The concept of first exhausting the ADR or rather Alternative Dispute Resolution process including arbitration or mediation or negotiation or conciliation and then only being able to enter the stage of litigation in courts of law has been introduced in India for the first time in the form of an amendment to the Commercial Courts Act, 2015 as an ordinance which inserts an important section 12A which makes pre-mediation an important step before initiating litigation in such commercial courts or the commercial division bench until and unless there is an urgent need of an interim relief, this was introduced in the 2018. It also needs to be highlighted that:

“In this regard, authorities constituted under Legal Services Authorities Act, 1987 will be notified and such authority shall complete the process of mediation within three months from the date of application. It further entails that the settlement arrived at by such mediation shall have the status and effect of an arbitral award under section 30(4) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).”[1]

There are multi-faceted benefits of the this amendment understanding the jurisdiction of the commercial courts which can extends to multiple disputes depending upon the definition of commercial disputes under Section 2(c) of the Commercial Courts Act 2015 as amended till date. Its beneficial effect can be specially felt in the field of IPR infringement cases as:

“In the absence of a law imposing a time limit for completion of such court-referred mediations, in many cases, mediations of patent infringement suits go on for months with no resolution. Mediation under the Commercial Courts Act bridges this gap by making mediation a time-bound process.”[2]

It is here required to trace the source of this entire idea of pre-institution mediation to its kind of origin, which is the Italian model of opt out mechanism which is applicable in civil and commercial disputes and in some particular cases only where though the right to access the judiciary under Article 24 of the Italian Constitution is preserved but moreover ADR is given more priority especially mediation. To this effect the European Union has come out with a directive no. 28 implemented on March 4, 2010 which implements an uniform regulation of mediation in civil and commercial disputes in cross-border and national contexts as well. But, “The hallmark of the new regulation, and its most controversial feature, is “mandatory out-of-court mediation” for the disputes concerning a large and diverse range of subject matters. Another distinguishing feature of the Italian system is the adoption of administered mediation, with mediators acting only within the framework of registered centres established by public or private bodies.”

This is where the benefits come in of this process, because the moment the process is registered and systemised while keeping the private and comfortable environment being maintained being at the crux of it, there comes a question of responsibility which bounds the mediators and the parties to come to a solution within the given time framework.

It is imperative here to take the support of statistics to understand the beneficial side of this newly introduced process of pre-institution mediation in the Indian model, in terms of the significant numder of the disputes that have been solved within a shorter span of time because of this new change in the law.

“The results of the same in Italy have been a driving force for other countries to adopt the same within their legal system. Statistics have stated that a rising number of litigants have stuck to the process of mediation before choosing to approach the courts. The country has noted close to 200000 cases where parties have opted to choose mediation to resolve the dispute. Close to 50% of this number of cases, were settled showing a win-win situation. A similar response was witnessed in Turkey where the country notices 30,828 mediations in a span of one month.”[3]

The most important benefit of a before-hand mediation is that the obvious possible solutions to a dispute are debated and discussed out, which saves the time in case the case further goes under the aegis of a court of law, which is a great benefit in terms of decreasing pendency of cases in India.

The most glaring benefit of this step has been aptly summarised as a part of the EU directive as follows:

“Agreements resulting from mediation are more likely to be complied with voluntarily and are more likely to preserve an amicable and sustainable relationship between the parties. These benefits come become even more pronounced in situations displaying cross-border elements.”[4]

The step of adopting the opt out mechanism was accepted way later in 2013 after a failed mediation explosion in 2011, wherein through lakhs of mediation started but the parties left in between. But with the new litigation, it is rather a burden on the parties to at least try out the process of mediation if not proceed in it if they find that no possible success can be achieved in it, that is the choice of the parties. But with the systematisation and structuration of the entire system, with registered educated mediators, which are also certified, they help in coming up with more structured nature of mediations in a professional manner, which in turn has achieved a lot of success lately.

Italy has come up with the following three types of ADR, broadly speaking:

  1. “In certain cases, the third party helps the parties come to an agreement without actually formally expressing an opinion on one or other possible solutions to the dispute.
  2. In other cases, it is the third party who finds the solution and puts it to the parties.
  3. Sometimes the third party makes a recommendation that the parties are then free to accept or not.
  4. Sometimes the third party takes a decision that is binding on the tradesperson.
  5. In yet other hypotheses, more closely resembling the conventional court procedure, the third party is called an “arbitrator” and takes a decision to settle the dispute.”[5]

While India has most of the above given processes in order, there are some like the ones which are binding upon the parties, which may be the future ADR in India is looking up to, but possibly at a later date. But the present feature of pre-institution mediation or rather pre-institution ADR can be introduced in other courts as well.

The benefits of following the opt out mechanism of ADR in Italy are as follows:

  1. With the presence of a limitation period, the mediation proceeding will be time bound and so the disputes can be settled cost effectively and in a speedy manner. “A recent example of effective use of this mechanism is the mediation instituted by Nokia to negotiate licenses for its standard-essential patents relating to technology used in handsets. The mediation procedure was reportedly completed within a time span of 8 months and Nokia was able to resolve the dispute without filing a suit.”[6]
  2. The confidentiality of the parties and the matter of the dispute is maintained which helps in case of family matters and certain civil suits wherein the parties would not generally prefer an open court proceeding.
  3. In cases of IPR disputes, it can help by avoiding a validity of IP rights and provide the avenue for assignment if the owner wishes for the same.
  4. The registration and certification of mediators would generate employment at a large scale and would help to arise the trust of common public in mediation.
  5. The pendency of cases in courts can be decreased to a great extent with numerous cases being resolved out of the court only.
  6. A formalised structure of mediation would prevent undue influence and duress and coercion playing their part, which is often said to be the biggest con of mediation. It can be curbed with the help of honest mediators too and by increasing their responsibility in terms of the agreement being achieved at the end.

The cons are many as well, in which case litigation is always the way out and is always the present at the end of this preliminary ADR step but the very idea behind all of this is to increase the popularity of mediation and help in building the trust of the parties in it, by forcing them to try the process at least once. In conclusion, this amendment is very apt in this hour in India with such lakhs and lakhs of cases pending.









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