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SIGNIFICANCE OF CONSENT TO MEDIATION/CONCILIATION

Piyush Rewatkar, 5th year, Maharashtra National Law University, Nagpur


ABSTRACT

Nowadays because of the hectic nature of the litigation, people are opting for the ADR processes on the increasing scale for dispute resolution like arbitration, mediation, conciliation, etc. which are more affordable, convenient, and time-saving. In lots of cases, parties go directly to the court in case any dispute arises between them even if they have an agreement with a mediation/conciliation clause in it. This article, therefore, talks about the legal enforceability of mediation/conciliation clauses in an agreement and the limitation and the challenges in making such clauses in the enforceable. This article discusses the challenges as well as it suggests the way out of such challenges with the discussion of various case laws from around the world.


INTRODUCTION

“There are one hundred and seventy-four countries which recognize mediation and conciliation as a method for resolving disputes, and as an alternative to going to courts.”[i] In the case of arbitration if the parties have an arbitration clause in their agreement then if any dispute arises between them they have to resort to arbitration only and the court does interfere into the matter. But such is not the case with the mediation/conciliation clauses, there is no law anywhere which talks about the role of the court if the parties have mediation/conciliation clause in their agreement.


In the mediation/conciliation, two or more parties try to reach an agreement with the help of a third party, the parties put forth their requirements and agree upon satisfaction. However, if one of the parties is not at all agreeing at any point, there is no solution to that because a party cannot be forced to agree, which would make enforcement a bit difficult. Even if the parties made to sit by the force of law for mediation/conciliation as per the clause in the agreement but if they don’t want to do resolve the dispute by mediation/conciliation then just because of the legal requirement they will sit in the process but will not agree at any point, and finally, by saying that there is no result reached they will ultimately approach to the court. If a party agrees to start mediation but at the end is going to withdraw and is going to approach the court then there is no point in making such preliminary mediation procedure mandatory. Therefore, here the question is that what is the significance of the parties’ consent to mediation/conciliation where the parties are ultimately going to the courts only?


There are three orthodox positions which come in between as barrier for the courts and legislation in making the mediation/conciliation clause enforceable, those three positions are:[ii]

1. Agreement to mediate is void as agreement to agree.

2. The requirement of good faith is fatal because it is not possible to ascertain whether party mediated in good faith; and

3. The vagueness of such agreements because of lack of procedural specification


STANCE OF THE COURTS ON THE ORTHODOXY

Talking about the first issue i.e. ‘agreement to mediate is void as agreement to agree’. The development of this issue has been taken through the various cases, for example, in the UK the court Walford v. Miles[iii] said that if the law does not recognize a contract to enter into a contract, in the same way, bestowing to its interpretation it cannot recognize contract to negotiate, but this particular case was not much of concerned about the problem of dispute resolution and it talked about an agreement which said that the party should agree to negotiate the sale of photographic processing business. This view of the court in Walford[iv], fortunately, has not been adopted by the other courts specifically dealing with the cases of enforceability mediation/conciliation clauses. For example, the English court in the case of Dunnett v.Railtrack[v] made clear that the argument saying agreement to mediate are void as agreement to agree has no application in the case where an agreement to mediate/conciliate is enforced because the court said that an agreement to mediate is an agreement to undergo a process, not an agreement to achieve a result. The court, in this case, made costs order against the party for refusing to mediate. The power of the court to impose costs based on unreasonable refusal to recourse to mediation retreated by the English Court of Appeal in Halsey[vi]. In Halsey, Dyson L.J. noted that “mediation can benefit parties by reducing the cost of the proceedings, offering a range of solutions that are not available to the courts, such as an apology, and the potential for greater party satisfaction at the outcome of the process.”

In addition to the first issue further talking about the second issue of affirmation of good faith, for example, if the parties have mediation/conciliation clause in their agreement and even if they are made to sit for mediation/conciliation so, in this case, the main question is that whether the parties will really mediate/conciliate in good faith in the sense that whether they will positively try to resolve their dispute because mediation/conciliation moreover involves mutual understanding and good faith to end the dispute? And if a party does not believe in mediation/conciliation will agree to no point which will end up into no result which will ultimately result into loss of a lot of time, money and energy moreover certainly there will be cases where one of the party will have an upper hand who is Shure that the judgment will be in its favor. So in the end, if parties are ultimately coming to the courts only then why should the mediation/conciliation clause be enforced mandatorily?


The answer to these questions may be that there is no set of rules to ascertain whether the parties were participating in good faith or not but the courts have made some progress to resolve the issue. Some of the important cases are as follows:

SC of South Wales in Aiton Australia Pvt. Ltd. v. Transfield Pty Ltd.[vii] said that “there may be vagueness about a ‘good faith’ obligation, the court cannot be too ready in striking down a contractual clause as void if it is possible to attribute a meaning to a vague term that corresponds to a party’s intentions.” The court further said the meaning of good faith is that the parties should submit themselves to the process, the concept does not clash with the individual interests of the parties mandating to compromise their wants, what it means is that the parties try their best to amicably settle. Although it is tough for the courts to ascertain the good faith, by just looking at the parties’ arguments the court may be able to find it out.


In Hooper Bailie Associated Ltd v. Natcon Group Ltd.[viii] the supreme court of New South Wales in Australia held that what is enforced is not co-operation and consent, but participation in the process from which co-operation and consent might come.


Further, on the issue Lord Ackner while commenting in Walford v Miles[ix] stated that each party involving in the negotiations is entitled to pursue his (or her) own interest, as far as they avoid misrepresentations. A duty to negotiate in good faith is not much practical as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies.


We can see a little more development of the issue of good faith in United Group Rail Services Limited v Rail Corporation[x] in this case there was an agreement according to which parties were needed that their corresponding senior representatives to meet and to undertake negotiations in good faith so as to resolve the dispute and differences between them. The court of appeal here, in this case, held that the parties have to fulfill their contractual obligation to good faith negotiation as the provision in their contract itself provides for an objective measure by which the court can determine if the parties have complied with it or not. To check whether the party negotiated in good faith court could see the honesty and the genuineness of the party by the approach it made for settling their dispute.


At present, courts at various states like the courts in Australia, US, UK and various other jurisdictions are having a very little development in accepting good faith as a determinable element in various other commercial situations.


As to the third issue of lack stipulation, this is the point where the agreement to mediate/conciliate can only be enforced only if the parties have properly made a stipulation in the agreement if the words are like the parties may/might will go for the mediation/conciliation then that agreement cannot be obligated on the vague terms, the words in the agreement shows the consent of the parties and without proper consent there cannot be proper agreement hence if there is lack of stipulation agreement to mediate/conciliate cannot be enforced.


In the landmark judgment of English court in Cable & Wireless[xi], The court here held that an agreement to mediate is an agreement ancillary to the main contract capable of being legally enforced and mere lapse in drafting that does not affect the substance of the agreement should not render the entire mediation agreement void.


Whilst the Cable & Wireless[xii] focused on the addition of the mediation clause in the agreement than focusing small lapses in the drafting of the agreement, the more conventional courts are still stuck to the orthodox position like court in the case of Hyundai Engineering[xiii] where it refused to enforce the agreement to mediate because of a lack of stipulation in it.


CONCLUSION

If the court becomes strict and follows logic to the core, it seems difficult that the courts will make mediation clauses in contracts enforceable. What can be done on the other hand is that proper method and approach is to be taken enforcement of mediation clauses. The reason why court should make such clauses mandatory is not only because ADR method is more affordable, convenient and time-saving but also with the overall increase in number of cases in courts it can focus on more important matters. Even though the courts are limited by the parties’ agreement but if there is a contract with carefully drafted mediation/conciliation clause in it then a Courts can at any time impose penalty on the parties for not complying the mediation clause. Further it can also be said that a breach of a mediation/conciliation clause is similar to the breach of any other contract.









[i]Available at: https://www.thehindu.com/opinion/op-ed/encouraging-mediation-to-settle disputes/article24273149.ece, visited on 09/02/2019 [ii] LYE Kah Cheong, Apresistent aberration: The Movement to enforce agreements to Mediate, Singapore academy of law Journal pp.196, 2008 [iii] 1992 2 AC 128 [iv] Walford v. Miles 1992 2 AC 128 [v] Susan Dunnett v. Railtrack Plc, [2002] 2 All ER 850. [vi] Lilian Halsey v. Milton Keynes General NHS Trust, [2004] 4 All ER 920. [vii] (1999) NSWSC 996 AT [129] [viii] 1992 28 NSWLR 194. [ix] [1992] 2 AC 128 [x] (2009) NSWSCA 177, [xi] Cable & Wireless plc v IBM United Kingdom Ltd [2003] BLR 89 (QBD) at 96. [xii] id [xiii] Hyundai Engineering and Construction Co. Ltd. v. Vigour Ltd. [2004] HKCU 440 (HC) at [94]

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