Draft Mediation Bill, 2021: A Preliminary Analysis

Introduction

In an effort to promote and strengthen the position of mediation as an effective Alternative Dispute Resolution (“ADR”) mechanism, the Ministry of Law and Justice on 5^th November 2021, released the Draft Mediation Bill 2021 (“Draft Bill” / “Bill”) in public domain.

The need for a stand-alone law on mediation has been advocated for by many experts in recent times, in order to provide sanctity to the mediation process as well as to remove the inconsistencies between the various pieces of existing legislation such as Code of Civil Procedure 1908, the Industrial Disputes Act 1947, and the Commercial Courts Act 2015 etc. Furthermore, it was essential to enact a law addressing issues of domestic and international mediation, as India is a signatory to the Singapore Convention on Mediation.

This article aims to provide a brief analysis of the Draft Mediation Bill 2021, focusing firstly on some of its significant provisions and the positives attached to them. It then highlights some of the gaps that exist in the legislation and require further deliberation.

Significant Provisions and the Positive Elements of the Bill

(i) Recognition and Enforcement of Domestic and International Mediated Settlement Agreements

The Bill as a welcome move has incorporated provisions to recognize both domestic and international mediation under Part I and III of the Bill respectively. Consequently, Section 28 and Section 50 of the Bill has recognized a mediated settlement agreement for domestic and international mediation, as final and binding as between the parties and the person claiming thereunder. Interestingly, a mediated settlement agreement under this Bill can be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, more specifically by filing an execution petition. This would help the enforcement mechanism, as the current practice, unless it is a court referred or court annexed mediation, is that it would be enforceable only through specific performance as the settlement agreement is of a contractual nature.

(ii) Availability of Interim Reliefs

The Bill has given the party(s) the power to approach a court or a tribunal of competent jurisdiction for seeking an interim relief in the event of urgency, under Section 8 of the Bill. This would ensure that there are no irreparable injuries caused to either of the parties during the course of the mediation proceedings and to adequately secure the interest of the parties involved.

(iii) Mandatory Pre-Litigation Mediation

In a bid to reduce the case load for the courts, specifically commercial disputes, the Draft Bill under Section 6(1) requires that a party “shall”, before filing any suit or proceeding in any Court or Tribunal, take steps to settle the disputes by pre-litigation mediation in accordance with the provisions of the Draft Bill, and interestingly, the same can be carried out, “irrespective of the existence of any mediation agreement”.

As pointed out brilliantly in a paper by the Vidhi Centre for Legal Policy, a significant advantage of mandatory pre-litigation mediation is that – “it can help deal with some of the myths associated with mediation. As far as the ‘first to blink’ syndrome is concerned, when the law mandates that parties at least attempt mediation, the burden of suggesting mediation is alleviated. Because the law mandates it, parties or their lawyers do not have to risk appearing weak by suggesting mediation.”

(iv) List of Disputes not fit for Mediation

Learning from the difficulties that have arisen with respect to the question of arbitrability of certain kinds of disputes, the law-makers have undertaken an excellent initiative to ascribe clarity with respect to mediation, by providing an indicative list of disputes which are not suited for mediation (Section 7 r/w Schedule II of the Bill).

Some of the disputes mentioned under Schedule II are: Disputes involving prosecution for non-compoundable criminal offences, disputes which have the effect on rights of a third party who is not a party to the mediation proceedings, any dispute relating to the validity of a patent, or proceedings relating to applications for compulsory licensing under the Patent Act, 1970 etc.

In our opinion, the jurisprudence around arbitrability will play a massive role in the selection of matters which can be subjected to mediation. Although the list seems to have followed the in rem vs. in personam test laid down in the judgment of  Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., it fails to take into account the intricate nuances laid down by the Hon’ble Supreme Court in the case of Vidya Drolia & Ors. v. Durga Trading Corporation (Vidya Drolia II). (Readers may refer to this article for a summary understanding of the tests laid down in the aforementioned cases)

(v) Suitability of a Mediator

Similar to rule 7 of Part II of the Civil Procedure Alternative Dispute Resolution and Mediation Rules, 2003, which gives primacy in consideration of the suitability of a mediator for a specific dispute; the present Bill pursuant to Section 11 also considers the same while appointing a person as a mediator. The suitability of the mediator to resolve the dispute is considered in addition to the views expressed by the parties for resolving the subject matter of the dispute.

(vi) Recognizes and Enforces the Neutrality Principle

Perhaps the most important principle which inspires parties to choose and believe in mediation as an effective ADR mechanism is that the process must be neutral and free from bias. The mediator is a ‘neutral’ third party and should therefore be independent or impartial in the conduct of the mediation process.

The Draft Bill recognizes and enforces this principle under Section 12, by placing an obligation upon the mediators to (before the commencement of the mediation process): “disclose in writing to the parties about any circumstances or potential circumstances, personal, professional or financial, that may constitute conflict of interest or that is likely to give rise to justifiable doubts as to such mediator’s independence or impartiality in the conduct of the mediation process.”

Furthermore, Section 13 also provides a mechanism to terminate the mandate of a mediator in case there is a justifiable doubt as to the mediator’s independence or impartiality.

(vii) Role of a Mediator clarified

In order to clear the air regarding the precise role to be played by a mediator, the Bill under Section 18 states that the mediator shall ‘attempt to facilitate’ the voluntary resolution of the dispute by each party. The mediator may further assist the parties in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise and generating options in an attempt to resolve the dispute. Hence, the Bill clarifies that the role of a mediator is a mere facilitative role.

The makers of the Bill have been cognizant of the international practices of using the terms mediation and conciliation interchangeably and incorporated the same into the Draft Bill. Notable scholars have stated that the terms mediation and conciliation have no clear difference and can be replaced with one another, especially in the United State of America (readers may refer to the book ‘ADR Principles and Practice’ by Henry J. Brown and Arthur L. Mariot). Furthermore, this point has also been re-affirmed in the 238^th Law Commission Report. To further strengthen the interchangeable usage of mediation and conciliation, Schedule – V of the Bill seeks to amend the provision of Section 89 of the Code of Civil Procedure, 1908 to state ‘conciliation or mediation’ as a mode of settling disputes.

(viii) Time Limit for the Completion of Mediation Proceedings

In order to ensure that mediation provides a faster dispute resolution mechanism for the parties, Section 20 of the Draft Bill provides that mediation under this Act shall be completed within a period of ninety days from the date of commencement of the mediation. With the parties’ consent, the time limit can be extended for a further period of ninety days.

Even though the implementation of these timelines is subject to skepticism, it cannot be doubted that the provision is indeed a step in the right direction and will help prevent delays in the mediation process.

(ix) Confidentiality Requirements

Recognizing another very important principle of mediation, i.e., confidentiality, Section 22 of the Draft Bill provides that the mediator, the parties and participants in the mediation shall keep confidential all important matters of the mediation process such as acknowledgements, opinions, suggestions, promises, proposals, apologies and admissions made during the mediation. It also provides that all mediation proceedings shall be kept confidential, except the mediated settlement agreement.

Confidentiality of mediation communications and information is essential to its validity and effectiveness. Accordingly, the aforementioned provision would inspire the confidence of the parties to choose mediation as the preferred dispute resolution mechanism. At the same time, in the opinion of certain scholars, the aforementioned confidentiality provision lacks nuance which shall be highlighted by the authors in the next section of this article.

(x) Grounds for Challenging a Mediated Settlement

The Bill has, for the benefit of the parties to the dispute, provided certain grounds to challenge the mediated settlement agreement in exigent cases. For a domestic mediated settlement agreement, the grounds to challenge are: fraud, corruption, gross impropriety or impersonation. In the case of an international mediated settlement agreement, the grounds to challenge are: that the subject matter of disputes is not capable of settlement by mediation under the law of India, the settlement agreement was induced or effected by fraud or corruption or that it is in contravention with the public policy of India. Introducing such grounds was necessary as it would provide sufficient recourse to the parties in the event that the agreement has not been settled on a free and fair basis.

(xi) Establishment of Mediation Council of India

The Bill provides for the establishment of the much needed Mediation Council of India which shall perform a number of functions, such as: frame regulations and guidelines for the conduct of mediation, frame policies and lay down norms, qualification and experience for accreditation of mediators, lay down by way of regulations standards for professional ethical conduct of mediators etc.

(xii) Provisions regarding Community Mediation

Community Mediation has a long history in India and plays a vital role in the resolution of disputes which affect or have the potential to affect the peace, harmony and tranquility within the members of a particular community. In many parts of India, elders and respected members of the community are often called upon to help resolve disputes which can affect the whole community at large.

The Draft Bill under Section 47 provides for the kind of disputes wherein community mediation may be resorted to, alongside listing out the kind of persons which may be included in the mediation panel by the concerned authorities, i.e., persons of standing and integrity who are respected in the community, representative of area/resident welfare associations etc. Further, Section 48 of the Bill spells out the procedure for community mediation.

(xiii) Due Recognition to Online Mediation

The Bill has provided due recognition to the online mediation setup under Chapter 6 of the Bill. Though the foundation of online dispute resolution was laid down in the year 1998 pursuant to the studies conducted by Prof. Ethan Katsh and Prof. Janet Rifkin, it is only after the onset of the pandemic that parties have increasingly opted to undertake such a mode of dispute resolution. The Bill, by recognizing online mediation, has additionally given the process due recognition of law and hence, the parties can confidently opt for such a convenient mode to resolve disputes.

Gaps within the Legislation

(i) Return of the Public Policy Monster

Under the Bill, one of the grounds on the basis of which an international mediated settlement can be challenged is if it is in contravention with the ‘public policy’ of India. Borrowing the language from the Arbitration and Conciliation Act (“Arbitration Act”), the Bill then clarifies that one of the grounds under which the settlement agreement may be held to be in conflict with the public policy of India is if it is in contravention with the ‘fundamental policy of Indian law’.

Similar to the Arbitration Act, the term ‘fundamental policy of Indian law’ has not been defined in the Bill, thereby leaving the interpretation of the term to the wisdom of the Courts. Even though the Courts have attempted to provide some clarity on the term in the last few years, the exact contours of the term remain unclear and the public policy ground has been widely misused by the parties (in an arbitration) to delay the enforcement of an award. Similar problems are likely to occur with respect to the enforcement of international mediated settlements and hence this ground calls for more clarity.

(ii) Vagueness

A number of provisions under the said Bill suffer from vagueness and require clarity. For example:

1. Explanation 1 to sub-section (1) of Section 2 states that “if a party has more than one place of business, the place of business is that which has the closest relationship to the mediation agreement.” The said explanation has been loosely worded and is vague in nature. The Bill does not clarify the contours of the term ‘closest relationship to the mediation agreement’. Such confusion can purport and give rise to numerous other litigations. The Bill can seek guidance from the Information Technology Act, 2000, wherein such a scenario has been tackled adequately. The Information Technology Act under sub-section (5) of Section 13 states that:

“(a) if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business; (b) if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business; (c) ―usual place of residence‖, in relation to a body corporate, means the place where it is registered”

Such clarity would be required to ensure that the applicability of the provisions of the Bill is made clear.

2. Even though the Bill has appreciably provided a list of disputes which may not be fit to be subject to a mediation proceeding, there is a compelling need to add certain tests, guidelines or criteria that may be adopted, in order to ascertain if the disputes are fit for subjecting it to a mediation. Furthermore, there is an inconsistency plaguing the terminology used in Section 7 of the Bill which provides for the substantive provision relating to cases not fit for mediation, and Schedule II of the Bill which relates to Section 7 and provides the list of disputes not fit for mediation. Section 7 states “that mediation under this Part shall not be conducted for resolution of any dispute…”, whereas Schedule II provides that it contains a list of “disputes which may not be fit for resolution through mediation under Part 1.” Though there are precedents to state that Section 7 of the Bill would prevail as against Schedule II, a clarification on the legislative intent, by harmonizing and using the same terminology for the said section and Schedule would lead to a lesser degree of confusion, and provide the much-needed clarity.

3. The Bill provides that a domestic mediated settlement may be challenged on the ground of ’gross impropriety’, without making any endeavor to define the term or specify its contours. The lack of clarity may provide a big leeway to the parties to resist the enforcement of a settlement agreement by bringing any and all challenges under the ground of ‘gross impropriety’.

(iii) Lack of nuance

Dr. Aman Hingorani, in his recent article had brilliantly highlighted as to how the Bill lacks nuance at various places. Some of the most notable observations made by Dr. Hingorani are:

1. The Bill has failed to recognize the layers attached to confidentiality in mediation, and has thereby omitted to include some of the important points mentioned (with respect to confidentiality) under the Civil Procedure Mediation Rules. For example, Rule 20(2) of the Civil Procedure Mediation Rules inter-alia stipulates that “when a party gives information to the mediator subject to a specific condition that it be kept confidential, the mediator shall not disclose that information to the other party”. The said principle does not find any mention under the Bill. Instead, a more generalized principle has been included in the Bill, which lacks sufficient nuance.

2. The Bill does not specify what provisions would govern an international mediation that takes place in India but relates to non-commercial disputes that have arisen under a foreign law, such mediation not being covered by either Part I or Part III of the Draft Bill.

3. The consequences of non-registration of a mediated settlement agreement have not been mentioned under the Bill.

Conclusion

To conclude, it cannot be denied that the Bill has its fair share of positives and is indeed a step in the right direction as far as the recognition and promotion of mediation is concerned. A stand alone law on mediation would not help in generating greater confidence and trust in the mediation process, but would also make it easier for businesses and commercial entities to resolve disputes in India. At the same time, it is imperative that the gaps and concerns highlighted above are addressed by the drafters, so as to ensure that the Mediation Act, as and when enacted, contains clear and elaborate provisions which, in practical terms, facilitate the ADR mechanism of mediation.

(This post has been authored by Shashwat Awasthi (Managing Editor at TCLF) and Akash Thomas Jose (Associate Editor at TCLF). Shashwat and Akash are final year law students at RMLNLU, Lucknow and School of Law, Christ University respectively)

CITE AS: Shashwat Awasthi and Akash Thomas Jose, ‘Draft Mediation Bill, 2021: A Preliminary Analysis’ (The Contemporary Law Forum, 16 November 2021) <https://tclf.in/2021/11/16/draft-mediation-bill-2021-a-preliminary-analysis> date of access.