The Types of Alternative Dispute Mechanism, and What Each Is Good For

CONCILIATION. A neutral assists and MAY formulate and reformulate the terms of a possible settlement, so the difference from mediation is that the conciliator proposes. Under Part III of the Arbitration and Conciliation Act 1996 the settlement agreement has the same status and effect as an ARBITRAL AWARD on agreed terms, which makes it enforceable as a decree, and that is its principal advantage over mediation as the Act stood before 2023.

ARBITRATION. A tribunal chosen by the parties under an arbitration agreement decides the dispute and makes an AWARD. Merits: a binding and enforceable result; choice of a decision-maker with the relevant expertise; procedural flexibility; confidentiality; and enforceability abroad under the New York Convention. Demerits: cost, which for a three-member tribunal can exceed litigation; delay in practice; the narrow grounds of challenge mean an error is usually uncorrectable; and it is unavailable without an agreement, so it is useless for the disputes of people who never signed one. That is [Arbitration].

LOK ADALAT. Constituted under the Legal Services Authorities Act 1987. Merits: NO COURT FEE, and a refund of fee paid; enormously fast, a matter being settled in a single sitting; near the parties; and the award is a DECREE of a civil court which is final and against which NO APPEAL lies. Demerits: it can only SETTLE, so if the parties do not agree the case returns; the pressure to settle in a mass sitting is real; and the finality that is its virtue is also its risk, because a party who settles unwisely has no appeal. That is [Lok Adalat].

PERMANENT LOK ADALAT. For PUBLIC UTILITY SERVICES under section 22B, which is different in kind because it may DECIDE THE MERITS if conciliation fails, up to a pecuniary limit. It is the only Lok Adalat that adjudicates, and it is the row students most often get wrong.

THE HYBRIDS. MED-ARB, in which the parties mediate and, failing settlement, the same or another neutral arbitrates; ARB-MED, in which an award is made and sealed and the parties then mediate; the MINI-TRIAL, in which counsel present summaries to the parties' own decision-makers with a neutral present; EARLY NEUTRAL EVALUATION, in which a neutral gives a non-binding assessment of the merits early; and DISPUTE RESOLUTION BOARDS in long construction contracts. The objection to med-arb is that a party will not speak freely to a person who may later decide against him.

Merits and demerits, as a general answer

The merits of the alternatives as a class. SPEED, because there is no docket and no adjournment; COST, because there is no court fee and fewer hearings; ACCESSIBILITY, because the forum can go to the parties; CONFIDENTIALITY, which litigation cannot offer; PARTY CONTROL over both the process and the outcome; the PRESERVATION OF THE RELATIONSHIP; the ability to fashion a remedy a court could not order; and, for the system, the removal of cases from an overloaded docket.

The demerits as a class. NO PRECEDENT, so the rule never becomes public and the same dispute recurs; INEQUALITY OF BARGAINING POWER operates unchecked, and a settlement records it; NO APPEAL in most of them, so an error stands; ENFORCEMENT depends on the character of the outcome, and a bare mediated agreement must be sued upon unless it has statutory force; CONFIDENTIALITY also shields wrongdoing from public scrutiny; the possibility of COMPULSION where a court refers unwilling parties; and the charge that it is a SECOND-CLASS justice for those who cannot afford the first.

The rule for choosing. Ask four questions. Are the parties roughly EQUAL in bargaining power? Must the RELATIONSHIP continue? Is an ENFORCEABLE order needed at once? And is the sum at stake larger or smaller than the cost of the process? Those four answer every question MU can set about which mechanism suits which dispute.

What the statutes say

Section 89 of the Code of Civil Procedure, and Afcons: five processes, arbitration, conciliation, judicial settlement, Lok Adalat and mediation, of which the first two require CONSENT; the two lists of suitable and unsuitable categories; and Order X rule 1A.

The Arbitration and Conciliation Act 1996, Part I for arbitration and Part III for conciliation, with section 74 giving a conciliation settlement agreement the status and effect of an arbitral award on agreed terms.

The Legal Services Authorities Act 1987, sections 19 to 22E for the Lok Adalat and the Permanent Lok Adalat.

The Mediation Act 2023, which for the first time gives mediation a statute of its own, including PRE-LITIGATION mediation and the enforceability of a mediated settlement agreement as a judgment or decree. How much of it is in force is [Mediation and Conciliation].

The Commercial Courts Act 2015, section 12A, which makes PRE-INSTITUTION MEDIATION mandatory in a commercial suit that does not contemplate urgent interim relief, and which the Supreme Court has held to be MANDATORY, a suit filed in breach being liable to rejection.

And the Consumer Protection Act 2019, which provides for mediation cells attached to the consumer commissions.

A worked example

MU sets: "Explain the various types of alternative disputes mechanism and their merits and demerits." Fifteen marks.

Open with the four axes, and put the table down: who decides, what is applied, what comes out, and enforceability.

Then take the six in order, negotiation, mediation, conciliation, arbitration, Lok Adalat and the hybrids, with one sentence of definition, two merits and two demerits each.

Make the three distinctions that carry marks. That a MEDIATOR does not propose and a CONCILIATOR may; that a Lok Adalat AWARD is a decree against which NO APPEAL lies; and that a PERMANENT Lok Adalat for public utility services may DECIDE the merits, which no other Lok Adalat may.

Then the general merits and demerits, in the two lists above.

Then the statutory frame in five lines. Section 89 with Afcons; the Act of 1996 for arbitration and conciliation; the Act of 1987 for Lok Adalats; the Mediation Act 2023; and section 12A of the Commercial Courts Act 2015.

And close on the rule for choosing. Equality of the parties, continuation of the relationship, the need for an enforceable order, and the size of the claim against the cost of the process.

What this does NOT mean

It does not mean the mechanisms are interchangeable. Each answers a different defect, and the wrong one produces a worse outcome than a court.

It does not mean mediation and conciliation are the same. The conciliator may propose terms; the mediator does not.

It does not mean every Lok Adalat only settles. The Permanent Lok Adalat for public utility services may decide the merits under section 22C where conciliation fails.

And it does not mean alternatives are always cheaper. A three-member commercial arbitration is frequently more expensive than a suit, and the saving is in time and confidentiality rather than in money.

Quick revision

Four axes: WHO DECIDES, WHAT IS APPLIED, WHAT COMES OUT, and WHERE. Negotiation, parties alone, agreement enforceable as a contract. MEDIATION, a neutral ASSISTS and does NOT propose; settlement; relationship preserved; no precedent; bargaining power unchecked. CONCILIATION, the neutral MAY formulate and reformulate terms, so he proposes; under section 74 of the Act of 1996 the settlement has the status and effect of an ARBITRAL AWARD on agreed terms. ARBITRATION, a chosen tribunal DECIDES; an AWARD enforceable as a decree with narrow challenge; costly, and needs an agreement. LOK ADALAT, the members persuade; no court fee and a refund; an AWARD deemed a DECREE with NO APPEAL; it can only settle. PERMANENT LOK ADALAT for PUBLIC UTILITY SERVICES may DECIDE the merits under section 22C. Hybrids: med-arb, arb-med, mini-trial, early neutral evaluation, dispute boards.

Merits as a class: speed, cost, accessibility, confidentiality, party control, preservation of the relationship, remedies a court cannot order, and docket relief. Demerits: no precedent, unequal bargaining power, no appeal, enforcement depending on the form of the outcome, confidentiality shielding wrongdoing, possible compulsion, and the second-class-justice charge. Choosing: are the parties equal, must the relationship continue, is an enforceable order needed at once, and is the claim larger than the cost of the process.

Statutes: section 89 CPC with Afcons and Order X rule 1A; the Arbitration and Conciliation Act 1996, Parts I and III; the Legal Services Authorities Act 1987, sections 19 to 22E; the Mediation Act 2023 with PRE-LITIGATION mediation; section 12A of the Commercial Courts Act 2015, MANDATORY pre-institution mediation absent urgent interim relief; and the mediation cells under the Consumer Protection Act 2019.

Test yourself

1. Distinguish mediation from conciliation. In both a neutral third person assists the parties, and in neither does the neutral decide. The difference is that a CONCILIATOR may formulate and reformulate the terms of a possible settlement, so he proposes, while a MEDIATOR only assists the parties to reach their own agreement. Under section 74 of the Arbitration and Conciliation Act 1996 a conciliation settlement agreement has the status and effect of an arbitral award on agreed terms.

2. What is distinctive about a Lok Adalat award? It is deemed to be a DECREE of a civil court, it is final, and NO APPEAL lies against it. The Lok Adalat can only bring about a settlement; if the parties do not agree, the case returns to the court.

3. What is a Permanent Lok Adalat, and why is it different? A Lok Adalat constituted under section 22B of the Legal Services Authorities Act 1987 for PUBLIC UTILITY SERVICES, which may DECIDE THE MERITS of a dispute where conciliation fails, up to a pecuniary limit. It is the only Lok Adalat that adjudicates rather than merely settles.

4. Give four merits and four demerits of the alternatives as a class. Merits: speed; lower cost; accessibility, since the forum can go to the parties; confidentiality; party control; preservation of a continuing relationship; remedies a court could not order; and relief for an overloaded docket. Demerits: no precedent; unequal bargaining power operating unchecked; no appeal in most of them; enforcement depending on the form of the outcome; confidentiality shielding wrongdoing; compulsion where a court refers unwilling parties; and the charge of second-class justice.

5. What four questions decide which mechanism suits a dispute? Whether the parties are roughly equal in bargaining power; whether the relationship between them must continue; whether an enforceable order is needed at once; and whether the sum at stake is larger or smaller than the cost of the process.