Settling disputes out of court- Mandatory Pre-litigation Mediation

Settling disputes out of court- Mandatory Pre-litigation Mediation

Article

1. Chitra Narayan, Chennai based Mediator has shared her views about Mandatory pre-litigation mediation in commercial disputes by the recent Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018, which amends the Commercial Courts Act of 2015.

Important Analysis

2. Mandatory Pre-litigation mediation is an important step to improve the ease of doing business.
3. Mediation is a process of resolution of disputes by the parties to them.

• The participation of the disputants is voluntary.
• The process is managed by a neutral person called the mediator, who may evaluate the disputes and weigh in on options for settlement (a variant called conciliation) but has no authority to impose a settlement.
• It involves discussion of the conflicts, moving out of the loop of allegations and counter-allegations, and assessing where interests lie in resolving the disputes.
• Options for settlement are explored and a settlement is worked out through joint evaluation.
• The terms of settlement, if the parties do settle, are decided by the parties. The discussions are confidential.

4. Mandatory mediation is not new in India. Some earlier provisions are

• The Arbitration and Conciliation Act, 1996, makes a settlement arrived at through conciliation enforceable like a court decree.
• The Micro, Small and Medium Enterprises (MSME) Development Act, 2006, mandates conciliation when disputes arise on payments to MSMEs.
• Under the Code of Civil Procedure, judges can refer cases to mediation.

5. Important Feature of ordinance

• It defines “commercial disputes” which include regular commercial and business contracts, construction contracts, shareholder agreements, licensing agreements, etc.
• The law makes changes for reduction of timelines, tightening processes and designating special commercial courts and commercial divisions to deal with these disputes, among others.
• The mediation is mandatory and will be conducted within a period of three months (extendable by another two months with the consent of the parties). However, if an urgent interim relief is required, this pre-litigation mediation can be dispensed with.
• Any settlement arrived at through mediation will have the status of an arbitral award on agreed terms and be enforceable like a decree of court.
• Also, the time limits for filing cases will pause during the time the pre-litigation mediation is underway.

6. Concern with amendment

• The mandatory nature of pre-litigation mediation is in conflict with voluntary nature of mediation.
• The ordinance is silent on whether the pre-existing mediation agreement be enforced or not
• There is no mention of about the status of cross-border mediation.
• Most disputes seek urgent orders for preservation of status quo or restraint orders on filing. This process is not so effective there.

7. Mediation policies in other countries mandate mediations through various mechanisms, with good effect. In Italy mediation process is highly successful.
8. In India, there is a need for a comprehensive policy on mediation, rather than the abbreviated and disconnected steps so far. When seen in the context of a deliberate and well-considered law, mediation as a process would be more credible to disputants.
9. The role and professional responsibilities of mediators, the rights and obligations of parties in the process, and the outcome of the mediation agreement should be well defined to get desired result.