Alternate Dispute Resolution

“ALTERNATE DISPUTE RESOLUTION TECHNIQUES “

AD R – H ist oric al us e i n India

• Not a new concept – Historically recognized • Ancient India - 3 types of popular courts – – –

Puga (local courts) Sreni (local business guilds) Kula (social matters of community)

• Medieval India – Panchayats : Territorial or Sectarian – Held in great veneration (Panch Parameshwar)

• British India – Lord William Bentick (Act VIII of 1859), had Sections 312 – 327 dealing with arbitration) – Above provisions formally separately enacted under Arbitration Act 1940

Lit iga tion – Us ua l Met hod

• ADR did not catch on and took a Back Seat to •

Litigation Reasons :

– Quick availability of interim relief (preliminary injunction, seizure of goods) especially relevant in IP rights : Half the battle won – Flaws in Arbitration Act 1940, namely • No interim power in the arbitrator • Too many grounds for judicial intervention at all stages – – – –

Pre-arbitral, During arbitration, Post award

• Result – defeated the whole object of speedy and cost effective •

dispute resolution Substituted in 1996 by the Arbitration and Conciliation Act, 1996 which is ADR friendly

Grow th of ADR

• 4 major reasons for Resurgence – Drawback of Litigation – Changing Business Scenario – Legislative responses including in India to promote ADR – Judicial sponsorship

Gro wth o f AD R (Reaso ns ) Dra wb acks of Li ti ga ti on

Adversarial in nature – – winner takes all – permanent rupture of relationship

• Complex and time consuming procedures – Pleadings – Evidence and cross examination – Hearings and – Decision – Appeals up to Supreme Court

• Overburdened, slow dispensation

Grow th of AD R (Re asons )

• • • •

•

Dra wba cks of Li ti ga tion (C ontd .) Lack of Judicial Appreciation of IP dispute Ill-equipped to handle certain IP disputes (e.g. patents) Very Costly – Court & Legal Fees Summarized by Warren Burger (Ex-chief Justice, U.S. Supreme Court) “…. the system is too costly, too painful, too destructive, too inefficient for a truly civilized world” Only two certainties in litigation – Costly and no certainty as to outcome

Gro wth o f AD R (Reaso ns ) Changing Bus ine ss Sc ena rio

• Global operation of business – Overseas JV’s/ Subsidiaries etc. – Technology/ brand licensing in various countries

• Object of Business – Earn profits, not to fight lengthy legal cases • Need of the hour – QUICK and IMPARTIAL resolution of business disputes

SO IS TH ER E ANY ALT ER NAT IVE ? (AD R)

• Methods – Negotiation,Mediation & Arbitration, Conciliation • Importance realized by business, jurists, and judiciary itself • Judicial response – Supreme Court and other courts have repeatedly emphasized – ADR deserves the serious look

Su itabi lit y of A DR Comm on F eat ures

• Neutral decision making (important factor in international business) • Consensual (not adversarial – preserves relationships) • Private (unlike the court system which is public )- Confidentiality of proceedings • Technical expertise in a Commercial Setting • Informal

Su itabi lit y of ADR Comm on Feat ures (Contd.)

• Wide autonomy in the parties as regards all

• • •

matters, e.g. Appointment and Powers of Mediator/ Arbitrator, Rules and Procedure of the process, Proper law, Venue, Relatively less expensive Relatively speedy Final and binding – Mediation “Agreement” not “judgment” – a win-win situation. – Not many grounds would challenge arbitral award under 1996 Act

Le gi sla ti ve & Judic ial Re spo ns e

• Legislative response (1996 Act) – Judical Intervention minimized (15:5) – Power of grant interim measures – Limited grounds to challenge arbitral award – Direct Enforcement (obstacles in 1940 Act removed/ minimized)

Media tio n ( Featur es)

• By Agreement (clause in a contract or a separate •

• • • • •

contract) – Completely Voluntary- Submission and Termination at any stage Mediation Process – Commencement by filing Request for Mediation in writing • Details of all the Parties/name, address, e-mail • Mediation Agreement • Brief Statement of Nature of Dispute Copy to the other party Mediator Selected by - parties / prescribed procedure / institution selected after consultation with parties Qualification : Neutral and should make sufficient time to mediate Conduct of Mediation – Conference: Mediator free to communicate separately with each party Fix timetable for submissions/meetings in consultation with parties (representation allowed)

Me di at ion (Feature s) (Contd.) • Disputes not susceptible to Mediation – May suggest •

• • •

such issues to Alternate means like ‘Expert Determination’ or ‘Arbitration’ Objective to assist the parties in reaching amicable “settlement” (settles the matter on the basis of the respective interests of the parties rather than on legal basis alone). – No power to impose “Settlement” if reached is a “CONTRACT” between the parties – NOT A “DECISION” of the mediator Termination Advantages – – –

non-adversarial, (preserves the relationship of the parties). informal (not bound by strict rules of legal procedure) Confidentiality Obligation of parties & Arbitrator

Arbi tra ti on (Feat ure s)

• Has the above features as in mediation – voluntary by contract. – Control of proceedings, – confidentiality,

• Party Autonomy -Parties to choose; – The institutional rules of procedures e.g. ICC, ICA Rules – The Powers conferred on the Arbitrator – The Applicable Law and – The Venue

Arbit rat io n (Advant ages ) • Particularly helpful in international transactions –

– Situs in different countries (multi jurisdiction dispute) – Problem of enforcement of decision of one court of one nation in another country, – avoids all these problems.

• Enforceable internationally (New York Convention) • • • •

the contracting states are obliged to enforce the Arbitral Awards. Expert Determination Confidentiality of arbitration proceedings Confidentiality of Technical know-how and other confidential information duly preserved Award is final and binding – absence of institutional appeal

INTRODUCTION • Arbitration has at its centre, the stone that the • •

builders of the Courts rejected- ‘ You can choose your own judge’ The Arbitration and Concillation Act, 1996 is based on the United Nation Commission on International Trade Law (UNCITRAL) Model Law Before this ,India had the Arbitration (Protocal and Convention) Act, 1937, the Arbitration Act 1940 and the Foreign Awards (Recognition and Enforement) Act, 1961.

Main Objectives • To Comprehensively cover international commercial • • • •

arbitration as also domestic arbitation To make provision for an arbitral procedure which is fair and efficient To minimize the supervisory role of courts in the arbitral process To provide that the arbitral tribunal gives reasons for its arbitral award To provide that every final arbitral award is enforced in the manner as it were a decree of court

Important Provisions • The Arbitration Agreement (Section 7) : Agreement in writing by the parties to arbitrate Disputes which have arisen or may arise Defined legal relationship, whether contratual or not Submission to arbitration Appointment of Arbitrator (Section 11): The procedure for appointment of arbitrators can be set out by parties in their agreement

Interim Measures by Court (Section 9) : -Appointment of a guardian for a minor or person of unsound mind -- The preservation or sale of goods which are the subject matter of arbitration -- Interim injuction or the appointment of receiver -- Such other interim measures as may appear to the court to be just and convenient.

Grounds For Challenge (Section 12): Circumstances exist that give rise to justifiable doubts as to his independence Or impartiality He does not possess the qualifications agreed to by the parties Form and Content of Award (Section 31) The award must be in writing and signed by arbitrators and must also contain the reasons

Interim Measures Any attempt to enforce interim measures granted by a tribunal could meet resistance on the ground of section 5 which provides that no judicial authority shall intervene except where so provided in the act. The effect of providing appeal against interim measures granted by the tribunal is that it gives to a defendant in arbitration an undue advantage

Ar bit rat ion & Conci li at ion Act , 1996 (19 96 Act ) Key Feat ures

• Arbitrator to rule on his Jurisdiction (validity

of Agreement, Qualification) • Commencement - WITHOUT Application to Court (old law : S.20 petition) • Interim Measures to protect subject matter of Disputes • Sanctity of Arbitration clause – Elaborate provision for Appointment of Arbitrator in Default Cases • Domestic Arbitrator : CJ • International Arbitrator : CJI

Ar bit rat io n & Co nci li at ion Act , 1996 (199 6 Act ) Key Fea tu res (Co nt d.)

• Agreement cannot be allowed to be defeated •

(Ved Prakash v UOI A 1984 Del, Sec. 325) Courts DUTY TO REFER where Arbitration Clause provided for -Suit to be stayed – (Kamani Engg. Case : A 1964 SC 558)

• Delay in Award is ground to terminate • •

Arbitrators mandate Provision of CPC, Evidence Act not applicable Governed by Substantive Law & Rules chosen by parties and Principles of Natural Justice

Arbitration & Conciliation Act, 1996 (1996 Act) Key Features (Contd.)

• Arbitrator can encourage parties for conciliation during pendency (JUST settlement rather than proper law) • Award –

– Written and signed (by majority) – Speaking award (unless waived by parties) – Place & date – Stamping – Registration (Immovable Property)

Ar bit rat io n & Co nci li at ion Act , 1996 (19 96 Act ) Key Fea tur es (Cont d.)

• Judicial intervention minimized – Interim Measures – Appointment of Arbitrator (Default) – Controversy re. Termination of mandate of Arbitrator – Taking Evidence – Jurisdiction/ Scope of Authority of Arbitrator (post-award )

Ar bit rat io n & Co ncil iat ion Act , 199 6 (1996 Act ) Key Feat ures (Co ntd.)

• Limited Statutory Grounds of Challenge to Award e.g. - Procedural violation (Natural Justice principles) - Appointment of Arbitrator not per Agreement - Incapacity - Agreement not valid under proper law - Jurisdiction error - No Arbitrable dispute - Public Policy (induced by fraud, corruption) - Bias

Ar bit rat io n & Co ncil iat ion Act , 199 6 (1996 Act ) Key Feat ures (Co ntd.)

• Enforcement:

- Final & Binding if no challenge within 4 months’ of Award Date - Enforceable on Decree of Court (no need for separate execution proceedings)

• All India application (including J & K) • Foreign Awards (Foreign venue or Law) enforceable

– India has retified New York Convention & Geneva Convention

Case - Law •

ONGC v. SAW Pipes (2003 SC) Pub lic Pol icy In Pri vat e Mat ters .

ONGC had placed an order on Saw Pipes for supply of equipment for offshore exploration, to be procured from approved European manufacturers. The delivery was delayed due to a general strike of steel mill workers in Europe. Timely delivery was the essence of the contract. ONGC granted extension of time, but invoked the clause for recovery of liquidated damages (LD), by withholding the amount from the payment to the supplier. Saw Pipes disputed the deduction and the matter was referred to arbitration. • While the arbitral tribunal rejected Saw Pipes’ defence of force majeure, it required ONGC to lead evidence to establish the loss suffered by the breach and proceeded to hold, in absence of evidence of financial losses, that the deduction of LD was wrongful • The award was challenged by ONGC, inter alia, as being opposed to public policy. • This decision, therefore, augments the concept of public policy to the extent that the ground of patent illegality can be invoked to set aside an award as being repugnant to public policy.

Case - Law

• Konkan Railway Corporation Ltd Vs. Rani Construction

Pvt Ltd . AIR 2002 SC 778 : 2002(1) RAJ 165 at 175 (SC) Interpretation of Arbitration and Conciliation Act 1996. The Model law was only taken in account in drafting the said Act, is therefore patent. The Act and the Model law are not indentically drafted. The Model Law and judgements and literature thereon are therefore not a guide to the intrepretation of the Act. UNCITRAL- United Nations Commission on International Trade Laws

Case - Law • Pamvi Consultancy Services Ltd Vs. Global

Syntex (Bhilwara) Ltd. 2003(2) RAJ 203 at 209 (BOM) Sou Motu artibration reference by Court not permissible :Clearly , it must be application to the court.

Con cilia tion • Part III of the Act makes provision for conciliation proceedings. In

conciliation proceedings, there is no agreement for arbitration. In fact, conciliation can be done even if there is arbitration agreement.

• The conciliator only brings parties together and tries to solve the dispute

using his good offices. The conciliator has no authority to give any award. He only helps parties in arriving at a mutually accepted settlement. After such agreement they may draw and sign a written settlement agreement. It will be signed by the conciliator.

• However after the settlement agreement is signed by both the parties and

the conciliator, it has the same status and effect as if it is an arbitral award.

• Conciliation is the amicable settlement of disputes between the parties, with the help of a conciliator.

Conc lus ion

• ADR offers real advantageous

– Relatively speedy – Amicable : more suitable for businessrather than litigation which is adversarial

• Internationally Widely used • India Experience – – –

Legal Framework is ADR friendly Judicial sponsorship Present Reality • ADR an “exception” rather than an “alternative” to litigation, • Has worked well (efficiently and expeditiously) within trade •

associations context (Jute/Cotton exchanges) Reasons

– Attitude of parties – cultural differences – in India, approach is to delay the proceedings – unduly challenge the award – Attitude of courts – grounds for interference liberally interpreted – Has become time consuming and costly like litigation

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