WILL THE SINGAPORE MEDIATION CONVENTION BE ENOUGH TO REVAMP THE INDIAN MEDIATION LANDSCAPE?
Tushar Behl, School of Law, University of Petroleum and
Alternative Dispute Resolution (“ADR”) has come a long way in India due to its effective mechanism. It has reduced the hassle of Court appearances, and saved time and money for all parties involved. Due to the huge pendency of cases in India, ADR has been duly adopted as an alternative. ADR infrastructure has been continuously improving, with the most recent development being the enactment of the New Delhi International Arbitration Centre Act, 2019 – a major step taken by the Government to make India a hub for institutional arbitration and a leading ADR centre.
Recently, JLN Murthy, Secretary of the ICADR, concluded the ET legalworld.com ADR Virtual Conclave by stating that Mediation will be the future of ADR due to the Singapore Convention adopted in 2019.
The UN Convention on Mediated Settlement Agreements Resulting from Mediation (“SMC”) was opened for signatures on 7th August 2019, in Singapore. India was one of the 46 signatories to the SMC, and intended to build a conducive environment for international trade and commerce by setting in place efficient systems to resolve cross border disputes. The SMC’s impact on India, however, remains to be seen; especially if it will be as substantial as the New York Convention’s (“NYC”). Moreover, there is a dire need to revamp the ADR landscape in India, if it wishes to reap the benefits of the international “direct” enforcement of Mediated Settlement Agreements (“MSAs”) and an efficient mechanism for resolving cross-border commercial disputes, which the SMC aims to deliver.
This article endeavours to address the challenges that India will face, while it proceeds to ratify the SMC and roll out a suitable legislation to take it forward. The article will also discuss how the SMC will act as an opportune catalyst for India in constructing an international framework supportive of mediation.
The present-day Mediation Landscape in India
While mediation has been prevalent in India since it was codified in Section 89 of the Civil Procedure Code (“CPC”) in 2002, interest in mediation has been renewed in recent years. Section 89 allows a civil court to proactively refer cases to mediation. Additionally, Part III of the Arbitration and Conciliation Act (“ACA”) includes conciliation of disputes, and also provides for a settlement agreement to have the same status and effect as an arbitral award. Such an agreement can be enforced as a decree of a court under Section 36 of the Act.
To evolve a comprehensive ecosystem for ADR, pre-institution mediation has been made mandatory under Section 12A of the Commercial Courts Act, 2015. This model is a welcome push, considering that it falls in line with the SMC by providing the express right to ‘opt-out’.
Currently, parties reaching onto a settlement agreement outside India in lieu of a cross-border dispute can enforce the agreement like a foreign award under Part II of the ACA if the settlement is made in a State party to NYC. If there is an absence of agreement to arbitrate, then the settlement agreement may be executed as a foreign decree under the CPC.
Implementing the Singapore Convention: Complications in Practical Exploration
While the SMC seems optimistic despite the cosiness that NYC provides to all, a lot remains to be seen after the Convention commences operation. India’s obligations under the Convention lead us to Article 253 of the Constitution of India, where it is a prerequisite for the Parliament to promulgate legislation to give effect to any International Convention. Consequently, India must roll out appropriate legislation, whilst continuing its pro-enforcement run. However, the inconsistency concerning the terms ‘mediation’ and ‘conciliation’ poses a major challenge to standalone legislation for mediation in India. Though the SMC disregards any difference between the two, a plain reading of Section 89, CPC, and Section 30, ACA suggests that mediation and conciliation are prescribed as two separate modes of settlement of disputes. The lack of certainty has been rectified by the SMC under Article 2 itself, by explicitly defining the term ‘mediation’. This would surely act as a guiding force when it comes to rolling out the legislation in India.
The ratification of the SMC would necessarily include the adoption of the UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation (“Model Law”). It is expected that the promulgation of the said legislation will be done in line with the Model Law for effective and efficient implementation of the Convention. However, looking at the slowed down Indian legislative and administrative process coupled with an absence of standalone legislation on mediation, an exercise like this, will take a lot of time.
The major challenge for India would be enforcement under NYC. While the SMC prohibits enforcement of agreements to mediate, a party will not be protected under the Convention if, in case, the opposing party is in breach of the agreement. Hence, the parties would generally prefer to resort to a more long-drawn-out avenue, such as NYC by entering into a hybrid-arbitration agreement. However, looking at the ‘mixed approach’ adopted by Indian courts concerning enforcement of foreign awards, tackling this challenge seems to be a daunting task. Moreover, enforcing a foreign decree uniting a settlement agreement may not be completely upfront in the Indian context.
This leads us to another encounter that India will face while ‘enforcing settlement agreements’. Due to the lack of an enforcement mechanism for recognizing and enforcing settlements arrived at in mediation proceedings, the parties always prefer to have the mediated settlement in a record. It could be in the form of a consent decree, award before the court, or tribunal – depending on the case – to accord it the recognition and consequent sanction under law. However, the SMC under Article 1(3) impedes application of the mediation process (concluded by way of either court process or arbitration) which leads to settlement agreements enforced as consent decrees and consent awards respectively. This creates a hassle for the parties to necessarily approach the courts to incorporate settlement terms in judgement to get the sanction of law which is against the spirit of an ‘out of court settlement’. In such a case, the SMC comes to the rescue, by providing a framework to recognize and enforce mediated settlements directly and as conveniently as an arbitral award.
SMC brings an opportunity: Where to now?
The SMC will come into force on September 12 this year, after three nations, i.e. Singapore, Fiji, and Qatar deposited their respective instruments to ratify the International Convention as per the criteria laid down under Article 14 of the SMC.
SMC comes with the immense prospect of putting mediation on par with arbitration which is often chosen by parties because of the effective and efficient enforcement mechanism under the aegis of NYC.
If India plans to ratify the SMC in the coming time, the legislature and executive will have to be prompt in bringing up the preferred changes to establish the independent authority as envisaged in the Convention. Standalone legislation for mediation coupled with an ‘opt-out’ policy is pressing priority today. Accompanying such legislation, we are likely to see the development of guidelines on the ‘conduct of the mediator’ and creation of the long-awaited mediation ecosystem in India, thereby enabling the SMC to realize its crucial role in facilitating an amicable settlement of international commercial disputes.
As India prepares itself for ratification, SMC is an opportunity we cannot afford to miss.