Module 8

MODULE 8

RULES GOVERNING MEDIATION: DOMESTIC AND INTERNATIONAL
FRAMEWORK

2.1 INTRODUCTION

In the previous module, we have discussed how mediation is a voluntary, party-centred and
structured process where a neutral third party assists the parties in amicably resolving their
dispute by using specialized communication and negotiation techniques. One of the most
attractive features in mediation is that the parties retain the right to decide for themselves
whether to settle a dispute and the terms of any settlement. Even though the mediator facilitates
their communication and negotiations, the parties always retain control over the outcome of
the dispute. Mediation is voluntary. Even if the court has referred the case for mediation or if
mediation is required under a contract or a statute, the decision to settle and the terms of
settlement always rest with the parties. This right of self-determination is an essential element
of the mediation process. It results in a settlement created by the parties themselves and is
therefore acceptable to them. The parties have ultimate control over the outcome of mediation.
Any party may withdraw from the mediation proceedings at any stage before its termination
and without assigning any reason.

This module proceeds as follows: First, it shall lay down the understanding of self-
determination in mediation and why the same is central to the process of mediation. Second,
it shall discuss the different types of rules that regulate mediation in India. Third, it shall briefly
discuss the rules and procedures of international mediation.

2.2 RIGHT TO SELF DETERMINATION

Party self-determination is the key factor distinguishing mediation from litigation and other
dispute resolution processes because mediation provides the parties with the ultimate power to
decide how to resolve their dispute. A mediator’s role is to use their expertise to empower the
parties to reach their own decision. This characteristic of mediation is special and distinct.

In litigation, arbitration and even conciliation, the focus is not on enabling and empowering the
parties to take control of their dispute and to reach an outcome of their own determination.
Rather, the focus is on the third- party decision-maker or specialist who judges the merits of

the parties’ cases and imposes a decision. Such adjudicative activity is generally guided by
objective norms or criteria—most often centred on the law. There is limited opportunity for
party self-determination in such processes.

Self-determination by parties in mediation is also distinctive because it is relational—grounded
in connection, cooperation and collaboration. This concept is very different from an atomistic
notion of autonomy that emphasises privacy and self.1 An atomistic conception of self-
determination arguably underpins the adversarial legal system, because each party is
encouraged to advocate single-mindedly for their own interests. In contrast, party self-
determination in mediation does not exist on an individual level. Rather, it encompasses the
interests of the both parties and adopts a holistic approach. If only one of the parties experiences
self-determination, the process has not succeeded in its aims.

Further, self-determination provides a principled foundation for the legitimacy of the process.
It can be said to lead to principled outcomes because it reflects the foundational values of our
legal, social and political order. These include values such as consent, autonomy, respect,
privacy and dignity. However, they also include relational values, such as empathy, emotional
expression and interpersonal dialogue. These values highlight the importance of party
involvement and collaboration in the negotiation, creative option generation and decision-
making components of mediation. In mediation, the parties can achieve a principled outcome
because they are deeply and thoroughly involved in working through the issues, discussing
their individual and mutual perspectives, and developing the terms of the final resolution. Such
engagement between the parties also promotes their personal dignity, particularly when the
result is to avoid the inevitable costs and uncertainties of litigation.2

Party self-determination also promotes principled outcomes because it allows the parties to
arrive at a constructive compromise and trade-off. This does not render the process illegitimate
but results in a more principled and legitimate result compared to an adversarial or rule-based
approach.

1 Rachael Field and Jonathan Crowe ‘The central role of party self-determination in mediation ethics’ The
Australian Dispute Resolution Research Network (December 2017). Available at
<https://adrresearch.net/2017/12/19/the-central-role-of-party-self-determination-in-mediation-ethics/>
2 ibid.

Though the mediation process is informal -which means that it is not governed by the rules of
evidence and formal rules of procedure- it is not an extemporaneous or casual process. The
mediation process itself is structured and formalized, with clearly identifiable stages. However,
there is a degree of flexibility in following these stages. Therefore, there are no “laws” per se
that govern the mediation process. There are only “rules” that assist the process at various
stages.

2.3 DOMESTIC FRAMEWORK OF MEDIATION: INDIA

The concept of mediation is relatively new in India and is therefore not a very popular method
of dispute settlement yet. Mediation in India can be of two kinds:

a. Statutory or court ordered mediation
b. Private or voluntary mediation

Statutory or Court-ordered Mediation
Mediation was first legally recognised as a method of dispute resolution in the Industrial
Disputes Act, 1947. Then in 1999, the Code of Civil Procedure (Amendment) Act provided for
Section 89 which empowered the courts to refer to alternative dispute resolution (ADR)
methods to settle pending disputes. As per this section, the court is required to direct the parties
to opt for any of the five modes of alternative dispute resolution and to refer the case for
Arbitration, Conciliation, Judicial Settlement, Lok Adalat or mediation under Section 89 and
Order X Rule 1A of Code of Civil Procedure, 1908. Moreover, the Civil Procedure- Mediation
Rules, 2003 provide for mandatory mediation under rule 5(f)(iii). These Rules lay down non-
binding procedural guidelines for court referred mediation. The Supreme Court has opined that
each High Court can adopt these rules with modifications that the Court deems fit.3
Consequently, the development of the mediation system in each state largely depends on the
inclination of each High Court. For example, only five disputes have been resolved at the
Tripura Mediation Centre from 2008 to 2015, while 31,441 disputes have been resolved by
Bangalore Mediation Centre from 2011 to 2015.4

3 Justice M. Jagannadha Rao, Concepts of Conciliation and Mediation and their Differences, available at
<http://lawcommissionofindia.nic.in/adr_conf/concepts%20med%20rao%201.pdf>
4 Vidhi Centre for Legal Policy, Strengthening Mediation in India: Interim Report on Court Annexed Mediations,
42, (July 29, 2016), available at

Therefore, these allow the court to refer cases for mediation even when the parties are not ready
for reference but the court recognizes that there is an element of settlement in the dispute. The
court, in exercising such opinion, must take into account the following factors:

● The nature of the dispute, i.e., make an assessment as to whether mediation will solve the
dispute or simply be an additional or unwanted step before litigating the matter.

● The bargaining capacity of parties and the suitability of an informal process.
● The judge making the reference, known as the referral judge, is required to acquaint himself

with the facts and nature of the dispute, and objectively assess the suitability of ADR.

The appropriate stage for making the reference in civil cases is after the completion of
pleadings and before framing the issues. In cases pertaining to family law, the appropriate time
for making the reference would be immediately after service of notice on the respondent and
before the filing of objections/written statements by the respondent. Even if the court did not
refer the cases to ADR at such stages, nothing prevents it from referring to it at a later stage.

Private Mediation
In private mediation, qualified mediators offer their services on a private, fee-for-service basis
to the Court, to members of the public, to members of the commercial sector and also to the
governmental sector to resolve disputes through mediation. Private mediation can be used in
connection with disputes pending in Court and pre-litigation disputes. In the 1980's, private
mediation caught on when insurance companies realized the cost benefits of resolving
insurance claims informally and expeditiously. Private mediation took hold in a variety of
ways, including the emergence of private/independent mediators, non-profit mediation
programs and agencies, and for-profit mediation providers. Private mediation was applied to
pre-litigation disputes, litigated disputes, and, more recently, commercial and international
disputes. Court-annexed mediation, which was the subject of experimental usage in the 1970's
and 1980's, began to expand significantly in the 1990's. This school of thought concluded that
mediation should be an extension of the legal system, even seeing mediation as an effective
means of narrowing issues for litigation in courts. Currently, court-annexed mediation is

<https://static1.squarespace.com/static/551ea026e4b0adba21a8f9df/t/579ee7be5016e10ca2ae65f0/14700319206
9 4/Interim+Report_Strengthening+Mediation+in+India.pdf>

offered by most courts at the trial and appellate levels. Voluntary or private mediation remains
relatively unexplored due to the lack of awareness regarding the same.

2.4 OTHER STATUTORY PROVISIONS THAT MANDATE MEDIATION
Apart from Section 89 of the CPC, other statutes that provide for dispute resolution
mechanisms that resemble mediation are the Industrial Disputes Act, 1947, the Companies Act,
2013 and arguably the Arbitration and Conciliation Act, 1996 (the ‘1996 Act’) and the
Commercial Courts Act. Before delving into the specific provisions of these legislations, it
must be noted that the provisions for ADR within these statutes resemble conciliation rather
than mediation, with some statutes collapsing the distinction between the two (Companies Act,
2013), while other statutes only providing for conciliation (Industrial Disputes Act, 1996 Act),
thereby, rendering mediation outside of section 89, unregulated.5 However, the Supreme has
understood conciliation and mediation to be legally synonymous. Therefore, one can assess
conciliation procedures and statutory provisions concerning conciliation as equivalent to that
of mediation as per the Indian legal framework.

The Industrial Disputes Act, 1947
The Industrial Dispute Act sets up a framework for conciliation for workmen and employers
to resolve their disputes. A Conciliation Officer and a Board of Conciliators are appointed by
the government. The duties of these officers, as codified in the statute, include investigating
the dispute and helping the parties arrive at an amicable solution. The Officer’s role is akin to
that of a civil court. He is vested with the power to adduce evidence and pass judgment. In case
the Officer is of the opinion that the dispute cannot be resolved, a failure report is submitted to
the government. While the statute seems to incorporate conciliation as a dispute resolution
mechanism akin to mediation, in reality the parties do not have a say in the terms of the
settlement or in the final outcome. In fact, the pleadings submitted by each party are drafted by
professionals and there is no scope to explore the issues underlying the dispute. The
proceedings envisioned under the Industrial Disputes Act similarly do not resemble either
mediation or conciliation.

5 Rashika Narain and Abhinav Sankaranarayanan ‘Formulating a Model Legislative Framework for Mediation in
India’ (2018) 11 NUJS Law Rev 1.

The Companies Act, 2013
The Companies (Mediation and Conciliation) Rules, 2016 (‘Companies Rules’) and Section
442 of the Companies Act 2013 set up a Mediation and Conciliation Panel “for mediation
between the parties during the pendency of any proceedings before the Central Government or
the Tribunal or the Appellate Tribunal.” While the panel is referred to as the Mediation and
Conciliation Panel, the Act states that it is set up only for the purpose of ‘mediation’. On a
reading of the Companies Rules with section 442, it is evident that the statute does not maintain
a clear distinction between mediation and conciliation, as laid down by the Jagannadha Rao
Committee report in 2003. For instance, Rule 17 of the Companies Rules describes the role of
the mediator and conciliator to be identical while the 2003 Report acknowledged that the two
do not and cannot perform the same function, as a conciliator has a more active role. The 2003
report cited several international authors and UK Reports and referred to mediation as a means
of settling disputes by a third party who helps both sides to come to an agreement, which each
considers to be acceptable. The Committee was of the opinion that mediation can be
‘evaluative’ or ‘facilitative’. ‘Conciliation’, on the other hand, required the conciliator to play
an interventionist role in bringing the two parties together and arriving at a settlement. In fact,
this distinction is recognised even within the 1996 Act, wherein Section 30 refers to mediation
and conciliation separately as alternative dispute resolution during the pendency of an
arbitration proceeding.

Blurring the lines between mediation and conciliation is especially troubling because it is
unclear whether the Companies Act, 2013 intends to create a separate framework for
conciliation outside the 1996 Act, or whether the legislature intended to create a framework for
mediation of commercial disputes separate from conciliation. The 1996 Act does not define
mediation or conciliation, however section 73 of the 1996 Act lays down what a settlement
agreement is and the role of a conciliator when a settlement agreement is being framed. His
role under the Act is that of an interventionist, proactive individual, as he can formulate the
terms of the settlement. Even when the parties want to make a suggestion for settlement, they
must make such a suggestion to the conciliator first, thus making the conciliation proceeding
under the 1996 Act rigid. Hence, it cannot be argued that mediation in India is regulated or can
be clubbed with conciliation under the 1996 Act. Therefore, even though these statutes make
references to mediation, in practice only the non-binding MCPC rules pursuant to Section 89
govern post litigation mediation while pre-litigation mediation is entirely unregulated.

The Commercial Courts (Amendment) Act, 2018
The Commercial Courts Act was introduced in 2015 to establish commercial courts in India
for the adjudication of “commercial disputes”. The statute lays down a streamlined procedure
for quick resolution of high-stake disputes of a commercial nature with strict timelines for filing
of pleadings, discovery and procedure for grant of summary judgments. The definition of
“commercial disputes” under the Act is broad and generally covers commercial transactions
and includes disputes arising out of intellectual property rights. In 2018, the Act was amended
to bring in some clarity of procedure and also to introduce the mandatory pre-institution
mediation provision. As per the amendments in 2018, any commercial dispute valued at more
than INR 3,00,000 is governed by the provisions of the Act.

Section 12A of the Commercial Courts Act provides parties with an alternative means to
resolve disputes through discussions and negotiations with the help of a mediator. The
provision states that a plaintiff must initiate mediation before filing a suit, with a limited carve
out for suits filed with applications for urgent interim relief. Courts in India frequently refer
ongoing patent infringement suits to mediation when there exists a possibility for the parties to
arrive at a settlement. However, 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. The Commercial Courts Act bridges this gap by making
mediation a time-bound process. In India, most IP infringement suits are filed with an
application seeking a preliminary injunction. This would qualify as “urgent interim relief”
under Section 12A and initiation of mediation prior to filing of the suit would not be mandatory.
However, in disputes where a patentee is not seeking a preliminary injunction and wants to use
litigation as a tool to negotiate terms for granting limited rights to their IP, pre-initiation
mediation is a viable option.

The procedure to be followed in such mediation proceedings is set out in the Commercial
Courts (Pre-Institution Mediation and Settlement) Rules, 2018 (“Rules”). As per the Rules, the
plaintiff must file an application with the State Legal Services Authority or the District Legal
Services Authority constituted under the Legal Services Authorities Act, 1987 (“Authority”)
to initiate mediation. Once an application is received, the Authority will issue notice to the
opposing party to appear within 10 days of receipt of notice and give consent to participate in
the mediation proceedings. The Rules provide for issuance of a final notice if the Authority
does not receive a response within 10 days of the initial notice. If the opposing party fails to

appear following the final notice or refuses to participate in the mediation proceedings, the
Authority will treat the mediation process as a non-starter and prepare a report to that effect. If
the opposing party agrees to participate, then the mediation process begins. Following
negotiations and meetings with the mediator, if the parties arrive at a settlement, it will be
recorded in a settlement agreement.