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The Interplay between Mediation and Arbitration in India: A Hybrid Approach
Mediation and arbitration are two of India's most popular alternative dispute resolution (ADR) mechanisms. They offer several advantages over litigation, such as speed, cost-effectiveness, flexibility, confidentiality, and party autonomy. However, they also have some limitations, such as a lack of enforceability, finality, and judicial oversight. To overcome these drawbacks, some parties opt for a hybrid approach that combines mediation and arbitration in a single process. This article explores the concept, benefits, challenges, and legal framework of such a hybrid approach in India.
What is Med-Arb?
Med-Arb is a term used to describe a hybrid ADR process that involves both mediation and arbitration. In this process, the parties first attempt to resolve their dispute through mediation with the help of a neutral third-party mediator. If the mediation succeeds, the parties sign a settlement agreement that is binding and enforceable. However, if the mediation fails or partially succeeds, the parties proceed to arbitration with the same or a different arbitrator. The arbitrator then decides the unresolved issues and renders an arbitral award that is also binding and enforceable.
The main advantage of Med-Arb is that it combines the best features of both mediation and arbitration. It allows the parties to explore creative solutions and preserve their relationship through mediation, while also ensuring a definitive outcome and legal certainty through arbitration. It also saves time and money by avoiding multiple proceedings and minimising the risk of litigation.
The main challenge of Med-Arb is that it raises some ethical and legal concerns regarding the role of the mediator-arbitrator, the confidentiality of the mediation process, and the fairness of the arbitration process. For instance, some critics argue that a mediator acting as an arbitrator may be biased or influenced by the information obtained during mediation. Similarly, some parties may fear that their confidential statements or concessions made during mediation may be used against them in arbitration. Moreover, some parties may feel coerced to settle during mediation to avoid an unfavourable arbitration.
Legal Framework of Med-Arb in India
In India, there is no specific legislation or regulation that governs Med-Arb as a distinct ADR process. However, there are some provisions in the existing laws that enable or facilitate Med-Arb in certain situations.
The Arbitration and Conciliation Act, 1996 (the Act) is the main law that regulates arbitration in India. The Act does not expressly mention Med-Arb, but it allows the parties to agree on any procedure for conducting the arbitration proceedings under Section 19. It also empowers the arbitral tribunal to use mediation as a means of settling the dispute under Section 30. Therefore, the parties can opt for Med-Arb by incorporating a suitable clause in their arbitration agreement or consenting to it during the arbitration proceedings.
The Mediation Bill, 2021 (the Bill) is a proposed law that aims to regulate mediation in India. The Bill defines mediation as a voluntary process in which parties try to settle disputes with the assistance of an independent third person (the mediator). The Bill also provides for confidentiality, enforceability, and admissibility of mediation proceedings under Sections 14, 15, and 16 respectively. However, the Bill does not explicitly address Med-Arb or its compatibility with arbitration.
The Commercial Courts Act, 2015 (the CCA) is a law that establishes commercial courts and tribunals for adjudicating commercial disputes in India. The CCA mandates pre-institution mediation for certain commercial disputes under Section 12A. It also allows for reference to arbitration under Section 8. Therefore, the parties can resort to Med-Arb by invoking these provisions in appropriate cases.
Case Laws on Med-Arb in India
There are few judicial pronouncements on Med-Arb in India. However, some of them have recognized or endorsed Med-Arb as a viable ADR option for resolving disputes.
In Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., (2010) 8 SCC 24, the Supreme Court held that all civil disputes could be referred to ADR processes such as arbitration or mediation by mutual consent of the parties under Section 89 of the Code of Civil Procedure, 1908 (CPC). The Court also suggested a model ADR clause that includes Med-Arb as one of the choices for the parties.
In Haresh Dayaram Thakur v. State of Maharashtra, (2000) 6 SCC 179, the Supreme Court observed that Med-Arb is an innovative ADR technique that can be used for resolving complex commercial disputes. The Court also noted that Med-Arb can be conducted by retired judges who have experience and expertise in both mediation and arbitration.
In M/S Afcons Infrastructure Ltd & Anr v M/S Cherian Varkey Construction Co. Pvt Ltd & Ors, 2018 SCC OnLine Ker 417, the Kerala High Court upheld an arbitral award that was rendered after a failed mediation attempt by the same arbitrator. The Court rejected the challenge to the award on the grounds of bias or violation of natural justice. The Court held that the parties had consented to Med-Arb and that the arbitrator had maintained impartiality and transparency throughout the process.
Conclusion
Med-Arb is a hybrid ADR process that offers several benefits over litigation, mediation, or arbitration alone. However, it also poses some ethical and legal challenges that must be addressed carefully. In India, there is no specific law that governs Med-Arb, but there are some provisions in the existing laws that enable or facilitate Med-Arb in certain situations.
Some judicial decisions have recognized or endorsed Med-Arb as a viable ADR option for resolving disputes. Therefore, Med-Arb can be considered a promising and emerging ADR mechanism in India, subject to the parties' agreement and the nature of the dispute.
- The article explores the advantages and challenges of using mediation and arbitration as complementary dispute resolution methods in India.
- It discusses the benefits of combining mediation and arbitration in a hybrid approach, such as saving time, cost, and preserving relationships.
- It also examines the potential drawbacks and pitfalls of hybrid processes, such as ethical dilemmas, procedural uncertainties, and enforceability issues.
