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Timestamp: 2019-04-21 08:19:14+00:00

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Alternate dispute resolution is fast becoming one of the most preferred dispute resolution mechanisms in the world. ADR has gained widespread acceptance among both the general public and the legal profession in recent years. Nowadays, certain courts recommend some parties to try an alternate dispute resolution mechanism like mediation or arbitration, before permitting the parties’ cases to be tried. Another reason for the rising popularity of alternate dispute resolution is the ever-increasing caseload in traditional courts. Alternate dispute resolution generally incurs lesser expenses than litigation. The parties can keep certain information confidential and also can have a better say over the selection of the individuals who will preside over their dispute and decide it.
The most important of the working assumptions is that of humans conflicting. Conflicts have existed in all cultures, religions, and societies since time immemorial, as long as humans have walked the earth. All societal interactions have been fundamentally an argument over the control of the resources. All philosophies and theologies have primarily been attempts a solving this perpetual conundrum of conflict. These philosophies and procedures for dealing with conflicts have been part of the human heritage, differing between cultures and societies. We find in The Bible and similar religious and historical documents in different cultures an account of conflicts that were resolved by various processes, including negotiation, mediation, arbitration, and adjudication.
The essence of arbitration is the settlement of disputes by a tribunal chosen by the parties themselves, rather than by the Courts constituted by the State. The popularity of arbitration as a mode of settling disputes is due to the fact that “the arbitration is regarded as speedier, more informal and cheaper than conventional judicial procedure and provides a forum more convenient to the parties who can choose the time and place for conducting arbitration and the procedure. Further, where the dispute concerns a technical matter, the parties can select an arbitrator who possesses appropriate special qualifications or skills in the trade”.
Arbitration is a means by which the parties reduce the transaction costs in terms of delays due to procedural rigidities as well as monetary costs in terms of costs of protracted litigation.
Further, alternative dispute resolution aims at settlement such that there is reconciliation and some modicum of gain or loss for both parties without further embitterment of their relationship, be it personal or commercial.
In the old Indian system for arbitration is Panchayat. In India arbitration has a very ancient heritage. Indian civilization expressly encouraged the settlement of differences by Tribunals chosen by the parties themselves.
Alternate dispute resolution is comprised of several advantages as, it is less expensive, and it is less time consuming. It is free from technicalities as in the case of conducting cases in law Courts.
ADR is generally classified into at least four types: negotiation, mediation, collaborative law, and arbitration. (Sometimes a fifth type, conciliation, is included as well, but for present purposes it can be regarded as a form of mediation.
The expression Public Policy is not defined either by the Arbitration Act or the Contract Act, it is a changing concept and it has nexus with public good and public interest which may vary form time and place.
ADR traditions vary somewhat by country and culture. There are significant common elements which justify a main topic, and each country or region’s difference should be delegated to sub-pages. ADR or Alternative Dispute Resolution is of two historic types. First, methods for resolving disputes outside of the official judicial mechanisms. Second, informal methods attached to or pendant to official judicial mechanisms. There are in addition free-standing and or independent methods, such as mediation programs and ombuds offices within organizations. The methods are similar, whether or not they are pendant, and generally use similar tool or skill sets, which are basically sub-sets of the skills of negotiation. ADR can be used alongside existing legal systems such as “Sharia Courts” within Common Law jurisdictions such as the UK.
Alternative dispute resolution in India is not new and it was in existence even under the previous Arbitration Act, 1940. The Arbitration and Conciliation Act, 1996 has been enacted to accommodate the harmonization mandates of UNCITRAL Model. To streamline the Indian legal system the traditional civil law known as Code of Civil Procedure, (CPC) 1908 has also been amended and section 89 has been introduced. Section 89 (1) of CPC provides an option for the settlement of disputes outside the court. It provides that where it appears to the court that there exist elements, which may be acceptable to the parties, the court may formulate the terms of a possible settlement and refer the same for arbitration, conciliation, mediation or judicial settlement.
The amendment of the CPC referring pending court matters to ADR was not welcomed by a group of lawyers and the amendment was challenged. The modalities to be formulated for effective implementation of Sec. 89 also came under scrutiny. For this purpose, a Committee headed by former Judge of the Supreme Court and Chairman of the Law Commission of India, Justice M. Jagannadha Rao, was constituted to ensure that the amendments become effective and result in quick dispensation of justice. The Committee filed its report and it was accepted and the Hon’ble Supreme Court of India has pronounced a landmark decision in Salem Advocate Bar Association, Tamil Nadu v. Union of India case, where it held that reference to mediation, conciliation and arbitration are mandatory for court matters. This judgment of the Supreme Court of India was the real turning point for the development of mediation in India.
In the United States, mediation, or “conciliation” as it is sometimes known, has been a staple of Alternative dispute resolution for generations, typically presided over by a town elder or respected figure in the community. The emergence of mediation as a device to resolve litigation in the United States can probably be traced to the seminal work in negotiation theory done by Roger Fisher and William Ury of the Harvard Negotiation Project, popularized in their 1981 book Getting to Yes.
After the British adversarial system of litigation was followed in India, arbitration was accepted as the legalized ADR method and is still the most often utilized ADR method. Mediation (as is now understood globally and unlike the ancient methods, which is by definition non-binding, and encourages the parties to voluntarily reach an agreement that meets all the parties’ needs) has only in the past few years begun to become familiar to lawyers and judges generally, except in traditional community settings and except where mediation has been court-directed or statutorily-prescribed, such as in the intragovernmental disputes between government agencies and undertakings, in labour disputes and in public utility services disputes. So when we compare the US and Indian system, over the last twenty (20) years, American lawyers and judges have warmly embraced mediation as a primary tool for resolving conflicts in court and out of court, while Indian lawyers and judges are still cautiously examining mediation, discussing whether and in which types of cases mediation should be used – similar to what was happening in the US in the 1980’s. In the United States, mediation, or “conciliation” as it is sometimes known, has been a staple of Alternative dispute resolution for generations, typically presided over by a town elder or respected figure in the community.
Application Of Principle Of Public Policy In India And United States.
The Arbitration and Conciliation Act, 1996 governs the law of arbitration in India. The Act incorporates the concept of public policy in two situations. First, under Section 34 (2) (b) (ii) for setting aside an arbitral award and secondly, under Section 48 (2) (b) for a refusal to enforce a foreign award. This paper will discuss the scope and ambit of the principle of public policy under Section 34 (2) (b) (ii) only. The principle of public policy rests on the premise that though the individuals are free to conduct their business through contractual agreements, yet if such agreements are injurious to the public good, then the Courts shall refuse to enforce such agreements. The principle of public policy means that no subject can lawfully do that which has a tendency to be injurious to the public, or against the public good. The principle thus reflects the primacy given to public interest over individual interests. , as early as 1824, Burrough, J. in Richardson v. Mellish, described public policy as an ‘unruly horse’ and recently in Deutshe v. National Oil Co., Sir John Donaldson MR emphasized that public policy could never be exhaustively defined, and that it should be approached with extreme caution. The Arbitration Act of 1940 did not contain any specific reference to public policy. Under Section 34(2) (b) (ii) of the Arbitration and Conciliation Act, 1996, an arbitral award shall be set aside by the Court if it is in conflict with the public policy of India from here onwards Public Policy came in to effect and in the landmark judgment given in Renusagar Power Co. Ltd. v. General Electric Co., by the Supreme Court which identified three such elements of public policy. These are: (i) fundamental policy of Indian law, (ii) the interests of India, (iii) justice or morality. If an arbitral award is contrary to any of these, it would be regarded as against the public policy of India. Though this case came under the Foreign Awards (Recognition and Enforcement ) Act, 1961, several decisions of the Supreme Court have extended its dicta to the Arbitration and Conciliation Act of 1996.
One of the earliest expositions of this principle was given by Lord Mansfield in Holman v. Johnson as follows: “the principle of public policy is this: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act.” Thus, it is something which is immoral, unfair or fundamentally against the current values and norms of a particular society or nation, that is sought to be rejected through the use of the principle of public policy.
The most important and controversial decision of the Supreme Court which has come under the present Act is ONGC v. SAW Pipes Ltd. In this case, the Supreme Court added one more aspect to the phrase ‘ public policy of India’, namely, “ patent illegality”. This would mean that if the arbitral award is, on the face of it, patently in violation of statutory provisions, it would be against the public policy of India. This decision has been criticized by several scholars on the ground that it gives a very wide meaning to the term public policy, thereby making an arbitral award highly susceptible to judicial scrutiny.
In the Arbitration Act of 1940, there was no specific provision for setting aside an arbitration award on the ground that it was in conflict with the public policy of India. But, Section 30 (c) of this Act provided three grounds for setting aside an arbitral award. These were : (i) an arbitrator or umpire has misconducted himself or the proceedings. (ii) an award has been made after issue of an order by the Court superceding the arbitration or after the arbitration proceedings have become invalid under Section 35; (iii) an award has been improperly procured or is otherwise invalid. Moreover, Section 161(c) of this Act authorized the court to remit an award to the tribunal for reconsideration ‘where an objection to the legality of the award is apparent on the face of it. None of these provisions mentioned specifically the phrase ‘public policy’, though they gave wide powers to the courts in the matter of reviewing arbitral awards.
The Foreign Awards (Recognition and Enforcement ) Act, 1961 mentioned the word public policy . Section 7(1) (b)(ii) of this Act provided that a foreign award may not be enforced under this Act if the court dealing with case is satisfied that ‘the enforcement of the award will be contrary to public policy’.
Section 34(2) (b) (ii): It states that an arbitral award may be set aside by the Court if it finds that the award is in conflict with the public policy of India. It also explains that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
Section 57(1) (e): It states that a foreign award (Geneva Convention Award) may be enforceable, only if it is not contrary to the public policy of India.
The United States applies a restrictive concept of public policy. For example, the definition of public policy most often quoted in the context of international arbitration is that of Judge Joseph Smith in Parsons & Whittemore (United States Court of Appeals, 1974) in which he held that enforcement of a foreign arbitral award may be denied on public policy grounds “only where enforcement would violate the forum state’s most basic notions of morality and justice”. In the same year (1974), the Supreme Court, in Scherk v. Alberto-Culver Co. Case recognized the difference between international and domestic public policy. It enforced an agreement to arbitrate a claim arising in international trade, although arbitration of a similar claim would have been barred had it arisen from a domestic transaction. The Supreme Court in the case of Matter of Board of Education of Arlington Cent. School Dist. v. Arlington Teachers Assn. held that an arbitration award may be vacated on three grounds: If it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power. In the Matter of New York City Tr. Auth. v. Transport Workers Union of Am. Local, the court established a two-prong test for determining whether an arbitration award violates public policy. First, where a court can conclude, ‘without engaging in any extended fact finding or legal analysis’ that a law ‘prohibits, in an absolute sense, the particular matters to be decided by arbitrations’ an arbitrator cannot act.’ Second, an arbitrator cannot issue an award where, the award itself violates a well-defined constitutional, statutory or common law of this state.
The essence of arbitration is the settlement of disputes by a tribunal chosen by the parties themselves, rather than by the Courts constituted by the State. The popularity of arbitration as a mode of settling disputes is due to the fact that “the arbitration is regarded as speedier, more informal and cheaper than conventional judicial procedure and provides a forum more convenient to the parties who can choose the time and place for conducting arbitration. The goals of the law of arbitration must be simple, less technical and more responsible to the actual reality of the situations, responsive to the canons of justice and fair play.
The issue of public policy as a ground for setting aside arbitral awards has raised much controversy in recent years. The crucial issue is the content of public policy. On the one hand, it is argued that it should have a narrow scope while on the other hand; wider interpretation of it is advocated. This issue relates to the broader issue of the harmonization of arbitration law in India. The Act of 1996 tried to lessen judicial interference in the area of arbitration process in India, basing itself upon the UNCITRAL model law. The United States applies a restrictive concept of public policy. On the basic notions of morality and justice an award is set aside as was held in the Parsons case. The setting aside of an award in both India and U.S can be done when it violates morality and justice or against public policy.
Goodin A. Robert; Mediation: An overview of alternate dispute resolution, http://lawcommissionofindia.nic.in/adr_conf/Mediation%20Goodin8.pdf.
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