Alternative Dispute

RESOLUTION (ADR)

- Dr. Thomas Kurma

 “Behold the Deciding Stone”

- Village dispute regarding place to fish (near their village)

- The villagers got divided into two groups
- Each group chooses one man to fight on behalf of the group. (Tension grows, emotions
build up, uncertainty, loss of life etc)
- A wise elderly man shouts “Behold the deciding stone” and resolved the dispute by
tossing the stone into the air (by allotting soft side and rough side to each group)
- The story might be fictitious but conveys great message. Resolve disputes amicably
Introduction

1 Concept of ADR (Origin, Development)

2 Types of ADR

3 ADR Laws in India

4 Matters that can be referred to Arbitration

5 Essential Elements of Arbitration

6 Usefulness of ADR

7 Case Law

Conclusion
 1 Concept of ADR (Origin, Development)

ADR (Alternative Dispute Resolution)

Is a process of settling the disputes outside the court procedures.

ADR Stands for: - Alternative Dispute Resolution

Others argue (Carrie Menkel-Meadow, David Spencer)

- Appropriate Dispute Resolution

- Assisted Dispute Resolution
- Additional Dispute Resolution
Origin - This process of settlement of disputes is as old as human existence. Disputes are part
and parcel of our daily lives.
- There are evidences of settling disputes from 1800 BC Kingdom of Mari (Modern Syria)
used mediation and arbitration to settle disputes with other kingdoms.
- 1200-900 BC Phoenicians practiced entrepreneurship and negotiations.
- 960 BC Israel’s King Solomon arbitrated the dispute over baby, threatening to split the
baby.
- 500 BC Arbitration called Panchayat in India.
- 400 BC Greeks used public arbitrator in City States.
- Bushmen of Kalahari in Africa settled their disputes without yielding to fighting. When the
discussion starts getting heated, some are appointed to hide the poisoned hunting arrows
and it is attributed to the early form of gun control.

Development - One of the flourishing and most opted methods of dispute resolution.

- In the United States, Eric D. Green, a litigation lawyer used for the first time, ADR in his article
entitled “Settling a large case litigation: an alternative approach” in 1978. He helped two parties
who had a dispute regarding the patents. They spent two and a half years for preparation.
- Since the date for hearing was not given, they wanted to try a ‘mini trial’.
- They had opportunity to meet a neutral third party and without the legal formalities they
exchanged the material and arrived at a settlement agreement and avoided paying US$ 1 million.
- 1980 UNCITRAL Conciliation Rules were made
- 1985 adopted the UNCITRAL Model Law on International Commercial Arbitration.
 2 Types of ADR

- Negotiation

- Conciliation

- Mediation

- Arbitration
 Negotiation
A negotiation is a bargaining process between parties when both seek to reach an
agreement that settles a matter of mutual concern or resolves a conflict.

- Fosters positive outcome to resolve the dispute.

- Ensures adopting a friendly attitude towards the other party.
- Helps to separate themselves from the problem.
- Time and cost effective
 Conciliation

Conciliation is a voluntary, flexible, confidential, and interest-based process. The

parties seek to reach an amicable dispute settlement with the assistance of the
conciliator, who acts as a neutral third party.

- The parties themselves resolve their disputes (autonomy of the parties)

- Neutral third party only facilitates the process
- Time and cost effective
- Increases confidentiality in the parties
 Mediation

Mediation is an informal, but structured settlement procedure. A mediator is employed

to facilitate and assist parties in reaching an amicable dispute settlement.

Mediator helps the parties find common ground and assists with drafting a settlement
agreement.

- Mediation is a voluntary, non-binding, confidential and interest-based procedure.

- Parties are free to terminate mediation at any time after the first meeting.
- No decision can be imposed on the parties involved, and they may or may not agree
upon a negotiated settlement.
 Arbitration
Arbitration is a method of dispute settlement using private entities known as “arbitral
tribunals’’

- Arbitral tribunals usually consist of either one or three arbitrators.

- The primary role of an arbitral tribunal is to apply the law and make a dispute
decision by administering a so-called “arbitral award”.
- In principle, arbitral awards are final and binding.
- They can only be challenged before a state court under exceptional circumstances.
- For example: it applies to cases where the parties never validly agreed on
arbitration. Arbitral awards can be enforced in most of the countries worldwide.
 3 ADR Laws in India
- Background for ADR Laws in India

- UNCITRAL (United Nations Commission on International Trade Law)

- India is a member State since 1971

- Upon the guidelines of the UNCITRAL all the member States are to enact
their own laws adapting to their situations.

- ADR Laws in India

- Arbitration and Conciliation Act 1996 (No. 26 , 16 Aug1996) (latest

amendment in 2015)
- UNCITRAL (United Nations Commission on International Trade Law)

- 1966 UNCITRAL was established to further promotional harmonization and modernization

of the law on international trade.
- UNCITRAL has been recognized as the core legal body of the United Nations system in the
field of international trade law.
- A legal body with universal membership specializing in commercial law reform worldwide.
- -There are VII Working Groups. (Working Group II deals about Arbitration and
Conciliation/Dispute Settlement
- From March 22-27 (73 Session takes place in New York )
- Agenda:
- Consideration of issues relating to expedited arbitration
- Consideration of texts on international mediation
Includes:
Dispute resolution
International contract practices
Transport
Insolvency
Electronic commerce
International payments
Secured transactions
Procurement and sale of goods
website: www.uncitral.org
 - Features of Arbitration and Conciliation Act 1996
- Autonomy of the parties (Court’s intervention only when mandated)

- Arbitral tribunal is to function in accordance with the principles of natural justice

(honesty, fairness & impartiality)

- In line with arbitration, conciliation has been recognised.

- Features of Arbitration and Conciliation Amendment Act 2015

- Commercial Courts in each district & High Courts, which have original
jurisdiction (will be set up by the State Governments in consultation with
the Chief justice of the High Court )

- International arbitrations commercial bench shall have jurisdiction

- Application for appointment of an arbitrator shall be disposed in 60 days

from the date of service of notice to the party.

- No appeal up on a decision of appointing an arbitrator.

- The arbitrator needs to declare that he is independent and has enough time
to conclude the arbitration in 12 months, before his appointment. (Arbitral
proceedings have to be disposed in 12 months and parties can extend up to
6 months by mutual agreement.)
- Only court can extend further, reduce the fee of the arbitrator or remove and
substitute the arbitrator/s if they are at fault in delaying the arbitration proceedings.

- Application to seek extension of time is to be disposed by the court within 60 days.

- Parties can choose a summary arbitration process, is to be decided within 6 months.

No oral hearing unless requested by the arbitrator/s or the by all the parties.

- Arbitrators are entitled for extra fee if they dispose the case within 6 months.
- Objectives of Arbitration and Conciliation Act 1996

- To cover international commercial arbitration and conciliation as also domestic

arbitration and conciliation comprehensively.

- To make an arbitral procedure fair, efficient and capable of meeting the needs of
the specific arbitration.

- To provide that the arbitral tribunal gives reasons for its arbitral award.

- To ensure the limits of arbitral tribunal and to be faithful to its jurisdiction.

- To minimise the supervision of the courts in the arbitral process.

- To allow the arbitral tribunal to use other methods like mediation and conciliation
during the arbitral proceedings in furtherance of dispute settlements.

- To ensure that every final arbitral award is enforced in the same manner as if it
were a decree of the court.
- To provide that a settlement agreement made by the parties as a result of
conciliation has the same status and effect as an arbitral award on agreed
terms on the substance of the dispute, rendered by an arbitral tribunal.

- To provide for the enforcement of foreign awards, every arbitral award

made in a country to which one of the two international conventions
relating to foreign arbitral awards to which India is a party applies, will be
treated as a foreign award.
 4. Matters that can be Referred to Arbitration
- Only Disputes can be referred to Arbitration
- What is a dispute?
Dispute means when one party asserts a right and the other repudiates the same.

- Existence of dispute is mandatory (Excluding differences)

In the law of arbitration difference and dispute have particular meaning.
Everything cannot be referred to the arbitration.

Difference: Meaning of a particular term in the contract i.e., one party understands
in one way and the other in another way)

Dispute: One party has a claim and the other party says for some specific reason
that it is not the a correct claim.
 5 Essential Elements of Arbitration

Section 2 (1) (f) “international commercial arbitration” means an arbitration relating to

disputes arising out of legal relationships, whether contractual or not, considered as
commercial under the law in force in India and where at least one of the parties is—

(i) an individual who is a national of, or habitually resident in, any country other
than India; or
(ii) a body corporate which is incorporated in any country other than India; or
(iii) 2*** an association or a body of individuals whose central management and
control is exercised in any country other than India; or
(iv) the Government of a foreign country;

- Arbitration Agreement:
Section 7 (1) of the Act defines,
“arbitration agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise
between them in respect of a defined legal relationship, whether contractual or
not.
(2) An arbitration agreement may be in the form of an arbitration clause in a
contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in

(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of
telecommunication 1[including communication through electronic
means] which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence
of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause

constitutes an arbitration agreement if the contract is in writing and the reference is
such as to make that arbitration clause part of the contract.
Arbitration Clause:
An arbitration clause is a section of a contract that deals with the parties’ rights
and options in the event of a legal dispute over the contract, agree to resolve
their disputes through arbitration.

Section 16 (1) (a) an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of the contract

Appointment of an Arbitrators:
Section 11 (1): A person of any nationality may be an arbitrator, unless otherwise
agreed by the parties.

Place of Arbitration:
Section 20(1) of the Act gives the parties the freedom to decide on a place of
arbitration.

Language of Arbitration:
Section 22 of the Act gives freedom to the parties to agree upon the language or
languages to be used in arbitral proceedings.

Procedure for Arbitration Proceedings:

Sections 23 to 27 of the Act stipulate the procedure to be followed in arbitration
proceedings.
Enforcement of the Arbitral Award: Section 35, After the termination of the arbitral
proceedings through a mandate of the arbitral tribunal, the arbitral award is to be executed.
It binds the parties.

Challenging the Arbitral Award: Section 34

On the ground of:

Incapacity on any ground
Invalidity of the arbitral agreement
The other party was not communicated
Composition of the arbitral tribunal was not in accordance with the arbitral
agreement
In conflict with the public policy of India
(i) the making of the award was induced or affected by fraud or
corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
 6 Usefulness of ADR

- Time Saving

- Economic

- Both Win (No looser)

- Informality & Flexibility

- Less intervention by the court

- Participation and Access to Justice

- Savings in Public Expenditure

- Better Relations
 International Chamber of Commerce (ICC)
International Court of Arbitration (ICA)
Function:
- confirming, appointing and replacing arbitrators, as well as deciding on any challenges
made against them.
- monitoring the arbitral process to make certain that it is performed properly and with
the required speed and efficiency necessary.
- scrutinizing and approving all arbitral awards to reinforce quality and enforceability.
- setting, managing and — if necessary — adjusting fees and advances.
- overseeing emergency proceedings before the start of the arbitration.
- to ensure proper application of the ICC Rules, as well as assist parties and arbitrators
in overcoming procedural obstacles.

- These efforts are supported by the Court’s Secretariat, which is made up of more than
80 lawyers and support personnel.

Languages: English and French are the Court’s official working languages. However, It
administer cases in any language and communicate in all major languages, including
Arabic, Chinese, German, Italian, Portuguese, Russian and Spanish.

https://iccwbo.org/dispute-resolution-services/arbitration/
- Commencing 2020 on a dispute resolution high note, the International Court of
Arbitration (ICC Court) of the International Chamber of Commerce (ICC) has
registered its 25,000th case and announced record arbitration figures for 2019.

- Case 25,000 involves parties from the Middle East and India and will be administered
through the Secretariat’s office in Singapore.

- registered a total of 869 new cases in 2019, of which 851 cases under the trusted ICC
Rules of Arbitration and 18 under its Appointing Authority rules. The 2019 figure marks
a record year for the ICC Court in its almost 100-year history.
 7 Case Law
Case on Place of Arbitration:

Brahmani River Pellets Ltd. v. Kamachi Industries Ltd. (25 July, 2019 )

Facts:
Two industries namely, Brahmani River Pellets and Kamachi Industries entered into an
agreement that they would sell iron ore pellets with their loading port and destination port
being in Odisha and Chennai, respectively. The dispute emerged between the them with
respect to the payment mode terms and conveyance of goods. This is when Kamachi went to
the Madras HC to file petition u/s 11(6) as per the clause in the agreement which provides
for the venue of arbitration as Bhubaneshwar. Brahmani challenged the jurisdiction of
Madras HC stating that it did not have the jurisdiction as the seat was decided as
Bhubaneshwar in the agreement and hence, only Orissa HC would had the jurisdiction to
which the Madras HC when there is an absence of an express clause ousting the jurisdiction
of other courts then both the court can have jurisdiction. Subsequently, Brahamani went to
appeal before the SC for the above order.

Issue:
Whether by stating a venue in the arbitration agreement of the parties, the jurisdiction of
court outside the court of venue becomes barred.
Rules:
1.Section 11(6)
While section 11 provides for appointment of an arbitrator, section 11 (6)
states that, when there are differences or complexities in the appointment a
party may approach the chief justice or an official so instructed to undertake
measures in this regard.

Case on entering into an arbitration agreement while the case is pending in the court:

P. Anand Gajapathi Raju & Ors vs P.V.G. Raju: The SC held that the arbitration
agreement can be entered while suit is pending in the court. The Supreme Court said
affirmatively that it can be entered.

Case on the intent of the parties than the words used in an agreement:

M.V. Baltic Confidence V. State Trading Corporation of India (2001) 7 SCC 473, The
SC held that the intent of the parties is to be considered over the words of the clause.

Case on number of arbitrators:

Narayan Prasad Lohia vs Nikunj Kumar Lohia & Ors on 20 February, 2002 Held that
arbitration agreement doesn’t become invalid if the parties agreed for two arbitrators,
where the Act prescribes odd number of the arbitrators.
 Conclusion

“As a litigant, I should dread a lawsuit beyond almost anything else short of sickness and death.”
- Judge Learned Hand

- ADR is the most effective method of dispute resolution/settlement

- The other option is always available
- Neglect of these simple methods of dispute resolution brings in million problems, which
might disrupt/tarnish the reputation of a company and its success.