Dawn Of Mediation – A Relief For Justice?

The Rajya Sabha has passed the Mediation Act on 1^st August 2023.

The entire conversation about a law on mediation started when India on 7^th August 2019 became one of the first signatories to the United Nations Convention on Enforcement of International Settlement Agreements resulting from Meditation, also known as "the Singapore Convention". After the signing of the Convention, there was a need for ratifying it and to make it operative, we needed a procedural law.

The Supreme Court of India kicked off the process by constituting a drafting committee for the mediation law and the said draft was forwarded to the Ministry. Draft Mediation Bills were made on 12/08/2021 and 29/10/2021 and were placed for public comments. Thereafter a Bill dated 20/12/2021 was introduced in Rajya Sabha on 20^th December, 2021 and the Bill was referred to the Department-related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice for examination and report, on 21^st December, 2021. The Committee held extensive deliberations on the Bill with various Stakeholders and public at large and gave a Report (No. 117) on 13^th July 2022, in two Volumes, containing the analysis and recommendations of the Committee and also the written memoranda/ submissions received by the Committee from the individuals/ experts/ institutions. After the Committee Report, again an Expert Committee was constituted by the Ministry to study the Report and finalise the Bill. So finally after all this, the Mediation Act 2023 was introduced in Rajya Sabha on 1^st August 2023 and it was passed. Now it has to be passed by the Lok Sabha and thereafter receive the assent of the President of India and gazetted, so that we get the Mediation Act in our hands.

The practice of mediation for resolving a wide range of disputes had gained popularity worldwide over the last few decades amongst individuals, corporate users, governments, judiciary, lawyers etc. It is now universally accepted that the use of mediation results in better resolution, fosters collaborative problem solving, reduces the burden on the courts, is cost and time effective, and preserves relationships amongst disputants.

To strengthen the legal framework on international dispute settlement, and considering the fact that use of mediation results in significant benefits, such as reducing the instances where a dispute leads to the termination of a commercial relationship, facilitating the administration of international transactions by commercial parties and producing savings in the administration of justice by States, the UNCITRAL came up with the Singapore Convention. It was made to establish a framework for international settlement agreements resulting from mediation that is acceptable to States with different legal, social and economic systems and would contribute to the development of harmonious international economic relations. As stated earlier, India was one of the first signatories to the Singapore Convention on 7^th August 2019.

In the Indian scenario, mediation in a different form was available from 1996 onwards as per the Arbitration & Conciliation Act, 1996, under the name “conciliation”, which could be used for resolving disputes amicably, where the conciliator would assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute. Even though the Supreme Court of India mentioned in several judgments that “mediation” and “conciliation” are words that would be used interchangeably and in content it has no difference, the similarity of mediation and conciliation were never understood properly by the public at large and mediation under the Arbitration & Conciliation Act, did not get the momentum as expected.

The next introduction of mediation came through an amendment in the Code of Civil Procedure, 1908 when Section 89 was introduced by the Code of Civil Procedure (Amendment) Act 1999, (which became effective from 01/07/2002), whereby a provision was made for settlement of disputes outside the Court. If it appears to the court that there exist elements of a settlement which may be acceptable to the parties, the court may refer the parties for mediation or other modes of ADR.

This court-annexed mediation gained momentum, since in pending matters, litigants got an option to resolve matters quickly. Mediation, as a process for resolution of disputes, started getting the attention of litigants.

Mediation started getting more recognition since 2002, when various statutes like the Companies Act, 2013, the Commercial Courts Act, 2015, the Real Estate (Regulation and Development) Act, 2016, the Insolvency and Bankruptcy Code, 2016 and the Consumer Protection Act, 2019, gave emphasis for mediation. But there was no procedural law available for mediation.

Since mediation became popular globally and the mediators profession also gained recognition and started to establish in many countries, there was a strong need for a comprehensive legislation for mediation in India, which will cover the multiple aspects of its practice, encourage mediation, and provide the platform of mediation for settling a wide range of disputes including domestic and cross-border commercial disputes, matrimonial, and other personal disputes.

After the Singapore Convention was signed, it was understood that none of the mediation happening in India would come under the category of “mediation” which could be enforced under the Convention. Under Article 3 of the Convention, the convention did not apply to settlement agreements that are approved by a court or concluded in the course of proceedings before a court and which are enforceable as a judgment of that court and also settlement agreements that have been recorded and are enforceable as an arbitral award. The settlement agreements made under Section 89 CPC are part of court proceedings and are made as judgment of that court, and therefore it will not come under the convention. Similarly, settlement agreements made under the Arbitration & Conciliation Act, 1996 are deemed to be arbitral awards under Section 74 of the Act and therefore they also go out of the scope of the convention.

Thus the need for a comprehensive law on mediation in India was highly required and now we got the Mediation Act!

The Act is made to promote and facilitate mediation, especially institutional mediation, for resolution of disputes, commercial or otherwise, enforce mediated settlement agreements (MSAs), provide for a body for registration of mediators, to encourage community mediation and to make online mediation as acceptable and cost effective process and for matters connected therewith or incidental thereto. There is no doubt that the Mediation Act will create a new culture in dispute resolution and disputants will get a newer, quicker, collaborative and participatory option for dispute resolution, which will maintain their autonomy and value their decision making powers.

But does the Mediation Act 2023, justify our wait and anticipation for such a long time? Are we satisfied in making a law just for domestic mediation and take a back seat in the ever-growing demand of cross-border mediation globally and deny India the benefit of taking a lead? Can we afford to lose the opportunity like we did in arbitration? Are we not pursuing the goal to make India as a hub for international mediation?

As per the Statement of Objects mentioned in the draft Bills dated 12/08/2021 and 29/10/2021, the Bill was made among other things to strengthen the legal framework on international dispute settlement, since India became one of the first signatories to the Singapore Convention.

So making a procedural law enabling the provision for enforcement of international MSA’s and for ratifying the Singapore Convention was one of the primary reasons for enacting the Mediation Bill. This provision was made available in the draft Mediation Bills dated 12/08/2021 and 29/10/2021 as Part-III. But unfortunately, this portion was omitted from Mediation Bill introduced in the Rajya Sabha in 2021.

The provision for international mediation and enforcement of international MSAs were omitted since the government felt that the overall implications of Singapore Convention are required to be examined in holistic perspective particularly of its implication / likely consequence of bypassing the compliance of other domestic laws in the country, particularly where the process of enforcement is not challenged before a Court of law.

The Parliamentary Standing Committee opined that the omission to include International mediation takes away the purpose of the Mediation Act. Taking cognizance of the reasons given by the Ministry for not including the provisions of Singapore Convention, the Committee recommended that the present definition of “International Mediation” needs to be revisited, so that, in future, the provisions of Singapore Convention can be incorporated in the enactment without any ambiguity. By doing so, the Committee felt that the object of developing India into a robust centre for domestic and international mediation can be achieved.

But in spite of the recommendation of the Committee, the part on enforcement of international MSAs is omitted from the present Mediation Act. Even though enforcement is omitted, as under Section 2(iii), it states that this Act shall apply where mediation is conducted in India, even if it is an international mediation. Under Section 3(g) “international mediation” is also defined.

Without ratifying the Singapore Convention and without having a procedural law for enforcing international MSAs, no party will be willing to conduct an international mediation with an Indian party, as he will not be able to enforce the MSA. Since unlike arbitration, mediation is not “seat” based, the effect would be drastic as no business entity will be willing to resolve a dispute with a Indian business entity by mediation even if it is to be conducted anywhere in the world, as the resulting MSA becomes unenforceable in India.

This will have other ramifications as well. The Singapore Convention on Mediation was made based on a common sentiment across the globe for the need of a uniform enforcement regime for mediation. It reflected the substantial growth and increasing awareness of mediation that have fuelled international efforts to develop a harmonised legal framework to support settlement agreements resulting from mediation. The establishment of an international framework boosts foreign investors’ confidence and the host States’ willingness to resort to mediation as a dispute settlement mechanism. Thus the Convention brought in a critical missing piece of the puzzle in the international dispute resolution landscape.

By not bringing in the provisions for enforcement of international MSA, actually we are deviating from a treaty that we have signed. A convention is a multi-member international treaty where we have agreed to comply with the terms of the convention. After signing the same, when we make a law subsequently covering the subject matter of the convention and not making procedural provisions to comply with the requirements of the convention looks like a denunciation or withdrawal from such treaty indirectly. This will not give a good impression about the ADR scenario in India, especially when we do not have a great reputation as a good “seat” for international arbitration also.

Apart from that, it loses the opportunity for Indian Mediators to take up international mediations. Even though mediation is not seat based, the reputation on the standard of mediation and compliance of international MSA’s would be a good ground to deny appointment of Indian mediators in international disputes by other countries.

So we should have been more careful in making the mediation law, so as to strengthen the legal framework on international dispute settlement and make India as one of the leading hubs for international mediation, especially when in the Statement of Objects and Reasons, one of the objectives is to promote mediation and to develop India as a robust centre for domestic and international mediation. Being in the state of pre-convention era, we will be hampering and severing investor and foreign relations. Ratification of the Singapore Mediation Convention to resolve international commercial disputes through mediation, effectively and efficiently will also serve as a declaration ensuring the sustainability and fostering of its international relations with foreign investors and other stakeholders. So we need to take steps to include provision for enforcement of international MSAs under our Mediation Act.

The other provisions relating to domestic mediation are generally good and in consonance with the international practice of mediation. Even though under the earlier drafts, pre-litigation was made mandatory, before filing any suit or proceedings of civil or commercial nature, the present Mediation Act under Section 5(1) has made it voluntary. This is made as per the recommendation of the Parliamentary Committee and a good move, considering the voluntary nature of mediation and upholding the autonomy of parties in choosing the option.

But the Mediation Act failed to consider the fact that after the Mediation law is made, business community and commercial contracts will start including mediation agreements in their contracts. Even though “mediation agreement” is provided in Section 4 of the Act and “Institutional mediation” is provided under Section 3(f) of the Act, under Section 5(1), there is no distinction given for disputes covered under a mediation agreement or not. This takes away the sanctity of mediation agreement and pre-defined institutional mediation clauses. The Act is also silent as to what happens if an agreement contains an institutional mediation clause and violated. The Mediation Act had to bring in a provision similar to Section 8 of the Arbitration & Conciliation Act, 1996, referring the parties to mediation, if their dispute is covered by a mediation agreement. Pre-litigation mediation will become successful only with such measures and giving statutory support for mediation agreements.

Similarly to encourage the use of mediation and to prevent cantankerous parties from using mediation for deliberately delaying the other side from approaching the court or taking the matter for arbitration, a provision is made in section 29 of the Mediation Act, which provides for exclusion of the period of limitation during the process of mediation, if the mediation fails or if no settlement was possible. But the Act has omitted to consider the situation, where settlement is made by the parties, but subsequently the court set-aside the MSA under Section 28. This period also needs to be excluded, as otherwise it will result in the party having no remedy.

Even though the Mediation Act has its drawbacks, it could be considered as the first step to bring in a culture of amicable dispute resolution which could be initiated by parties before attempting adjudicatory dispute resolution methods. That should make all of us happy, considering the huge delay in access to justice.

But we need a more comprehensive Mediation law, which includes international mediation and enforcement of international MSA’s. Our Arbitration & Conciliation Act, 1996 has also underwent extensive amendments in 2015, 2019 and 2021 and after the Mediation Act is made, again an amendment will be required removing the Conciliation portion of the Act. As on 14^th June 2023, the Government of India has constituted a new Expert Committee for examining the arbitration law and suggest reforms. So there is a possibility of a new arbitration Act also coming up.

Many of the neighbouring countries, which are perceived as “ADR-friendly” jurisdictions have consistently updated their legislations on ADR with the objective of ensuring a legislative framework that is supportive of mediation and arbitration.

We could also therefore consider reforms in the law of ADR, in order to make India updated with the ADR system and to make the laws governing ADR less complicating and easily accessible to the users, lawyers and ADR service providers. Therefore, it would be ideal to have a single consolidated “Indian ADR Act”, which will have the laws relating to arbitration and mediation, applying for both domestic and international disputes, along with the accreditation and certification of arbitrators, mediators and institutions, rather than having separate Arbitration Act and separate Mediation Act. We could also have a single ADR Council of India, rather than having a separate Arbitration Council and Mediation Council. This will avoid conflicting policies framed by the Council and conflicting court orders based on different enactments, making the process more transparent and credible.

Anil Xavier is the President of the Indian Institute of Arbitration & Mediation and Chairman of the Asia Pacific Centre for Arbitration & Mediation. He is also a  lawyer practising in the High Court of Kerala. Views are personal.