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ADR - 5TH MAY - V K GUPTA - 1st LECTURE
- 1. 1 Alternate Dispute Resolution (Commercial Conciliation & Arbitration) Company of Master Mariners 5th & 6th May 2018 Company of Master Mariners 5th & 6th May 2018
- 2. 2 OVERVIEW OF THE COURSE 1. Difficulties / problems in State Administered Mechanism 2. Advantages / Disadvantages of ADR 3. Mariners’ role in shipping disputes 4. Statutory provisions 5. Practical suggestions
- 3. 3 Alternate Dispute Resolution • What is a dispute? • State’s responsibility in civil disputes • Alternatives to State administered mechanism
- 4. 4 DRAWBACK OF THE COURTS 1. Long delays before getting to trial 2. No judges with domain knowledge - especially in developing economies 3. Time consuming – impact on Executives’ effort and time on main business 4. Overkill by lawyers – multiple depositions & motions (paper wars) 5. Probability of Appeals -- further delays, costs and uncertainties 6. Problems in enforcing foreign judgments 7. High Costs 8. Adverse publicity
- 5. 5 The Court System – in a nutshell!
- 6. 6 ADVANTAGES OF ADR 1. PARTY AUTONOMY 2. COSTS - IF PROPERLY CONTROLLED 3. SPEED 4. FINALITY 5. SIMPLE / SEMI FORMAL PROCEDRES 6. DOMAIN KNOWLEDGE OF ARBITRATOR 7. HOWEVER, ALL DISPUTES MAY NOT BE RESOLVED THRU ADR
- 7. 7 Alternatives to Courts - I Accord by Negotiation –best alternative 1. Careful Evaluation – preferably by a detached / neutral expert to negotiate from an “Informed” position; 2. Correspond on “Without Prejudice” basis; 3. Use polite language; Avoid adversarial stance – hostility has no place and serves no purpose; 4. Do not comment on merits of own case or weakness of the other party’s 5. Save Limitation of time - have a broad understanding of applicable prescriptive provisions. Conciliation / Mediation 1. Facilitated dialogue; 2. Not based on legal rights; 3. Mediator can talk separately and in confidence – Hence parties can express their anxieties; 4. Not appealable as court decree by consent; 5. Opportunity to weigh the various alternatives to a negotiated settlement
- 8. 8 Alternatives to Courts - II ARBITRATION 1. Submission of disputes to one / more independent private persons – often with commercial experience in the concerned business; 2. “Party Autonomy” the foundation; 3. Legally binding and enforceable through the Courts; 4. Semi formal procedures; 5. No rigid rules of evidence – principles of natural justice 6. Arbitration statutes based on UNICITRAL model – hence international uniformity;
- 9. 9 Arbitration – Advantages & Disadvantages ADVANTAGES 1. Speedier; 2. Cheaper (Provided carefully controlled / managed ab-initio); 3. Confidentiality; 4. Commercial Arbitrators with specific subject expertise; 5. Limited discovery – controlled by parties; 6. Commercial view of evidence; 7. Not bound by precedence; 8. Finality of Award – very limited scope for appeals / challenge (Advantage winner); 9. Easy enforceability – through provisions of NY Convention (Advantage winner); DISADVANTAGES 1. Not all disputes can be referred to arbitration; 2. No RIGHT of discovery – (unless agreed by parties or permitted by arbitrators) 3. No RIGHT of appeal (Disadvantage winner);
- 10. 10 MEDIATION OR ARBITRATION? MEDIATION ARBITRATION 1 INEXPENSIVE RELATIVELY COSTLIER 2 SWIFT RELATIVELY LONGER 3 SIMPLE MORE FORMAL THAN MEDIATION 4 ALLOWS PARTIES TO ADJUST SCOPE OF DISPUTE ONCE REFERRED – DIFFICULT TO ADJUST THE SCOPE 5 NOT CHELLANGEABLE / APPEALABLE CHALLENGEABLE ON LIMITED GROUNDS 6 CONTINUED CORDIAL RELATIONS ADVERSARIAL PROCEEDINGS 7 FLEXIBLE SOLUTIONS PROCEEDS ACCORDING TO AGREED PROCEDURES 8 EQUITABLE – WIN, WIN FOR BOTH AWARD AS PER LAW 9 ANY PARTY MAY DISCONTINUE AT ANY TIME CANNOT TERMINATE UNLESS BOTH PARTIES AGREE
- 11. 11 INSTITUTIONAL –v-AD H0C ARBITRATION ADVANTAGES OF INSTITUTIONAL ARBITRATION: 1. Standard & time tested Arbitration Clauses; 2. Comprehensive Rules – known in advance; 3. Maintain panel of proven arbitrators; 4. Institution have powers to appoint arbitrators; 5. Institutions – rather than arbitrators, communicate; 6. Some institutions provide assistance in drafting Awards 7. Arbitrators’ fees are prescribed & known in advance
- 12. 12 DISADVANTAGES OF INST. ARBITRATION 1. Strict & often inflexible time frames for submissions; 2. Overly bureaucratic 3. Costs often based on amount in dispute – can sometimes be more expensive than ad-hoc arbitration;
- 13. 13 ADR Procedures Cheap & Fast- (but only with advance preparation and control)
- 14. 14 MARINERS’ ROLE 1. As independent evaluator / advisor 2. As Expert Witness 3. As advisor in witness examination 4. As arbitrator
- 15. 15 EXPERT WITNESS CONDUCT (EXPERT NOT A HIRED GUN) 1. PARAMOUNT DUTY TO HELP THE TRIBUNAL WITH HIS EXPERTISE 2. INDEPENDENT AND SEEN TO BE SO 3. OBJECTIVE & UNBIASED – NOT AN ADVOCATE 4. DO NOT OMIT MATERIAL DETRACTING FROM OWN OPINION 5. DO NOT DEPOSE OUTSIDE YOUR EXPERTISE 6. STATE IF DATA / INFO INSUFFICIENT TO EXPRESS DEFINITIVE OPINION 7. QUALIFY YOUR OPINION IF IT IS NOT THE WHOLE TRUTH 8. AMEND / CORRECT YOUR OPINION AFTER SUBMISSION; IF NECESSARY 9. DO NOT LET ADVOCATES DRAFT YOUR AFFIDAVIT
- 16. 16 LEGISLATIVE HISTORY • Indian tradition – Panchayati System – Binding Authority – fear of ex- communication and respect commanded by the Elders in the Society; • 1772 to 1883: Various Regulations passed in Bengal, Madras and Bombay Presidency empowering Courts to refer disputes to Arbitrations; • CPC of 1859: Permitted reference to arbitration in pending suits and provided procedures for arbitration; • Contract Act 1872: Section 28 excepted arbitration agreements as “agreements in restraint of legal proceedings” • Arbitration Act 1899: Permitted present and future disputes to the Arbitration of a named or un-named arbitrator • Arbitration Act 1940: Repealed the 1899 Act and the provisions regarding arbitration in the CPC of 1908 • UNICITRAL MODEL LAW ON COMMERCIAL ARBITRATION – ADOPTED 1985: • Arbitration Act 1996:
Editor's Notes
- Occasional Disputes – an inseparable part of doing business. But when they do occur, the objective should be to: Resolve them earliest; Least cost in Time and Money – So you can get on with your main business At best advantageous terms; and Continue to maintain cordial business relations. When we first thought of this course, we had no clearly delineated lesson plans. COURSE OBJECTIVES: Introduce ship-masters and commercial executives to ADR; Out-line of statutory provisions; Practical suggestions to avoid delays and minimise costs. Mariner’s role in shipping disputes C. Total period about 30 minutes to cover the topics shown
- Delays: Commercial cases filed in 1996 – coming up for directions now. Evidence goes cold – witnesses die or untraceable – Claims which were large at the time appear insubstantial –difficult to carry forward contingent liabilities. Back Log of cases in India so high that CPC amended to refer parties to mediation / conciliation / arbitration – even without the consent of parties. The fact Indian judiciary at highest levels trying promote ADR and Lok Adalats shows court system cannot cope. People rushing to Consumer Courts. Judges: By and large Indian judiciary is good at technical rules of interpretation – but very few lawyers with commercial practice ever agree to be judges. Judges have very limited exposure to commercial disputes in India - indeed in most developing economies – have had persons on the Admiralty Bench who spent a life time in family courts hearing matrimonial disputes. Paper Wars: A senior lawyer was explaining to young potential lawyers what they can expect in litigation practice. He said, “You spend years and years in pretrial motion practice. I smother the other side with papers and they smother me with papers until we wear each other out and the judge knocks my head against his head and we settle. It takes around three or four years.” A bad lawyer can let a case drag out for several years. A good lawyer can make it last even longer. Not uncommon to have two / three appeal stages in India – SLPs in Supreme Court. Lawyers can advise “WHAT SHOULD HAPPEN – NOT WHAT WILL HAPPEN” Foreign judgments – enforcement thru Part II / Part III of the Act – NY / Geneva Conventions. HIGH COSTS: Star value of certain seniors because of overload of courts and quality of the bench-- do not read papers – CEMENT CASE
- DO YOU WANT TO BE THE THIN SKNNY GUYS FEEDING THE FAT LAWYER / JUDGE?
- Accord by Negotiation: By far the best. But, before reaching a settlement, review in-house at a senior level. Get neutral and expert evaluation and correspond on without prejudice basis. Invoke arbitration to save limitation of time. Mediation: Settlement through negotiation facilitated by an expert; Mediator can talk separately to parties and suggest compromise terms – not necessarily based on legal rights / equity; Offers rare opportunity to parties to directly express their interests and anxieties about the dispute and create solutions uniquely tailored to their individual needs. Once compromise reached – consent terms submitted to court and binding. NOT APPEALABLE; Confidentiality In India, mediation has not worked with large corporate and PSUs – working well with family controlled businesses – example of Dong… family dispute. Mediator must be a good listener – have subject-specific knowledge; non judgmental; worldly wise and good judge of human nature. WATNA; BATNA; MLATNA
- Conciliation: Mostly employed in Civil law countries; In common law countries, limited to labour & consumer disputes; Also NOT BINDING BUT SLIGHTLY DIFFERENT FROM MEDIATION. Conciliator plays a relatively direct role in the actual resolution of a dispute and is seen as an authority figure who is responsible for figuring out the best solution for the parties as distinct from a mediator who works together with the parties as a partner to assist them in finding the best solution to further their interests Conciliation and mediation both look to maintain an existing business relationship Arbitration: Institutional arbitrations: Some institutions are good – some not so good. Examples ICA; FICCI; IMC; Stock Exchanges; Cotton Exchanges; LMAA; LCIA; GAFTA; ASTA and ICC. Most institutions permit choice of venue. Advantages of institutional arbitration: Time tested Rules of procedures; Panel of “Expert” Arbitrators often with subject specific knowledge and experience Prescribed arbitrators fees – either based on time or amount in dispute; Large number of precedents where contracts prescribed by the instituton concerned (GAFTA; FOSFA; ASTA; COTTON TRADE) DISADVANTAGES OF INSTITUTIONAL ARBITRATION” Cannot choose arbitrator; Cannot control procedures; Cannot control fees – if based on “Amount in Dispute” but the points for determination are short and not time consuming, end up paying very high fees.
- To avail of the advantages of arbitration, parties must be vigilant from the very moment the probability of dispute appears on the horizon. Re: Not bound by precedence: Examples of Great Circle track under time charter (The Hill Harmony) and Demurrage under voyage charters (WHEN Bombay and Calcutta decisions no followed). DEMURRAGE" - means the money payable to the owner for delay for which the owner is not responsible in loading and/or discharging after the lay time has expired."
- Not a Gourmet meal –not a perfect solution – but if handled right, permits you to get on with your business and resolve disputes at a relatively low cost.