Keywords: Dispute Resolution, Pre-Litigation Mediation, COVID-19
The outbreak of COVID-19 has created volatility and complexity in the justice delivery system, which potentially poses the greatest challenge as well as an opportunity for mediation to thrive as a mechanism for dispute resolution. While this macroeconomic disruption has drastically affected the functioning of the courts, the flexibility that pre-litigation mediation offers is being realised now more than ever. Pre-litigation mediation offers the parties an opportunity to meet in a private setup to settle their dispute harmoniously with the assistance of a mediator (a neutral third party) before initiating any sort of litigation proceedings.
This article details pre-litigation mediation and how it could enhance the legal system and efficiently provide access to justice in a timely and economical manner. Initially, the authors discuss the legal mandate concerning pre-litigation mediation under Indian law followed by the roadblocks in its implementation. Further, the authors elaborate on how pre-litigation mediation is a viable option for dispute resolution in the face of challenges posed by the ongoing pandemic.
The Current Legal Mandate
In India, Arbitration, which is the adversarial method of dispute resolution, is more widely prevalent than mediation. However, with an intent to improve the ease of doing business, the policymakers experimented with the ‘out of court’ settlement mechanism i.e. mediation. Under Section 12A of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018, the parties are legally obligated to exhaust the remedy of pre-litigation mediation for resolving commercial disputes before approaching courts. Earlier the basic framework that governed mediation in India was given under Section 89 of the Code of Civil Procedure, 1908, wherein courts referred the parties to resolve their dispute through mediation. Section 89 of the Code also provides for conciliation as an Alternate Dispute Resolution method.
In the case of Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. the Supreme Court has cleared the misnomer between the terms ‘judicial settlement’ and ‘mediation’ in Section 89 of the Code, and held that these two terms should be interchanged and read in sub-clause (c) and (d) respectively of clause (1) of the provision. The Apex Court also observed that the cases related to trade, commerce, contract, and consumer dispute can be referred to mediation depending upon the distinct facts of the case.
Apart from this, section 442 of the Companies Act, 2013, read with the Companies (Mediation and Conciliation) Rules, 2016, provides for referral of disputes to mediation by the National Company Law Tribunal and Appellate Tribunal. Family and personal laws including the Hindu Marriage Act, 1955, and the Special Marriages Act, 1954 require the court in the first instance to attempt mediation between parties.
Contemporary Roadblocks to Pre-Litigation Mediation
The motive of the mediation process is to enable the parties to understand their interests and priorities and project them towards a mutually acceptable resolution resulting in a win-win situation for the parties. It holds various advantages other than being cost-effective and speedy, such as preservation of relationships, mutual satisfaction, reducing the burden of the Court, avoiding unnecessary delays, completely party-oriented, process in a convenient and comfortable setting as volunteered by parties, empowerment of parties in the sense of their active participation etc. Despite all the benefits it holds over litigation, mediation is unrecognised in India and suffers from certain inadequacies which adversely affect the advancement of the pre-litigation mediation system in India.
Challenges to the Enforceability of a Pre-Litigation Mediation Settlement Agreement
In pre-litigation mediation, the settlement arrived at is a contract because it is reduced in writing and signed by the parties to the dispute as well as by the mediator. There is no dispute when parties voluntarily execute the agreement but the issue arises when one of the parties decides to breach the said settlement agreement. This settlement agreement is not per se enforceable as a decree of the court. Such an agreement will at the most form a basis of the suit, while the parties will have to move to litigation to settle the dispute and bind the said settlement agreement. In India, there are three different ways through which such settlement agreement can be enforced – under Order 23 rule 3 of the Civil Procedure Code, under contract law, and under the Arbitration and Conciliation Act, 1996 as an arbitral award, subject to following the procedure laid down in the Act. Each one of these ways will essentially trigger the litigation process, thus hampering confidentiality, which often is the reason for parties wanting to opt for mediation. Therefore, there is a need for a regulatory framework to clear such ambiguities keeping in mind the confidentiality aspect of mediation.
Absence of an Exhaustive Legal Framework
In contrast to arbitration and conciliation, mediation has no exclusive statutory mandate governing its procedural aspects. Statutory overlooking makes it difficult for all kinds of mediation, be it court-referred or private mediation, to flourish. Although the Supreme Court has released guidelines for mediation in India, a bare reading would reveal that they do not cover the entire ambit of mediation and are inadequate. Suggesting that, neither the confidentiality nor do the other aspects of pre-litigation mediation such as preservation of cordial relationship between parties, mutual satisfaction have a statutory guarantee.
Lack of a Pre-Litigation Mediation Culture
A crucial obstruction to the acknowledgement of pre-litigation mediation is the lack of a culture for mediation in India. There is no overreaching structure for pre-litigation mediation, which results in a lack of uniformity among mediation centers, resulting in confining of pre-litigation services to the limited areas with only some centres offering pre-litigation mediation service. Insufficient public awareness regarding the benefits of pre-litigation mediation and non-encouragement, results in lack of confidence among the potential users of the mechanism. As a result, in many cases parties show the lack of cooperation or sometimes do not turn up for sittings. Therefore, there is a requirement for mediation centres to come forward to promote and facilitate services of pre-litigation mediation by setting up pre-litigation help desks and clinics allowing access to mediation on a pre-litigation basis and by formulating a robust mechanism for the code of conduct of mediators to help establish faith between the parties. On the other hand, there is also a need for the government to invest in new initiatives for building sound infrastructure to make the parties more comfortable and familiar with the process.
The Scope of Pre-Litigation Mediation in COVID-hit India
In the wake of challenges posed by the COVID-19 pandemic such as uncertainty, instability, ambiguity and panic, India is desperately trying to keep its sinking economy afloat by making its laws business-friendly. These laws aim to protect businesses, which are suffering losses due to low demand and consumption, disruption in supply chain and delayed performance of the contract etc. As a result, it is almost certain that parties will often find themselves on both sides of the coin i.e. on one side they will be aggrieved by the non-performance of the contract by the opposing party, and on the other hand, they will risk incurring a default on non-performance of the contract. It therefore becomes viable for the parties to mediate their disputes instead of going to court.
The process of mediation assumes greater significance in this context as the lockdown has compelled courts to drastically reduced the number and types of cases they take up for hearing. An introduction to pre-litigation mediation will allow the parties to overcome their disputes and operational challenges in a forward-looking manner. As the types of disputes arising most commonly out of the lockdown are matrimonial and force majeure, mediation on matrimonial disputes will help preserve family relationships. While concerning the force majeure event like COVID-19, parties often sour their relationships with one another due to forced economic compulsion and budget constraints. In such a scenario, pre-litigation mediation will enable parties to engage in a constructive dialogue and understand the economic interests of both parties and reach at a more creative alternative which otherwise may not have been possible with the interference of the court. This is essential since COVID-19 is temporary but maintaining a good business relationship is critical for sustaining business in the long run.
Since internet has a wider reach and convenience, it is now time for dispute resolution mechanisms to be promoted on online platforms. Pre-litigation mediation as a method of online dispute resolution will facilitate the access to justice to all the concerned parties by providing most needed certainty by resolving a dispute promptly, as opposed to the inherent uncertainty in litigation. Additionally, companies are trying to prioritise their spending on essentials costs such as employee salary, sanitation etc., thereby reducing their expenses on non-essential costs. Pre-litigation mediation will act as a better alternative for dispute resolution for the companies who are looking to cut their operational costs, as the high and recurring cost involved in litigation will be a non-essential expense in these trying times. Lastly, virtual pre-litigation mediation offers a more flexible and comfortable environment, where the parties can take part just by sitting in the comfort of their office or house, which can be advantageous in these times of social distancing.
Currently, India is facing the problem of not only the absence of legislation on mediation but also that of stressed dedication towards its development. In such times of chaos caused by the pandemic, the courts are flooded with a large number of pending cases, hence it is imperative to implement pre-litigation mediation route of dispute resolution with a better regulatory framework. Such a framework can be used to enhance mediators’ abilities, have a check and balance policy to secure equality and maintain independent nature of the process while improving its credibility. With mediation establishing its roots in India, it is the right time to introduce mandatory pre-litigation mediation reform in the system, which is a successfully operating framework in some countries like Italy.
[i] Vishesh Jain and Rati Chourey are 3rd-year law students at National Law University Odisha. Vishesh has a keen interest in Insolvency Law and Dispute Resolution while Rati is interested in Competition Law and Dispute Resolution. For any discussion related to the article, they can be contacted via mail at firstname.lastname@example.org and email@example.com respectively.
Preferred Citation: Vishesh Jain and Rati Chourey, “Pre-Litigation Mediation – Strengthening Access to Justice amidst COVID-19” Arbitration and Corporate Law Review, Published on 10th July 2020.