Application of ADR methods in Commercial, and Financial Disputes

Alternative Dispute Resolution (ADR) refers to a wide range of dispute-resolution mechanisms or

techniques that share one an essential characteristic: they all differ from the resolution mechanism of
litigation in a court. In India, there are four prominent ADR techniques in application.

To examine in detail the commercial use of ADR techniques, let us pick each one and expound:

1. Arbitration

Arbitration is the first ADR a technique to be accepted internationally, The UNCITRAL Arbitration Rules
were initially adopted in 1976 and have been used for the settlement of a broad range of disputes,
including disputes between private commercial parties where no arbitral institution is involved, investor-
State disputes, State-to-State disputes and commercial disputes administered by arbitral institutions.[24]
The resolution made in the assembly carved the way for Arbitration as a mechanism for international
commercial dispute resolution.

The techniques are arranged in descending order of formality. Arbitration and Conciliation the most
formal techniques have been given legal recognition via the Arbitration and Conciliation Act of 1996.
Which was drafted pursuant to the UNCITRAL resolution of 1976.

Arbitration is much more effective than litigation, as it is a speedy process and consequently saves a
massive amount of economic resources, which organizations can use to achieve their goals. The latest
example for the application of Arbitration in commercial disputes is Mbl Infrastructures Ltd vs Ircon
International Ltd on 19 December, 2016 here an arbitral award of Rs.61,01,904/- was ordered by the
arbitrator.

2. Conciliation

One of the firsts statues in India that provides for conciliation is The Trade Dispute Act, 1929 which created
provision for a Conciliation board, this act was superseded by the Industrial Disputes Act, 1947 section 5
of the Act creates for Conciliation board. In India, the application of conciliation is not as widespread as
other ADR techniques.[26] Conciliation widely applied in Australia, where parties to a dispute are required
to fill conciliation form. In conciliation an independent person who understands body corporate law (a
conciliator employed by the Department of Justice and Attorney-General) helps you and the other parties
try to resolve your dispute.[27] The Australian government mandates for parties involved in Conciliation
to attend a session regarding the same.

3. Negotiation

There is a widespread application of ADR techniques in commerce, as wherever there is trade there is
Negotiation. Negotiation is the simplest form of ADR, in this both the parties through the application of
their attorneys or not, negotiate terms of any deal, contract, settlement or dispute to gain an advantage
for their side. Negotiations are a prominent technique in the commercial area, as often deals or contracts
between any two parties, involving a huge amount need to be negotiated. This is a must-have skill these
days.
 4. Mediation

Mediation is the upcoming and most promising ADR technique; India is a signatory of Singapore mediation
convention which pertains to international settlements arising from mediation.

Nationally also lawgivers of India have understood the importance of Mediation in commercial disputes
and consequently, chapter IIIA of Commercial Courts Act, 2015 wherein Section 12A[30] mandates the
remedy of pre-institution mediation. Negotiation is the most popular when it comes to trade, especially
international trade

After examination of the Section it can be derived that:

 The section is applied where urgent interim relief is not sought,

 The plaintiff has to apply for pre-institution mediation before instituting the suit in a court of law,
 Authorities under LSA, 1987 can take up pre-institution mediation,
 The authorities under LSA, 1987 shall complete pre-institution mediation within 3 months from
the date of application made by the plaintiff,

Proviso:

A. The period of completion of Mediation can be extended by 2 months with the consent of the
parties,
B. For the purpose of Limitation Act, the Mediation period that parties are involved in will not be
computed;
 The settlement award shall have the same status as an arbitral award.
 The award shall be reduced to writing and signed by the parties as well as the mediator.

In light of the Section 12A of the Act, Ravi Shankar Prasad Minister of Law and Justice of India, states:

This (pre institution mediation) is the most important commercial law initiative perhaps in the entire world
where the pre-mediation initiative has been given a very important focus.

The 47th Chief Justice of India, Justice Bobde is also actively seeking to expand the use of pre-litigation
mediation, especially in the commercial area. In this opinion, the application of ADR in commercial dispute
would greatly increase the ease of commercial activities in India nationally as well as internationally.[34]

One of the issues that arise after an examination of the provision is effectiveness. To gain an insight on
the same, I went to the Lok Adalat of Pune, courtroom No. 17 which derived its authority from Section
12A. The panel consisted of three respected panellists. Mr D.A – Ad Hoc District Judge, Adv. M.S and Adv.
A.T. The panellists informed me that majority of the matters before they were in the nature of recovery,
settlement and bank dispute.

The objective is to advance business and trading and diminish the dependence on the already burden
judiciary.
UAE

Considering the UAE is a major trading hub and a host country for foreign investment, arbitration is
becoming an optimal method, for parties to solve their commercial disputes. Many foreign investors
prefer to assign their disputes to arbitration committees for many reasons such as:

 to avoid long process of commercial disputes reviewed by courts of law

 to avoid controversial international laws and accordingly save time, money and efforts which
would otherwise be spent on many sessions at the courts of law
 the lack of precedent doctrine in the UAE which makes the result of disputes somehow uncertain
 the fact that the court proceeding is conducted in Arabic.

In 2012, on an average, 57 per cent cases were settled through alternative methods.

Key arbitration institutions

The Abu Dhabi Commercial, Conciliation and Arbitration Centre

In 1993, Abu Dhabi Chamber established Abu Dhabi Commercial Conciliation and Arbitration Centre to
settle trade disputes through conciliation and arbitration. The centre kept panels to register the names of
specialists in the fields of conciliation, arbitration, expertise and translation.

Conciliation is conducted through a mediator accredited by the centre or selected by both disputing
parties. The conciliator's decision concerning a dispute is not considered binding, but it has the nature of
recommendation on a proposal for dispute solving. The default language is Arabic, unless the parties
expressly choose English.

The Dubai International Arbitration Centre (DIAC)

Dubai holds an autonomous arbitration institution known as The Dubai International Arbitration Centre
(DIAC) which replaced the former Centre for Commercial Conciliation and Arbitration. The rules of
arbitration are governed by Decree No. 11 of 2007, which was approved by H. H. Sheikh Mohammed bin
Rashid Al Maktoum, the Ruler of Dubai on 6 May 2007. The new rules are available in both English and
Arabic languages.

DIFC-LCIA Arbitration Centre

DIFC-LCIA Arbitration Centre is a partnership between the London Court of International Arbitration (LCIA)
and the DIFC. It was established in 2008 and is based in DIFC. The rules of the DIFC-LCIA Arbitration Centre
are adapted from LCIA rules and are compatible with the civil and the common law systems. Written
agreement of the parties is required for DIFC-LCIA jurisdiction to mediate in the case.

International Islamic Centre for Reconciliation and Arbitration (IICRA)

International Islamic Centre for Reconciliation and Arbitration (IICRA) is an international, independent,
non-profit organisation of the Islamic finance industry. The centre settles financial and commercial
disputes that arise between financial or business institutions and their clients or between them and third
parties that choose to apply the provisions of Islamic law and sharia principles in resolving disputes
through reconciliation or arbitration. The centre practices locally, across GCC and internationally.
Agreement of the parties is required for IICRA's jurisdiction.