India's bid to be arbitration hub hit by mediator council delay
Summary
The delays in setting up the MCI may have an impact on the overall speed of dispute resolution in the country, hurting India's aim to become a hub for out-of-court dispute resolution mechanisms such as arbitration and mediation.
NEW DELHI
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The search for candidates to fill up the Mediation Council of India (MCI) is still ongoing, said attorney general R. Venkataramani on Tuesday, in a sign the creation of the body that will govern and regulate mediators and mediation institutions will get further delayed.
The MCI was created under the 2023 Mediation Act, with powers to decide best practices for mediators, as well as handle the duty of registering mediators.
At a media briefing in Delhi, Venkataramani said that during consultations with the Union law minister regarding the personnel to occupy the MCI, he had rejected a few shortlisted candidates.
The delays in setting up the MCI may have an impact on the overall speed of dispute resolution in the country, hurting India's aim to become a hub for out-of-court dispute resolution mechanisms such as arbitration and mediation. Foreign investors also use the quality of dispute resolution within a jurisdiction to ascertain the ease of doing business there.
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A key function of the MCI is to decide the rules and procedure of mediation in India, and give mediators the authority to conduct such dispute resolution procedures.
In mediation, a third party engages with the disputants to bring them to a consensus – often a compromise for both sides. But, the agreement that both parties come to is not legally binding, unlike the decision arising out of arbitration which can be enforced and executed by a court.
To be sure, certain aspects of the MCI such as salaries have been notified by the government, but the MCI has not been created yet.
Mediation push gathers steam
Developing standards, rules, and procedures for mediation assumes importance as it is a crucial procedure for resolving commercial disputes.
Under section 12A of the Commercial Courts Act, 2015, mediating a commercial dispute is mandatory before approaching a Commercial Court. The only roundabout to skipping the mandatory mediation is to seek ‘urgent interim relief’ from the court. Urgent interim relief refers to when a court stays further action against a disputed asset till it reaches a verdict.
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But in a draft amendment to the Act published for public consultation on 8 November last year, the Union law and justice ministry removed the ‘urgent interim relief’ provision, making mediation completely mandatory in commercial disputes.
Commercial disputes are an umbrella term for disputes related to transactions between merchants and traders, import-export, carriage of goods, construction contracts and tenders, franchising and distribution agreements, intellectual property, and insurance, among others.
The government has also indicated a preference for mediation over arbitration. That is due to high costs and long-winding timelines in arbitration, which have not benefited the government, the biggest disputant in the country.
On 3 June 2024, the Union finance ministry published an office memorandum to all government entities in the country asking them to reduce their exposure to arbitration matters in public procurement contracts where the disputed value is over ₹10 crore.
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This created a public outcry from practitioners, who claimed that this move would be contrary to the plan of making India an arbitration hub. Mediation is a cheaper and faster alternative to arbitration, the finance ministry advisory said.
