The rollout of the draft mediation bill by Ministry of Law and Justice has caused a flurry of excitement among mediators in India. Rightly so since if the bill becomes a law, India will join the club of a handful of countries with their standalone law on commercial mediation including Singapore, Hong Kong, Brazil and United States of America (with a uniform code). While the intent of the bill is laudable and pioneering, most practitioners agree that it is a work in progress which shall require a lot of polishing to reach status of a good law. Through this article, I discuss the key hits and misses of the bill.
Hit #1: Domestic provisions for Singapore Convention
For those hibernating, Singapore Convention on Mediation Settlements is a UNCITRAL convention that allows signatory nations to provide for easy enforcement of international mediation settlement agreements. India is one of the 42 signatories to the convention which interestingly does not include otherwise advanced mediation jurisdictions like United Kingdom and USA. The bill provides for the domestic provisions necessary for enforcement of international mediation settlements under the convention. The fact that we are actually bringing a domestic law to implement the Singapore Convention really shows how India is now moving from the position of an observer in foreign policy to becoming a front runner and pioneer. In my opinion, this puts in India out of the shadow of other international hegemonies and is a clear signal that India is coming into its own as a global economy. Having said that, there is still a lot to be done to make the enforcement mechanisms in India really work not just for mediation settlements but also for foreign judgments and awards in international commercial arbitrations and foreign arbitrations.
Hit #2: Parallel, urgent interim relief
Clause 8(2) of the Bill allows the court or tribunal to grant or reject urgent-interim relief and then ask the parties to go attempt mediation before coming to the court. If we jog our memory back to the Section 12 (A) of the Commercial Courts Act, 2019, we may recollect that this provision made it mandatory for all parties to attempt mediation prior to approaching the court. However, there was a caveat. If parties “needed” urgent interim relief, which they “always” do, they would not be required to attempt mediation first. This loophole in the current mediation bill has been done away with, ensuring parties do not circumvent this provision any more.
Hit #3: Institutionalization of mediation services
India has lost the battle on becoming an international arbitration hub owing to its excessive culture of ad hoc arbitrations. Till this culture does not change, it is difficult for us to join the race to become an international arbitration hub. Once bad habits takeover, it is difficult to revert back to good habits. It is for this reason that the emphasis of institutional mediation in Clause 12(3) of the Bill is a great foundational habit for commercial mediation in India. Further emphasizing on party autonomy and in happy contrast to provisions of the Arbitration and Conciliation Act, 1996, Clause 12(3) clarifies that when parties do not reach an agreement on a procedure for appointing the mediator or mediators, then the party seeking to initiate mediation shall make an application to a mediation service provider (instead of courts) for the appointment of a mediator. This is an innovative provision which sets the tone of the proceedings even before they commence towards confidentiality and party autonomy.
Hit #4: Trust triumphs neutrality
There is no denying that India is an arbitration heady jurisdiction. Arbitration is an adjudicatory process, while mediation is not. The arbitrator takes the final decision in the matter requiring him to maintain utmost standards of neutrality. A mediator is a facilitator who streamlines the process of negotiation and coaches the parties to communicate for consensus and collaboration. In my personal opinion, an arbitrator loses if the neutrality is lost. But a mediator loses in a mediation if any one of the parties loses trust in the mediator. Based on the primary research conducted by Bridge Policy Think Tank, in most high-profile cases that get mediated in India (which are so confidential they rarely get reported), the mediator is often a family friend or an old-time business partner. But thanks to the potency of arbitration advocacy, many practitioners over emphasise on the neutrality aspect of the mediator. Now, in line with international best practices, Clause 12(3) of the Bill allows the mediator to declare any conflict of interest before the mediation and the parties are at liberty to issue a written waiver and continue with the mediator regardless.
Now coming to the misses.
I know self-care is trending and people are out repairing their cracks with gold like the Japanese repair their crockery (or so we have been told). But some things are best when rectified before unleashing onto the world. Draft laws are one of them and I outline some issues in brief below.
Miss #1: Definitions of domestic and international mediation
We have already been on a long, drawn battle under the Arbitration and Conciliation Act, 1996 on what is domestic and what is international commercial arbitration, and, as a consequence, how much judicial intervention is permissible in arbitrations with an Indian nexus. Party autonomy in ADR includes the right of the parties to choose their applicable law and applicable jurisdiction. The essence of international contracts is the application of conflict of laws principles to ensure that only courts in one jurisdiction (preferably the one chosen expressly by the parties in their contract) exercise jurisdiction over a dispute. Thanks to residuary powers of courts under Section 20 of the Code of Civil Procedure, courts in many cases continue to exercise jurisdiction in international contracts even if parties have expressly opted for another jurisdiction. Foreign investors and international partners expect comity of courts when interpreting such provisions.
Now, in Clause 2 of the bill, domestic mediation is ambiguous and shall definitely attract multiple rounds of litigation up to the Supreme Court of India before it reaches any clarity. This should ideally be avoided. A person who is a habitual resident of India or has a place of business in India is considered domestic. But the term ‘habitual resident’ is not defined. The term ‘place of business’ is a subject of high controversy already in international taxation. Ideally, it is better to align what party is domestic and what party is international as per the Foreign Exchange Management Act, 1999 (FEMA) which clearly defines person resident in India and person resident outside India. This shall also resolve the new problem of companies incorporated in International Finance Service Centres of India (IFSC) which are technically incorporated in India but enjoy the privilege of person resident outside India under FEMA.
Miss #2: Mediation- A rose by another name
It is also to be noted that, the term mediation itself is loosely defined in Clause 4. The provisions are drafted such that one is often confused whether a mediator shall have adjudicative powers or not. The definition of mediation from the Singapore Convention could have been adopted instead for international parity. It is important for us to get the definition of mediation right, since this is after all, a standalone mediation legislation.
Miss #3: The under-confident operative provision
Clause 6 is the operative provision which places the key obligation to opt for mediation before approaching a court as a dispute resolution mechanism of first resort. But the provision is drafted in a very subjective fashion leaving room for colourful interpretation. The use of ‘in accordance with the provisions of this Act’ is unnecessary as it creates room for doubt and also does not clarify the instruction to the parties. The provision asks parties to ‘takes steps to settle the dispute through mediation’ without clarifying what ‘steps’ shall be adequate compliance of this provision. Although the tenor is mandatory, the enforcement shall be optional. Like arbitration, there needs further clarity that in the instance when parties contractually agree to mediation, they cannot take up any other dispute resolution until they exhaust the remedy of mediation.
Miss #4: Mediation, like Monte Cristo has a cannonball tied to its leg
In an interesting turn of events, we can further look at Clause 15, where they have tied the jurisdiction of the mediation to the jurisdiction of the court. A mediation is mandated to take place where the court has jurisdiction of the dispute. This is unnecessary. In alternative dispute resolution parties are free to choose the place of mediation as well as jurisdiction of courts so long as they are in parity with code of civil procedure and conflict of laws. Internationally, savvy commercial disputants prefer to mediate in the tranquillity of a high-rise building overlooking the sea or some scenery. When the bill already mentioned that the mediation shall be as per the mediation agreement, the parties in the agreement should have complete autonomy to decide the place of mediation and not be tied up with the jurisdiction of the court. Parties should have complete autonomy to decide the applicable law and jurisdiction.
The bill is a giant leap in terms of policy in Indian ADR but in its present form, the bill is like a child in a candy store- full of potentially wonderful possibilities but lost in confusion. Other problems include the excessive bestowed power on the Mediation Council of India and the exclusion of important community disputes like interstate water disputes from the scope of community mediations. If not revised before presenting to the Parliament, the law will end up being “interpreted” by my fellow advocates instead of being “used” by commercial disputants.
Anuroop Omkar, Mediator- World Bank, United Nations and Asian Development Bank