Four Stumbling Blocks in the Mediation Bill, 2021- Part I


[This article is the first part of a three-part blog series, authored by Balapragatha M and Shreyas Kafle, fourth year law students at JGLS, Sonipat.]


Keywords: Mediation Bill, international, domestic, CPC, seat, Singapore


INTRODUCTION:

“It may be worthwhile to recall that the failure of mediation (in Mahabharata) led to disastrous consequences.”

-CJI N V Ramana


The need for a stand-alone law on mediation has been strongly advocated for by the legal community, owing to the lack of structure for mediation proceedings and the existing inconsistencies between various legislations such as Code for Civil Procedure, 1908 (“CPC”), Industrial Disputes Act, 1947 and the Commercial Courts Act 2015. Additionally, as India is a signatory to the United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”), the need for the stand-alone legislation echoed closer to the lawmakers. As a milestone to the efforts to strengthen mediation as a viable ADR mechanism in India, the Ministry of Law and Justice released a Draft Mediation Bill, 2021 on 5th November 2021for public comments and consultation and the Mediation Bill, 2021 (Bill No. XLIII of 2021) (“the Bill”) was introduced in Rajya Sabha on 20th December 2021. Currently, the proposed law is before the Parliamentary Standing Committee on Law and Justice.


The Bill takes up many objectives including promotion, encouragement and facilitation of mediation, enforcement of domestic and international mediation settlement agreements and endorsing online mediation as an acceptable and cost-effective process. The power of mediation certainly needs to be harnessed, and this Bill will provide fertile soil for its growth. However, the Bill must be ‘perfect’ to house mediation at the same level as the thoroughbreds of litigation and arbitration. Many legal critiques have pointed out that the Bill falls short on multiple counts.[i] In this blog series, the authors will discuss four such shortcomings of the Bill. In Part I, the authors will discuss the lackluster way in which the Bill deals with the difference between International Mediation and Domestic Mediation. Part II discusses the issues with mandating the registration of mediated settlement agreements with an authority constituted under the Legal Services Act, 1987. In Part III, the complications in enforcing the final mediated settlement agreement as a ‘judgment or order’ of the court and the issues with the proposed Mediation Council of India are discussed.


A GORDIAN KNOT: DISTINGUISHING INTERNATIONAL MEDIATION AND DOMESTIC MEDIATION


Section 3(f) of the Bill defines an ‘International Mediation’ based on the residence, nationality, and place of business of the parties. At the outset, distinguishing domestic and international mediation based on the ‘habitual residence’ or the ‘place of business’ of parties would give rise to interpretative challenges, as they are undefined ambiguous terms. As the interpretation of these terms is a highly controversial matter in international taxation too, incorporation of these uncertain thresholds in the Mediation Act could possibly result in multiple rounds of litigation to gain clarity. Apart from this, the distinction between international and domestic mediation and its scope has multiple problematic features, which are examined below.


Limiting International Disputes to Commercial Disputes:

Section 3(f) of the Bill, while defining ‘International Mediation’, limits its scope only to ‘commercial disputes’. Further, according to Section 3(a), ‘commercial disputes’ are disputes that are covered under Section 2(1)(c) of the Commercial Courts Act, 2015. However, there could be various non-commercial disputes which could be categorized as ‘International Mediation’. For instance, family disputes, where one or more parties reside outside India and the property is in India or a custody dispute in which one parent resides outside India, would be considered International Mediation. Excluding such non-commercial disputes from the Bill, therefore, confines its application.


Mismatch with the Singapore Convention:

According to Section 28 of the Bill, a mediated settlement agreement will be enforced in accordance with the provisions of the CPC in the same manner as if it were a ‘judgment and/ or decree’ passed by the court. Though this could strengthen the enforceability of mediated agreements, it could potentially neutralize the benefits enumerated under the Singapore Convention. According to Article 1(3), the Singapore Convention does not apply to settlement agreements that are enforceable as a ‘judgment’ in the State of that court. As a result, if cross-border disputes are mediated in India, they will not be eligible to avail the benefit of worldwide enforceability under the Convention due to the treatment of mediated agreements as ‘judgment and/or decree’ of the court. This could crush India’s dream to be a mediation hub and affect the ease of doing business in the country.


Is there a need for distinguishing international and domestic mediation?

The challenges discussed above and several other implementational issues that would arise in distinguishing international and domestic mediation raises a primary question, what is the need to differentiate international and domestic mediation? The basis of distinction between domestic and international mediation in the Bill is eerily similar to the Arbitration Act. For arbitration, the differentiation between domestic and international arbitration is imperative, given the crucial importance of ‘seat’ in supervising the proceedings. In arbitration, like court proceedings, arbitrators consider the law, evidence put forth by the parties and pronounce a binding decision. The roots of the ‘seat’ in arbitration can be found in what is conventionally known as ‘localization theory’, according to which, it is the law of the place where arbitration takes place that ultimately governs the arbitration proceeding through the courts of that place. In contrast to this, the ‘delocalization theory’ envisions a dissociation of mediation from the laws of the geographical location where mediation takes place. This approach emphasizes on party autonomy and the ability of parties to self-regulate the process in a mediation proceeding. The theory rejects the idea of any supervision by a putative ‘seat’ of mediation. The proposed Bill has embraced the former theory incorrectly, rather than following the latter.


Mediation, being a form of assisted negotiation and a completely voluntary process, requires minimal intervention from the court. When it comes to the question of enforcement of the mediated agreement, as parties themselves have negotiated and reached a settlement without any adjudication by a third party, they would most likely comply with it. Therefore, unlike an arbitral award, the enforcement of the mediated agreement will not require much involvement from the court. If parties do not comply with the terms, they can sue for breach or specific performance of the settlement agreement, and the courts can recognize jurisdiction as per the provisions of CPC. Even when parties wish to seek interim relief from courts, these provisions would be the guiding light to identify the court’s jurisdiction. Therefore, the need to recognize the ‘seat’ of mediation doesn’t arise. Pro-mediation jurisdictions like Hong Kong, and Singapore, do not differentiate between domestic and international mediation in their legislations. Therefore, the rigid categorization of domestic and international mediation to identify the territorial jurisdiction, or for other purposes, doesn’t arise and such distinction in the Act would cause unwarranted confusion.


A discussion on the issues with mandating registration of mediated agreements with an authority constituted under the Legal Services Act, 1987, can be found in the second part of this blog series.

[i]Dr Aman Hingorani, Draft Mediation Bill, 2021: How not to draft a mediation law, SUNDAY GUARDIAN (November 13, 2021) <https://www.sundayguardianlive.com/legally-speaking/draft-mediation-bill-2021-not-draft-mediation-law>; Shyam Sundar& Romi Kumari, Draft Mediation Bill, 2021- An Analysis, LEXOLOGY (December 7, 2021) <https://www.lexology.com/library/detail.aspx?g=7483d918-06e3-4309-b99b-8f4efefc7eb0>; Sriram Panchu, Mediation Bill: Not getting the Act together, THE HINDU (December 8, 2021) <https://www.thehindu.com/opinion/op-ed/mediation-bill-not-getting-the-act-together/article37887793.ece>;Aman Hingorani, Mediation Bill 2021: How still not to draft a mediation law, SUNDAY GUARDIAN (January 8, 2022) < https://www.sundayguardianlive.com/legally-speaking/mediation-bill-2021-still-not-draft-mediation-law>; AM Jigneesh, Mediation Council can’t be handled exclusively by the Executive, THE HINDU BUSINESS LINE (December 28, 2021) < https://www.thehindubusinessline.com/news/mediation-council-cant-be-handled-exclusively-by-the-executive/article38050878.ece> ; Anuroop Omkar, Hits and Misses of the Mediation Bill, 2021, THE DAILY GUARDIAN (December 10, 2021) <https://thedailyguardian.com/hits-and-misses-of-the-mediation-bill-2021/>.

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