India's Mediation Act and International Mediation

In September 2023, the Mediation Act 2023 (‘the Act’) was passed by the legislature in India and received the assent of the President, representing a big step in the development of mediation in the country. The Act creates a comprehensive mediation system for India, with rules dictating every step from the formation of a mediation panel, all the way through to the challenge to and enforcement of mediated settlement agreements. The Act seeks to formalize the framework that governs mediations,  encouraging greater uptake of the mechanism around the country. Whilst the Act limits itself to only mediations conducted within India, there are a few points of interest to be noted by international parties.  This article contextualises the Act to explain why it was needed and the problems it seeks to solve. It looks into some key provisions governing the scope of the Act’s application. While the Act is a huge step forward for mediation in India as a whole, it leaves room for further advancements, particularly in international mediation.

Context

In contrast to many other countries where mediation only seems to have gained recognition in the 1990s, India has a significantly older relationship with the mechanism. Senior Advocate Mr Prashanto Chandra Sen, Associate Member of Quadrant Chambers in New Delhi, explains: “Mediation has been intrinsic to traditional forms of dispute resolution in India. It is very much part of Indian history and culture.”    

Despite its illustrious history, mediation in India - like in many other countries - fell out of favour during the 1900s, and only much later came to be incorporated in legislation, most notably by way of the 1999 amendment to the Code of Civil Procedure, 1908. Mediation became a mechanism which a judge could recommend as a means to bring about a settlement in appropriate cases. Such court-annexed mediation stood alongside arbitration, conciliation and Lok Adalat[1]. 

Despite the legislative push, "court-annexed mediation never achieved its full potential," explains Ms Laila Ollapally, Founder of CAMP Arbitration & Mediation Practice in Bangalore and a key figure in the instigation of the Act's creation. This was because there was no formal framework governing mediation. Ms Ollapally elaborated, suggesting that no one knew what a mediator's powers were, or the legal status of a mediation agreement, nor were there any rules on how a mediation was to be conducted. 

To get around this, mediators used rules that were available to create what Ms Ollapally calls ‘backdoor mechanisms’. "We went through the Arbitration and Conciliation Act, but conciliation is very different from mediation; it's evaluative." Therefore, the rules did not quite fit. This sentiment was echoed by other practitioners as well.

"There were no set rules for mediation. There were no standards, no guidelines to follow," explained Ms Ekta Bahl, Partner at SAMVĀD: Partners in Hyderabad. Therefore, mediators conducted services that were within their interpretation of the rules, and not to a prescribed guideline. While some mediation centres did set rules to follow, this was far short of a national standard created by statute. 

The Bar and the Bench alike recognised the need for a formalised structure to govern mediations. A statistic of concern that underlines this thought is the backlog of cases in Indian courts which passed the 50-million mark in July 2023. Against this scenario, Mr Sen noted the Supreme Court’s observation in a 2022 case that “Mediation can become a potent alternate dispute resolution device.”[2]  

From practitioners’ perspectives, it is not only the courts and legal professionals who feel the need for a speedier and more efficient dispute resolution mechanism. Modern businesses share these concerns but insist particularly on enforceability, certainty, and confidentiality in their legal dispute resolution.

"When you told corporates about mediation, it was always a ‘no’. Mediation was seen as a touchy-feely process," recollected Ms Ollapally. “If mediation was to move forward, we needed something that would give it credibility.” 

That view did not go unnoticed. India was already taking further steps to formalise and encourage the use of mediation. By way of an amendment in 2018 to the Commercial Courts Act, 2015, pre-institution mediation was made mandatory for commercial disputes[3]. With the coming into effect of the United Nations Convention on International Settlement Agreements Resulting from Mediation (‘the Singapore Convention’/ ‘Convention’), mediation as a mode of dispute resolution gained further momentum, particularly for international disputes. India was among the first signatories to the Convention. It was thus hoped that a law on mediation would reflect India’s enthusiasm towards the use of international mediation. However, currently as it stands, the 2023 Act is of limited use to international parties. Some provisions that highlight the scope of the new Act are discussed below.

Key provisions   

While being limited in its scope, the Act does apply to certain international mediations. The relevant parts of the provision relating to its application are extracted below: 

“2. This Act shall apply where mediation is conducted in India, and— 
 

(i) all or both parties habitually reside in or are incorporated in or have their place of business in India; or 

(ii) the mediation agreement provides that any dispute shall be resolved in accordance with the provisions of this Act; or 

(iii) there is an international mediation; or 

...” 

Further, section 3(g) defines ‘international mediation’ as under: 

“(g) "international mediation" means mediation undertaken under this Act and relates to a commercial dispute arising out of a legal relationship, contractual or otherwise, under any law for the time being in force in India, and where at least one of the parties, is— 

(i) an individual who is a national of, or habitually resides in, any country other than India; or 

(ii) a body corporate including a Limited Liability Partnership of any nature, with its place of business outside India; or 

(iii) an association or body of individuals whose place of business is outside India; or 

(iv) the Government of a foreign country;” 

While the second part of the definition makes it sufficiently wide, its application is limited insofar as it applies to commercial disputes arising from legal relationships “…under any law for the time being in force in India…”.  What is further intriguing, is this definition’s similarity with that of ‘international arbitration’ in India. As Mr Sen pointed out: “In my view, this definition of International Mediation is heavily influenced by the Arbitration and Conciliation Act, 1996.”

Secondly, section 13 of the Act describes the territorial jurisdiction of the Act as below:

“13. Every mediation under this Act shall be undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction to decide the subject matter of dispute:  

Provided that on the mutual consent of the parties, mediation may be conducted at any place outside the territorial jurisdiction of the court or tribunal, or by way of online mediation.  

Explanation.—For the removal of doubts, it is clarified that where the parties agree to conduct the mediation at any place outside the territorial jurisdiction or online, for the purpose of enforcement, challenge and registration of the mediated settlement agreement, the same shall be deemed to have been undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction.”

 Section 13 paints the picture of a tug-of-war between territoriality and a liberal approach.

“The new Mediation Act acknowledges that it is crucial to take into consideration the convenience of parties engaged in mediation in order to make mediation a more viable and better option than litigation. Hence, the explanation to Section 13 of the Act enables mediation to take place outside the territorial jurisdiction of the competent court. However, for the purpose of enforcement, challenge and registration of the mediated settlement agreement, the same shall be deemed to have been undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction. There are two possible interpretations to this deeming provision, one restrictive and the other more liberal,” in Mr Sen’s view.

For a restrictive interpretation to apply, Mr Sen suggests that the mediation can be conducted outside the territorial jurisdiction of the competent court, but has to be within India. This would be consistent with section 2 of the Mediation Act, 2023 which requires the mediation to have been conducted within India, and the Explanation to section 13, which uses the word ‘place’. The courts are likely to interpret ‘place’ in the same way as they have for the Arbitration and Conciliation Act, 1996, which provides that parties are free to agree on the place of arbitration - as restricted to one within India.[4]

Alternatively, if one adopts a more liberal interpretation, section 13 can be taken to provide for the mediation to have been conducted in India, even if the parties are conducting the mediation outside the territorial jurisdiction of the competent court in India. In keeping with the current times, “[r]eference has also been made to online mediation without any qualifications of any one party being required to be territorially [located] in India in case of online mediations,” pointed out Mr Sen. In contrast, no such provision appears in the Arbitration and Conciliation Act, 1996. Thus, in mediation, where party autonomy and flexibility are key attributes, Mr Sen argues that “…on account of the Explanation to section 13, the mediation can be deemed to have taken place in the competent court in India. However, it must be an international mediation in which one of the parties would have to be Indian.”

Step towards ratification of the Singapore Convention

In its current form, the Act does not give recognition to international mediated settlement agreements nor allow for their registration in an Indian court or tribunal of competent jurisdiction. “This Act is purely for mediations within India, it will not work for international mediation” says Ms Ollapally. The Law and Justice Minister Mr Arjun Ram Meghwal touched upon the Singapore Convention in the Lower house of Parliament during the reading of the Mediation Bill in August 2023. While stating that the bill was necessitated to give greater support to mediation, he said appropriate action would be taken in due course.

Ms Ekta Bahl mentioned that it could be due to the Indian Parliament wishing to wait to see how other countries responded to the Singapore Convention before taking the significant step of ratifying it.  Further, Mr Sen noted that the Ministry had explained that the misalignment with the Singapore Convention was due to India not having ratified it yet. “The Ministry also highlighted the need to assess the overall implications of the convention, especially concerning potential conflicts with domestic laws, especially in cases where enforcement processes are not legally challenged,” Mr Sen pointed out.

While it is clear that the Act is not intended to enable the operation of the Singapore Convention at this point, it does cover a sufficiently large base if the Act’s provisions are given a liberal interpretation. The Act as it currently stands will also give India’s Parliament room to address any shortcomings with the existing law before India ratifies the Singapore Convention.

About the Authors 

James Piercy is an aspiring commercial barrister. Hailing from London, United Kingdom, he has a particular interest in the field of international energy and commodities. With a stellar academic record, James graduated with first-class honors in law and explored the legal landscape through mini pupillages in several renowned UK chambers and an internship within the legal department of International SOS, a global leader in medical and security services. He was also awarded the prestigious Yarborough-Anderson Scholarship by Inner Temple. Currently, he is enhancing his knowledge of international commercial law and alternative dispute resolution during a stint with SIMC while simultaneously preparing for the UK Bar Exam at the Inns of Court College of Advocacy. 

Meghna Jandu is an LL.M. candidate at the National University of Singapore, with a specialisation in international arbitration and dispute resolution. As an intern with the Singapore International Mediation Centre, she has contributed to varied initiatives in the organisation. Meghna previously worked as a Judicial Clerk at the High Court of Delhi, India. Prior to her engagement as Judicial Clerk, she worked as litigation counsel in a New-Delhi based law firm, focusing on civil and commercial disputes. Meghna's professional pursuits are directed towards developing a comprehensive expertise in appropriate dispute resolution, encompassing arbitration, mediation, and litigation.