Author: Chua Shu Ying, SMU X International Mediation Law and Practice Course 2018. This blog has been published with the author’s permission.
It is no news that procedural inefficiencies and judicial backlog have plagued the Indian courts for many years. With over 54,000 pending cases in the Indian Supreme Court and an acute shortage of judges, it will take India at least another few decades to clear the backlog. It is not uncommon for commercial cases to be abandoned even as they approach trial as the long passage of time often render the original dispute no longer economical to litigate. It is for the same reasons that alternative dispute resolution (“ADR”) mechanisms such as arbitration and mediation were introduced to provide more efficient remedies to disputants.
In India, arbitration is often viewed as the better alternative to litigation for commercial disputes. In recent years, India has introduced many measures to promote mediation as a ADR mechanism. Moreover, with the upcoming Convention on the Enforcement of Mediation Settlements (“the Singapore Convention”) that is scheduled for signing in 2019, it is a timely opportunity for India to promote the use of mediation to resolve international commercial disputes.
Efforts to promote international commercial mediation in India
In September 2015, the Indian Institute of Arbitration and Mediation signed a Memorandum of Understanding with the Singapore International Mediation Centre to pledge their commitment to promote international commercial mediation (“ICM”) in India. The Indian Institute of Corporate Affairs is currently setting up the Indian International Mediation Centre to handle domestic and international commercial disputes, with the aim of providing efficient redressal of commercial disputes to attract more foreign investments. More recently, on the 10 August 2018, the Indian parliament passed the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill 2018 (“Commercial Courts Bill”). The new provision, section 12A, requires parties to a commercial dispute to go for mandatory mediation before they can file the suit in the courts.
Indeed, these efforts reflect India’s growing recognition of mediation as an effective ADR mechanism to resolve commercial disputes before they unfold into a long protracted battle. Where commercial disputants struggle to even have their cases heard in the courts, mediation can step in to provide at the minimum, some redressal. Moreover, as compared to arbitration, mediation offers commercial parties the flexibility to decide on settlement terms that can address their business needs, reduces animosity between parties and preserves important ongoing relationships.
Lack of certainty in the mediation process
India’s efforts to promote ICM are laudable. However, there is no denying that the success of these measures remain dependent on the strength of the mediation process in India. As the financial stakes of commercial mediation are extremely high, commercial parties are unlikely to choose mediation if they do not trust the process or fear being disadvantaged.
Perhaps, the greatest obstacle to the development of ICM in India is the fragmented mediation laws, which has resulted in much uncertainty in the process. The uncertainty in the current legislative framework will likely deter commercial parties from mediating commercial disputes. Even with the new mandatory mediation laws, there is no guarantee that parties will participate in the mediation seriously if they do not trust the mediation process.
In India, there is no specific statute that deals with mediation. Instead, mediation is governed by the Arbitration and Conciliation Act 1996, the Code of Civil Procedure 1908 (“CPC”), and a patchwork of mediation rules issued by the various High Courts. ‘Mediation’ is not defined anywhere, and there is no uniformity in the use of the terms ‘mediation’ and ‘conciliation’ in the statutes. In fact, there are conflicting case authorities suggesting that the terms are used synonymously: see Afcons Infrastructure Ltd v M/s Cherian Varkey Construction  (7) SCALE 293, Salem Advocate Bar Assn. (II) v. Union of India (2005) 6 SCC 344. Moreover, important aspects of the mediation process such as confidentiality are only provided for in certain mediation rules, and are left to judicial developments in case law.
The fragmented legislative framework of mediation has many implications that may potentially stunt the growth of ICM in India. First, as it is unclear whether ‘mediation’ and ‘conciliation’ are used synonymously to refer to the same process, it is uncertain when the mediation rules will apply to a particular proceeding.
Second, while the enforceability of settlement agreements and confidentiality of process is provided for in the supplemental mediation rules under the CPC for court-directed mediations, there is nothing to suggest that the same will apply for private mediations. Without the assurance that mediated settlement agreements (“MSAs”) can be enforced, commercial parties might decide that they are better off arbitrating or litigating their disputes. Moreover, if the mediation is not confidential, discussions during the mediation may potentially be used to prejudice claims in subsequent adjudication proceedings if mediation fails.
Third, notwithstanding the introduction of mandatory mediation for commercial cases in the new Commercial Courts Bill, there are significant difficulties in implementation.
Going Forward: Refining the mediation laws
Fortunately, there are steps that India can take to improve its current legislative landscape. First, instead of leaving the clarification of ‘mediation’ and ‘conciliation’ to judicial pronouncements, India can define the two terms statutorily. In the same vein, specifying when particular types of confidentiality will apply during mediation will provide greater clarity and certainty to commercial parties. In this regard, India may consider introducing a consolidated statute to set out important definitions and provide for the mediation process from start to end, similar to Singapore’s Mediation Act 2017. While this will require substantial time and effort, it will certainly bolster India’s efforts to promote ICM.
Second, India may consider becoming a signatory to the upcoming Singapore Convention. This will provide certainty to international parties that MSAs will be recognised and enforced. Moreover, as the Singapore Convention will be the most credible acknowledgment of ICM to date, signing the Singapore Convention will signify India’s commitment to join the other international parties in promoting ICM.