A good settlement strategy evolves depending on the interplay between different aspects of the dispute, write Shaneen Parikh and Shalaka Patil
India has grappled with the issue of lengthy delays in the court system, eliciting numerous attempts at speeding up the process, including setting up specialized tribunals and commercial courts and filling in vacancies to realize a full bench strength. However, justice may be best served if effective techniques are employed to resolve a dispute even before it formally enters the judicial system. The current Chief Justice, in a recent speech, emphasized the increasing importance of alternative dispute resolution (ADR). Given the labyrinthine court system in India, litigation takes time, which he recognized as being a “big deterrent”, necessitating a strengthening of ADR mechanisms, “such as through arbitration, mediation and conciliation, especially pre-litigation mediation”.
Mediation and conciliation
Mediation is not a recent concept in India. It has historically been undertaken by the older (presumably wiser), village elders, to resolve disputes between residents of the village. The Indian Arbitration Act, 1899, was the first formal statute dealing with alternative dispute resolution – by way of arbitration (initially applicable only to the Presidency towns). The Arbitration Act, 1940, which followed did not contain provisions for mediation/conciliation. In 1996 when the arbitration regime in India was overhauled, part III of the Arbitration & Conciliation Act, 1996 (A&C act), introduced provisions dealing with conciliation. Conciliation is referred to as assistance rendered to disputing parties by the conciliator, “in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute”. Although the words conciliation and mediation are often used interchangeably, the A&C act does not refer to mediation.
Taking a technical view of the matter (including by virtue of the two forms of ADR being dealt with distinctly in other statues), an agreement arrived at through mediation out of court, may not be enforceable under the A&C act.
Provisions for mediation/conciliation codified in 2002 in amended section 89 of the Code of Civil Procedure, 1908 (CPC), based on the recommendations of the 129th Report of the Law Commission of India. Where it appears to the court (in already instituted legal proceedings) that there exist elements of a settlement which may be acceptable to the parties, the court may formulate possible terms of settlement and/or refer the dispute (subject to the consent of the parties) to arbitration, conciliation, mediation or settlement including through the Lok Adalat.
In 2015, specialized commercial courts were set up under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, to expedite the resolution of commercial cases above ₹0.3 million. Giving a fillip to mediation, it is mandated that where no urgent relief is required, a commercial suit shall not be instituted, unless the plaintiff attempts pre-institutional mediation.
Both the mediator and conciliator are bound to act in a facilitative capacity, so as to try and bring an amicable resolution to the dispute. However, under Indian law, a conciliator may perhaps be more pro-active. This is recognized in the A&C act, which provides that the conciliator “may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute”.
Similarly, the Civil Procedure Alternative Dispute Resolution and Mediation Rules, 2006, framed by Bombay High Court (CP ADR & M Rules), enable the conciliator to make proposals for a settlement of the dispute by formulating the terms of a possible settlement, stating that they have “a greater role than a mediator.” A mediator acts in a more passive manner, by “facilitating discussion, assisting in identifying issues, generating options to resolve the dispute, but ultimately, emphasizing that it is the parties’ own responsibility for making decisions that affect them.”
Strategies for settlement
One of the biggest benefits of ADR, is party autonomy and the ability to choose an arbitrator/conciliator and to formulate a procedure that facilitates a resolution without the confines of a formalistic court process. Indeed, for these (and other) reasons, ADR is the most preferred form of dispute resolution in commercial transactions the world over. The mediator can mould the process for communications and negotiation, in a balanced manner that suits the parties, allowing them to concentrate on the substance of the matter and mutual resolution of the dispute.
Every relationship and every dispute have several dimensions that should be factored in while devising a strategy to achieve a settlement. Much like the Superstring Theory (a theoretical framework in physics) that posits that the universe actually exists in 10 dimensions at once, we posit that there are 10 dimensions or facets to consider in order to achieve a fruitful resolution to a dispute through conciliation. As you will see, each dimension melds into one or more other dimensions, so that a strategy evolves and shape-shifts, depending on the characteristics and interplay between these dimensions.
First dimension – the parties: An understanding of the parties and their relationship, shapes much of the rest of the strategy. Is the relationship professional/commercial or personal? Do they trust each other? Have ties been irretrievably broken, or can they be saved? The answers to these questions direct the way forward.
Second dimension – the dispute: The nature of the dispute often suggests in itself the best approach to adopt. Mediation is often effective in family matters, or personal disputes, particularly if the parties still have regard for each other, in which case a settlement through conciliation is often feasible. In such cases, a more informal and familiar approach may work well with a trusted elder or neutral family member. If there is a complete lack of trust, a more formal and transparent process may be warranted. That said, it is becoming more common to use mediation in commercial and otherwise complex disputes, such as inter-state water disputes, border disputes, etc. Mediation was even attempted in the Ayodhya matter, a socio-religious dispute relating to a place of worship.
Third dimension – the mediator: The contours of the dispute determine the shape of the mediator. Would an elder statesman role work better, or a retired judge, or perhaps an accountant? Should they chose a professional mediator, or choose someone within the family? The authority the mediator holds in the resolution of a dispute may carry with it the parties’ willingness to settle the dispute and comply with a settlement arrived at. Often a professional mediator with a proven track record is the best choice – they have the skill to keep the conversation going even when frustration sets in.
Fourth dimension – Timing: What is the right time to invoke the conciliation process? Many contracts, require pre-arbitral negotiations, or formal conciliation, before the invocation of arbitration. Of course, where formally prescribed, the parties are bound to follow, but generally, they often grapple with the timing for initiating a non-contractual process. A settlement is best achieved when the dispute, issues and claims are sufficiently crystallized, but the parties’ positions have not been set in stone and relationship not irretrievably destroyed. Suggest it too soon, it can be taken as a sign of weakness; too late, and apart from positions having frozen, the limitation may have expired (although time spent in settlement discussions and good faith negotiations may be excluded in computing limitation).
Fifth and sixth dimensions – an alternate view: The superstring theory explores hypothetical possible parallel universes, yet different from the perception of our own. Strategically, we move to the merits of the case – the case of the opposite party and crystallization of the issues. Most parties start with the confident assumption that their claim (or defence), is justified. Listen closely to the opening statement of the other side to get a realistic view of the merits, the similarities and differences between the manner in which each issue is perceived. The opening statements can give an inkling of the possible outcome of the case should it proceed to more formal adjudication. At this stage, a party can start thinking about compromise and the kind of settlement that could be achieved.
Seventh dimension – the approach: In some cases, a facilitative approach works best; the conciliator does not propose or suggest an outcome, but encourages the opponents to work things out themselves. In other cases, particularly when there seems to be no meeting point, a robust evaluative approach on the merits of each party’s case is warranted. The best conciliators use both approaches in some manner. Overall, no matter which method is chosen, the conciliator cannot have the right to impose his will or opinion on the parties, and they must mutually agree to the resolution.
Eighth dimension – confidentiality: The A&C act mandates that all matters in relation to the conciliation shall be kept confidential but it permits a party to give information to the conciliator subject to specific conditions. These provisions ensure that no outside party is privy to what may be dirty laundry and also that it be kept confidential from the other party, though be available to guide the conciliator in facilitating a settlement.
Ninth dimension – negotiations: We are near the final dimension – a point where everything imaginable is possible, a settlement can be seen on the horizon. The most fruitful negotiations usually begin after the parties have a sensible assessment of their case. If their goals are within a reasonable range of each other, each party is usually willing to cede something to reach a middle-ground. Negotiations themselves take myriad forms, but are most successful when a collaborative attitude is taken, with a focus on the future and possible solutions to the quarrel.
Tenth dimension – arbitration: Here we depart from the superstring theory, as we come to the end of the line for this ADR process. If there is a clear realization that no settlement is achievable, arbitration (or other formal court processes), should be invoked. That said, the commencement of arbitration may not necessarily be the end of the road for a settlement; resolution may still be achieved once parties have gone down its path. The arb-med-arb procedure of the Singapore International Arbitration Centre along with the Singapore International Mediation Centre exemplifies this and could well be the start of a new strategy. In this procedure, a dispute is first referred to arbitration before mediation is attempted. If parties can settle their dispute through mediation, their mediated settlement is recorded as a consent award. Of course, arbitration may be invoked at any time during the mediation – this may be for various reasons – the need to protect or enforce some right, expiry of limitation, or just the disappointing realization that there is no hope for a settlement.
Just like the superstring theory that posits different possibilities and parallel universes, so a mediation may have a different outcome, depending on a tweak of just one dimension. The challenge is to unify and sculpt a strategic masterpiece that results in a settlement that is satisfactory to everyone, rather than establishing the saying that, an effective settlement is one where neither of the parties are happy.
Shaneen Parikh is a partner and Shalaka Patil is a principal associate at Cyril Amarchand & Mangaldas