Encouraging mediation to settle disputes(Hindu summary-28th June 2018)

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Encouraging mediation to settle disputes.

The Hindu

Context:

Encouraging mediation to settle disputes as part of ADR(Alternate Disputes resolution)

Why in news?

  • India will participate in deliberations at the United Nations Commission on International Trade Law (UNCITRAL) in New York on an important issue concerning resolution of commercial disputes.
  • The deliberations will consider how these settlement agreements in disputes in international commercial transactions will be implemented by courts in different countries.
  • UNCITRAL has formulated principles on which countries should recognize and enforce mediation agreements arising from cross-border disputes. Once formalized, countries will have a consistent framework for enforcing mediation agreements made in other countries.

What is a commercial dispute?

  • Commercial dispute essentially occurs when relations between businesses break down.

For example, a dispute may arise when one party fails to pay money that they owe to another. Or a dispute might develop over a disagreement as to the terms of a lease.

  • Unfortunately, the reality of modern business means that commercial disputes occur frequently. Without proper management, such disputes can be very lengthy and very expensive.

What is Alternative Dispute Resolution (ADR)?

  • Alternative Dispute Resolution (ADR) is the procedure for settling disputes without litigation, such as arbitration, mediation, or negotiation.
  • These procedures are usually less costly and more expeditious.
  • They are increasingly being utilized in disputes that would otherwise result in litigation, including high-profile labor disputes, divorce actions, and personal injury claims.
  • One of the primary reasons parties may prefer ADR proceedings is that, unlike adversarial litigation, ADR procedures are often collaborative and allow the parties to understand each other’s positions.
  • It also allows the parties to come up with more creative solutions that a court may not be legally allowed to impose.

Types of ADR:

  • Arbitration – A process similar to an informal trial where an impartial third party hears each side of a dispute and issues a decision; the parties may agree to have the decision be binding or non-binding
  • Binding and Non-Binding – A binding decision is a ruling that the parties must abide be whether or not they agree with it; a non-binding decision is a ruling that the parties may choose to ignore
  • Arbitrator – An impartial person given the power to resolve a dispute by hearing each side and coming to decision
  • Hearing – A proceeding in which evidence and arguments are presented, usually to a decision maker who will issue ruling
  • Mediation – A collaborative process where a mediator works with the parties to come to a mutually agreeable solution; mediation is usually non-binding

What is mediation?

Draft convention defines mediation as a “process whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person (the mediator). The mediator lacks the authority to impose a solution upon the parties to the dispute.

  • Courts of a country before which a mediated settlement agreement is brought must ensure implementation of the terms of settlement.
  • The courts will allow a party to a settlement agreement to rely on this agreement as a defense in cases filed on the basis of disputes already settled by the agreement.

Process of Settlement:

Step 1:

  • Settlement agreement comes up before the court for implementation or enforcement, the court will review it on the basis of certain conditions.These conditions include the capacity of the parties to enter into the agreement, the question whether the subject matter of the agreement is one that can be settled through mediation in terms of its domestic laws, and so on.

Step 2:

  • Once the agreement has been reviewed, the court must enforce the agreement on the terms agreed.
  • Courts can decline enforcement only on these conditions. The importance of the draft convention is in the identification of these conditions after careful deliberation.

Note:

  • Mediated settlement agreements typically don’t need court assistance for enforcement since the terms of settlement have been chosen and determined by the parties. However, with this convention comes the certainty that settlement agreements through mediation will be acknowledged as a resolution of the dispute, and will be respected and enforced.
  • Further, if the court were to decline enforcement, this will be done on grounds that are known to international parties.

Significance of Mediation:

  • 174 countries recognize mediation and conciliation as a method of resolving disputes, and as an alternative to going to courts.
  •  International business and dispute resolution institutions such as the International Chamber of Commerce, the Singapore International Mediation Centre and the World Intellectual Property Organisation all have established rules and assist businesses in resolving disputes through mediation.
  • Mediation as the first step in resolving differences that arise from business in to international disputes.
  • The convention is opportune and will facilitate legal reform to ease dispute resolution.

How this draft is important to India?

  • Mandatory pre-litigation mediation has been introduced in commercial disputes.
  • The adoption of the convention will address a policy gap on outcomes from the mediation process involving cross-border disputes.
  • With a definitive legal framework recognizing and enforcing mediated settlement agreements, businesses will be encouraged to consider mediation in managing and resolving disputes that arise in their commercial transactions.
  • India has lost substantial earnings as a result of international disputes being taken for resolution outside the country. Strengthening the dispute resolution policies will encourage dispute resolution in India, where the commercial relationship once began.
  • The draft will help for enforcement of settlement agreements arising from disputes in international commercial contracts.
  • The convention will link laws adopted by countries to recognize domestic mediation and extend them beyond their boundaries.

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