A-Z of ADR: Pre-Institutional Mediation

-Anurag Tirpude (IInd Year, NLSIU Bangalore)

Pre-Institutional Mediation, also known as Pre-Trial Mediation, is an alternate dispute resolution (ADR) process where the parties in a feud try to settle the issues through negotiations and discussions in the presence of a mediator, before going to trial. In India, parliament has made pre-institution mediation a mandatory process, by introducing an amendment to the Commercial Courts, Commercial Division and Commercial Division of High Courts Act of 2015 (hereinafter referred as the Act) by way of an Ordinance in the year 2018,[1] which needs to be followed whenever “Commercial Disputes” arises.[2] These commercial disputes include the issues regarding business transactions between traders, bankers, merchants, etc. and it deals with partnership agreements, IP rights, insurances and many more contract-related disputes. This means that the plaintiff, mandatorily, has to exhaust the remedy of mediation before they can file a suit unless the suit is observed to give an interim relief under the Act. However, the other party has the right to not participate in the mediation.

This Act mandates that pre-institutional mediation gets completed within three months, with a possible extension of up to two more months.[3] As both parties have to follow this procedure of mediation, they both get a limited time where they can try to come to an amicable solution and resolve the feud. If they resolve the issues at this stage, it helps both the parties to save a lot of time and money that they would have spent while directly opting for litigation. It is the obligation of both parties, their counsels, and the mediator to maintain utmost confidentiality of the negotiations that take place. Many business companies don’t like to disclose their business strategies to their competitors and by this process of mediation, it is made sure that these strategies are kept confidential. These are some of the prime reasons that identify the importance of pre-institutional mediation.

This method is, somewhat, similar to the “opt-out” model followed by Italy and Turkey.[4] In these countries, the petitioner can opt-out of court proceedings after going through a mandatory mediation procedure. In the year of 2017, Italy received a total of 1,80,000 cases out of which around 50% of the same were resolved through pre-trial mediation.[5] Even Turkey chose a very similar method where they have additionally included quality control mechanisms over the existing pre-trial mediation clause.[6] This means Turkish law makes it obligatory to maintain certain training standards of mediators, which enhances the quality of mediation.

In Italy, the mediator has to complete the process within 30 days, which is extendable up to 90 days, under certain circumstances.[7] Turkey’s legislation allows for a very small period of 3 weeks to complete the mediation process.[8] India gives the largest time span to complete this particular procedure which, to some extent, reflects on the lack of proper mediation infrastructure in the country. The Act reduces the consideration of filing a commercial suit from one crore to three lacs. This will increase the number of cases, which will ultimately increase the pressure over the pre-institutional mediation. Where this Alternate Dispute Resolution (ADR) method was alleviating a large burden of the courts, this particular clause puts more pressure over the pre-institutional mediation method, which India’s infrastructure might not be ready to handle. Further, India needs quality control mechanisms to ensure that the mediators are well trained and can handle the process effectively and ensure smooth functioning. This is a crucial step considering the increasing number of commercial disputes in India.

If one of the parties fails to attend the initial mediation meetings, then that particular party has to pay for the litigation costs, to the other party, according to Turkish law.[9] In Italy, sanctions can be imposed over the party who did not attend the mediation process, during the proceedings. However, it is the discretion of the Judge to identify the type of sanction that needs to be imposed over the party, which is unable to attend the mediation procedure. India does not have any mentioned criteria to impose sanctions if the party does not attend the mediation process, accordingly. This can be a problematic scenario when the other party might not participate in the pre-institutional mediation process, making this amendment to be partially effective.

India has tried to address a very crucial issue of costly and time-consuming litigations of commercial disputes, by initiating pre-institutional mediation. However, there are a few concerns regarding the quality and efficiency of mediation, as India lacks well trained and qualified mediators. There should be some laws that make it mandatory for the defendant to attend pre-institutional mediation as it is important as well as beneficial for both the parties. These are a few issues that need to be addressed for the smooth functioning of pre-institutional mediation.

[1] India, ‘The Gazette of India’ (New Delhi, Published by Authority, 21 August, 2018) <http://egazette.nic.in/WriteReadData/2018/188688.pdf> accessed 27 July 2020. 

[2] Avaneesh Satyang and Sohini Mandal, ‘India: Mandatory Pre-Institution Mediation: Commercial Courts’ (NovoJuris, 13 August 2018) <https://www.mondaq.com/india/Litigation-Mediation-Arbitration/727214/Mandatory-Pre-Institution-Mediation-Commercial-Courts> accessed 27 July 2020.

[3] Vishal Hablani and Pankaj Agarwal, ‘Mandatory Pre-Institution Mediation in Commercial Matters: Is India Ready?’ (Incorplaw, 28 June 2018) <https://indiacorplaw.in/2018/06/mandatory-pre-institution-mediation-commercial-matters-india-ready.html> accessed 28 July 2020

[4] ibid

[5] ibid (n 2)

[6] Tuba Bilecik, ‘Turkey Mandatory Mediation Expands into Commercial Disputes’ (Kluwer Mediation Blog, 30 January 2019) <http://mediationblog.kluwerarbitration.com/2019/01/30/turkish-mandatory-mediation-expands-into-commercial-disputes/?doing_wp_cron=1596288508.7134869098663330078125> accessed 28 July 2020.

[7] Giovanni Matteucci, ‘Mandatory Mediation, The Italian Experience’ (2015) 16 Revista Eletrônica de Direito Processual<https://www.researchgate.net/publication/286409655_MANDATORY_MEDIATION_THE_ITALIAN_EXPERIENCE> accessed 28 July 2020.

[8] ibid (n 6)

[9] Demet Yılmaz Utkaner and Kaya Kayaogu, ‘Mandatory Mediation for Intellectual Property Disputes in Turkey as a Pre-Trial Dispute Resolution Method’ (CEE Legal Matters, 11 March 2019) <https://ceelegalmatters.com/turkey/10422-mandatory-mediation-for-intellectual-property-disputes-in-turkey-as-a-pre-trial-dispute-resolution-method> accessed 30 July 2020.

-Anurag Tirpude (IInd Year, NLSIU Bangalore)

Anurag Tirpude is a second-year student from the National Law School of India University (NLSIU), Bangalore.

BIMACC expresses its gratitude towards the author and to the members of the Legal Services Clinic, National Law School of India University (NLSIU) for their support in our collaborative efforts to promote ADR with this series titled “A-Z of ADR”. The purpose of this series is to increase the understanding of certain fundamental concepts of Alternative Dispute Resolution.

The Legal Services Clinic is a student-run committee that provides free legal services to the socially and the economically backward sections of the society who have difficulty accessing the judicial system. It also has a mandate of spreading legal awareness and providing free legal assistance to those who cannot afford it.
Website: www.legalservicesclinic.org/
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Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of BIMACC, any of the members of the Board, or the empanelled neutrals. This blog is for informative purpose only and does not constitute legal advice in any manner whatsoever.