Arbitration: A Missing Link
If the taxonomy(a hierarchical system used for classifying organisms into species)is applied in the legal field, we can classify different departments of law into family. There are eight ranks in taxonomy; family is one of such ranks which is classified between order and genus. In that situation, we may classify ‘Dispute Resolution Process’or‘Justice Delivery System’into a family If judicial process is a family, then adversarial system qualifies to be genus of the ‘Justice Delivery System’. Then Courts, Tribunals and Quasi-Judicial Tribunals qualify to be species of ‘Adversarial system’. Similarly if ADRS is a genus, then Negotiation, Mediation, Conciliation and Arbitration would be different species of ADRS. (Organisms that share many features in common and can breed with each other and produce fertile offspring are members of the same species. Related species are grouped into genus. Genera are grouped into families and so on)
Continuing this inter-disciplinary approach, it is important to note that, genera and species are classified based on the unique and common characteristics. In this regard, ADRS as a genus possessing three important characteristics, namely, autonomy of the parties, here the parties enjoy complete freedom to enter and exit the ADR process. Secondly the process ends with an outcome which may differ in characteristics or nomenclature (Settlement or Award) but it is always the ‘interests’ that are protected rather than rights, liabilities or legal position of the parties. Third and lastly, the process is takes into account relations; either commercial or social over the value of the contract. Social values are at the centre of the process rather than rights and liabilities.
These characteristics would be foundation stone for all the species of ADRs. It is important to note that, all legal institutions are living organic beings; they do undergo gradual changes through evolution process. But such gradual changes cannot derogate fundamental characteristics. In the light of these arguments, it is important to understand the process of arbitration in the light of these fundamental characteristics.
The party autonomy is the first characteristics. Negotiation, Mediation and Conciliation ensures party autonomy in all aspects of the proceedings. The party autonomy extends from commencement of ADR proceedings to departing them. In addition autonomy also extends to other important aspects of the proceedings like ‘not to agree’, ‘replacing the mediator’, ‘controlling the procedure’ including others. However, arbitration doesn’t seem to ensure same autonomy. The parties have freedom or autonomy to enter arbitration process, but exiting the process is not possible until other party permits such exit. The party do not have ‘right not to agree’. Replacing arbitrator is a cumbersome process at the will the Arbitral Tribunal. The procedure is controlled by Arbitral Tribunal.
Withdrawal of such autonomy hits at the fundamental characteristics of ADRs, which forms the definition of the specie. This change pushes arbitration to the far end of the boundary of the ADRs field. Any more fundamental changes to the characteristics would expunge arbitration out of ADRs process.
Next characteristic is decision making process. It is important to note that characteristic of ADRs includes‘interest based justice’. The individually processes in ADRs may vary from one another, but the decision making always based on the interest of the parties. To put the whole discussion in perspective, let’s take an example.
Two brothers are undergoing partition. One has secured job in a city and his visit to village is restricted to family gatherings and festivals. The other has taken up agriculture, settled in the village and takes care of the agricultural lands and other properties. Both are interested in out of court settlement.
When brothers sit across the table and discuss about partition, they would definitely consider the nature of the property and its utility. While doing so, the division may end up 55:45. But utility and maximisation of efficacy is the important consideration. This is interest based negotiation.
Instead of sitting across and discussing, if brothers decide to invite elderly neighbour to supervise whole partition process, the negotiation will wear garb of mediation or conciliation. However, it is important to note that, the third person is also concerned about utility and efficacy and maximisationof profit, rather than rights and liabilities. But important thing to note is that, suggestions or hint expressed by third person could be ignored by the brothers.
As a third stage, if brothers decide to pay visit to ‘village head’ and ask him to intervene in the process of partition, he would definitely hear the parties out. Assess their interests and limitations. Consider their wishes, demands and opinions. Keeping the best interest of the parties in mind, ‘village head’ would decide the shares in the property. The difference to be noted is, unlike elderly neighbour suggestion and hints, the decision of the village head is binding on the parties. They would be obligated to the outcome.
While breezing through all the four processes in the above example, the fundamental characteristic of ‘interest based justice’ is kept intact. However, the important question to be answered is whether the present day arbitrations are loyal to the concept of ADRs?
Another important corner stone of ADRs is relations and social values. All the processes consider relations as more important than commercial interests. However, it largely depends upon the interests of the parties. If the parties are too commercial minded, then any process would be discussion on loss and profit, accounts balance sheet etc.
However, the present day arbitrations have become poor replica of court proceedings. The basic characteristics are completely ignored. There is an urgent need to relook into whole of arbitration processes.
Missing the point
The arbitration has been loyal cousin for other ADRs processes. However, the evolution process has played a trick and changed the characteristic of this loyal cousin. World War I created havoc in the western world. During that time, Mr Bernheimer a rich businessman from United States of America proposed a process which would create a world without wars.
He suggested that, arbitration could solve all inter-state disputes. All commercial interests would be taken care of by this process and chances of war would vanish completely. However, the arbitration process of that time was incapable of fulfilling the tall promises. There was an immediate need for research and development of law which would tweak with concept of arbitration and solve the problems of the world like a magic wand.
The research resulted in Federal Arbitration Act (FAA). The tweaking was in two ways, exit door for parties was closed and decision became more or like a judicial pronouncement.
As history shows, the arbitration could not stop World War II. However, it gave a new order to the fast commercialisingworld.
The point that is being missed isabout the original arbitration which is being completely ignored. Tweaked arbitration is required for world order. But it is absolutely ridiculous to have it for social order in the society. There is a need to classify arbitration into original and tweaked arbitration. Original needs to be revived for all disputes between private individuals. Tweaked could be used for disputes between states or event of international concern.
No doubt, the present irrevocable arbitration helps in its efficiency. But it loses itscharacteristic. No doubt, deciding on law would bring down personal influences, and consistency could be assured in functioning of arbitrator, but it won’t remain ADRs.
I may be accused of being purist. But it is important to revive arbitration to its original glory. We cannot sacrifice specieof Dispute Resolution for the need of the society. We can deal with the problem by other means rather eliminating speciealtogether from the face of the earth. Most importantly, this theoretical understanding would bring major misuse of arbitration to an end.
B S Patil is an Assistant Professor in V M Salgaocar College of Law, Goa
[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]
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