanisms (“ADRs”)[2]. These recommendations eventually paved the way for the Code of Civil Procedure (Amendment) Act, 1999[3], which introduced Section 89 of the Code of Civil Procedure, 1908 (“CPC”). Section 89 CPC empowered the courts to refer disputes, with the potential to be settled to ADRs (which included arbitration, conciliation, mediation, judicial settlement)[4].

On April 9, 2005, the Tamil Nadu Mediation and Conciliation Centre, the first court annexed mediation centre was inaugurated[5]. Thereafter, in August 2005, the ex-Chief Justice of India, Justice R.C. Lahoti, constituted a Mediation and Conciliation Project Committee for imparting mediation training for Judges[6]. As of date, several High Courts have their own mediation centres and rules governing them.

Please see below a table providing the various initiatives taken by different High Courts in India:

Realising the potential of mediation for speedy and cost-effective dispute resolution, an amendment to the Commercial Courts Act, 2015, was made in 2018, introducing Section 12-A, which mandatorily requires the parties to attempt to mediate their disputes before initiating judicial proceedings[7]. Recently, the Supreme Court in January 2020, set up a panel, headed by Mr Niranjan Bhat, to recommend and draft legislation, codifying mediation practice in India.

These attempts made by the legislature and judiciary to bring mediation in the mainstream have been futile as the true potential of mediation still remains underutilised.

III. Statistical Analysis of Mediation in India

Vidhi Centre for Legal Policy (“Vidhi”) published a report called “Strengthening Mediation in India” in December 2016 (“the Report”)[8], wherein Vidhi, in collaboration with the Department of Justice, Ministry of Law and Justice, analysed the progress of court referred mediation[9], focusing on the data provided by Bangalore Mediation Centre and Delhi High Court Mediation and Conciliation Centre.

The table below shows certain key trends in mediation[10]:

According to the statistics available on the website of Kerala State Mediation and Conciliation Centre, matters referred to mediation show a success rate of 35.42% in 2016[11]. These abysmal figures can be attributed to various factors, including reluctance of litigants to mediate, lack of awareness and inadequate infrastructure.

IV. Why Mediation?

Mediation is different from other forms of ADR such as arbitration, conciliation and settlement. Unlike litigation and arbitration, which are adversarial in nature, mediation is founded on pillars of cooperation and trust, and is similar to negotiation. A mediator acts as a facilitator between the parties to arrive at a solution, without dictating the settlement terms.

The main difference between mediation and conciliation lies in the role played by a mediator and a conciliator. A conciliator has broader powers of intervention and is empowered to draft the terms of settlement. However, a mediator is a facilitator, who helps parties to resolve their problems on their own. A mediator can give suggestions and persuade the parties to arrive at a solution.

Indian courts have always been over-burdened and the backlog of pending cases is daunting. Even though litigation provides an effective dispute resolution method, it does have various drawbacks, including exorbitant costs, undue delays and cumbersome procedure.

In recent times, arbitration has gained popularity. Although arbitration provides solution to the various drawbacks of litigation, it remains to be an expensive ADR.On the other hand, mediation provides for a cost-effective manner of dispute resolution. It also provides parties an opportunity to resolve their disputes amicably, within a pre-decided time-frame. This helps them avoid the exorbitant cost incurred due to litigation and the undue delays, which are beyond their control.

Mediation gives the parties the flexibility to decide the manner and procedure to be followed to resolve their disputes, depending on the nature of their dispute and the relation between the parties. It also allows the parties to arrive at a tailor-made solution, minimising an unfavorable impact. Parties have the autonomy to conduct a cost-benefit analysis before arriving at the most favourable solution. Additionally, unlike litigation, where the documents once filed become public, mediation allows the parties to keep their documents and discussions undertaken during the mediation, confidential. This is specifically relevant for the companies, as any adverse information about the company, can fluctuate share prices of the company.

It is worth mentioning here that various multi-national corporations, companies and partnership firms have also realised the above mentioned benefits of mediation, which has resulted in them introducing clauses for mandatory mediation in cases of any disputes or disagreements between the parties. Even with all these advantages, mediation is still not a popular choice.

V. Mediation in the wake of COVID-19

As already discussed in the introduction, this pandemic has placed us in a situation where we are forced to adapt to survive. Slowly and gradually, we are shifting from the traditional ways to modern and innovative ways.

Mediation provides a viable alternative to resolve disputes. Under the current circumstances, it would be beneficial for the parties to act in cooperation instead of being adversarial, as an adversarial approach may not always yield a beneficial outcome.

In light of the virus outbreak, jurists contemplate that a number of disputes will arise on the interpretation of force majeure clauses, material adverse effect clauses and termination clauses. While doing so, it is not always advisable to knock on the doors of the courts to seek justice, especially when such key clauses are missing or inadequately drafted. Therefore, while the courts are grappling with the existing backlog of cases, the restrictions in its functioning due to the lockdown and the fresh set of disputes arising due to the current scenario, we feel there might be a shift in the manner in which commercial disputes are or will be resolved, with increased reliance on mediation.

Several Indian High Courts, including the High Court of Judicature at Bombay, Delhi High Court, Kerala High Court, etc., and various international organisations like the Singapore International Arbitration Centre, London Court of International Arbitration, International Chamber of Commerce have already formulated mediation rules. These rules are comprehensive, extensive and can be adopted by parties to deal with the procedural aspects of mediation. Parties also have the option of opting for adhoc arbitration, allowing them to decide on the procedure to be followed during mediation.

Keeping in mind the above benefits and the role mediation can play in the times to come, Singapore International Mediation Centre has launched the SIMC COVID-19 Protocol[12], providing business with an effective solution by way of expedited mediation for dispute resolution. A similar project has been launched by Georgian International Arbitration Centre in collaboration with Resolve and with assistance of European Union and United Nations Development Programme, allowing the parties to either refer their dispute to facilitation or mediation[13]. These moves show the preparedness of various organisations in accepting that mediation will bring the new dawn in dispute resolution, during and even after the pandemic.

IV. Conclusion

The outbreak of the COVID-19 pandemic has resulted in the introduction of various restrictions and changes in law by the legislature, thereby disrupting the functioning of business. Due to the lockdown initiated on account of the COVID-19 outbreak, the Indian economy is experiencing a steady downfall. People and businesses are fending for themselves and are making all efforts to survive. Market leaders are contemplating that the present situation will act as a hotbed for disputes. These new disputes would require speedy and cost-effective solutions. To contain the impact of the fast spreading virus, the courts have also been functioning at minimal capacity and only hearing urgent matters, which makes approaching the courts for dispute resolution a slightly challenging exercise. In the wake of the current situation, mediation appears to be a viable and effective alternative to traditional dispute resolution methods as it can deliver cost-effective and speedy resolution of disputes, especially in cases of commercial disputes. Considering the pandemic and the repercussions to follow, we envisage a shift in the dispute practice being driven by mediation. This shift would require us to be prepared and hence it is imperative to ensure we obtain the requisite training and the skill set to be able to meet the changing demands.

*Partner, Cyril Amarchand Mangaldas

**Associate, Cyril Amarchand Mangaldas

***Associate, Cyril Amarchand Mangaldas

[1] Legal Services Authorities Act, 1987  

[2] https://delhicourts.nic.in/dmc/history.htm, last visited on May 28, 2020.

[3] Code of Civil Procedure (Amendment) Act, 1999

[4] Section 89  CPC 

[5] http://www.hcmadras.tn.nic.in/mashist.html last visited on June 10, 2020.

[6] https://delhicourts.nic.in/dmc/history.htm last visited on June 10, 2020.

[7] Section 12-A, Commercial Courts Act, 2015

[8] https://doj.gov.in/sites/default/files/Final%20Report%20of%20Vidhi%20Centre%20for%20%20Legal%20Policy.pdf last visited on May 28, 2020.

[9] There are two broad categories of mediation: (i) Court referred mediation, wherein, the courts while exercising their powers under Section 89 CPC, refer appropriate matters to mediations; and (ii) Private mediation, wherein, the parties to a dispute agree to mediate their disputes.

[10] https://dakshindia.org/Daksh_Justice_in_India/14_chapter_04.xhtml#fn21 last visited on May 28, 2020.

[11] http://keralamediation.gov.in/Statistics  last visited on May 28, 2020.

[12] http://mediationblog.kluwerarbitration.com/2020/05/21/international-mediation-and-covid-19-the-new-normal/?doing_wp_cron=1591162205.3996729850769042968750 last visited on June 3, 2020

[13] http://giac.ge/giac-and-resolve-are-joining-forces-to-launch-covid19-business-support-initiative/last visited on June 3, 2020.