Law and policy

Definitions

Is there any legal definition in your jurisdiction of the terms ‘ADR’, ‘conciliation’ and ‘mediation’?

In India, ADR is generally understood as a term encompassing various modes of settling disputes outside the traditional judicial system. It refers to various methods such as arbitration, negotiation, mediation, conciliation, Lok Adalats, etc.

Rule 4 of the Civil Procedure - Alternate Dispute Resolution Rules, 2003 (ADR Rules) defines mediation by stating that:

Settlement by ‘Mediation’ means the process by which a mediator appointed by parties or by the Court, as the case may be, mediates the dispute between the parties to the suit by the application of the provisions of the Mediation Rules, 2003 in Part II, and in particular, by facilitating discussion between parties directly or by communicating with each other through the mediator, by assisting parties in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise, generating options in an attempt to solve the dispute and emphasising that it is the parties own responsibility for making decisions which affect them.

In Afcons Infrastructure Ltd v M/s Cherian Varkey Construction [2010] (7) SCALE 293, the Supreme Court clarified that the words ‘mediation’ and ‘conciliation’ are used synonymously. In this commentary, the words ‘mediation’ and ‘mediator’ are used; they should be taken also to mean ‘conciliation’ and ‘conciliator’.

Mediation models

What is the history of commercial mediation in your jurisdiction? And which mediation models are practised?

Commercial mediation in India was given life in 1996 when the Indian parliament amended the Civil Procedure Code (CPC) and introduced section 89, which empowered courts to direct settlement of disputes by mediation amongst other means. This provision governs mediation in the court system in India. The year 1996 also saw the introduction of the Arbitration and Conciliation Act (ACA). The provisions of the ACA govern private mediation (conciliation) in India.

The primary mediation style is evaluative. Disputants seem to prefer having an authority figure as the mediator, and are more comfortable being led in the mediation rather than the mediator being more hands-off. This is a cultural trait quite common in Asia. The parties expect the mediator to give them his or her view of the weakness of their case, and to actively participate in finding solutions; indeed, they would be disappointed if they felt that the mediator was not fully engaged with them in resolving the dispute. Interests, as well as rights, are focused on. Some mediators prefer to be facilitative. Transformative mediation is rare.

However, it needs also to be said that most mediators will start off being facilitative, encouraging movement to come from the parties, and become evaluative later in the process when the interventionist skills become necessary to break an impasse and come up with solutions.

Domestic mediation law

Are there any domestic laws specifically governing mediation and its practice?

There are two principal enactments that deal with mediation in India- the CPC and the ACA. Section 89 of the CPC and the rules framed by various high courts under that section deal with court-annexed mediation while Part III of the ACA deals with private mediation. Part II of the Civil Procedure Alternate Dispute Resolution and Mediation Rules (the Mediation Rules) also provides for various rules relating to mediation.

Other legislation that covers mediation is the Commercial Courts Act 2015, whereby it is mandatory for parties to exhaust the remedy of pre-institution mediation under the Act before instituting a suit. The Commercial Courts (Pre-Institution Mediation and Settlement) Rules 2018 (the PIMS Rules) have been framed by the government under the Act.

These laws are not based on the UNCITRAL Model Law on International Commercial Conciliation.

Singapore Convention

Is your state expected to sign and ratify the UN Convention on International Settlement Agreements Resulting from Mediation when it comes into force?

Yes.

Incentives to mediate

To what extent, and how, is mediation encouraged in your jurisdiction?

Mediation is encouraged very strongly by the courts in India. Many high courts have set up mediation centres housed within the premises of the courts. The courts provide staff and facilities to the mediation centres and also bear the expenses. A huge number of lawyers and others have been trained to become mediators, and the court also pays an honorarium to the mediators. The process is generally free for the parties.

A large number of cases are referred to mediation by the courts. Although consent of parties is invariably taken before referring a case for settlement by mediation, the court does have the power to direct parties to attend the mediation, if at least to get to know more about the process of mediation.

Judges, leading lawyers and policy makers speak very positively about mediation. However, mediation is yet to catch on significantly in the private field. With the success of court-annexed mediation in India, attention is now being focused on private commercial mediation. Leading business organisations and industrial leaders are getting involved for the same.

Sanctions for failure to mediate

Are there any sanctions if a party to a dispute proposes mediation and the other ignores the proposal, refuses to mediate or frustrates the mediation process?

No, there are no legal sanctions for ignoring or refusing a proposal for mediation. However, if a dispute has reached the stage of litigation, the courts can suggest mediation in the course of proceedings and, invariably, such suggestions are accepted by parties.

Prevalence of mediation

How common is commercial mediation compared with litigation?

Commercial mediation is fairly new in India and, hence, litigation remains the most popular mode of settling disputes. Therefore, the percentage of commercial cases settled by mediation would be small in comparison to cases litigated.

Of the cases settled by mediation, cases that have been referred to mediation by the courts would be an overwhelming majority in comparison to cases where mediation has been attempted voluntarily by the parties.

Mediators

Accreditation

Is there a professional body for mediators, and is it necessary to be accredited to describe oneself as a ‘mediator’? What are the key requirements to gain accreditation? Is continuing professional development compulsory, and what requirements are laid down?

There is a professional association of mediators in India called Mediators India.

It is not necessary to be accredited to practise as a mediator in India. However, accreditation is necessary for empanelment with court and tribunal mediation panels. With growing awareness of mediation, there will be a preference for certified accredited mediators.

In India, court-annexed mediation centres conduct two training courses: a basic training course that is 40 hours in duration and an advanced training course that is 20 hours in duration. Accreditation of mediators takes place after completion of the basic training course, 20 hours of mediation (including co-mediation) and completion of the advanced training course.

There is no requirement that mediators must undertake continuous professional education or development courses. In the court mediation system, the mediation centres do arrange for refresher courses and mediators are encouraged to attend the same.

Liability

What immunities or potential liabilities does a mediator have? Is professional liability insurance available or required?

The ACA and the CPC spell out the duties of mediators that pertain to disclosure, avoiding improper conduct, maintaining confidentiality, not imposing settlements, etc. The PIMS Rules also impose certain ethical duties on mediators.

However, no potential liability is spelt out in the statutes for mediators. In fact, Rule 22 of the Mediation Rules and Rule 23 of the Companies (Mediation) Rules provide that mediators shall not be liable for anything bona fide done by them or omitted to be done by them during the mediation process and are immune from civil or criminal action. In the court mediation system, mediators can be removed from the panel for misconduct or poor performance.

Professional liability insurance is neither available nor required.

Mediation agreements

Is it required, or customary, for a written mediation agreement to be entered into by the parties and the mediator? What would be the main terms?

In the court mediation process, there is no obligation to have an agreement between the parties and the mediator, since the rules under the CPC govern the mediation.

In other mediations, while there is no legal mandate, it is customary to have such written agreement. This will include provisions regarding confidentiality and the process to be followed.

Appointment

How are mediators appointed?

In the court system, the Civil Procedure (Mediation) Rules regulate the accreditation, empanelment of mediators and appointments in individual cases. Such appointments are usually based on the roster; in exceptional cases mediators may be specified by name by the referring judge himself or herself or acting on the suggestion of parties.

In the field of private mediation, the practice of including mediation clauses in contracts is gaining popularity. Such clauses may specify the name of a mediator to settle disputes or the name of an institution whose assistance may be sought in appointing a mediator.

Conflicts of interest

Must mediators disclose possible conflicts of interest? What would be considered a conflict of interest? What are the consequences of failure to disclose a conflict?

Mediators are obliged to inform the parties about conflicts of interest. This must be done before the proceedings commence, or, if a conflict arises thereafter, as soon as the mediator is aware of it. Both the ACA and the Mediation Rules require such disclosure. As per the Mediation Rules, anything that would give rise to a justifiable doubt as to the mediator’s independence or impartiality must be disclosed. This would include, but would not be limited to, the mediator having financial interests in a corporate party, etc.

If the mediator fails to disclose a conflict of interest, he or she would be liable to face civil action. In the case of court-referred mediations, a report regarding such conduct of the mediator may also be submitted the court and the court may consider taking any action that it deems fit.

Fees

Are mediators’ fees regulated, or are they negotiable? What is the usual range of fees?

In the court-run mediation scheme, the mediation service is usually free for the parties. The court, however, pays an honorarium to the mediators.

In the field of private mediation, there is no statutory or legal regulation of the fees of the mediators. The fee is negotiable, is usually on a time spent basis and varies from 25,000 rupees to 300,000 rupees per day. The parties usually share the mediator’s fees equally.

In the context of pre-institution mediation under the Commercial Courts Act, a fee structure is in the process of being devised. If the parties choose the mediator by themselves, they can negotiate a fee with the mediator. If the state agency’s services are used for appointment of a mediator, a fee will be fixed for the same.

Procedure

Counsel and witnesses

Are the parties typically represented by lawyers in commercial mediation? Are fact- and expert witnesses commonly used?

It is extremely common to see parties being represented by lawyers in commercial mediations in India. However, fact and expert witnesses are rarely used.

Procedural rules

Are there rules governing the mediation procedure? If not, what is the typical procedure before and during the hearing?

In court-appointed mediation proceedings, the mediator is free to decide on the mediation procedure to be followed or to follow the Civil Procedure Mediation Rules. Some mediators request parties to file a brief statement of facts and issues prior to the first session. At the first session the process of mediation is explained fully, facts and issues are ascertained and (if they have not done so already) the mediators may request statements or summaries to be filed.

In private mediation, it is quite common for the mediator to require parties to submit a statement of facts and a summary of legal proceedings ahead of the mediation. Parties are requested to come to mediation prepared with the facts and with authority to settle the dispute. The mediator may also ask for further notes for additional information during the course of the mediation.

Mediation usually begins with a plenary (joint) session. The mediator will usually hold separate sessions with the parties during the course of mediation as and when he or she deems necessary.

Prior to the mediation, the following take place:

  1. the mediator will ensure that he or she has no conflict of interest in the matter, and will withdraw if any exists;
  2. the terms of engagement of the mediator (fees and expenses, etc) are made known and agreed to by the parties; and
  3. the confidentiality agreement is signed between the parties and the mediator.

Steps (ii) and (iii) do not apply in court-referred mediations.

At the mediation proceedings, at the first joint session, the mediator will:

  • ensure that all required are attending and have the requisite authority to do so, and make the necessary introductions;
  • explain the concept of mediation and answer queries on the same;
  • request parties to each make their opening statement;
  • request the lawyers to make the supplementary statements on the law relevant to the matter;
  • see if any further facts are needed, and determine how to ascertain them; and
  • identify the issues that need to be resolved to arrive at a settlement.

Thereafter at the separate sessions the mediator will:

  1. explore the long-term interests of the parties;
  2. identify the weakness in their case, and the lack of good alternatives to settlement (in the evaluative mode);
  3. encourage and engage with the parties in identifying options for settlement;
  4. focus on possible settlement options and refine them; and
  5. draft, or help draft, the written settlement agreement.

Steps (iii) to (v) may also take place in joint sessions.

As per the PIMS rules, the following is the prescribed procedure:

  • At the beginning, the mediator shall explain the process to the parties. The time and date of each mediation sitting shall be fixed in consultation with the parties.
  • The mediator may hold sessions jointly or separately with the parties as he or she deems fit.
  • The parties may share their settlement proposals with the mediator with instructions as to what can be shared with the other party. The parties may also share settlement proposals with each other orally or in writing.
  • Once a settlement is reached, it shall be reduced to writing, and signed by the parties and the mediator. The settlement shall be provided to all parties and a signed copy will be sent to the authority under the Commercial Courts Act.
  • When no settlement is arrived at within the time limit allowed under the Act, or if the mediator is of the view that settlement is not possible, the mediator shall submit a report stating the same to the authority under the Act.
Tolling effect on limitation periods

Does commencement of mediation interrupt the limitation period for a court or arbitration claim?

As per the Commercial Courts Act 2015, any period during which the parties ‘remain occupied’ with the pre-institution mediation under the Act shall not be computed for the purposes of limitation.

In other cases, the mediation proceeding does not suspend the limitation period for a court claim. Section 77 of the ACA prohibits parties to conciliation from initiating any arbitral or judicial proceedings during the conciliation proceedings in respect of a dispute that is the subject matter of the conciliation proceedings, except that a party may do so where such proceedings are necessary to preserve its rights. So, in the event that the limitation period is close to expiring, the claimant is advised to initiate arbitral or judicial proceedings.

Forthcoming legislation is likely to address this issue and is expected to exclude the period of mediation from the period of limitation.

Enforceability of mediation clauses

Is a dispute resolution clause providing for mediation enforceable? What is the legal basis for enforceability?

A dispute resolution clause providing for mediation would be enforceable in India in the sense that if a suit is filed, then a court would most likely enforce the clause and send parties to mediation in pursuance of its power under section 89 of the CPC.

Confidentiality of proceedings

Are mediation proceedings strictly private and confidential?

Mediation proceedings are strictly private and confidential in India. Section 75 of the ACA provides that, notwithstanding anything contained in any other law in force in India, the conciliator and the parties shall keep all matters relating to the mediation proceedings confidential, and that confidentiality extends to the settlement agreement except where its disclosure is necessary for implementation and enforcement.

Best practices dictate that in a private commercial mediation, parties to the dispute and the mediator sign a confidentiality agreement prior to the commencement of mediation proceedings.

Section 80(b) of the ACA specifically provides that the conciliator shall not be presented by the parties as a witness in any arbitral or judicial proceedings.

Section 81 of the ACA makes the following inadmissible as evidence in arbitral or judicial proceeding:

  • views expressed or suggestions made by the other party in respect of a possible settlement of the dispute;
  • admissions made by the other party in the course of the conciliation proceedings;
  • proposals made by the conciliator; and
  • the fact that the other party had indicated to accept a proposal for settlement made by the conciliator.

In court-referred mediations, confidentiality is protected by the rules drawn up by courts under the CPC to regulate cases referred by judges to mediation (Rule 20 of the Model Civil Procedure (Mediation) Rules 2003). These rules are similar to the rules set out in the ACA. In their reports to the court, the mediators must only state whether the case has been settled or not; no further details are to be given.

Confidential information given by one side to the mediator in the mediation process cannot be revealed to the other party.

In the case of a breach of confidentiality, the injured party can sue for breach of contract, negligence or wilful misconduct. It can seek damages or a permanent injunction against disclosure. It may also be entitled to seek interlocutory injunctions to prevent disclosure. The court will take a serious view of a breach of confidentiality.

Success rate

What is the likelihood of a commercial mediation being successful?

It is generally observed that the likelihood of a commercial mediation being successful is above 50 per cent.

Settlement agreements

Formalities

Must a settlement agreement be in writing to be enforceable? Are there other formalities?

Section 73 of the ACA provides for the drawing up and signing of a written settlement agreement. The settlement agreement must also be witnessed. When the parties sign the settlement agreement, it shall be final and binding on the parties claiming under them respectively. The mediator is required to authenticate the settlement agreement and furnish a copy of the same to each of the parties.

In the case of a settlement arrived at in a court-annexed mediation or judicial settlement, the same should be reduced to writing and presented to the court, which will pass an order or decree on the terms thereof.

Challenging settlements

In what circumstances can the mediation settlement agreement be challenged in court? Can the mediator be called to give evidence regarding the mediation or the alleged settlement?

As per the ACA and the Commercial Courts Act, the mediation settlement has the same status as an arbitral award and hence can be challenged on the same grounds as an arbitral award.

The vitiating factors are in the nature of fraud, coercion, corruption, incapacity of a party or the settlement being contrary to public policy or a fundamental policy of Indian law.

In India, a mediator cannot be called to give evidence in relation to the mediation or the alleged settlement in any judicial or arbitral proceeding. This provision exists to protect the confidentiality of the mediation process.

Enforceability of settlements

Are there rules regarding enforcement of mediation settlement agreements? And on what basis is the mediation settlement agreement enforceable?

Section 74 of the ACA provides that a settlement agreement has the same effect as an arbitral award on agreed terms. The position in the Commercial Courts Act is also the same as a settlement in a pre-institution mediation proceeding under the Act and is given the same status as that of an arbitral award under the ACA. Such an arbitral award is enforceable as a decree of court as per section 36 of the ACA.

In cases of settlements in court-annexed mediations, the settlement is enforced through the courts as the court passes an order or decree in terms of the written settlement.

Stays in favour of mediation

Duty to stay proceedings

Must courts stay their proceedings in favour of mediation?

It is common practice for a court to stay the proceedings before it if a dispute has been referred to mediation. However, if any urgent relief is required for a party (such as an interim injunction), the same may be heard and considered by the courts.

Where in the course of arbitration the parties agree to try mediation, usually arbitrators would adjudicate proceedings to await the results of the mediation.

Miscellaneous

Other distinctive features

Are there any distinctive features of commercial mediation in your jurisdiction not covered above?

The ground is ripe for commercial mediation, especially in the private field, to take off in India. The practice of including dispute resolution clauses that contemplate mediation is becoming popular, which is a positive trend. The Commercial Courts Act, which has mandated mediation proceedings prior to the institution of suits, is a game changer. Once the Act is properly applied, it will change the status of commercial mediation in India. A system is being contemplated wherein the parties have the choice of selecting the mediator and where they are unable to do so, the state shall provide one for them.

The practice of med-arb and arb-med is also gaining popularity in India. It must also be noted that online dispute resolution is beginning to take shape in the country.

Update and trends

Opportunities and challenges

What are the key opportunities, challenges and developments which you anticipate relating to mediation in your jurisdiction?

Opportunities and challenges 25 What are the key opportunities, challenges and developments which you anticipate relating to mediation in your jurisdiction?

The major development in the field of mediation in the Indian context has been the 2018 amendment to the Commercial Courts Act 2015. The 2018 amendment introduced section 12 A to the Commercial Courts Act. According to section 12A, it is now mandatory for parties to exhaust the remedy of mediation prior to the institution of a suit under the Act. Settlements arrived at in this process are enforceable by law. The period of mediation would not be computed for the purposes of limitation under India’s limitation Act. These changes are expected to provide a major boost for mediation in the country.

In addition to this, mediation has also begun getting attention as an important mode of dispute resolution in the country and is slowly gaining popular acceptance. This can be seen from the fact that various business leaders and organisations have spoken in support of mediation and the practice of including mediation clauses in contracts has begun to spread. The Supreme Court of India has also recently referred a major long-standing public dispute to mediation, bringing national attention to mediation as a means of dispute resolution.

A new legislation that comprehensively deals with mediation is under consideration and is expected to be introduced soon. This would include provisions on accreditation, standards, confidentiality, immunities, and would cover both court-annexed and private mediation. This would further strengthen mediation in the country.

Overall, the stage is set for mediation to finally emerge as a major and widely accepted mode of dispute resolution in the country.