Citation: 2022 SCC OnLine SC 1328.

Court: The Supreme Court of India.

Coram: Mukesh R Shah, J.

Date: 30th September 2022

Keywords: Section 11, preliminary inquiry, non-arbitrable matters.

Overview: The Court may interfere at the stage of Section 8 or section 11 when it ex-facie exists that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable. However, the level of judicial scrutiny would depend upon the nature and level of non-arbitrability.

Facts:

Tarun Aggarwal Projects LLP (“Petitioner”) entered into a collaboration agreement dated 07.05.2009 (“ the Agreement”) for the development of a residential colony with Emaar India Limited (“Defendant”). Subsequently, they entered into an addendum agreement dated 19.04.2011 (“Addendum”). Clause 36 of the Addendum stipulated that in case of any disputes which are related to Clauses 3, 6 and 9 arose then the other party had the right to approach the Court seeking specific performance of the Agreement. Clause 37 of the same expressly stated that except for the disputes that are mentioned in Clause 36, disputes arising out of the Addendum shall be referred to arbitration.

A dispute arose between the parties where the Petitioner claimed that Defendant did not comply with the obligations under the Addendum. In pursuance of this, they issued a legal notice dated 20.11.2019 which raised a demand for physical possession of 5 plots measuring 2160 sq. yards and demanded a sum of Rs. 10 crores for the losses from them. Petitioner invoked Clause 37 of the Addendum to state that the dispute is arbitrable and accordingly appointed their Arbitrator while requesting Defendant to appoint theirs. Defendant denied the appointment of the Arbitrator. Aggrieved, Petitioner approached the High Court for appointment of arbitrators under Section 11(5) & (6) of the act in terms of Clause 37 of the Addendum.

The High Court ruled in favour of the Petitioner. The Court reasoned the decision on a conjoint reading of Clause 36 & 37 which according to them meant that although a right to seek specific performance does exist, it does not bar settlement of disputes through the Act. The impugned order was challenged by Emaar consequently.

Issues:

Whether the Court can appoint an Arbitrator under Section 11(5) & (6) of the Act without holding a preliminary inquiry or inquiry on the arbitrability of the dispute?

Analysis:

The Court noted that Clause 37 of the Addendum stated that all disputes apart from the ones in Clause 36 have to be referred to arbitration which clearly makes the disputes in Clause 36 i.e., concerning Clause 3, 6 and 9 non-arbitrable. The Court relied on previous judgments to establish that contracts have to be read literally unless there exists ambiguity to acknowledge the intention of the parties to exclude a matter from arbitrability. The Court observed that courts cannot interpret the contracts differently or form new contracts unless the parties have agreed to it despite the fact that it may be reasonable. This was considered in light of the High Court’s interpretation of Clause 36 being a mere choice contrary to what was agreed between parties.

Further, the Court relied on (“Vidya Drolia”) to explain the law on arbitrability, enumerating the four-fold test and clearly laying that disputes that are excepted matters are non-arbitrable. It further elaborated that the Court has the authority to hold the inquiry with respect to arbitrability. This interference is entered into at the stage of section 8 and section 11 of the Act when it is ex-facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable. But the level of judicial scrutiny would depend upon the nature and level of non-arbitrability as recognized by Vidya Drolia and . The Court emphasized that this is only a limited and restricted review to check and protect parties from forcefully participating in unwanted arbitration and not an attempt to usurp jurisdiction from the arbitral tribunal.

Given the law laid down in various cases, the Court in the current case stated that the High Court was at the very least required to hold a prima facie inquiry to decide upon the arbitrability of the dispute. Herein, the High Court did not hold the primary inquiry despite observing the excepted categories as present in Clause 36, it still decided that the same was not a bar to the settlement of dispute via arbitration.

Conclusion:

The Court concluded that the High Court erred in its decision due to the above-mentioned reasoning. Since a primary inquiry was required in the case, the Court remitted the matter to the High Court to carry out the same.

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Keywords: Third-Party Funding, Security for Costs, International Investment Arbitration, Litigation Funding.

I. Introduction

The mechanics utilised by Tribunals in granting security for costs in the sphere of International Commercial Arbitration have been discussed in Part I of the series. However, given the recent in global FDI flows, disputes concerning the discriminatory practices of states in sanctioning FDI have concomitantly risen. This trend has therefore ushered in the prevalence of Investor-State Dispute Settlement (“ISDS”) claims, which is a process that is extremely onerous on investors given the hefty costs associated with instituting ISDS claims against a State. Part II of this series will therefore evaluate an Investment Tribunal’s criterion for granting security for costs in ISDS disputes. It will additionally navigate the viability of the security for costs model within India’s Third-Party Funding framework.

II. The Power of Investment Tribunals to Grant Security for Costs

As per and , an ICSID tribunal has the power to grant “any provisional measure[s]” for the preservation of the parties’ rights. However, they do not explicitly mention security for costs as a provisional measure that may be ordered. However, the case of marked the first time an investment tribunal granted an order for the security for costs in 2014. The Tribunal ruled that a tribunal’s power under the Convention relating to provisional measures is in fact broad enough to permit security for costs.

More recently, the case of . triggered an onslaught of diverging perspectives on the enforceability of security for costs. In this case, the State of Turkmenistan requested that the Tribunal order the Claimant to post security for costs since it believed that the Claimant would be unable to pay the costs if he were unsuccessful in his claim. Accordingly, the Tribunal first ordered security for costs, since it found that the claimant was reliant on TPF; however, the third-party funder was not liable for a potential adverse costs award. It, therefore, held that such a scenario would prejudice the Respondent’s right to enforce cost awards. However, in a later order, the Tribunal reversed its previous order in holding that the Claimant faced ‘insurmountable obstacles’ to obtain funds for security, and the requirement of security for costs in such a situation would result in a ‘denial of access to justice’ to the investor.

In light of this uncertainty regarding the applicability of security for costs in investment arbitration, it is currently under discussion at the and in the . However, the myriad views among states reflect the conflicting arbitral decisions on this matter, meaning that a consensus is yet to be crystallised.

III. The Indian Scenario with Respect to TPF and Security for Costs

With arbitration emerging as an increasingly popular dispute resolution mechanism in India over the past decade, the costs associated with arbitral proceedings, though less intimidating than those of litigation, are still a reality. While there is no law explicitly barring or allowing third-party funding in India, consent can indirectly be deduced from the Civil Procedure Code, 1908. (State Amended) of the Code empowers plaintiffs to secure finances for litigation by requiring the financier to become a party and deposit such costs in Court. As reiterated by Courts in cases like and , an agreement of the nature of TPF is legally enforceable and while it necessitates monitoring such financing, it is not against public policy. Additionally, in the recent case of , the Supreme Court barred advocates from funding litigation on behalf of their clients without imposing such a bar on funding by any other third party.

Thus, such scattered instances of TPF recognition in India reflect a deficit of institutionalisation of arbitration mechanisms in this regard. Per Contra, they also bring to the foreground a growing inclination in India to legalise TPF. Such enthusiasm is also evident in the of a legal technology start-up, LegalPay, to launch India’s first third-party litigation funding platform. However, this bears further implications for an ancillary need to envisage the incorporation of security for costs within the TPF framework in India. Particularly so, as costs in arbitral proceedings often emerge as a site of contestation between what has been intended by the parties and any contrary decisions of a tribunal. In the recent case of Company, while the parties had agreed upon bearing costs on their own, the Arbitral Tribunal deriving powers from , granted costs to the Respondent company. While the Appellant contended that such award of costs was contrary to the contract provisions, the Delhi High Court upheld the primacy of the Act provisions over the clause of costs in the contract. Therefore, in the backdrop of an upward trend in imposing cost liabilities on parties either through contracts or the discretion of tribunals, the requirement for security for costs becomes increasingly relevant, especially where the parties are reliant on TPF. However, with the international view itself being muddled in contradicting perspectives on security for costs with respect to TPF in investment and commercial arbitrations, it is unlikely for India to efficiently implement the inept present structure in the near future.

IV. Conclusion

Therefore, while the tests for granting security for costs remain largely subjective and discretionary, TPF emerges as an indicative factor in situations where the claimant’s ability to satisfy an adverse costs award is dubious. While TPF in itself does not warrant security for costs, it serves as a tool in assessing the capital adequacy of an ill-intentioned claimant, which is considered an important factor in both international commercial and investment arbitration. Nonetheless, a nuanced analysis would only emerge from a balance between details of the funding agreement between the parties and the discretion of the tribunal after considering ancillary factors like unilateral termination rights. Further as explained previously, since the applicability of security for costs in investment and commercial arbitration is inundated with conflicting arbitral decisions and subjectivity of tribunals, it posits a bleak prospect for the liberalised granting of security for costs in India. With the gradually expanding ambition around third-party funding mechanisms in arbitral proceedings seated in India, it remains to be seen whether such gradual adaptation will usher developments towards security for costs or only emerge as an emulation of international perspectives on the subject matter. However, the authors propose the adaptation of the liberalised approach taken by the Tribunals in the Tenke, RSM, and Herzig cases in order to cement the assessment for the availability of TPF through the security for costs route in India.

[1] J. Lew, L. Mistelis & S. Kroll, Comparative International Commercial Arbitration, (1st ed., 2003), p. 601.

[2] (2021) EWHC 3301 (Comm.).

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Keywords: Mediation, Tenancy, Compulsory, Litigation, Arbitration.

I. Introduction

The use of dispute resolution methods like mediation to resolve issues has become very predominant in India and the world. However, the , and allow third parties to stall any form of negotiation. This article seeks to understand the viability of compulsory mediation in India with its current framework with respect to certain situations such as tenancy disputes in India as compared to other common law jurisdictions that have already applied such mandatory mediation. The article therein focuses on the use of the Retail Leases Act, 1994 as used in Australia and legislation in the United States such as the Federal Rules of Civil Procedure, or the Alternative Dispute Resolution Act, 1998, that encourages ADR for dispute resolution. This article would be divided into four main parts: the analysis of compulsory mediation itself, the comparison with other jurisdictions, the applicability of mediation in tenancy disputes and a conclusion on whether compulsory mediation is viable since Section 89 of the Civil Procedure Code allows third-party mediation organizations such as and to enforce their mediated settlement agreements as arbitral awards.

The dilemma with the concept of mandatory pre-litigation mediation for tenancy disputes is that such since the dispute is considered as subjective rights in-personam, that arise from rights in rem. This is except for when they are covered by specific rent control laws that allow exclusive jurisdiction to particular forums. This decision was made after a 2017 decision of the Supreme Court in that ruled that when the Transfer of Property Act (TOPA), as applicable, the dispute would not be arbitrable.

In the scenario where compulsory mediation is implemented for tenancy disputes, parties with a pre-existing arbitration clause in their tenancy agreements would have to endure significant challenges to resolution, such as the arbitration and the mediation – both of which allow either party to delay the filing of the dispute before any Court as they are time-consuming. The arbitrability of the dispute also raises questions such as – if the mediation agreement has been created, but is violated by either party, does that allow the other party to enforce the arbitration agreement in the contract, or would they necessarily have to follow the terms of the mediation agreement itself? Furthermore, the applicability of under (“A&C”) could raise the question of whether a mediated settlement agreement is to be treated as an arbitral award and set aside before arbitration could be pursued. This requires a re-examination of and the precedent it set on the enforceability of mediation agreements.

II. Compulsory Mediation in India

The mandatory mediation of tenancy disputes would require specific legislations that would encourage its acceptance, but this is done sparingly in domestic legislation. This is seen in the implementation of (“CCA”) which has . There are also several laws governing mediation in India such as Section 21 of the , , the and .

. This perpetuates the notion that the justice gained by it is inferior to the binding nature of litigation despite the enforceability of a mediated settlement agreement. Furthermore, the legal fraternity would also face due to the dilution of litigation if compulsory mediation is to be implemented. However, mandatory mediation could this by placing the onus of requesting mediation on the Court and not on a specific party, allowing parties to reconcile without worrying about the power differences inherent within a mediation . However, this does raise the question of whether party autonomy is an inherent part of a mediation session. With the possibility of mandatory mediation, the options allowed through the judgment of , such as arbitration, negotiation or a mix of mediation and arbitration would no longer be available to parties that may have preferences for a particular form of ADR. Further, it leads to the disclosure of confidential information that would have been vital in litigation for either party or for restoring the power imbalance between the parties before the mediation session begins, as it is required for parties to enter into the mediation session in good faith.

III. Comparative Analysis with India

The use of mediation in other common law jurisdictions is dependent on the court’s discretion. In Australia, states that a tenancy dispute is not to be a subject of a proceeding till the Registrar has certified that the mediation has failed, or if the Court is satisfied that mediation would not be able to resolve the dispute. This allows Judges the discretion to decide if mediation is still necessary, making party autonomy a secondary priority despite party autonomy being an essential part of a mediator’s opening statement. Furthermore, as per the precedent in , the Court is prevented from exercising its jurisdictional powers (except for orders related to injunctions), until the mediation is complete, allowing either party to impede proceedings.

However, , the approach to mediation contains a mix of statutes, local rules of the court, federal statutes, and the . This framework includes the treatment of a settlement agreement as a “contract”. , also require parties to negotiate in good faith and have the authority to settle claims mandatorily. Being absent at a mediation session or ignoring court orders could lead to a determination of bad faith participation and lead to prosecution. However, the determination of bad faith is done by the court, after a party files a motion to seek sanctions for not entering into the mediation with good faith. that allows Courts to interfere in a mediation session despite the confidentiality it needs to offer. However, in India, the use of mediation is voluntary (With the exception of Section 12A of the Commercial Courts Act), and there is no examination on the use of “bad faith” for prosecution since the mediated settlement agreement is treated as an arbitral award, and not as a contract.

IV. Conclusion

The use of mediation as a part of dispute resolution is relatively new in India but has led to the rise of several platforms that advocate for the private resolution of disputes through mediation such as and , that do not require authorization from the Court under Section 89 of the Civil Procedure Code but have binding mediated settlement agreements that could be treated as an arbitral award. The comparative analysis between other common law jurisdictions and the Indian approach to mediation is similar and requires a uniform legislation – an effort taken by the United States through the Uniform Mediation Act and the in India, both of which are yet to be implemented as law. Borrowing legislation on the enforcement of bad faith, on the other hand, is not only needed but could also encourage parties reluctant to enter a mediation session from exploring it due to the authority of the court.

However, considering taken by the Parliament, the possibility of compulsory mediation as a reality could diminish, but still allow the fight between party autonomy and court-annexed mediation to continue, preventing weaker parties from equalizing the power between parties in a mediation session.

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Citation: O.M.P. (COMM.) 154 of 2021.

Court: The High Court of Delhi

Coram: Vibhu Bakhru, J.

Date: 5th July 2022.

Keywords: Section 34, Arbitration & Conciliation Act, 1996 (the ‘A&C Act’), Invocation of Bank Guarantee, Section 17, Arbitration & Conciliation Act

Overview

A Single-Judge bench of the Delhi High Court adjudicated that a lumpsum amount cannot be awarded against specified claims without adjudicating the claim pending before the Tribunal. Consequentially, the Award was set aside by the High Court.

Facts

Kanti Bijlee Utpadan Nigam Limited (“KBUNL”) and Paltech Cooling Towers and Equipments Ltd. (“PCTEL”) entered into a Supply and Service Contract dated 10th September 2011 for a complete induced draft cooling tower package for Muzaffarpur Thermal Power Project Stage-II.

The time limit for completion of the said project was determined to be two years from the date of the commencement of the project, i.e., 9th August 2011. As per the terms of the agreement, two Bank Guarantees (“BGs”) amounting to ₹4,54,23,600/- were furnished by PCTEL, which were to be released upon successful completion of the Performance Guarantee Test (“PGT”). However, 17 extensions were granted to PCTEL for the completion of the project, which remained unfulfilled even after the lapse of such extensions.

On 21st April 2016, the majority of the work regarding the thermal power project was deemed complete by PCTEL for which it requested KBUNL for a Certificate of Completion of Facilities (“COF”) and the release of its dues. KBUNL was apprehensive of issuing the COF, however, after multiple meetings, the Petitioner granted a provisional COF to PCTEL provided that the outstanding work including the PGT would be completed. Thereafter, the Respondent again defaulted in performing the PGT from the date of completion and requested the Petitioner to release its BG. According to the Petitioner, since the work remained incomplete and the PGT had also not been fulfilled, they would not be releasing the BG.

Eventually, the PGT was conducted, which revealed a temperature shortfall in Cooling Towers 3 and 4 of the project which were requested to be rectified by the Petitioner and conduct a PGT for the release of its BG. Upon the Petitioner’s failure to release the BG, PCTEL filed a Writ Petition in the Delhi High Court, seeking the release of the Performance-based BGs which was eventually dismissed by the Court by directing the parties to approach the appropriate dispute resolution forum. Subsequently, another Civil Suit was filed by PCTEL which was dismissed as withdrawn by the Court with the liberty to avail the appropriate legal remedy.

Thereafter, the dispute was adjudicated by an arbitral tribunal in light of the relevant provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”). The Respondent filed a claim before the Tribunal amounting to Rs 45,95,10,542/- which was met with a counterclaim filed by the Petitioners; however, the latter was rejected summarily by the Tribunal on account of it merely being “a counterblast to PCTEL’s claim at a belated stage”. Subsequently, the Tribunal awarded a lumpsum amount of Rs 5.5 Cr. to the Respondent after dismissing its application under Section 33 of the A&C Act seeking clarity on whether the amount awarded was inclusive of the Performance-based BG.

The said Award had come up in appeal against an application filed under of the A&C Act by the Petitioner on the ground that the Tribunal failed to accord any reason towards calculating the quantum of the amount awarded to the Respondent.

Issue

Whether an arbitral tribunal can award a lumpsum amount as opposed to specified claims without even adjudicating the claims?

Analysis

At the outset, the Court expressed its displeasure with the way in which the Tribunal drafted the impugned Award. It noted that of the 152 pages in the Award, 142 were a mere reproduction of the parties’ pleadings with only the last 3 pages being indicative of the Tribunal’s findings and reasoning. It then went on to discern the validity of the Award, particularly critiquing the Tribunal’s failure to adjudicate the dispute before making its decision. Essentially, the High Court’s decision can be summed up as follows:

i. The Tribunal incorrectly assessed the period of completion of the project under the assumption that the repeated granting of extensions by KBUNL alluded to its incorrect assessment of the period required for completion of the work.

ii. The COF issued to the Petitioner was to enable PCTEL for collecting certain amounts notwithstanding that certain works required completion. According to the Tribunal, the COF issued was casual in nature but later observed the same to be a conditional one in KBUNL’s statement of defence, making the Tribunal’s finding ex-facie erroneous.

iii. With regard to the quantum of claims and counterclaims filed by the parties, a lumpsum award of Rs 5,50,00,000/- in favour of the Respondent was erroneous since there is no basis for such quantification. The Tribunal, in order to “meet the ends of justice”, had passed the aforesaid arbitrary award. Such an award of an arbitrary amount without the adjudication of the dispute between the parties is unsustainable.

iv. Additionally, an application under seeking clarification as to whether the Award was inclusive of the BG would be unmerited when the Award itself is devoid of any basis for calculation.

Conclusion:

The Court was of the opinion that the Tribunal’s decision towards awarding a lumpsum amount despite the existence of specified claims was an incorrect one. An award cannot be passed merely to meet the ends of justice. Instead, the dispute ought to be properly adjudicated between the parties and the quantum of the award should be properly calculated by the Tribunal.

[This case note has been authored by Mayannk Sharma, an Editor at Mapping ADR.]

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Citation: 2022 SCC OnLine Del 3123

Court: The High Court of Delhi

Coram: Anup Jairam Bhambhani, J.

Date: 27th September 2022

Keywords: Section 11, Arbitration & Conciliation Act, 1996 (the ‘A&C Act’), Limitation Act, 1963, Consent of Parties

Overview:

A Single Judge bench of the Delhi High Court adjudicated that despite the consent of parties, arbitration proceedings cannot be initiated if such an application is time-barred.

Facts:

The Petitioner and the Respondent entered into an Agreement dated 02.05.2014 (“the Agreement”) for the sale, implementation, and installation of multi-media accessory systems and software for 24 Hour Smart Live classes in the schools owned by the Respondents. The Petitioners terminated the Agreement via notice dated 04.01.2017 and sent subsequent reminder notices on 24.03.2017 and 22.08.2017. However, the current petition was filed under Section 11 of the A&C Act for the appointment of an Arbitrator for a dispute stemming from the Agreement only on 21.01.2022, thereby crossing the three-year limitation as encapsulated within Article 137 of the Limitation Act, 1963.

Issue:

Whether the invocation of arbitration via the current petition is time-barred?

Analysis:
The Respondents relied on to argue that the limitation period for the notice of arbitration would not get extended by correspondence through letters between the parties. It was further emphasised that a claim would be time-barred unless a “clear notice invoking arbitration setting out the particular dispute” is sent to the other party within three years. However, the Petitioner brought to the attention of the Court that in the aforementioned judgment it was noted that the Court may only refuse to refer the matter to arbitration “where there is no vestige of doubt that the claim is time-barred” and that in the event of even the slighted doubt, the rule is to refer the dispute to arbitration.

The Court noted that the invocation notice dated 28.07.2021 for payment of arrears, which was built upon the termination notice dated 04.01.2017, denotes that the cause of action first arose in the latter. Hence, the invocation notice should have been issued before 03.01.2020, as against 28.07.2021, which is beyond the prescribed period of limitation. The Court relied upon and observed that limitation only “bars a legal remedy and not a legal right” since it has been founded upon a policy to ensure that remedies are not available “endlessly”.

Conclusion:

The Court held that arbitration cannot be invoked once a claim is ex-facie time-barred under the Limitation Act, 1963 despite the consent of the parties. It also affirmed that communication between parties does not extend the period of limitation. This decision is in compliance with the Apex Court’s in , where it notes that limitation must be calculated from the date of the first cause of action such that any further negotiations must be pleaded and explained for its exclusion from the limitation period.

[This case note has been authored by Vatsala Poddar, an Editor at Mapping ADR.]

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Case Citation: Rev.I.A.No.1/2022 in ARRB APPL.No.138 of 2017

Court: In the High Court of Andhra Pradesh at Amaravati

Coram: Hon’ble Sri Justice R. Raghunandan Rao

Date: 30th September 2022

Keywords: Section 11 of the Arbitration and Conciliation Act, 1996; Review Application; Procedural Review.

Overview

The High Court of Andhra Pradesh at Amaravati held that a review petition on merits is not permissible unless a specific provision exists for such a review. However, the court also stated that in case there is a procedural irregularity, the order can be subjected to a procedural review.

Facts

The respondent in the Arbitration Application is the review petitioner, and the respondents in this review petition are the applicants.

On 14th December 2011, the applicants (respondents) and the respondent (review petitioner) entered into a development agreement for the development of a piece of land to construct an apartment complex in the said land in Pata Srikakulam Village, Srikakulam Mandal and District. However, a dispute arose between the parties, and an application was filed before the Court under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”) for the appointment of an arbitrator. Accordingly, an Arbitrator was appointed to adjudicate the disputes between the parties after the court allowed the application.

Later, the respondent filed a review application in the High Court of Andhra Pradesh at Amaravati against the order given by the arbitrator. The review petitioner contended that even though he claimed in paragraph 14 of the order that the application was barred by limitation, the learned Judge had not taken the said claim into account, due to which, the right of the review petitioner to object to the arbitration on the ground of limitation was lost.

ISSUE

The main issues, in this case, were as follows –

1. Whether a review petition under Section 11 of the Act against the order was maintainable or not?

2. If there were any provision in the “the act” which provided for a review of an order passed under Section 11 of the Act?

2.1 In case of the absence of such a provision, would the review fall under the category of procedural irregularity or under the category of review on merits?

ANALYSIS

The court, in the judgement, noted several precedents in context to the sub-issues before arriving at the verdict. The Judge first noted the case of , and affirmed that the proceedings under Section 11 of the Act were judicial proceedings, in the light of the fact that court had appointed the arbitrator in this case. The Judge next, moving to the main issue of the case, observed that unlike in the case of , where the supreme court had the mandate to review the petition under Article 137 of the Constitution of India, the present application before the High Court did not have that benefit. Additionally, the judgement also noted the case of wherein the Supreme Court highlighted sub-sections (1) and (3) under section 11 of the Act to draw a distinction between procedure and powers of the Tribunal under the Act, and also further elucidated upon the expression “review”. The judge explained “review” in two senses First, either as a procedural review where the order was erroneous on procedural grounds. Secondly, as review on merits where the error was in context the correct application of law. This expression is crucial to the case as it laid down the essentials of categorising a review application under merit or procedural error.

In context to the main issue raised in this case, the court cited the case of , wherein the High Court of Allahabad took the view that the power of review is a creature of the statute and in the absence of such specific power, it would not be appropriate to hold that a review is maintainable, unless the review is a procedural review. Thus, the Judge noted, ‘in the extant case’, that since there is no provision in “the Act” providing for a review of an order passed under Section 11 of the “Act”, the review in question, cannot be held maintainable. Consequently, the only other circumstance under which the order would be subject to review would be on procedural grounds, which was again something in question before the court.

Thus, the court on the question of whether the review sought by the review petitioner fell under the category of procedural irregularity or under the category of review on merits, inferred that the complaint of the review petitioner is on the merits of the order passed by the learned Judge and hence, the review sought by the review petitioner would have to be treated as a review on merits.

Conclusion

The court thus held two major verdicts in this case –

1. Since no provision in the Arbitration and Conciliation Act provides for a review of an order passed under Section 11 of the Act, the order could not be reviewed. Furthermore, it was held that the provisions of the Act do not make out a case for holding that such a power of review was available by implication.

2. The only other way to review the order in case of the absence of a provision was if there was a procedural irregularity. However, in this case, the court inferred that the complaint of the review petitioner is on the merits of the order passed by the learned Judge and that there was no procedural irregularity in terms of non-service of notice to the affected party or passing of an order without hearing the affected party. Thus, it was held that the review could not be allowed on the grounds of procedural irregularity either.

Considering the above holdings, the court rejected the review application. It established that the High Court had the jurisdiction to review the order under section 11 of “the act” only on the grounds of procedural irregularity and not based on merits. The judgement has therefore brought further clarity regarding High Court’s jurisdiction on reviewing Arbitral orders under section 11.

[This case note has been authored by Kaushiki, an Editor at Mapping ADR.]

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Citation: O.S.A.No.341 of 2019

Coram: Paresh Upadhyay, J. and D. Bharatha Chakravarthy, J.

Date: 28th September 2022.

Keywords: Section 34, Arbitration & Conciliation Act, 1996 (the ‘A&C Act’), Inequitable Contract, Specific Performance, Section 14, Specific Relief Act (the ‘SR’ Act), Section 20, SR Act.

Overview

A Two-Judge bench of the Madras High Court adjudicated that an Arbitral Award directing the specific performance of a contract, could not be set aside on the basis that the contract from which the dispute arose, was inequitable. Consequentially, the Madras High Court set aside the order of a Single Judge Bench of the Madras High Court.

Facts

Macro Marvel Projects Ltd. (“Appellant”) and Mr J. Vengatesh, A.R. Gomathi and V.Annalakshmi (“Respondents”) through their Power of Attorney, M.Arumugam, entered into an agreement of sale dated 17th February 2004. Under the terms of the agreement, the Respondents agreed to transfer land admeasuring 8.21 acres for a sale consideration of Rs. 3,85,000 per plot of land. An advance of Rs. 1,00,00,000 was agreed to be paid to the Respondents. Rs. 65,00,000 of this advance amount was to be paid to the Respondents upon the receipt of project finance by the deposit of title deeds of the property held by the Respondents. The Appellant had been authorised to identify buyers for the plots of land and enter into sale agreements for the same as well as obtain building licenses, etc. An arbitration clause had been inserted in the sale agreement under which all disputes that would arise out of the agreement would be referred to and settled by an Arbitral Tribunal in Chennai. Owing to a sudden rise in Real Estate prices, the sale consideration was revised upwards, first to Rs. 4,20,000 and then to Rs. 5,00,000. Subsequently, the Power of Attorney in favour of M. Arumugam was cancelled and the Respondents refused to execute further sale deeds for the unsold plots.

Given the Respondents’ refusal to execute the sale deeds for the unsold plots, the Appellant invoked the arbitration clause and after consultation with the Tribunal, filed a statement of claims in January 2007, praying for specific performance according to the terms of the agreement for sale, and further sought damages for delay in registering the sale deeds. The same was granted by the Tribunal.

The Respondents challenged this Award before a Single Judge Bench of the Madras High Court under Section 34 of the Arbitration Act. The Respondents contended that the Award suffered from patent illegality and was in violation of the fundamental policy of India. The learned Judge found that the agreement gave an undue advantage to the Appellant, and further that the Arbitrators had not considered Section 14(i) and 20(2) of the Specific Reliefs Act. An Award for specific performance was thus deemed to violate the public policy of India. The learned single Judge altered the Award of the Arbitral Tribunal and directed that a sum of Rs. 50,00,000 be paid to the Appellant by the Respondents within 6 months.

Aggrieved by this Judgement, the Appellant filed an intra-court appeal before a Two-Judge bench.

Issue

i. Whether an Award could be interfered with, varied or modified under Section 34 of the A&C Act?

ii. Whether the Court may interfere with an Award for Specific Performance when the contract is alleged to be inequitable and thus not specifically enforceable?

Analysis

With regards to the first question of variation or modification of the Arbitral Award, the Court held that under Section 34 of the A&C Act, any variance or modification of the Award and any grant of a new or modified relief is impermissible. The same was laid down in the case of . Thus, it was held that the Judge was not right in varying the Award of the Arbitral Tribunal and ordering the sum of Rs. 50,00,000 to be paid. The same was beyond the scope of the Court’s powers under Section 34. Citing Redfern and Hunter on International Commercial Arbitration, the Court held that the limited remedy granted under Section 34 is co-extensive with the limited right conferred by the Section, namely the right to either set aside the Award or to remand the matter. In doing so, the Court limited the broad application of powers under Section 34, that the learned single judge on the original side had sought to undertake.

With regard to the second question, concerning the grounds for interference, the Court found that there were several rival contentions of both the Parties which needed to be appreciated by the adjudicatory authority. These contentions would have been dealt with and considered by the Arbitral Tribunal when it appraised the evidence and rendered its finding that it was a case of specific performance. The mere possibility that a Court may, upon the construction of the documents and evidence submitted before it, may draw an alternate conclusion could not be sufficient ground to interfere with the Tribunal’s Award. The Court held that an attempt to interfere with a decided position laid down by the Arbitral Tribunal would amount to an appeal of the Tribunal’s Award, which falls outside the scope of the Court’s powers under Section 34. When the parties have chosen arbitration as the forum for the resolution of their disputes, the Arbitral Tribunal’s decision shall be final and shall not be interfered with unless one of the specific grounds which are available under Section 34 is present. Thus, there existed an implicit understanding, with the inclusion of an arbitration clause, that the Tribunal’s Award would be final, binding and not amenable to change, except when it is liable to be set aside under Section 34. In drawing this inference, the Court has displayed marked deference to the Award of the Arbitral Tribunal and placed strict limits on its powers of interference with the Arbitral Award.

Conclusion

The Court, therefore, set aside the order of the Single Judge of the Madras High Court, giving firstly, that, courts may not vary or modify the terms of an Arbitral Award under Section 34, and secondly, that to warrant interference under Section 34, presence of the specific grounds specified under the Section must be shown, and a mere possibility that the Court may have arrived at an alternate conclusion cannot warrant interference under the same.

[This case note has been authored by Ishan Mhapsekar, an Editor at Mapping ADR.]

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Keywords: Third-Party Funding, Security for Costs, International Commercial Arbitration, International Investment Arbitration, Litigation Funding.

I. Introduction

Third-party funding has become increasingly common in international arbitration. It can be described as the financing by a third-party of part or all of the costs of the arbitral proceedings for one of the parties to the dispute. In return for this financial liability, the financier receives a certain percentage of the compensation obtained by an award or a settlement. Conversely, if the claim fails, the funder will usually receive no compensation and will remain liable for the client’s legal fees, as well as for any other adverse costs. TPF is a relatively novel concept that arose as a solution to the challenges emerging from the financial impecuniosity of a party, resulting in its inability to proceed with an arbitral proceeding.

The onset of the COVID-19 pandemic has triggered economic fluctuations that have resulted in a shortage of resources, thereby hindering the business operations of entire industries. As documented by , most funders have increased their business despite the COVID-19 economic downturn, backed by growing interest and use by law firms and clients. Thus, these conditions have allowed for the scope of litigation funding to allow businesses to fulfil their litigation claims through TPF.

However, on the one hand, while TPF helps impecunious claimants fund their claims and obtain access to justice, on the other hand, it creates the risk that a respondent may not be able to enforce a potential adverse costs award against an impecunious claimant that is funded. Thus, this article seeks to address this imbalance by exploring the prospect of tribunals granting ‘security for costs’, i.e., a method by which a respondent can ensure that it is able to recover the costs of successfully defending claims brought by impecuniously funded claimants. It is enforced as an order that requires the claimant to pay money or provide a guarantee or a bond, as security for the respondent’s costs of litigation. Part I of this article will assess this solution and the effect of TPF on a tribunal’s decision to grant security for costs in the context of international commercial arbitration. Thereafter, Part II of this article will address the scope for the liberalised granting of security for costs within India’s legal framework by recapping the legal framework surrounding an arbitral tribunal’s power to grant costs in investment treaty arbitration. Consequently, it will present TPF as a solution by analysing how it weaves into a tribunal’s decision to grant security for costs.

II. The Mechanism of Security for Costs in International Commercial Arbitration

The increased prevalence of TPF in the realm of international commercial arbitration can be attributed to its attractive promises of providing tenable solutions regarding financing preferences and risk management policies. An arbitral tribunal’s power to grant security for costs in this regard generally arises either from an agreement between the parties or the lex arbitri (law of the seat)[1] considering that a party seeking TPF is equally vulnerable to an application for security for costs. A recent judgement affirming the same is , where the English Commercial Court on 7th December 2021, upheld an award of third-party funding costs rendered by a London-seated ICC arbitral tribunal and confirmed the stance that a tribunal has the power to grant security for costs. The case dealt with a challenge to the final Award rendered in favour of Katanga, the Respondent. The Tribunal ordered Tenke, the Appellant, to pay Katanga’s legal and expert costs. However, Tenke challenged the Tribunal’s Award under , on the grounds of “serious irregularity” and “substantial injustice”. The Court held that since the parties’ arbitration clause in their contract was subject to ICC arbitration seated in London, they would be subject to the , implying that the Tribunal’s TPF costs award would stand. The case further referred to another landmark decision, Essar Oilfields Services Ltd v. Norscot Rig Management Pvt Ltd, where the Commercial Court rejected a similar application to set aside an arbitral award granted under the ICC rules entitling the respondent to costs for third party litigation funding on grounds of serious irregularity.

As recognised in these cases and several other and , some of the potential factors considered by tribunals while granting security for costs in commercial arbitration are likely to be the party’s financial situation and the likelihood of the claims’ success on merits, with the most relevant consideration being the probability that a party may not satisfy an adverse cost award. This is particularly pertinent because TPF does not imply that a party is impecunious per se; merely obtaining funds, therefore, does not qualify as a material change in the claimant’s finances guaranteed to counteract adverse costs. Thus, the granting of security for costs is extremely subjective and dependent on a tribunal weighing the scale between commercial viability and broader fairness concerns unless the third-party possesses powers to the extent of unilaterally terminating the agreement.

III. Conclusion

Therefore, while TPF clearly emerges as a burgeoning trend in international commercial arbitration, its scope seems to be inundated by the inability of parties to satisfy adverse cost awards. Thus, arbitral tribunals have accommodated security for costs as a viable solution. Although the tests for granting security for costs remain largely subjective and discretionary, TPF emerges as an indicative factor in situations where the claimant’s ability to satisfy an adverse costs award is dubious. While TPF in itself does not warrant security for costs, it serves as a tool in assessing the capital adequacy of an ill-intentioned claimant, which is considered an important factor in international commercial arbitration. Nonetheless, since it attempts to provide a safety valve against ill-intentioned claimants, it might be more favourable in international investment arbitration where awards are generally publicly available with higher compensatory amounts requested, thus appealing to funders.

[1] J. Lew, L. Mistelis & S. Kroll, Comparative International Commercial Arbitration, (1st ed., 2003), p. 601.

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Keywords: Arbitration, Sharia, Saudi Arabia, New Arbitration Law, Foreign Awards.

Introduction

The rapid expansion of commercial activities and the burgeoning web of global trade necessitates a uniform framework for arbitration to resolve disputes without tardiness and with efficiency. The advantages of instantaneous resolution of disputes are beneficial for everyone involved in it by saving time and costs of litigation, reinforcing trust in the legal systems, and, more importantly, safeguarding a country’s resources. Recognising this, the Kingdom of Saudi Arabia (“KSA”) enacted a New Arbitration Law in 2012 that was laid out in consonance with the framework of the UNCITRAL Model Law. This was done, in part, to promote the country as a. However, it remains to be seen whether such reforms have truly aided the alignment of Saudi Arabian laws with Western Arbitration models and international conventions for commercial arbitration. In this article, the authors examine the pre-2012 and the post-2012 reforms to arbitration laws in Saudi Arabia, with particular emphasis on the procedure for enforcing arbitral awards in the country. The article first highlights the major conflicts between Sharia and arbitration and its interplay with the domestic arbitration procedures within KSA. It then brings to the foreground the inefficacy of the New Arbitration Law in recognising and enforcing foreign arbitral awards while also emphasising the implications it can possess for KSA’s commerce and economy with regard to the rights of foreign investors in the country.

The Enforcement of Domestic Arbitral Awards in KSA ������-à-������ Sharia

The Sharia is an assortment of laws that encapsulates spiritual and everyday aspects of Muslim life. Sharia deems Allah as the highest authority. In Islamic nations such as Saudi Arabia, Sharia is the provenance of all laws and orders. So, it merits no explanation that even arbitral awards are bound by the tenets of Sharia law. Unlike the West, where parties can choose the law that will govern their dispute in arbitration as per Article 28 of the UNCITRAL Model Law, Sharia does not offer . Arbitral awards subjected to international laws must pass muster when appraised through the prism of Sharia law in Saudi Arabia. In the same vein, the decisions of arbitrators are also not absolutely binding on the parties. The rigmarole around the non-binding nature of arbitral awards in Islamic jurisprudence stems from the divergence in opinions among While the Hanafi and Shafi’i schools postulate that arbitral awards must not be regarded as anything more than conciliation, the Maliki and Hanbali schools hold that an arbitrator’s judgment is binding and final unless there is flagrant unfairness on the arbitrator’s part. The Saudi Arbitration Regulations have purportedly adoptedunder the Hanbali school.

However, in modern arbitration proceedings, the supportive role of courts in endorsing arbitration is crucial to ensure the sanctity of the arbitration process. The scope of interference by courts in arbitration proceedings has also engendered contentious debates. The courts in Saudi Arabia can interfere in arbitration proceedings : 1. At the beginning of arbitration proceedings; 2. During the arbitration proceedings; 3. Once the Arbitral Award has been passed, in this article, the authors will deal with the court’s role in arbitration when an arbitral award has been passed since the award, even if binding, could be rescinded if it does not meet the merits of Sharia law in KSA.

As per the law that was in force in Saudi Arabia till 2010, parties could challenge arbitral awards before the Board of Grievances (“Board”) if there were issues pertaining to jurisdiction, procedure or capacity. However, unlike in the West, objections could also be raised if the award is inconsistent with Sharia and public order. This could create multiple challenges because the failed to lay downon which challenges could be sustained with respect to Sharia. Moreover, questions of public policy have always puzzled lawyers due to the uncertainty of enforcement of awards. In Saudi Arabia, public policy originates from : (1) Sharia, (2) Royal power, and (3) public morals. The country may come up with new royal orders that are promulgated as laws or policies in the kingdom in order to keep up with modern needs without violating Sharia principles. Therefore, public policy in Saudi Arabia is not similar to that of many modern states, and thus, the scope of interference by the courts is more due to the limited role of the arbitrator and the indomitable powers of the Royals. This makes enforcement of arbitral awards challenging and cumbersome if the award is challenged before the Board.

Such an ambiguity-riddled atmosphere for the enforcement of domestic arbitral awards not only posits a bleak future for arbitration in the country but also raises relevant questions pertaining to International commercial arbitration. While the (“NEL”) in Saudi Arabia has provided an alternative pathway for international parties to enforce commercial awards, it begets an assessment of this framework of enforcing awards in harmony with Sharia and several International Conventions.

The Enforcement of Foreign Arbitral Awards within KSA’s Arbitral Framework

As can be inferred from the domestic viewpoint, the Saudi legal system is heavily based upon the principles of Sharia Law, with Judges being obliged to apply the Holy Quran and the Sunnah when adjudicating cases, as given in Article 46 of the Further, it is noteworthy to mention that Islamic jurisprudence does not explicitly preclude international commercial arbitration procedures. However, the procedures could only be followed so long as they do not contradict the basic principles of Islam. Thus, before the 2012 pro-arbitration amendments in KSA, the enforcement of a foreign award was subject to the scrutiny of the Board of Grievances. The review involved a consideration of whether the Award conflicted with the Saudi public policy, Sharia principles or any previous decisions of the Saudi judicial authorities. Such wide discretionary powers and resistance to recognising foreign procedural laws typically prevented the enforcement of most awards citing public policy reasons. An infamous illustration of the same is the 2008 case of ,where the Board was required to assess an award issued by the ICC ordering Jadawel to pay legal costs to Emaar. In a seemingly absurd turn of events, the Board not only refused to enforce the award but also overturned the decision itself, ordering Emaar instead to pay over $250 million as damages to Jadawel.

In the backdrop of such a potential anti-arbitration ethos, the 2012 New Arbitration Law and Enforcement Law in KSA, prima facie, emerged as a beacon of hope. With Saudi Arabia’s ratification of international treaties like the 1983 Riyadh Convention and the New York Convention of 1958, it seems to have willingly bound itself to the obligation of recognising and enforcing foreign awards. The power to scrutinise awards has now shifted to the Enforcement Circuits according to . However, the parameters of assessment continue to remain inter alia contradictions with Sharia law or Saudi’s public policy. Thus, this move can be interpreted as a mere semblance of reform solely effectuating a switch between players while a clear resistance to foreign awards persists. Moreover, such vesting of exclusive jurisdiction with the Enforcement Courts simply reinforces the potentiality of judicial interference in awards, which the New Law sought to minimise. This is all the more problematic since Saudi Courts have undertaken a strict interpretation of Sharia to justify the non-recognition of awards issued outside Saudi Arabia. Consequently, it might create impediments for international contracting parties who do not have any clear legal criteria or guidance with respect to what constitutes a breach of Sharia principles or of public policy. Thus, while the Saudi Legislative System appears to have been unsuccessful in reconciling Sharia with international instruments within the arbitration framework, it is even more imperative to consider its potential implications on the commerce and economy of KSA.

Implication for Foreign Commercial and Investor Parties in KSA

The framework of enforcing arbitral awards within KSA also bears considerable repercussions for the Saudi government’s treaty obligations and investment agreements that are intrinsically interwoven with commercial arbitration. While foreign parties are readily investing in Saudi Arabia, the commercial mindset is accompanied by a pursuit of high immediate gains as well as stability in such expectations. Such assurance can only be secured through the non-discriminatory application of unambiguous predictable laws. Thus, it is imperative for such parties to be aware of their rights and obligations under the law of the enforcing state to protect their commercial interests effectively. Considering the Saudi government’s rigid adherence to Sharia, a laborious endeavour needs to be shouldered to harmonise the national laws with international practices to protect foreign investor rights. This is particularly relevant to counter the growing concerns of by foreign investors where they seek jurisdiction of such courts/domestic laws, which are likely to protect their economic interests best. Such unsolicited interference by third-party countries not only breaches the reciprocity of the treaty but also hampers the quid pro quo envisaged through the treaty.

Notwithstanding the aforementioned concerns, it is also important to highlight a few measures undertaken by Saudi Arabia in this regard, including accession to international treaties with contracting states. The Saudi Arabian General Investment Authority (SAGIA) has provided general financial and commercial information for investors through the while also playing an integral role in strengthening their rights over their assets. Such liberalising reforms offer an optimistic perspective to bolster macroeconomic growth in KSA while also highlighting the willingness of the government to enact laws that can protect the rights of international parties.

Conclusion

Thus, an examination of the recognition and treatment of both domestic and international awards clearly indicates Saudi Arabia’s evolving attitudes towards the rights of private parties. While KSA seems to have attempted to reform the judicial process in the country through the New Arbitration Law, it still seems to be knee-deep in the quicksand of balancing Sharia with international principles. Although such strict adherence to Sharia can be considered ill-suited to deal with modern commercial realities, it is also undeniable that such principles constitute a core position in the lives of modern Muslims in KSA. Additionally, while international arbitration continues gaining traction as a flexible and faster dispute resolution mechanism, it solely depends on the continued efforts of the KSA government to modernise the arbitral award enforcement procedures to finally render the alliance between Sharia and Arbitration a truly successful one.

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Keywords: Mediation, Politics, Diplomacy, International Relations, Conflict

Introduction

Mediation is a whereby disputants take the assistance of a third party (a state, group of states, or organization) to settle their conflict without the use of physical force or invoking the authority of law. The stresses a number of key fundamentals that need to be considered for successful international mediation, including consent, impartiality, inclusivity, national ownership, and quality peace agreements.

While mediation has been used to solve conflicts for centuries in the private and commercial realm, it is equally, if not more, useful to solve larger international political disputes as well, for three reasons. First, the makes the cost of conflict extremely high in such situations. Mediation, therefore, provides a quicker and relatively cost-effective method of resolving disputes. Second, within the international sphere, there is regulating states’ behaviour. Third, in the international sphere, all of which wish to protect their sovereignty. Mediation, through its , is, therefore, an effective tool to deal with differences between these antagonistic interests, as it does not endanger states’ right to act according to their own wishes.

In light of the above, this article examines the use of mediation in resolving international political disputes. It explores the role of mediators in such disputes, the definition of a “successful” mediation process, and the external influences on such outcomes.

The Role of Mediators in International Disputes

argue that it is futile to distinguish between mediation, conciliation, facilitation, diplomacy, and fact-finding, as a mediator often employs one or more of these strategies to resolve an international conflict. The role taken on by a mediator can be described on a “”, depending on the circumstances of the conflict. Mediators may adopt a by deciding the agenda, timing, meeting place, or other arrangements of meetings between the disputants, to reduce the stress on parties that may not have a prior history of peace-making. They may also take a more interventionist role by or attempting to influence parties through diplomatic sanctions or providing humanitarian aid (the of mediation).

The , and may even be at odds with principle of in the mediation process; for a settlement to be effectively implemented, it must be a voluntary consensus between the disputants themselves, and mediators cannot impose solutions upon them. To illustrate the ineffectiveness of highly prescriptive international mediation, one may consider the mediation in Sudan led by the Intergovernmental Authority for Development (“IGAD”). In 1994, the IGAD prepared the outlining the essentials for achieving peace in Sudan, however, because it , it for another four years. Similarly, Trump’s Israel-Palestine peace plan and was thereby rejected by them.

At the same time, merely playing a procedural role may not be beneficial to the mediation process. Depending on the circumstances, it may be preferable for the mediator to have an increased degree of involvement. For example, that the parties wanted to receive his ideas for settlement during the process. The role of a mediator must therefore remain flexible and be shaped based on disputants’ expectations from the process. Further, explains that Carter saw his role as mediator to be simply facilitating improved communication and that it was the disputants’ job to solve the conflict. He would simply come up with a “blueprint” for the solution. However, the , and an agreement was reached only when Carter became, in effect, a third negotiating party (this was partly also due to his position as US President).

Therefore, the role of a mediator is highly contingent on the circumstances of the conflict itself. There is no one-size-fits-all model of mediator involvement which can be imitated for success in each instance. Their role may also be influenced by factors external to the mediation process itself, as will be explained later in this article.

What Constitutes “Successful” International Mediation?

As mentioned earlier, the notes “quality peace agreements” as a fundamental of international mediation. However, although a mediation process is usually considered successful if it results in the signing of a peace agreement, that . In fact, more than half of all civil war peace agreements arrived at through regional governmental organization mediation . For example, after mediation by the United States, Russia, and the United Nations in 1991 in Angola’s civil war, the two disputing factions agreed to sign the . However, this did not lead to peace; after the elections, a , causing over 300,000 casualties in two years.

Therefore, it is important to look beyond short-term consensus and the creation of a peace agreement in defining successful international mediation. This leads to the question of enforcement of the consensus reached through mediation; if the formulation of an agreement clearly does not translate to durable peace, is it the job of the mediator to ensure enforcement of the agreement as well? Noting that the blurred line between mediation and enforcement leads to the reduction of mediation to power-based diplomacy, Nathan argues that mediation and enforcement should be conducted by separate actors. Enforcement measures taking the form of punitive action such as sanctions are ineffective; less than a third of sanctions implemented between 1914 and 1990 achieved the intended foreign policy goal. Punitive measures also directly hindered the mediation process in Burundi, where sanctions undermined Tutsi confidence in reconciliation, prolonging hostilities. The adoption of punitive enforcement measures further makes the mediator a party to the conflict, violating the process’s characterization as a third-party intervention.

as well, appears to pre-empt the concern of joint mediation and enforcement. It posits that success occurs when, firstly, an agreement is reached by third-party intervention, and, secondly, the agreement is implemented such that the disputing parties refrain from returning to war “when the outsiders leave”. By defining success as the continuance of peace once third-party intervention ends, it removes from the purview of “successful” mediation situations where peace is only achieved due to the mediator’s enforcement of the peace agreement.

If this is the case, then it is clear that the outcome of mediation is not dependent solely on the mediation process itself; it is shaped by many external influences, including the disputants’ willingness to abide by the agreement, which is often out of the mediators’ control.

External Influences on the Outcome of International Mediation

Typically, heavy and their dexterity as the key determinant of the success or failure of international mediation. However, it is only one of many influences on the outcome of the mediation process. The most obvious external influence is the nature of the dispute itself. concludes that lengthy, complex disputes with high number of fatalities are “incompatible with successful mediation”, as they are intensely hostile and less “amenable to mediation”.

Their study also notes how the substantive nature of the issues at stake have, in previous research, been found to directly impact mediation outcomes. Generally, “intangible” issues of legitimacy concerns, national honour, and concerns of the image are associated with prolonged hostility between disputants. On the other hand, disputes involving “tangible” issues (those which can be concretely measured, such as money, territory, etc.) are relatively easier to mediate. For Bercovitch & Langley, the implication for mediators is that they should repackage issues and focus on tangible issues for the mediation process to be successful. Application of this suggestion, however, seems ineffective for most disputes, which often involve a combination of both tangible and intangible issues. For example, a dispute appearing to be merely territorial may be rooted in parties’ concerns of their image and the national honour associated with occupying that territory. Therefore, the suggestion of focusing on tangible issues merely to achieve an agreement is not necessarily favourable; as has been previously noted, mediation cannot be deemed successful simply because an agreement is reached. To create long-term, durable peace, it is necessary for international mediation to address and resolve the differences causing the dispute, not just its symptoms. Thus, this suggestion should not be taken as a model guaranteeing success if imitated. Rather, its use should be limited to those conflicts where the root of the dispute may be expressed in tangible issues, not simply when the dispute impacts tangible issues.

Next, the institutional body to which the mediator belongs to also significantly impacts the outcome of mediation. For example, noted that the internal politics of the IGAD impacted not only the composition of the mediation team but ultimately would “infect” and “complicate” the peace process. Further, , thereby impacting the outcome of a possible agreement. For example, the Organisation of African Unity (“OAU”) in a 1964 Resolution of the OAU Assembly of Heads of State and Government forbade secessionism and irredentism, a stance reiterated in a . This led to the OAU attempting to resolve successionist struggles . It further bars redrawing borders as a solution to conflict even if both parties agree to it.

.

Conclusion

Unlike other kinds of mediation, international mediation does not come to an end when parties reach an agreement. Even if the methods suggested by the studies cited in this article are used to reach a peace agreement, its durability and enforceability is often dependent on factors external to the mediation process itself. The high-stakes nature of the disputes at hand also makes splitting differences an undesirable outcome, requiring reconsideration of traditional mediation techniques.

This article, therefore, reaches three conclusions with respect to international mediation, each having implications for mediators’ strategy. First, mediators’ level of involvement should depend on the circumstances of the conflict and must strike a balance between the two ends of a continuum. Second, international mediation cannot be deemed “successful” simply because parties have reached an agreement. Rather, consideration of durable, long-term peace is crucial. Finally, the outcome of international mediation is contingent on several factors external to the mediation process itself.

Notwithstanding the foregoing, it is important to note that mediation is and should be tailored to specific conflicts, and arguments encouraged or discouraged in this article may not be applicable in all circumstances. Instances of successful international mediation should remain examples, and not imitable models, of success. As this article has established, a mediation strategy that is successful in one instance may be detrimental in another; an increased level of mediator involvement made Jimmy Carter’s mediation successful but reduced the level of national ownership in Trump’s and the IGAD’s peace plans. A mediator’s focus on tangible issues may successfully resolve some disputes, however, this may be ineffective when the dispute is rooted in intangible issues. Therefore, it is crucial that mediators remain flexible and craft their techniques according to the circumstances of the dispute.

Additionally, there is a need to improve the legitimacy of the third parties intervening as mediators, in order to foster the growth and development of international mediation. Mediating states and institutions must be seen as just, fair, and unpartisan. Unfortunately, as previously enumerated, history proves otherwise – since their interests are impacted by international political disputes, mediators sometimes ignore one disputant in favour of the other. Yet, without correcting this perception through practice, disputants will view the process with suspicion, and mediation will never occur in the first place.

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