ADR (Alternative Dispute Resolution) notes
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ADR (Alternative Dispute Resolution) notes
Alternative Dispute Resolution (ADR)
Introduction
Alternative dispute resolution (ADR) offers to settle disputes outside of the courtroom with the help of an impartial third party. Outcomes may be non-binding and advisory in nature or enforceable without the right to appeal. ADR is not advised in situations of criminal law or situations where one party has excessive power over the other party.
Meaning
Alternative dispute resolution (ADR) helps settle disputes without going to court. An unbiased third party assists in the process. ADR usually occurs after the client and the insurer have tried to resolve their differences directly but can’t reach an agreement.
Alternative dispute resolution (“ADR”) refers to any method of resolving disputes without litigation. ADR regroups all processes and techniques of conflict resolution that occur outside of any governmental authority. The most famous ADR methods are the following: mediation, arbitration, conciliation, negotiation, and transaction.
Process
When both parties in a dispute agree to use alternative dispute resolution (ADR), the ADR process begins. This agreement can come from a court order, a clause in a contract, or it may be voluntary. The parties choose the best ADR method for their situation, often with the help of a lawyer. The different methods are explained in the next section.
Negotiations begin the next stage of the ADR process by setting up the procedure’s structure and rules. This includes making confidentiality agreements, outlining the schedule and expectations, and defining the roles and responsibilities of each party. At this stage, the parties can also share relevant information, documents, and evidence.
During the last part of the ADR process, the parties discuss a settlement for the conflict. If they agree on a settlement, they will create a written agreement that details their arrangement. Then, the parties need to follow through on the agreement and fulfill their commitments, such as making a settlement payment if they are found liable.
Types of Alternative Dispute Resolution
Mediation
Mediation involves a neutral third party who helps the insured and insurer communicate to find a solution that works for both. The mediator guides the conversation but does not decide who is right, allowing the parties to reach an agreement together.
Arbitration
Arbitration occurs when a neutral independent party called an arbitrator listens to arguments from both sides, collects evidence, and then decides on the outcome of the dispute, similar to a court ruling. Arbitration can either be non-binding or binding.
Negotiation
Negotiation occurs when there is direct contact between the parties to a dispute. In order to arrive at a solution that is acceptable to both parties, it enables the parties to debate their views, interests, and prospective solutions. The parties may choose to negotiate informally amongst themselves or with the aid of lawyers or other representatives.
Conciliation
Conciliation means the attempted resolution of issues raised by a complaint, or by the investigation of a complaint, through informal negotiations involving the aggrieved person, the respondent, and the Assistant Secretary.
Need for ADR:
The system of dispensing justice in India has come under great stress mainly because of the huge pendency of cases in courts.
In India, the number of cases filed in the courts has shown a tremendous increase in recent years resulting in pendency and delays underlining the need for ADR methods.
Advantages of ADRs
The resolution of disputes usually takes place privately, which helps maintain confidentiality.
It is more viable, economical, and efficient.
Procedural flexibility saves valuable time and money and the absence of stress from a conventional trial.
This often results in creative solutions, sustainable outcomes, greater satisfaction, and improved relationships.
The possibility of ensuring that specialized expertise is available on the tribunal in the person of the arbitrator, mediator, conciliator, or neutral adviser.
Further, it offers greater direct control over the outcome.
Disadvantages of ADR
Decisions made in ADR do not set a legal precedent
In some forms of ADR, such as binding arbitration, the opportunities for appealing the decision are limited.
While court judgments are enforceable by law, enforcing the outcome of an ADR process can sometimes be more challenging.
Lack of Legal Representation
Since ADR processes are less formal and more flexible, there can be inconsistency in how disputes are resolved.
In Renusagar Power Co Ltd vs. General Electric, AIR 1985 SC 1156
the Supreme Court said that the object of this legislation was to facilitate and promote international trade by providing for speedy settlement of disputes arising in trade through arbitration. It was stated that ordinarily, as a rule, an arbitrator had no authority to clothes himself with power to decide the question of his own jurisdiction unless parties expressly conferred such a power on him.
‘
Further the Court held that the question as to the validity of the contract was also for the court to decide under Section 33 and not for the arbitrator. If there was no arbitration clause at the time of entry of the arbitrators on their duties, the whole proceedings would be without jurisdiction.
Process of conciliation
Conciliation
Conciliation is a way to solve disputes without going to court. It is a voluntary and private process that helps people communicate and understand each other better. In conciliation, a neutral person called a conciliator helps the parties find a solution that works for them both. The conciliator guides the discussion, helps identify the issues, encourages understanding of different viewpoints, and assists in finding common ground for agreement.
Conciliation follows specific procedures and guidelines, which can differ based on the jurisdiction or the laws that apply. In India, the Arbitration and Conciliation Act regulates the conciliation process.
Scope of conciliation
Conciliation is a process of settlement of disputes that have been widely spread throughout the centuries. In ancient cultures, parties in a dispute would visit the village old men for advice. They sought ways to resolve their dispute through the advice given by the old experienced men. Consequently, with the evolution of ADR, conciliation as an informal institutional practice gained popularity. This was furthered by the introduction of various guidelines framed to regulate the process of conciliation.
Process of Conciliation
Part 3 of the Arbitration and Conciliation Act 1996 discusses the process of conciliation, which is an alternative method of resolving disputes outside of court.
Step 1: Commencement of Conciliation Proceedings
To start conciliation proceedings, one party must send a written invitation to the other party, as outlined in Section 62. The process can only continue if the other party accepts the invitation. If there is no response within 30 days, this will be considered an refusal to engage.
Step 2: Appointment of Conciliators
Once both parties agree to conciliation, they need to choose a conciliator, which is explained in Section 64. They can appoint one conciliator together, or if they prefer, each can select one, making two in total. If they want three conciliators, each party will choose one, and then they will agree on a third conciliator to act as the leader.
Step 3: Submission of Written Statements to the Conciliator
The conciliator might ask both parties to write statements that explain the important facts about the case. Both parties must send these written statements to the conciliator. They also need to share their statements with each other.
Step 4: Conduct of the Conciliation Proceedings
Sections 67(3) and 69(1) explain how to run conciliation proceedings. The conciliator can choose to communicate with the parties in writing or by talking. They may hold meetings with the parties together or separately. The way the proceedings are conducted will depend on the specific situation of the case.
Step 5: Administrative Assistance
section 68 of the Act talks about getting administrative help. The parties or the conciliator can ask for help from an organization or individual if needed. However, they must get the parties’ agreement to use this help.
Termination of Conciliation Proceedings – Section 76
Section 76 of the Arbitration and Conciliation Act provides four ways in which conciliation proceedings can be terminated:
Termination by Signing of Settlement Agreement (Section 76(a))
Conciliation ends when the parties sign a settlement agreement. The signing date is the end date.
Termination by Conciliator’s Declaration (Section 76(b))
The conciliator can end the proceedings with a written declaration stating that further efforts aren’t needed. The declaration date is the end date.
Termination by Written Declaration of Parties (Section 76(c))
The parties can end the process by sending a written notice to the conciliator expressing their desire to stop. The notice date is the end date.
Termination by Party’s Written Declaration to Other Party and Conciliator (Section 76(d))
A party can end the conciliation by sending a written notice to both the other party and the conciliator. The notice date is the end date.
In Mysore Cements Ltd. v. Svedala Barmac Ltd. (AIR 2003 SC 3493), the court examined Section 73 of the Arbitration and Conciliation Act. This section outlines the conciliator’s role in resolving disputes.
Section 73(1) states that when the conciliator identifies potential settlement terms, they should present these to the parties for feedback and can adjust them based on their comments. However, the court found that no such terms were created or adjusted
in this case.
If the parties agree on the terms, Sub-section (2) allows them to draft and sign a settlement agreement. Once signed, Sub-section (3) makes the agreement final and binding for the parties and their representatives. Sub-section (4) requires the conciliator to sign the agreement and provide copies to each party.
Arbitration meaning definition and types
Arbitration
Introduction
Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.
Meaning
Arbitration is one of the forms of Alternative Dispute Resolution (also referred to as appropriate or amicable dispute resolution). Arbitration is one of the prominent forms of ADR and is a type of private court where parties resolve their disputes without taking them to court. This form of ADR is commonly used in disputes that are commercial in nature, especially international commercial transactions, because of its time and cost- effective nature.
Contractual parties insert an “arbitration clause” in their contracts, where they specifically mention and appoint a neutral third party referred to as the “arbitrator” , to whom a dispute shall be referred if parties to the contract violate any provisions of the contract.
Definitions
Section 2 (1)(a) of the Act defines arbitration as to any arbitration which is either administered or not by a permanent arbitral institution.
It is an alternative to litigation in courts and is advantageous as it provides flexibility and confidentiality.
According to Black Law Dictionary, it means a method of resolving disputes which includes two parties and a neutral third party whose decision is binding on both parties. Principle characteristics of arbitration :-
1. Consensual Arbitration
Both parties must agree to go to arbitration. They can add arbitration clauses to contracts for future disputes. Once in arbitration, no party can withdraw alone.
2. Choosing an Arbitrator
Under Section 10 of the Arbitration and Conciliation Act, 1996, parties can choose their arbitrators. If they select more than one, they must have an odd number. For example, in a three-member tribunal, each party picks one arbitrator, and those two choose the third.
3. Fair Process
Parties can decide on jurisdiction, language, and laws for arbitration, ensuring no unfair advantage and that the arbitrator’s decision is fair.
4. Final Decision
The arbitrator’s decision, known as an “arbitral award, ” is final and binding for both parties.
Types of Arbitration
Domestic Arbitration This means arbitration follows Indian laws and is handled by Indian courts.
International and Commercial Arbitration
This happens when the dispute involves at least one party who is a foreign national, a company from another country, or a company controlled by a foreign government.
Institutional Arbitration
This type of arbitration is managed by established organizations, such as the Indian Council of Arbitration or the International Centre for Alternative Dispute Resolution (ICADR).
Statutory Arbitration
Some laws require disputes to be resolved through arbitration. If there is a conflict between these laws and Part I of the Arbitration Act, the specific law will take priority.
Ad Hoc Arbitration
In this case, the parties agree to arbitrate on their own without any help from an Arbitral tribunal.
Fast Track Arbitration
Also known as documentary arbitration, this method is quick and based only on the claim from one party and the written response from the other.
Look–Sniff Arbitration
This combines arbitration with an expert’s opinion and does not involve formal submissions or hearings.
Flip–Flop Arbitration
Also called pendulum arbitration, here, parties present two options and ask the arbitrator to choose one to resolve the issue.
Arbitration agreement
An arbitration agreement allows parties to resolve disputes through arbitration instead of going to court. According to Section 7 of the Arbitration Act, this agreement can be a separate document or a part of a contract.
Key Features of an Arbitration Agreement:
The Supreme Court highlighted these important features in K.K. Modi v. K.N. Modi and Ors. (1988) 3 SCC 573:
1. Binding Decisions: The agreement must state that the tribunal’s decisions are binding.
2. Mutual Consent: Parties must agree to use arbitration and accept the tribunal’s jurisdiction, which may also be established by a court order.
3. Fair Process: The tribunal should fairly determine the rights of the parties.
4. Legally Valid: The agreement must be valid and its terms enforceable.
5. Pre-Arbitration Requirement: The agreement must specify that disputes should be defined before starting arbitration.
These features ensure a clear and fair arbitration process.
Section 8 of the Act talks about the powers of any judicial authority to refer a case to arbitration. It must be followed by an arbitration agreement.
Arbitral tribunals
Composition of tribunals
It is the creation of an agreement which conforms with the law. Section 10 of the Act enables the parties to determine freely the number of arbitrators to settle their dispute. The only restriction is that the number of such arbitrators must not be even. If the parties are not able to decide then there will be only 1 arbitrator. But if there are even number of arbitrators then the agreement cannot be held invalid merely on this ground.
Procedure for appointment of arbitrators
Further, Section 11 of the Act provides the procedure for the appointment of arbitrators. The valid requirements for any such appointment are:
Party must give proper notice of appointment to the other party. If it does not do so, the appointment is held invalid.
A person appointed as an arbitrator must be duly informed and his consent must be taken.
The consent must be obtained before finalising his appointment.
Jurisdiction
Section 16 of the Act provides that the tribunal will act in its jurisdiction. If the arbitral tribunal has no jurisdiction then a plea will be raised but not later than when the statement of defence is submitted. It also provides that in case a party is not satisfied with the arbitral award, it can make an application to set it aside according to Section 34 of the Act.
The Supreme Court in the case of Centro trade Minerals and Metals v. Hindustan Copper Ltd. (2006), held that any issue related to the jurisdiction can be raised by people in the proceedings or anyone from outside. But if it is made by the party then it must be done during the proceedings or at the initial stage.
Arbitral award
An arbitral award, also known as an arbitration award, is a decision granted by the arbitral tribunal with respect to the disputed matter. An arbitral tribunal makes final decisions on claims or counterclaims, which must be written and signed by its members according to Section 31 of the Act. This section also allows the tribunal to issue interim awards on various matters. If money is involved, the tribunal can grant interest deemed fair and reasonable.
Section 32 of the Act gives the tribunal the authority to end proceedings with a final arbitral award. Section 33 explains how to correct or interpret the award. It allows the tribunal or arbitrator to fix any mistakes within 30 days but does not cover judicial review. Tribunals cannot go beyond the powers mentioned in this section.
Types of Arbitral Awards
1. Interim Award – This temporarily resolves an issue related to the main dispute and can change once the final award is given.
2. Additional Award – Parties can request the tribunal to address any missed claims, as allowed by Section 33 of the Act.
3. Settlement Award – This is issued when parties agree on settlement terms, using methods like mediation or negotiation as outlined in Section 30 of the Act.
4. Final Award – This resolves all issues in a dispute and is binding, unless a court cancels it.
Negotiation procedure and types
Negotiation
Introduction
Alternative dispute resolution (ADR), also known as external dispute resolution (EDR), is basically a method to resolve a dispute outside the court, i.e., without any interruption from the court. Negotiation is also a prominent method of ADR. When two or more parties have different interests and want to come to a mutually acceptable conclusion, they opt for negotiation as an ADR method.
Meaning
Negotiation comes from the Latin word ‘negotiari, ’ which means ‘to do business. ’ It is very common in India. You can see it when people haggle over prices at markets or when companies negotiate deals.
Negotiation is when two or more parties communicate to solve a problem or reach an agreement. They do this by discussing their needs and finding common interests. The goal is to explore possible solutions and make compromises that work for everyone involved.
Negotiation is important for several reasons. It helps preserve relationships by allowing people to work together instead of creating winners and losers, which builds trust for the future. It is also often cheaper than going to court. Legal battles take time, money, and emotional energy. Negotiation saves these resources while achieving desired results.
Additionally, negotiation encourages creative problem-solving. It allows participants to come up with new ideas and find solutions tailored to their needs. Finally, negotiation gives people control over the outcome, enabling them to shape agreements that reflect
their interests rather than relying on judges or arbitrators.
Characteristics of negotiation
1. Voluntary: Negotiation must be voluntary. No one should be pressured to negotiate. One party asks the other, and both must agree without force.
2. Bilateral/Multilateral: It can involve two or more parties, depending on the situation.
3. Non-adjudicative: Only the involved parties discuss the issue. There are no outside parties like judges or arbitrators.
4. Informal: Negotiation is informal, with no strict rules. The parties create their own guidelines.
5. Flexible: The parties decide when and where to meet, what to discuss, and how to approach it, allowing for tailored solutions.
Procedure of negotiation
Preparation: Before negotiations, parties should identify their best and worst alternatives and check if the other party is willing to resolve the issue.
Discussion: Set ground rules, including where and when to meet and the approach to take.
Clarification of Goals: Clarify goals and views to avoid misunderstandings.
Bargaining and Problem Solving: Share views, make adjustments, and find a solution everyone can accept.
Agreement: Create and sign the agreement once a solution is reached.
Implementation: Follow and implement the agreement’s terms.
Prepare Alternatives: Think of backup options if negotiations fail to ensure solutions are ready.
Types of negotiation
1. Distributive negotiation: In this type of negotiation, parties negotiate over one topic, which creates a win-lose situation for the parties due to which one party will get the advantage.
2.Integrative negotiation: In this, parties negotiate over many topics, which creates chances to get a win- win situation for the parties and mutual gain.
Team negotiation: In this type of negotiation, the parties negotiate in teams.
Multiparty negotiation: In whichever negotiation there are more than two parties, that negotiation becomes a multiparty negotiation.
In the case of Salem Advocate Bar Association v. Union of India, The Supreme Court of India upheld the constitutional validity of the amendments and emphasized the importance of ADR mechanisms in the Indian legal system. The Court recognized that negotiation, as part of ADR, plays a crucial role in resolving disputes amicably and efficiently. It highlighted that ADR processes, including negotiation, should be encouraged to reduce the pendency of cases in courts and provide parties with a quicker resolution.
The Court also provided guidelines for the effective implementation of ADR processes, ensuring that parties are informed about the benefits of negotiation and other ADR methods. It stressed the need for trainingmediators and arbitrators and creating awareness among litigants and lawyers about the advantages of ADR.
Mediation
Mediation is a way to resolve disputes without going to trial. It is part of a special process called Alternative Dispute Resolution, which is mentioned in Section 89 of the Code of Civil Procedure.
In mediation, a neutral third party, known as a mediator, helps the parties involved find a solution to their conflict. The mediator uses negotiation and communication skills to help both sides understand each other better. Everyone involved, including their advocates, participates in the process.
One important aspect of mediation is that the parties keep the power to make decisions about their situation. The mediator does not decide who is right or wrong, nor do they assign blame. Instead, the mediator helps the parties identify the issues and remove barriers to communication, making it easier for them to reach an agreement.
Principles of the mediation
Five basic principles of mediation process are as follows:-
- Parties should participate voluntarily
- Confidentiality matters in the process
- Mediators are impartial
- An agreement has to be settled with the satisfaction of parties concerned
- Mediation is without prejudice to other procedures
Process of Mediation
In mediation, both parties and their advocates come together for joint sessions. The first meeting includes:
– Introducing all participants
– Explaining the mediation process
– Discussing important issues for settlement
– Allowing parties to share their views and terms
The mediator may also hold private sessions with each party to:
– Understand their needs and challenges
– Clarify strengths and weaknesses of their cases
– Help prioritize interests
– Explore settlement options confidentially
The mediator will spend necessary time with both sides to discuss all options. If they reach an agreement, it will be documented and submitted to the court for approval. If not, the case returns to the referring judge for a decision.
Benefits of the mediation process
To parties
Many people choose mediation over litigation for several reasons. It leads to faster resolutions, keeps discussions private, and is more affordable. Parties can work together to solve problems, helping to maintain their relationships. Mediation costs less because the mediator’s fees are lower than those of lawyers, and it can often be scheduled within weeks after deciding to mediate or receiving a court order.
To attorneys
Mediation is said to offer an opportunity to improve the case. The attorneys want to improve the financial status of their position. They can charge regularly on the mediation table rather than in the courtrooms as there may be a lack of services on the part of judges or other lawyers, even when the case is scheduled.
landmark decision by the Supreme Court was arrived at on 22nd Feb, 2013 in the case of B.S. Krishnamurthy v. B.S. Nagaraj, wherein it directed the Family Courts to strive to settle matrimonial disputes via mediation and to also introduce parties to mediation centres with consent of the parties, especially in matters concerning maintenance, child custody, and the lot.
In the case of Hussainara Khatoon & Ors v. State Of Bihar: The Supreme Court held that mediation is one of the best methods to get speedy justice to parties.
Good Offices
Alternative Dispute Resolution (ADR) helps courts manage their caseloads and resolve disputes peacefully. ADR allows parties to settle their disagreements without going to court, giving them different options to choose from based on their needs. The main options include mediation, conciliation, arbitration, Lok Adalat, and judicial settlement. Additionally, “Good Offices” can assist parties in resolving their disputes effectively.
The term ‘Good Offices’ first appeared in the case of Schooner Exchange vs. M’Faddon (1812), as noted by Justice Marshall. It is often confused with mediation, but Good Offices are a different part of Alternative Dispute Resolution (ADR). This process involves a neutral third party or a state that seeks to help the parties in conflict. They do this either on their own or when asked, using diplomatic methods to encourage the parties to negotiate directly or find other ways to resolve their issues.
Good Offices can come from international organizations or neutral countries that want to help settle disputes peacefully. While they offer various services and support, they do not actively participate in negotiations. Their role ends when the parties start talking to each other. Good Offices aim to bring unwilling parties together for discussion, without getting involved in the negotiation process itself.
Article 33 of the UN Charter states that any dispute that may threaten international peace and security should first be handled through negotiation, mediation, or other peaceful means. The phrase “other peaceful means” includes Good Offices in the international dispute resolution process. Similarly, Article 33 of the UN Watercourses Convention requires parties to resolve their disputes by seeking Good Offices or requesting mediation or conciliation.
This approach works well for regional disputes because it can lead to faster resolutions than court processes. It allows parties to maintain control over the situation with little interference from outside parties. Good Offices focus on encouraging communication and understanding between those involved, helping them find solutions together.
Good Offices distinct from Mediation
Good Offices and mediation are similar but not the same. Good Offices involves a third party who helps bring the parties in conflict together, without joining in the discussions. In contrast, mediation means a third party actively helps the conflicting parties negotiate by facilitating conversations and suggesting solutions.
For instance, British Prime Minister Harold Wilson provided Good Offices to help India and Pakistan reach an agreement to send the Kutch issue to an Arbitral Tribunal. On the other hand, Soviet Union President Alexei Kosygin acted as a mediator in the 1966 conflict between India and Pakistan, which led to the Tashkent Agreement. So, while both Good Offices and mediation aim to resolve disputes, the degree of involvement from the third party differs.
Punjab & Sind Bank v. Allahabad Bank (2006)
This case stated that the Supreme Court directed the government to set up a committee to monitor disputes between government departments and public sector undertakings.