CDMAC shall recognize the following types of ADR as coming within its purview.
a) Assisted Negotiation
d) Non Binding Arbitration
e) Binding Arbitration
The boundaries of each of these different types of ADR supported by CDMAC are explained below.
ADR is essentially a process that kicks in when there is a “Conflict” between two or more parties.
The Conflict could be personal between individuals in the course of their relationship and may not be based on any contractual obligations. Some of these disputes may be amenable to be resolved through the intervention of Courts as in the case of family disputes. Some may be outside the purview of law but may end up in a Police complaint or a petition in the Court only causing a burden on the system. In such cases, the authorities try to amicably reason with the parties to withdraw their complaints and in the process enter into some kind of mediation without even officially recognizing the conflict, failing which the complaint may be refused or the petition may be dismissed without being admitted.
Conflicts could also arise as differences between parties to a “Contract” enforceable under law. These will be amenable to be resolved in a competent judicial authority subject to certain procedures and cost as per the law applicable to the type of contract.
Civil Courts , Adjudicating Authorities and Tribunals could be legally empowered to resolve the conflicts and impose their decision on the parties by interpreting the terms of the contract with reference to the evidences presented by the parties on why either party is right.
If the Civil Court system had been efficient enough, we would not have been in a position now where there are 4 plus crores of pending disputes in different Courts and many disputes do not get resolved during the lifetime of the disputing parties.
There is therefore a need for ADR process to take over and Arbitration is the process which is suited for resolving the contractual disputes. In an Arbitration proceedings, the Arbitrator/s follow the legal principles applicable to the Contract based on a given jurisdiction and provide their award which is a shadow of what a similar Court should deliver. Arbitration therefore works like an alternate Court where the disputants chose their own Judges and they have time to hear the case exclusively and come to a decision within a short time. The Indian Arbitration Act sets the time of one year as the time within which the arbitration should be completed.
Negotiation is a process where the disputing parties themselves meet, discuss, argue and resolve their differences. It should normally be the first step parties to any business contract try. If this fails, then the conflict needs to be resolved with the assistance of an outside party.
The next step consists of “Mediation” which itself can be sub divided into “Assisted Negotiation”, “Mediation” and “Conciliation”.
In all these three forms of Mediation, there is an involvement of a trusted third party who intervenes at the invitation of the parties and helps in the resolution of the conflict.
The first approach of the Mediator can be to “Assist Negotiation” by separately providing clarifications to each of the conflicting parties so that every party has a correct perception of the conflict and the possibility of “Differences by Misunderstanding” are eliminated. With this independent assistance, the conflicting parties may sit together again for negotiation among themselves and try to resolve the conflict.
The second approach in continuation of this Assisted Negotiation is for the trusted third party appointed as a “Mediator’ with the consent of the parties to the dispute, sits through sessions of discussion in which the parties put across their points of view, try to understand the views of the other party, negotiate a Win-Win situation with the neutral facilitation of the Mediator.
The third approach is “Conciliation” which is a form of mediation in which the Mediator takes the responsibility to suggest remedies and convince the parties to the dispute to arrive at a settlement and may go the extent of suggesting the terms of the settlement also. This method works when the Conciliator is a little more than a mere “Trusted Third Party” as in the case of normal mediation and enjoys the respect of the disputing parties as an “Expert” whose words are “Authoritative”. The “Authority” is normally derived from the known expertise of the Conciliator and some time is presumed because another established authority designates him as a “Conciliator”. When a Court appoints a Mediator under Section 89 of Civil Procedure Code, he is seen by the parties as a person enjoys the confidence of the Court and one who will report back to the Court of any failure of the conciliation process. In such cases “Authority” is bestowed on the Conciliator because of his relationship with the bigger authority such as the Court.
Except for this difference, Conciliation is only an extension of “Mediation” and ends up with a settlement that is signed by the disputing parties.
When we come to “Arbitration” itself, a fine distinction can be made between “Binding” and “Non Binding” arbitration. generally, Arbitration is binding by default since it is governed by the Indian Arbitration and Conciliation Act (2015). However, all arbitration are subject matters of a “Contract” which is either a clause in the contract itself or entered into after the dispute has arisen and before the ADR process commences.
If Arbitration is part of the Contract, its terms cannot be changed without the consent of all the parties and hence after the dispute has arisen, it is unlikely to be changed though it cannot be ruled out. However, if Arbitration contract is agreed to just before the commencement of the ADR process, the parties are free to chose any form of ADR including Mediation or Conciliation as well as Arbitration with or without any conditions. One of the Conditional Arbitration that the parties may chose at their discretion is to subject themselves to a limited Arbitration process where the Arbitration award is considered as a tentative award and not become operative until it is ratified by a competent Court.
A clause of an arbitration agreement which may state that the “Arbitration Award” shall not be binding could be considered as ultra vires the Section 34 of the Arbitration and Conciliation Act 2015 which proclaims that unless a “Stay” is specifically granted, the Arbitration Award which is challenged in a Court is deemed to be final.
However, since the entire foundation of “Arbitration” as well as other forms of ADR is the agreement between the parties, Courts may not take a view that a “Non Binding Arbitration” is not valid and is deemed only as a “Binding Arbitration”.
We need to await a Court decision in this regard as and when a dispute on this point comes up for discussion for further clarification that can be considered as a Judicial Precedence.
However, since “Non Binding Arbitration” is also a contract, it is unlikely that the Court may consider it invalid. In fact it may smoothen the spectrum of ADR processes available between Assisted Negotiation, Mediation, Conciliation, Non Binding Arbitration and Arbitration subject to Section 34 of ACA-2015.
Thus we can identify 5 distinct types of ADR processes based on the “Agreement between the disputing parties”. The wording of the arbitration clause will define what type of ADR process is agreed to between the parties and hopefully there will be no litigation even to clarify this aspect of the clause!.