[Sakshi Vijay is Senior Research Associate at Jindal Global University.]
Singapore will be the witness and the namesake for the signing of the Convention on International Settlement Agreements resulting from Mediation (Convention) in August 2019. Member states of the United Nations may sign to indicate their intention to support the enforcement of settlement agreements resulting from international mediations through their domestic courts/competent authorities. It remains in suspense for supporters of alternate dispute resolution (ADR) in India whether or not the ministry at New Delhi will sign the Convention.
Recent events like the decision of the Indian Supreme Court to attempt resolution of the Ayodhya dispute through mediation and statements made by the Law Minister for introduction of compulsory pre-litigation in government disputes indicates the faith of the Union in this conciliatory form of dispute resolution.
It is often preferred in international commercial transactions that disputes be resolved through ADR since foreign parties want to minimize their interaction with domestic courts. Despite improvement post the 2015 amendment to the Arbitration and Conciliation Act 1996 (Indian Arbitration Act), the Indian jurisdiction has often carried the image of a black sheep for enforcement of arbitral awards. Hence, mediation will be a perfect substitute for dispute resolution process in cross border disputes but for the lack of enforcement mechanism for the agreement resulting from such mediation.
The position as of today is that most mediations in India occur only pendente lite and in court attached mediation centers. It is logical to say that the compliance rate for a settlement resulting from an agreement between the parties is much higher than an award or a decree forced upon them through adjudicatory resolution processes. Nevertheless, it is not rare to find that a party to a settlement agreement experiences ‘buyer’s remorse’ or has signed the settlement agreement only as a delaying tactic without having the resources to fulfil its promises. Therefore, it is recommended that parties have the settlement recorded as a ‘consent decree’ or an ‘award’ so as to borrow the sanction of the law.
If India ratifies the Convention, then parties to settlement agreements in cross border transactions will be able to skip the unnecessary step of validation of the settlement agreement by the courts and can have it enforced directly through the competent authority, as and when required. Hence, parties to such disputes can have disputes settled, at a fraction of the cost of traditional dispute resolution, with the same certainty and efficacy of enforcement, should the need ever arise.
In order to ratify the Convention, the Indian legislature will have to pass an appropriate law to give effect to the Convention; it is suggested that this will be an opportune time to either amend the Indian Arbitration Act or create a new legislation which can also recognize domestic mediation and include the same powers of enforcement for a settlement agreement resulting from a domestic mediation as that of agreement resulting out of a cross-border mediation or a domestic conciliation.[1]
The following observations and suggestions are made regarding the adoption of the Convention in India:
Mediation or conciliation - What’s in a name?
The Convention has disregarded all differences by including a very wide definition of ‘mediation’. The definition includes all form of dispute resolution “….whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person or persons lacking the authority to impose a solution upon the parties to the dispute”.[2] Thus, the definition includes mediation, conciliation or even other mechanisms like expert evaluation.
It is suggested that the Indian Arbitration Act be amended to include a similarly broad definition of ‘conciliation’ to include ‘mediation’ in proceedings governed by Part III of the Indian Arbitration Act.
Scope of the Convention
The Convention applies to all settlements where at least two parties are from different countries. The element of ‘international’ is also wide, however, consumer, employment, inheritance and family disputes are excluded from the ambit of the Convention.[3] The exclusions indicate that the Convention targets commercial disputes which reflect roughly the scope of subject matter arbitrability in India.
The Convention also does not apply to settlement agreements that have been approved by a court or concluded in the course of proceedings before a court; and that are enforceable as a judgment or an award.[4] This provision ensures that there is no duplicity of enforcement proceedings and the ‘conciliation’ proceedings that have received sanction of the court (domestic or cross-border) will not be governed by the Convention as it is already enforceable under the Indian Arbitration Act.
Requirements for reliance on settlement agreements
Two documents are required to ensure application of the enforcement provisions under the Convention:
The settlement agreement has to be in writing and signed by the parties,
The mediator or the institution has to provide evidence that the settlement agreement has been derived from mediation or in case of unavailability, any other evidence that is acceptable to the competent authority.
As per the current situation in India, there are very few non-court attached mediation centers and no statutory rules or guidelines for functioning of any such centers or private mediation institutions. More importantly, there is no uniform regulation for accreditation of mediators or conciliators in India. In such a situation, it is likely that either the parties will not choose Indian mediators for the lack of infrastructure or choose such mediators who have not received proper training and are incompetent to play the role of a mediator efficiently.
It is hence suggested that contemporaneous to the Convention, a regulation with regard to uniform accreditation of mediators be issued which ensures that mediators in India receive international standard training and exposure.
Grounds for refusal of enforcement
Article 5 of the Convention lays down grounds for refusal of enforcement of the agreement and they are similar to Section 48 of the Indian Arbitration Act in terms of procedural irregularities. Enforcement may be refused if the party was under some incapacity or if the agreement is null and void, or incapable of being performed or is not final or binding or if the there was a serious breach by the mediator of standards applicable to the mediator without which breach that party would not have entered into the settlement agreement.
There are two issues that will be faced by the competent authority when dealing with challenges under this provision. The first issue is that of frivolous challenges which is similar to what is faced by courts while enforcing arbitral awards. A party who does not want the enforcement of the agreement may challenge it on the basis of its incapacity or by alleging that the agreement was not final. These allegations often take time to be adjudicated upon and thus negate the benefits derived out of direct enforcement. However, the Convention, in its Article 6, gives the power to the competent authority to adjourn the decision, and it may also, on the request of a party, order the other party to give suitable security when an application or claim relating to the settlement has been made in any other forum.
The second issue is connected to the problem of there being no regulatory standards for mediators in India and hence it is unclear as to what will constitute a ‘serious breach’ of mediator standards.
The relief may also be refused on the ground of violation of public policy or because the subject matter was incapable of settlement by parties. This provision will require the court to intervene in order to interpret ‘public policy’ and it is suggested that it be interpreted in lines of Section 48 of the Indian Arbitration Act.
Enforcement by the Competent Authority
The Convention provides the flexibility to the contracting state to appoint an authority for enforcement of the settlement, and such an authority is to act expeditiously while considering the request for relief. India can consider creating a specific competent authority just for this task so that there is no further burden on courts.
Opting out of the Convention
Article 8 of the Convention lays down that a contracting state can opt that “It shall apply this Convention only to the extent that the parties to the settlement agreement have agreed to the application of the Convention”. Hence, if India opts for this reservation, parties to the settlement agreement have the option of excluding the applicability of the convention if they want. This option (like the Convention on Contracts for the International Sale of Goods) will allow party autonomy with reference to whether or not the parties from signatory countries choose to be bound by the convention.
We can hope that India will sign the Convention and this will bring forth a wave of pro-mediation legislations and regulations in the country. Parties will be encouraged to include clauses for mediation in their contracts and refer disputes to mediation at an early stage rest assured that the agreement will be enforceable. However, as discussed above, the change will only be effective if it is accompanied by laws that ensure mediation in India to be conducted at international standards, infrastructure development and institution of world class mediation centers and accreditation and training of mediators.
[1]The Indian Arbitration Act, Section 74.
[2]The Convention, Article 2(3).
[3]The Convention, Article 1(1).
[4]The Convention, Article 1(3).