Written by - Rashi Upadhyay (Intern)
Introduction
India is currently putting in various efforts to make it a centre for international trade. To further ease of conducting business, it is pushing the international standards concerning dispute resolution mechanisms. The importance of Alternative Dispute Resolution (ADR) mechanisms has been highlighted in great detail in recent scholarship. However, if parties of various jurisdictions are involved in the ADR process, several legal nuances come into play.
The newly enacted Mediation Act also furthers this aim as it promises increasing the effectiveness of Mediation as a dispute resolution mechanism. However, the lack of recognition of international mediation settlement agreements has raised concerns. It might lead to the hesitation of international parties to choose mediation as a process to resolve their disputes. This article is a discussion on enforcement measures in both arbitration and mediation. After discussing the same, the author will discuss whether enforcement is relatively easier in arbitration or in mediation in the Indian jurisdiction.
Enforcement of Foreign Mediation Settlement Awards in India: Understanding the provisions of the Mediation Act of 2023
Prior to the enactment of the Mediation Act of 2023, there was no such provision for the enforcement of a cross-border mediation settlement agreement. Hence, the manner of enforcement of such agreements was rooted in the law of the contract of that jurisdiction. In lieu with the same, Sections 30(4), 73 and 74 of the Arbitration and Conciliation Act (hereinafter, ACA), 1996 talks about a mechanism of enforcement of a settlement agreement. Such agreements, in turn, will have the same legal effect as that of an arbitral award. However, such provisions were not consistent and there was a huge possibility of a lack of uniformity.
Therefore, in the earlier scenario, to implement a mediation settlement agreement, Section 30 would be used to provide it the same status and effect as an arbitral award. Section 30 talks about enforcement of conciliation settlement award and the ACA considers mediation and conciliation as the same. However, the same opened various issues. The constitution of an arbitral tribunal was a necessity in such instances. Additionally, other jurisdictions do not recognise the interpretation that settlement agreements can be interpreted as arbitral awards.
However, such issues were expected to be resolved through the Mediation Act of 2023.
No provision for cross-border merger conducted outside India
In India, however, the newly enacted Mediation Act of 2023 does not mention an effective mechanism for the enforcement of foreign settlement agreements. This is especially concerning as, in 2019, India had also become one of the 56 signatories of the Singapore Convention which governs the enforcement of foreign mediation settlement agreements. In pursuance of the same, it was expected of India to ratify the Convention with the Mediation Act. The result of the same is that there might be issues relating to the harmonisation of the enforcement of mediation settlement agreements.
The Mediation Act fails to recognise the mediations conducted outside India. It only provides a framework of international mediations where the place of the mediation is India. Hence, for example, in a cross-border mediation, the enforcement of the settlement agreement will only be recognised if the mediation is conducted in India. This is a huge issue in the modern-day world where the parties are increasingly relying on mediation as an effective way to deal with their disputes. It undermines the value of mediation as a form of dispute resolution mechanism especially in cross-border transactions.
Manner of enforcement of cross-border mergers
Since the Mediation Act does not recognise foreign mediation settlement agreements, attention could then be directed to similar enforcement mechanisms under the Code of Civil Procedure. Section 13 of the Code lays down that the foreign judgements are to be considered as conclusive. The exception of lack of merits is irrelevant in the present case of settlement agreements. The Bombay High Court in the case of HSBC Bank, USA v. Siverline has, in fact, recognised that the exception of lack of merits cannot be used as an excuse to render settlement agreement of a foreign court unforceable in India.
Additionally, Sections 61 and 74 of the ACA could be used to enforce mediation settlement agreements which would have the same legal status as that of an arbitral award.
Enforcement of foreign arbitral awards in India: Is it comparatively better?
The enforcement of foreign arbitral awards is extensively discussed by both the scholarship and the Indian Courts. Part II of the ACA covers such enforcement and holds that it could either be under the New York Convention or the Geneva Convention. Such an application, however, can be presented only before a High Court. The rules regarding the application before the court are laid down in Section 47 of the ACA while Section 48 recognises the right of the other party to file an objection. There are various grounds such as corruption, contravention with the fundamental policy of Indian law and conflict with morality or justice recognised to stop the enforcement of a foreign award. There is no time limit specified in the ACA for when the enforcement application of a foreign award to be placed before a High Court. However, Article 137 of the Limitation Act lays down a period of three years.
Conclusion
The lack of ratification of the Singapore Convention in the Mediation Act would lead to various issues including the lack of compatibility and it might make the process of mediation slightly difficult. In the light of these ambiguities, it is better to resort to arbitration clauses as there is relatively better clarity on its enforcement and it is in consonance with international standards.
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