The Social & Economic facet of Alternative Dispute Resolution – Indian Perspective
: ANIL XAVIER
Disputes and its Resolution:
Justice is the foundation and object of any civilized society. The quest for justice has been an ideal which mankind has been aspiring for generations down the line. The resolution of dispute has a very long history and the true determination of its beginning lies in the history of the origin of the evolution of man. Mankind in different ages in different communities has resolved disputes using various methods – harmoniously or by coercion and force. The object of dispute resolution is to ensure continued peaceful co-existence among the people as well the maintenance of equilibrium and growth of the society as a whole. Mediation and Arbitration as dispute resolution mechanisms are as ancient as the history of man. The main philosophy underlying the relevance and growth of Alternative Dispute Resolution (ADR) methods like mediation and arbitration is that it is quicker and cheaper and above all parties have a level of control of the process and the advantage of having a continued harmonious co-existence even after the process. Mediation is a process by which a third party brings together the opposing groups not only to iron out the differences between them but also to find answer to such problems. It is a flexible, non-binding process in which a neutral third party (the mediator) assists two or more disputants to reach a voluntary, negotiated settlement of their differences. The parties have ultimate control of the decision to settle and the terms of resolution and the mediator is not empowered to impose any decision. On the other hand arbitration is the reference of a dispute or difference between not less than two parties for determination, after hearing both sides in a judicial manner, by a person or persons other than a Court of competent jurisdiction, called the arbitrator. He is empowered to give a decision and the same is binding on the parties. Arbitration is undoubtedly as old as mankind, and is certainly older, as an institution, than the modern-day court systems. Arbitration has been favored in all the ancient culture and legal systems – Jewish, Roman, Greek, Byzantine, Islamic and Christian. Normally, we think that ‘dispute resolution’ and ‘rule of law’ is a subject within the domain of jurisprudence. The evolution and growth of dispute resolution mechanisms is also considered as the resultant growth of the science of jurisprudence. But the growth of arbitration as a dispute resolution mechanism had an additional perspective. Commerce, economics and business exigencies changed the scene of dispute resolution process in the course of time, yielding place for commercial arbitration. Arbitration was viewed as a shortcut to early determination of cases amongst the business community since the courts were getting increasingly congested, time-consuming and procedurally complicating. On the other hand, the advantages of arbitration were many; including,
♦ Expediency: Arbitration paved way for faster result than typical dispute resolution through the public court system. It was not uncommon for business disputes to languish in courts for years together.
♦ Choosing the decision-maker: Parties could agree on the arbitrator or on how the arbitrator is to be selected. The ability to select the decision maker for a dispute was found attractive to the parties as it gave the feeling of control over the proceedings. It also gave parties the choice and freedom to select the decision-maker who is knowledgeable about both the subject matter upon which a dispute may be based and the specific laws related to the issues involved.
Commercial arbitration must have existed since the dawn of commerce. All trade potentially involves disputes, and successful trade must have a means of dispute resolution other than force. From the beginning, it must have involved a neutral determination, and an agreement, tacit or otherwise, to abide by the result backed by some kind of sanction. It must have taken many forms, with mediation no doubt merging to adjudication.(1)
Arbitration is a universal human institution. It is the product of a universal human need and desire for the equitable solution of differences inevitably arising from time to time between people by an impartial person having the confidence of and authority from the disputants themselves”.(2) It could be seen that Arbitration developed as it offered businessmen or others disaffected with the State legal system a way of solving their problems without involving the State.
Growth of Arbitration Law – International Scenario:
Appropriate dispute resolution mechanism is an inevitable part of any trade and commerce. International trade and commerce cannot be an exception to this basic premise. As stated above, Arbitration was found to be the appropriate dispute resolution mechanism, rather than the traditional court system. The history of modern international commercial arbitration began in Paris, France under the auspices of the international Chamber of Commerce founded in 1921. The ICC International Court of Arbitration was established in 1923. The expanding horizons of international trade created a greater need for close cooperation among the states to evolve a machinery for enforcement of arbitral awards arising from international commercial arbitration. In this background, a Protocol on Arbitration Clauses (for short, “Geneva Protocol”) was concluded under the auspices of the League of Nations on 24th September 1923, which came to be ratified by thirty states and came into force on 28th July 1924. Although the Protocol was named as the “Protocol on Arbitration Clauses”, it also provided for arbitral procedure and execution of arbitral awards. One of the provisions of the Protocol, however, provided that each contracting state undertook to ensure the execution of the arbitral awards in accordance with the provisions of its national laws, if these arbitral awards were made in its own territory. The effect of this provision was that only domestic awards could be enforced under the Protocol by the courts of member states. This was one of the glaring shortcomings of the Protocol. In order to overcome the deficiencies exhibited by the Protocol, the League of Nations was instrumental in the conclusion of another treaty called the International Convention on the Execution of Foreign Arbitral Awards (for short, “Geneva Convention”). This treaty was concluded on 26th September 1927 at Geneva and was ratified by twenty-four states. This Convention came into force on 25th July 1929. As per Article 1 of the Geneva Convention, each contracting state was required to recognize as binding and to enforce, in accordance with the rules of procedure of its territory, an arbitral award made in the territory of one of the contracting states to which the Geneva Convention applied and which was between persons who are subject to the jurisdiction of one of the contracting states. In effect, Geneva Convention supplemented the Protocol by making it possible to enforce an arbitral award in a contracting state other than where the award was given. Experience showed that the Geneva Convention failed to achieve its desired object. The most important reason for this was that the beneficiary of the award was required to show to the court, before which the matter came for enforcement, that the award had become final in the country in which it was made. So, the party opposing the enforcement of the award would effectively prevent its execution on the ground that the award was the subject matter of litigation in the country where it was rendered. The Convention also laid too much emphasis on the remedies that were open to the parties to invoke the law of the country where the award was given for the purpose of setting aside the same. The United Nations Economic and Social Council (ECOSOC), therefore, decided to convene a ‘Conference to conclude a Convention on the Recognition and Enforcement of Foreign Arbitral Awards’. The Conference was held at New York from 20th May to 10th June 1958 and the new International Convention on the Recognition and Enforcement of Arbitral Awards was adopted by the Conference (held on 10th June 1958), which came to be known as the New York Convention and which came into force on 7th June 1959. Article 1(1) of the New York Convention applied to the recognition and enforcement of arbitral awards made in the territory of the state other than the state where the recognition and enforcement of such awards was sought. It also applied to the arbitral awards not considered as domestic in the state where their recognition and enforcement was sought. The New York Convention thus marked a clear departure from the Geneva Convention as the latter was based strictly upon the principles of reciprocity and applied to arbitral awards made in the territory of one of the contracting states and between persons who were subject to the jurisdiction of two different contracting states. Hence, the area of operation of the New York Convention was wider than that of the Geneva Convention and the Protocol. Thus the stage was set for effective dispute resolution and enforcement in international arena.
Effect of Trade Liberalization & Economic Growth:
Openness and trade liberalization were seen almost universally as the key components for economic growth and aggregate economic well-being. They are considered to be the main cause to the remarkable growth of industrial countries since the mid-20th century and to the examples of successful economic development since around 1970. Foreign investment and trade were being promoted by almost all countries for the purpose of economic development. But many governments of countries receiving foreign investments lacked appropriate systems to tackle disputes. The local courts were mostly insensitive to trade or commerce or to the trade or foreign policy of the governments. The foreign investors had to turn to their own governments for assistance. The investors’ governments, if they were inclined to help their nationals, responded either with a show of military force (so-called “gunboat diplomacy”) or by providing “diplomatic protection”. The latter was based on the international law principle of nationality, the governments of the foreign investors claiming an interest in the treatment of their nationals by other governments. Diplomatic protection was usually pursued through exchanges of diplomatic notes between governments, with the investor’s government formally protesting the taking of the investor’s property and demanding either its return or the payment of full compensation. It could also be exercised by the investor’s government espousing a formal claim on behalf of its national, on a government-to-government basis, creating by joint action ad-hoc arbitral tribunals or mixed claims commissions to adjudicate the claims. But these were cumbersome proceedings and not easy to invoke. Moreover these types of “threatened high-handed” actions were not welcomed by many developing countries. The United Nations General Assembly adopted resolutions in 1974, viz., “Declaration on the Establishment of a New International Economic Order” and “Charter of Economic Rights and Duties of the States”. These resolutions were designed to create a new international economic order, asserting each country’s right to choose its own economic system and exercise sovereignty over its own natural resources and providing that any disputes over expropriations must be resolved by the law of the host government and in its own courts. As stated earlier, these declarations were backed by a majority of developing states but by virtually no developed countries. Naturally it adversely affected the inflow of foreign investment. Even though the developed and developing countries had difference of opinions on the standards for treatment of foreign investment or the content of the international law that governs it, they had no two opinions about the need for foreign investment. It was also understood that the most important aspects of any potential investment are financial (i.e., the potential to earn a reasonable profit) and legal (i.e., the ability to protect the corpus of the investment and its profit – making potential from confiscation, either directly or through unreasonable interference). Prudent investors will not risk substantial capital in a foreign enterprise unless the financial prospects are promising and the legal structure is sufficient to protect the investment. These elements are the sine qua non of a prudent investment.
Effect of Globalization:
Then came the era of economic revolution called “Globalization”. Whatever be the contradictory opinions about the concept of globalization, the fact remains that the international community strongly encouraged foreign investment. It paved way to jump start some economies, an improved infrastructure, better schools and hospitals. Psychologically, it provided economic role models, generated financial incentives and created hope. According to Foreign Direct Investment Trends and Statistics, (International Monetary Fund, Statistics Department, 2003), as of the end of 2001, the book value of the world’s FDI stood at approximately $6.8 trillion. Foreign affiliates employ about 54 million people, and their sales have amounted to almost US $19 trillion. Thomas Friedman attributes the explosive growth of free market globalization to three factors; the democratization of technology, the democratization of finance, and the democratization of communications. The fact that these three elements of economic growth are more accessible to everyday people helps to explain why today, as Friedman says it, "free markets and free trade produce far greater incomes for a society as a whole".(3) But the foundation to this remains the implementation of an effective tool for resolution of disputes and its proper enforcement, so that the trade and commerce can function smoothly. The world became smaller and a more interdependent market place. Manufacturers and service providers started having clients throughout the world. The world became more deeply connected and became “flat” as formulated by Thomas Friedman(4) . When disputes arose in international commercial arena, parties were reluctant to litigate in courts due to numerous jurisdictional, procedural and substantive obstacles. Globalization and interdependence, as well as profound international conflict, made the theory and practice of alternative methods to resolve disputes increasingly important. The deficiencies and failures of traditional methods of dispute settlement (diplomatic protection and action in domestic courts) lead to the idea of getting direct access to effective international procedures, especially arbitration. It carried advantages for both the investor and the host state. The advantage for the investors being that they gain access to an effective international remedy and for the host state being that by offering an international procedure for dispute settlement it improves its investment climate and is likely to attract more foreign investment and moreover by consenting to international arbitration the host state shields itself against other processes, notably diplomatic protection(5) . The need for modifying arbitration laws and procedures, especially for international matters, was felt as the need of the hour.
Fine-tuning Dispute Resolution Llaws – Globally:
Investor-State arbitration and in particular arbitration based on international investment treaties was not considered merely a dispute resolution method, it was also a structure of global governance. In the last 25 years most countries in the world have adopted new or modernized their legislation in respect of international commercial arbitration. It was not basically as a result of law reforms, but mostly as a result of increase of international trade relations and the need for enabling global trade and commerce. As we know, the United Nations Commission on International Trade Law (UNCITRAL) was established by the General Assembly resolution on 17th December 1966, with promotion of the progressive harmonization and unification of the law of international trade as its objectives. The Commission consisted of as many as thirty-six states from various geographic regions and different economic and legal systems of the world. The Commission, after deliberations on various aspects of arbitration on international trade and commerce, adopted the Model Law on 21st June 1985. Since the model law is not a treaty, it does not compel the state adopting it to enact a national law on that basis. But there were obvious advantages in following its terms. The General Assembly by its resolution of 11th December 1985 made recommendations as follows: “All states give due consideration to the Model Law on International Commercial Arbitration, in view of the desirability of uniformity of law of arbitral procedure and the specific needs of international commercial practice.” Several countries have enacted law to give legal force to the model law within their jurisdiction.
Dispute Resolution System – Indian Scenario:
Ancient India had many traditions of ADR (it could be mediation, arbitration or even a hybrid of mediation and arbitration) upto the medieval period. The affairs of the community were generally managed by a single headman whose position was either hereditary or elective. During the years, administration of justice underwent various changes and developments and adopted various types and compositions. It even had various stages of appeals. The king became the ultimate judge. The scene changed with the arrival of the East India Company(6) . The Anglo-Saxon, formal dispute resolution process or the Court system, where state institutions conducting public, formal proceedings that result in binary, win-lose remedies, subsequently enforced through social control over the losing party was established. But even then, the importance of the determination of disputes by arbitrators was well recognized. One of such method was through the institution of Panchayat or Village head. They proceeded in an informal way untrammeled by the technicalities of procedure and the laws of evidence. The advantage of this system lay in its location at the grass root level. However in British India, the Panchayat system underwent considerable changes. Commencing from 1772, a number of Regulations were made – the Legislative Council, for India was established in 1834 and subsequently in 1857, the procedure of Civil Courts was codified except those established by the Royal Charter. Gradually the importance of arbitration as a primary method of dispute resolution lost its significance. The reason was quite obvious. Even though arbitration was prevalent under the Roman law and in the Greek civilization since the sixth century BC, the attitude towards arbitration at its inception in England was generally hostile. There was a policy against agreements ousting jurisdiction of courts. Such agreements were considered as void and against public policy.
Change in Indian Scenario – Economic Exigency:
Arbitration in independent India was governed by the Arbitration Act, 1940. India had become a party to both the Geneva Protocol and the Geneva Convention on 23rd October 1937. For implementing and giving them effect, the Arbitration (Protocol and Convention) Act, 1937 (the 1937 Act), was enacted, incorporating the Geneva Protocol as its First Schedule and the Geneva Convention as its Second Schedule. India became a party to the New York Convention on 13th July 1960. In order to give legislative effect to the New York Convention, Foreign Awards (Recognition and Enforcement) Act, 1961 (the 1961 Act) was enacted in India, incorporating the New York Convention as its schedule. Even though India was a signatory to the Geneva and New York conventions and passed two legislations to enforce it, the apparent flaws in the arbitration laws, constant interference by national courts and difficulty in enforcing foreign awards added to the confusion. It was said that the way in which arbitration proceedings were conducted and without an exception challenged in courts, made lawyers laugh and legal philosophers weep, in view of unending prolixity, at every stage providing a legal trap to the unwary.(7) One of the primary grievances of investors and business groups, including domestic and international, had always been the delay, cost and uncertainty involved in litigation in the ordinary courts of the country. None of it would be finally disposed of for atleast 10 years from commencement. The only accepted alternative was Arbitration. The Indian economic miracle began in 1991. Mr. Manmohan Singh, the Finance Minister at the time and India's Prime Minister today, jettisoned the "democratic socialism" of the country's founding fathers. India decided to move away from an apparent mixed economy stance to adopt market oriented reforms with the aim of integrating with the industrialized nations of the northern hemisphere. It paved way for liberalizing of market and privatization of a large sector of Indian industries, which were till then State-owned or State-controlled. Added to that the IT industry began booming since the late 1990s, and the economy as a whole reflected growth by an average of 8 percent a year. India had to make a sincere and timely effort to make available a speedy, inexpensive and impartial alternative to litigation for resolving disputes, particularly involving foreign element. After extensive deliberations and consultations at all possible levels, it adopted the UNCITRAL Model Law, accepting the recommendation of UNCITRAL to ensure uniformity of law of arbitral procedures worldwide and produce the desired convenience to international commercial practice. The Arbitration & Conciliation Act, 1996 was enacted, consolidating and amending the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign awards. Major thrust and legislative intent was to achieve “speed and efficiency”, coupled with maximum independence from court intervention. The Act also for the first time gave statutory recognition to mediation.
Arbitration – Its Social Acceptability:
International Arbitration has made great advances in the past several decades in becoming the prime choice to resolve international disputes. The relative costs, speed and predictability of this dispute resolution system are unbeatable. While international arbitration does its best to bridge the cultural, legal and even ideological difference among parties from opposite sides of the globe, it has to be seen whether it has fulfilled its role as a dispute resolution method satisfying the requirements of the common people – whether arbitration has helped or contributed in the socio-economic rights of the poor segment or has helped nations in uplifting the poverty of the country.
Viewpoint – India:
When India attained freedom and people were celebrating in the streets with sweets and fireworks and when India’s first Prime Minister, Jawaharlal Nehru addressed the Constituent Assembly by his famous speech, “Tryst with Destiny”, with the historic words; “At the stroke of midnight hour, when the world sleeps, India will awake to life and freedom”, where he declared the end of the colonial era and called on citizens to recognize the promise and opportunity of the moment, only one man, Mahatma Gandhi, the father of the Indian nation, was not celebrating – because millions of people were still starving and because independence also meant partition of the former British India into two countries, India and Pakistan. Gandhiji stayed at home and fasted.(8) India has since made steady progress against poverty. A look at the 25-year period between 1981 and 2005 shows that India has moved from having 60 percent of its people living on less than $ 1.25 a day to 42 percent. The number of people living below a dollar a day (2005 prices) has also come down from 42 percent to 24 percent over the same period. Both measures show that India has maintained even progress against poverty since the 1980s, with the poverty rate declining at a little under one percentage point per year.(9) When it grew at 7.5% in the year 2005, even though it added 156 million more people to its population during the decade, the number of poor people in India fell by 37 million. Had the poverty remained the same, there would have been 361 million poor in India. Instead the economy lifted 94 million people out of absolute poverty during the period.(10) Globalization leading to opening up of economy, growth of international trade and investment, was cited as the growth of Indian economy. India has been widely heralded as a success story for globalization. India is now the fourth largest economy in the world and the second fastest growing economy in the world. A major reason for foreign investment is the comfort level foreign corporations feel in the country, directly influenced by the rule of law and, more specifically, a good exit strategy in the event of an unsuccessful venture. Exit strategies include a well developed dispute resolution system, accepted globally, viz., Arbitration. The giant country is expected to be the world's third-largest economy within the next three decades. Despite India’s significant success in reducing the number of the poorest of its poor – those living on less than a dollar a day – there are still a huge number of people living just above the line of deprivation.(11) About two-thirds of Indians today are still farmers, a number that puts many things in perspective. They live in villages that consist of a handful of tiny mud huts. India is a lesson in glaring contrasts. India is a land of the future, and yet parts of it are still a long way from the present. It is a country of the fabulously rich and the desperately poor. India might have several Silicon Valleys, but it has also three Nigeria’s within it – that is more than 300 million people living on less than a dollar a day. It is home to 40% of the world’s poor. But even if the India of poverty is the familiar India, the moving picture is more telling than the snapshot. India is changing. Mass poverty persists, but the new economic vigor is stringing things up everywhere.(12) Is globalization the reason for these glaring contrasts? Despite repeated promises of poverty reduction made over the last decade of the twentieth century, the actual number of people living in poverty across the world has actually increased by almost 100 million. This occurred at the same time that total world income actually increased by an average of 2.5 percent annually.(13) Growth in global income inequality characterizes the most recent wave of economic globalization.(14) It is said that many economists support income inequality because they endorse the idea that inequality provides incentives for effort and risk-taking entrepreneurship and thereby spurs efficiency and productivity, the gains from which will trickle down and will be helpful for the living standards of the poor over time. In fact, there are no definitive conclusions as to whether rising levels of income inequality cause faster growth(15) and as Joseph Stiglitz reminds us "the evidence against trickle-down economics is now overwhelming."(16) Is this the Malthusian Trap?(17) But anyhow, analyzing the pros and cons, it could be said that the promise of globalization outweighs the threat.(18) No doubt that for general progress to be assured, economic progress is a must. Within the country to bring about industrial peace which would accelerate economic growth is to ensure social justice to both the employees and employers by bringing about existence of harmony and cordial relationship between the parties. The Industrial Dispute Act, 1947 was passed in India with the above objective, providing for appointing /constituting conciliation officers, boards of conciliation, courts of inquiry and industrial tribunals. A proper and effective dispute resolution mechanism in the settlement of industrial disputes plays an important role in ameliorating the working and living conditions of labour class. Labour dispute management is one of the instruments for the improvement of wages and working conditions and for securing allowances for maintaining real wages, bonus and introducing uniformity in benefits and amenities. It also helps to avert many work stoppages by providing acceptable alternatives to direct action and to protect and promote the interest of the weaker sections of the working class, who are not well organized or are unable to bargain on an equal footing with the employer.(19) The concept of industrial harmony postulates the existence of understanding cooperation and a sense of partnership between the employers and the employees.(20) To achieve a higher rate of poverty reduction, India will need to address the inequalities in opportunities that impede poor people from participating in the growth process. We may have to evolve systems which could generate such a move and create an atmosphere of peace and harmony to ensure such a growth. The basic need for effective dispute redressal systems is highlighted again.
Justice & Value:
The Constitution of India calls upon the state to provide for free legal aid to ensure that opportunities for securing justice are not denied to any citizen by reason of economic inability. In fact, the Indian Constitution is wedded to equal protection and non-discrimination. But, we should never forget two values synthesized in the constitutional culture, as set out in the Preamble – unity and integrity of the nation and equality of opportunity of weaker sections. Without the latter becoming a sure reality the former may be mere rhetoric. Indian socio-economic conditions warrant highly motivated and sensitized legal service programs as a large section of population are either poor or ignorant or illiterate or backward, and as such, at a disadvantageous position. Therefore dispute resolution programs or justice delivery system has to guarantee administration of justice on the basis of equal opportunity. We cannot conceive justice which is not fair and equal. Effective access to justice is recognized as the most basic requirement, the most basic human right, in modern egalitarian legal system which purports to guarantee and not merely proclaims legal rights to all. But the real question is how we define the term “justice”. Should “justice” be defined by reference to external “objective” values, or by reference to the parties’ own “subjective” evaluation of the process.(21) Human development is an expansion of the real freedoms of people to pursue lives that they value and have reason to value. The traditional approach of evaluating the “success” of dispute resolution is to define intended outcomes and the criteria or indicators by which achievement of those outcomes can be judged. The norms could be many. For some, fairness may be more important than settlement of the dispute; for others, durability and long term impact may be more important than the immediate outcome. It is often said, “Laws and regulations tell you what you can do, but values tell you what you should do.” ADR, which includes arbitration and mediation, apart from its primary goal of dispute resolution also have broader goals such as capacity building, skills development and reductions in social friction. Then the big question is does ADR and in particular Arbitration provide “justice” and “value” effectively to all groups in the community, for example remote/rural communities, disadvantaged and poor people?
Where does Arbitration Stand?
It is true that arbitration as an internationally accepted dispute resolution method, instilled faith in international business community and it in turn promoted the growth of international investment and trade. Growth of international investment and trade in turn helped growth of economy and it helped uplift the poverty level. But, as stated earlier, is Arbitration accessible or affordable to underprivileged or marginalized groups at a micro and macro level? Does the poor or ignorant or illiterate or backward section of the population understand the Arbitration process? Arbitration is, in many respects, in crisis mode. Arbitration has become as slow and costly as litigation.(22) The “Indian” system of arbitration is mostly “ad-hoc” and therefore entirely dependent on the widely varied “surprise” fee factor of arbitrators, who are mostly retired judges. There is no pre-fixed arbitration rules and for the same reason the arbitration process gets enormously delayed. In most of government related arbitrations, arbitrators are “employee” or “officer” arbitrators nominated by the government, nullifying the basic concept of neutrality and fairness. International arbitrations or investor-state arbitrations have set up standards that in turn developed into a form of global governance. These arbitral tribunals exercise power in the global administrative space. If these proceedings are not properly or professionally conducted, the adverse awards not only affect India, but also have a ripple effect flowing down to all people, especially the poor. They are destined to bear the costs for which they had no direct access or control. On the other hand the traditional court system continues to be marred by delays and technicalities. Disputes are not resolved in a reasonable time. Also, in a country of continental dimensions, every disputant cannot afford to travel and contest in a court of law. Many a time delay frustrates litigants and they resort to extra-legal methods for resolving their disputes. This phenomenon has serious impact on the social, political and economic scenario of India. An effective justice system is a basic demand of the economically poor, disadvantaged, culturally amicable and peace-loving common people. It is true that enormous amount of industrial and economic prosperity is the need of the hour in India and that seems to be the only answer for economic upliftment. But no amount of prosperity is either possible or worthwhile, if it is not accompanied by social infrastructure, one of which is a good legal system and an efficient dispute redressal mechanism, which provide the citizenry the assurance that they live under the protection of an efficient legal regime.(23) We will have to polish up the tool of ADR to satisfy the needs of trade and commerce coupled with the aspirations and needs of the common people for speedy justice. Anyone anywhere, humble or high, agrestic or urban, man or woman, and whatever his religion, has to be afforded equal opportunity. We have to give renewed hope to millions of the India’s poorest and most vulnerable people and create the conditions for shared prosperity and security.
Need for Change:
I was greatly impressed and influenced by the catchphrase IBG/YBG formulated by Friedman.(24) It postulates the need for taking the initiative and responsibility of your actions. Friedman attributes IBG/YBG the main reason for the US financial recession. It means – do whatever you like now, because “I’ll be gone” or “You’ll be gone” when it becomes due. The same logic and reason for collapse would be applicable for ADR mechanisms also, if we do not take the responsibility of transforming it. There is a Chinese proverb that says, “When the wind changes direction, there are those who build walls and those who build windmills”. When the wind has definitely changed direction, we need to build the kind of windmills that can sustainably harness it.(25) So, when it is understood and accepted that ADR is the most suited dispute resolution method for promoting global trade and commerce and thereby to uplift the economy and conditions of the poor, why not accept it and modify it to suit the requirements of the common people as well. The change in the legal side to improve the process of mediation and arbitration is imminent and important. ADR should aim not only to render justice to parties, but also to achieve peace in resolving their disputes.(26) We have to bring in changes in the ADR methods, including arbitration and mediation, which could harmonize the economic and social needs, integrating the cultural values. As Mahatma Gandhi has said, “Be the change you wish to see in the world”.(27) We now see a sudden resurgence of interest in all things traditional, natural, holistic and alternative. This is true with dispute resolution also. The term “ADR” to mean “alternative” dispute resolution may be problematic as the term “alternative” may imply that the effectiveness of ADR is to be compared with the courts. This may not be the most appropriate point of comparison.(28) Law is a great instrument of change and we have to ensure that the system works according to the mandate of organic law of the country. The traditional system of adjudication through courts and the ADR mechanism must complement each other and act in the respective fields. The primary object of ADR is avoidance of vexation, expense and delay and promotion of the ideal of “access of justice” for all. ADR system has to provide cheap, simple, quick and accessible justice. It has to be distinct from normal judicial process. The World has become an incubator of stress, depression, hopelessness and fear. It seems that the rulers and governments of this world are bankrupt. They no longer offer innovative solutions for these ever increasing problems. Many of the time-weathered institutions are being tried by challenges that threaten to transform tradition and demand creative and innovative responses.(29) As Joseph Jenkins has said, "if men are ever to realize their potentials, they must master the art of living together peacefully... they must devise means of settling their differences by words instead of swords or warfare... it seems... that when the concepts of conciliation, mediation, and arbitration were introduced into human society, an immense stride was made in the problem of enabling people to live peacefully together."(30) The use of ADR should lead to a decrease in litigious or adversarial behaviour, foster better relationships between parties to disputes or result in higher levels of compliance with outcomes.(31) It should become a very attractive “alternative” for the people who have access to the other systems of formal dispute resolution methods. We should understand that for those who do not have access to justice due to several reasons – poverty, illiteracy, lack of awareness, etc. – convenience is not the deciding factor. They want to get their disputes resolved and for them speedy and efficacious decision is much more important than convenience. People with problems, like people with pain, want relief, and they want it as quickly and inexpensively as possible.(32) ADR should provide the opportunity to experience individualized justice through the exercise of self determination and the expression of participatory values.(33) With a little imagination ADR can be applied to almost any facet of life. ADR practices should provide a moral and practical alternative to compulsory dispute settlement by the State. It should flourish and constitute an integral part of civilized life. Gandhi’s gift to the world was in applying the spiritual truth of love and nonviolence to political and social struggles. As Martin Luther King, Jr. wrote in Stride Toward Freedom: “Gandhi was probably the first person in history to lift the love ethic of Jesus above mere interaction between individuals to a powerful and effective social force on a large scale.” We have to adapt the same principles in the field of dispute resolution as well. If humanity is to progress, Gandhi is inescapable. We may ignore him at our own risk.(34) The Dispute Resolution mechanism should integrate the cultural shades and values, people are familiar with. It has to be understood that cultural context influences how disputes and conflicts are construed and as to how they are best resolved.(35) There has to be a Multi-layer ADR system to address the need of the society.
Multi-layer ADR System:
Arbitration, as far as possible, should be confined to commercial matters. The system should be made speedy and cost effective, through professional and institutional mechanisms. The rules and fee for arbitration should be known to parties prior to the proceedings and should not be a “surprise” element. We should have specialized, trained and neutral arbitrators and professional institutional service to administer the process. Courts and judges should be sufficiently trained and informed about the limitations of court interference and need for effective enforcement of awards. The primary and basic option for dispute redressal should shift to voluntary mediation, whereby the process of self-determination enhances the development of the parties’ problem-solving capacities, their ability to craft individualized justice in their own terms based on their own interests and values.(36) As the former President of India, Mr. A.P.J. Abdul Kalam has said, “If nation is to have ethics for sustained economic prosperity and peace; society has to promote ethics and value system. If society is to have ethics and value system, families should adhere to ethics and value system.”(37) The objective should be to bring about a transformation of the value systems of disputants, so as to achieve a change in the hearts and minds of people that in turn deescalates violence and encourages community to manage difference peacefully. Community mediation programs, like IIAM Community Mediation Service(38) has the potential for transforming our conflictual society into a collaborative, problem-solving one. It can also help in restorative justice through its variety approaches and restoring the offender in community by giving correctional practice thereby giving everyone a second chance. There is no conflict without emotion. There can be no resolution of a conflict without addressing the underlying emotions that gave rise to it and sustained it. By remedying one group's misfortune other groups’ should not be hurt. The Court can only view rights and wrongs, through the legal lens. While getting the two sides together to talk is not a normal part of the judicial process, mediation makes it possible. It can also empower people, especially the oppressed sections of society and women to participate in the prevention and early intervention of conflicts as an alternative to institutional mechanisms. At the heart of the early community mediation movement is the principle of democratic participation, drawing on people rights and responsibilities and the involvement of networks of community organizations. It is not a philanthropic exercise but a serious, well thought out program for the long term gains of society. ADR has to evolve to satisfy the basic requirement of maintaining peaceful co-existence among the people as well the maintenance of equilibrium and growth of the society as a whole. The multi-layer process of Dispute Resolution should focus on the need, requirement and purpose of the people. The disputants should be free to choose the option and opt for those that offer the best quality service at the lowest possible prices. As Justice V.R. Krishna Iyer has said, we may weave those special facilities into the web of equality which, in an equitable setting, provide for the weak and promote their leveling up so that, in the long run, the community at large may enjoy a general measure of real equal opportunity.(39) As stated earlier, the primary dispute resolution system for social, family and labour issues should be voluntary mediation. The next level of commercial, trade and business disputes within the country should be a system of “med-arb”, i.e., where the voluntary mediation fails, the dispute will have to be resolved by arbitration, which has to be professional, neutral and inexpensive. There could be hybrid processes like “Neutral evaluation” or “Mini-trial”, which could complement or supplement mediation process. Then comes high stake commercial, contractual and business disputes, domestic and international, which could be resolved through highly professional, trained and certified arbitrators, assisted and administered by professional institutions with efficient staff and internationally accepted rules and fee schedules. There should be readily available community mediators, commercial mediators and arbitrators who can act as full-time professionals. The tool of ADR should be polished up to serve the needs of all.
Only a stable social society can aspire for economic growth and upliftment of the poor. We have to instill renewed hope to millions of the India’s poor and vulnerable people and create the conditions for shared prosperity and security. Only with basic communal harmony coupled with international trade and commerce, can India expect to become the world's third-largest economy within the next couple of decades with underlying prosperity for the poor.
(This paper was presented by the author at at the conference - "Poverty and the International Economic Legal System: Duties to the World's Poor" held at Basel, Switzerland on 21-22 October 2011.)
(Author: Anil Xavier is a lawyer and an IMI Certified Mediator. He is a charter member and the President of Indian Institute of Arbitration & Mediation (www.arbitrationindia.org). He is also a member of the Independent Standards Commission of the International Mediation Institute, The Hague, Netherlands and Committee Member of Asian Mediation Association. He can be reached at firstname.lastname@example.org)
(1) “Arbitration: History and Background” – Mustill, 1989 (6), Journal of international Arbitration
(2) “Reflections on the Philosophy of International Commercial Arbitration and Conciliation” – Jerzy Jakubowski in Schultz and Van Den Berg
(3) “The Lexus and the Olive Tree: Understanding Globalization” – Thomas L. Friedman
(4) “Hot, Flat & Crowded” – Thomas L. Friedman
(5) “Principles of International Investment Law” – Rudolf Dolzer / Christoph Schreuer
(6) The British East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China. The Company also came to rule large areas of India, exercising military power and assuming administrative functions, to the exclusion, gradually, of its commercial pursuits. Company rule in India, which effectively began in 1757 after the Battle of Plassey, lasted until 1858, when, following the events of the Indian Rebellion of 1857, and under the Government of India Act 1858, the British Crown assumed direct administration of India in the new British Raj. The Company itself was finally dissolved on 1 January 1874. (Wikipedia)
(7) Supreme Court of India in its decision dated 29/09/1981 in “Guru Nanak Foundation Versus Rattan Singh and Sons” (AIR 1981 SC 2075)
(8) “Poverty and Riches in Booming India” – Mathieu von Rohr
(9) “New Global Poverty Estimates – What it means for India” (World Bank - www.worldbank.org.in)
(10) Salil Tripathi on the Guardian Unlimited Web site (June 13, 2006) – Hot. Flat & Crowded – Thomas L. Friedman
(11) “New Global Poverty Estimates – What it means for India” – (World Bank - www.worldbank.org.in)
(12) “The Post-American World” – Fareed Zakaria
(13) “Globalization and Its Discontents” – Joseph E. Stiglitz
(14) "Has World Poverty Really Fallen?" – Sanjay G. Reddy and Camelia Minoiu – Review of Income and Wealth 3 (2007)
(15) "Globalization" – Wade
(16) "Is there a Post-Washington Consensus Consensus?" – Joseph E. Stiglitz
(17) Thomas Malthus’s famous 1798 treatise, “An essay on the principle of Population” – Disasters raised living standards by killing off large numbers of people, leaving fewer people to share the fixed pool of income. Growing wealth, on the other hand, caused people to have more babies and live longer, so incomes fell, as, over time, did population.
(18) “The Lexus and the Olive Tree: Understanding Globalization” – Thomas L. Friedman
(19) Government of India Gazette (1969) page 325
(20) Government of India Gazette (1969) Report of the National Commission on Labour p. 53
(21) “A Framework for ADR Standards” – Canberra, Commonwealth of Australia, NADRAC (2001)
(22) “Is Creeping Legalism Infecting Arbitration?” – Gerald F. Phillips
(23) Commendation on IIAM CMS by Mr. Justice M.N. Venkatachaliah, former Chief Justice of India
(24) “Hot, Flat & Crowded” – Thomas L. Friedman
(25) “Hot, Flat & Crowded” – Thomas L. Friedman
(26) “Against Settlement” (93 Yale L. J. 1073 (1984) – Owen Fiss
(27) “Be the change you wish to see: An interview with Arun Gandhi" – Carmella B'Hahn
(28) NADRAC (2002) ADR Terminology: a discussion paper and (2003) Report of submissions Canberra, Commonwealth of Australia
(29) “Unleash your Purpose” – Myles Munroe
(30) “The Peacemakers” – Joseph Jenkins in Georgetown Law Journal
(31) “The Political and Economic Roots of the 'Adversary System' of Justice and Alternative Dispute Resolution” – Wanger P (1994)in The Ohio State Journal on Dispute Resolution
(32) Keynote address by former US Supreme Court Chief Justice Warren Burger in the “National Conference on the Causes of Popular Dissatisfaction with Administration of Justice" conducted under the sponsorship of the American Bar Association in 1976.
(33) “The Merger of Law and Mediation” – Jacqueline Nolan-Haley
(34) “Stride Toward Freedom” – Martin Luther King, Jr
(35) “Cultural Constructs of Conflict and Peace” paper delivered to NADRAC conference ‘ADR: a better way to do business’
(36) “The Merger of Law and Mediation” – Jacqueline Nolan-Haley
(37) Address during the celebration of National Colloquium on Vision of a Noble Family and Ideal Nation
(38) IIAM Community Mediation Service (IIAM CMS) conceived by the Indian Institute of Arbitration & Mediation (IIAM) is intended to provide “Community Mediation Clinics” in the villages of India with the motto; “Resolving conflicts; promoting harmony” – For details, see: http://www.communitymediation.in
(39) Justice V. R. Krishna Iyer, Former Judge, Supreme Court of India in his judgment in “Jagdish Saran and Others Versus Union of India and Others”