Spotlight On India: Mediation Reform And The Big Implementation Problem

The mediation movement in India has had strong supporters who have tirelessly worked on setting up court-annexed centres and starting the conversation on mediation for over two decades now. India, today, has accelerated reform in the commercial dispute resolution space starting with the arbitration ordinance, bankruptcy laws on specialised tribunals and now the Commercial Courts (Amendment) Ordinance, 2018 (‘CCA’) which introduces ‘pre-institution mediation’. An excerpt of the operative portion of the amendment reads:

“A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted  unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.”

Now, India is not “new” to mediation. In 2002, India became one of the first Asian countries to introduce procedural and legislative amendments recognising mediation as a key process, giving it the stamp needed to validate it as a recognised dispute resolution tool. However, what became apparent in the years after setting up the court-annexed mediation centres, is that the process in itself was unable to garner the traction it required to find its foot-hold as a commercial dispute resolution process. Nor was mediation gaining the momentum required to take on the commercial cases burden in the courts. The question was and continues to be, why?

In the wake of the CCA, where the agenda is to allow parties to mandatorily “try mediation” in the hope that the process in itself will make them realise its effectiveness, efficiency and usage, a little walk back through time to look at some data and related conclusions that highlight implementation hurdles is necessary.

What does the data say?

A recent study on the use and the most effective means of commercial dispute resolution conducted as a part of the Global Pound Conference Series indicated that external lawyers are the most resistant to change and adopting non-adjudicative methods of resolution. This indicates that there needs to be a shift in the mentality of external lawyers who advise the client on appropriate dispute resolution mechanisms. The CEDR Mediation Audit found that 12,000 commercial mediations (excluding small claims mediations) were performed in the last 12 months, with an increase of 20% since 2016. These numbers are indicative of the fact that while there is resistance towards the use of mediation, there is also scope for acceptance amongst various stakeholders (judges, lawyers, parties) to appreciate the effectiveness of mediation as a conflict resolution tool.

In India, the Vidhi Legal Study on Court Annexed Mediation studied four of the leading mediation centres and found that there was a trend in the type of cases which were being referred to mediation??. An informal survey along with the Vidhi Report also revealed that there is also a lack of client satisfaction with the court programmes, since the overall quality of mediators and the infrastructure offered in the centres do not cater to corporate clients or the complexity of the cases. The amendment is supported by rules which once delve into the creation of another “authority” and “mediator empanelment process” for the purposes of conducting the mediation process.  So how does an ambiguous legislative provision which loosely remarks upon pre-institution mediation and requires more unplanned government spending, assist in giving mediation the recognition in deserves?

One can infer that with the CCA, reliance is being placed on the ability of the process to convince parties and lawyers about its efficiency. Moreover, this marks a key point for private mediation centres since the court does not specify which programmes should be used. Another view on this could also be that there is a resigned expectation of the inefficiency of the court process to cater to the infrastructural requirements for corporate cases as indicated in the Vidhi Study.

Costs and sanctions as a solution

Today, in India, the general consensus is that reform in mediation is necessary. However, the absence of infrastructure to support such a model will, in my view, deter the growth of the process. Another reason why the CCA has not been thought through properly, is because it does not address the question of mediator quality. In a recent article, Juhi Gupta, Disputes Resolution Associate at Shardul Amarchand Mangaldas & Co, analysed the pros and cons of the amendment and also concluded that the CCA is premature.

A possible solution to this issue, is a policy or regulation on the imposition of sanctions to be imposed by courts for parties and lawyers who reject pre-trial mediation. The imposition of costs has been a tested model in several countries who have faced similar implementation hurdles.

In the UK and Hong Kong, courts have taken a strict view on imposing sanctions and mediation. In Egan v Motor Services (Bath) Lord Justice Ward noted that “coercive advice to members of the profession to advise clients on mediation if they were minded to avoid the sanction of costs against them” is an integration necessity. Furthermore, in Supply Chain & Logistics Technology Limited v. NEC Hong Kong Ltd., the Court held that “failure to mediate could be taken into account on the question of costs and proper case management”.

Sanctions have also played a key role for lawyers in advising on strategy and dispute design, where ADR is only used as an alternative and not independently. A concern that was highlighted by Sriram Panchu, while discussing the use of the word “appropriate” instead of “alternative” to create a focal shift in the practical use of various non-adjudicative processes in India.

The first step for India today, is for courts and company tribunals to actively impose sanctions on lawyers who do not advise on appropriate strategy for a mediation case, parties who refuse mediation in suitable cases and to identify cases in the commercial space which can be mediated (I will write more on mediation in government contracts in a future blog post).

A trial integration phase could have been an effective way of implementing the legislation, since the intent of the law is to educate the public on how the process works – this cannot move forward if parties are not coming to the mediation table in the first place. For instance, a five-year trial period where all suitable cases go to mediation could have been introduced, providing the basis for future policies and laws.

Where do we go from here?

The CCA as it stands does not seem to be a hope for mediation, since in its aim is primarily to maintain the underlying ethos of mediation, it loses sight of the roadblocks and fails to be proactive in using the process within the Indian legal and corporate community. What is even more baffling with the CCA, is that setting the existing system right is not on the agenda.

Lastly, in addition to a policy on costs and sanctions that courts could be required to impose, we need a more solid support mechanism to aid mediation in India, which has to start with the court processes which are an entrenched part of the system. If we do not make the court annexed mediation centres equipped with the mediators and infrastructure needed, the functionality of the process will continue to be questioned and the lawyers/parties will continue to shy away from the process! At this stage, urgent strategic policy and judicial and legal activism is a necessity.  There is no longer room for a policy of “try it just once”, we need a consistent and practical approach to make mediation more accessible and feasible for potential parties.

Written by Ishana Tripathi.

Ishana is the GPC/IMI India Correspondent. She is an India qualified lawyer with practice and experience in commercial litigation and ADR.

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