Arbitration and Mediation
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Context: The Chief Justice of India lays foundation for the International Arbitration Center in Hyderabad.
Details:
- The foundation stone for the International Arbitration and Mediation Center in Hyderabad was laid by the Chief Justice of India N.V.Ramana.
- Telangana government provided land, as well ₹50 crore for construction of the building.
- The center would emerge as an alternative to those in Dubai, London and Singapore.
Resolving Business Disputes:
- Business activities face disputes. Business conflicts can arise from any reason.
- Arbitration and mediation are the methods of dispute settlement that falls under the category of Alternate Dispute Resolution (ADR) methods.
- It involves out-of-court settlements to avoid unnecessary litigation and receive quick settlement of disputes.
- Alternate Dispute Resolution (ADR) methods are becoming popular due to the ease and speed of dispute settlement.
Arbitration:
- Arbitration is a method of settling disputes without either party having to go to court.
- This involves a neutral third party who receives evidence, hears the arguments and then passes an order known as an award. The award is final.
- Mandatory arbitration is also becoming popular now where contracts state that jurisdiction over disputes would only be settled by an arbitrator and not by a court.
- In India, arbitration is backed by the Arbitration and Conciliation Act, 1996 which was amended by the Arbitration and Conciliation (Amendment) Act, 2015.
- The Act provides for a fair chance for both parties to be heard and to settle disputes.
- The award has to be enforced under the Code of Civil Procedure, 1908.
- The Act mandates that arbitration proceedings have to be completed within a 12 months Period, however, if both the parties agree, then the period can be extended by 6
- Significance of arbitration
- Cost effective: Litigating a dispute in court is an expensive process. Arbitration is a much more cost-effective way of settling disputes.
- Speed: There are well defined time limits to pass awards, resulting in quick disposal of the matter.
- Fairness: Arbitrators are usually appointed by both the parties to the agreement resulting in a fair selection of the arbitrator.
- Awards passed are final in nature.
- Simple Procedure: They are not bound by any procedural laws of the land. They are free to take on their own procedure to hear arguments, receive evidence and pass awards.
- Confidentiality: Arbitration proceedings are confidential, there is no public record preserved of the dispute. This makes whatever trade secrets or confidential details of the business remain between the parties themselves.
- Specialization: Parties can choose an arbitrator skilled in the law they are facing disputes over, for example, patent law.
Mediation:
- Mediation is the method of resolving business disputes.
- Mediation usually involves the disputing parties, their legal counsel and a neutral third party who facilitates the discussions.
- Mediation is the step before litigation. Instead of going for expensive courtroom visits, it is better to discuss the problem before an impartial third party and consider the options that are available and agreeable to both parties.
- Significance of mediation
- Preferable Outcome: The goal of mediation is to come up with options that are beneficial to both parties.
- Lower Costs: Mediation involves only discussions between parties and a third party. Costs are much lower since parties do not need to engage legal counsel over a long period.
- Confidentiality: Discussions take place in a private room only between the parties and their mediator. It protects trade secrets and other confidential documents that would otherwise be open to the public as a case in litigation.
- Flexibility: Parties are allowed to frame the discussions in a way most suitable to them.
Arbitration v/s Mediation:
- Mediation is when a neutral third party aims to assist the parties in arriving at a mutually agreeable solution whereas arbitration is like litigation which is outside the court and which results in an award like an order.
- Mediation is not binding on the parties whereas arbitration is.
- The process of mediation is more informal than that of arbitration.
- The outcome in mediation is controlled by the parties whereas in arbitration it is controlled by the arbitrator.
- In mediation, the dispute may or may not be resolved whereas in arbitration it is always settled in either party’s favor.
Way forward:
- Mediation and Arbitration are two different forms of alternative dispute resolution methods.
- Mediation is a good first step in trying to resolve business disputes. It is an easy and cost-effective method.
- Arbitration is a good way to settle the dispute if mediation does not work effectively. Both are an important step to resolve business disputes.
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