Formal and Informal Dispute Resolution

By Sahil Arora, JGLS

Introduction

In this booming economy and the competitive world, it is natural for people to have opposing interests, needs, and values. Having a conflict is not a problem; rather people live with it every day. Conflicts become harmful only when they take the shape of disputes. Disputes can occur between family members, relatives, friends, acquaintances, businesses as well as between the state and individual citizens. Disputes can also be international. Governments or companies of the two countries may enter into a dispute. The problem with disputes is that they cannot be ignored, causes real damage and can bring life and business to a standstill.

Interestingly in some situations, conflicts can also be positive if they are dealt with constructively. For example, disputes can bring differences of view ‘out in the open’, they lead people to deal with issues together rather than stay isolated, they stimulate change and progress, and they can ‘clear the air’ between parties.[i] However, if they are not dealt with and resolved effectively, they can be very harmful. Disputes:

  • can be stressful and physically and psychologically draining
  • can sour and even destroy relationships
  • are time-consuming
  • divert people’s attention and energy away to more useful activity
  • can be costly – in terms of the interruption of normal relations (e.g. supply of service or goods) or the expenses of dealing with the conflict
  • can make other problems or issues more difficult to resolve too.

Dispute Resolution

Dispute resolution refers to methods used by trained neutrals to help people to communicate more clearly, negotiate effectively, develop and evaluate solutions, or resolve conflicts.  Neutrals do not take sides or represent the parties.  Dispute resolution is an interdisciplinary field that attracts neutrals from backgrounds like human resources, law, and social work.[ii] The term dispute resolution may also be used interchangeably with conflict resolution. Some generally known dispute resolution mechanisms include;

  1. Lawsuits (litigation)
  2. Arbitration
  3. Mediation
  4. Conciliation
  5. Negotiation
  6. Facilitation, and
  7. Collaborative Law

Strictly going through the definition of dispute resolution, one may also think of violence in terms of war as part of this spectrum, but practioners do not do so. War as a dispute resolution mechanism rarely ends it in an effective way, it often escalates them. The resolution processes are generally categorized into two major types; Adjudicative processes, such as arbitration or litigation, in which an arbitrator, judge or jury determines the outcome.

Secondly, consensual processes, such as collaborative law, mediation, conciliation, or negotiation, in which the parties attempt to reach an agreement. People who feel that they have been harmed by some incident or contract or any other transaction may either pursue formal methods of dispute resolution like filing a law suit against the other party or may use the informal methods to resolve their disputes.[iii] Principally, dispute resolution offers a private and voluntary option beyond the court.

Formal methods include the mechanisms which are officially constituted or organized, whereas informal may include those which are not officially recognized and organized. To give a brief idea of what these methods actually are:

1. Negotiation – It is a discussion between two or more people who want to solve their disagreements, decide what to do, or make a bargain.  Negotiation may also involve advocates or representatives.[iv]

2. Whereas, Conciliation uses a third person who is asked to help people reach an amicable resolution of their dispute.  The conciliator cannot impose a settlement upon the parties and generally interacts with the parties separately.

3. On the other hand, Facilitation is a dispute resolution technique that involves a neutral who helps members of a group to define and meet their goals, solve a problem, exchange ideas and information or hold effective meetings.

4. Another method for discussing problems and exploring solutions with the help of a trained neutral is Mediation. The job of mediators is to help people communicate clearly and negotiate effectively.  Mediators do not give legal advice, take sides, impose solutions or make decisions about resolutions.  Mediation is a private and voluntary practice.  A research survey done by an organization shows that mediation frequently results in agreements that are voluntarily followed because they are created by the people directly involved.

5. Neutral evaluation is another technique that is conducted by a neutral that has expertise in hearing arguments and predicting the likely outcome in court.  The evaluator may also provide guidance and settlement assistance with the parties’ consent.

6. Arbitration, the most common these days, is a formal proceeding that uses one or more neutrals to listen to evidence and render a decision. These neutrals collectively are known as the ‘Arbitral Tribunal.’  The decision may be binding or non-binding.

7. Litigation is a legal dispute which is argued in the court of law. Attorneys help negotiate a resolution, or a judge or jury make a decision.  The people directly involved in the dispute have little control or no control over the process or outcome. It is entirely left on the attorneys to represent their clients and get the best outcome for them.

8. Along with these more known practices, there are some other processes too which may be prevalent in some parts of the world but definitely not in all. Consensus Building is one of them and is a process of negotiation that crafts an outcome to which all participants can agree.  In tailoring the agreement, participants seek to resolve or mitigate objections of the minority to achieve the most agreeable decision. A consensus is usually defined as meaning both general agreement and the process of getting to such agreement.[v]

9. Restorative Justice is another such process. It encompasses victim/survivor centered processes that address harm from crime, bullying, and violations of legal and human rights.  Restorative resolutions engage those who are harmed, wrongdoers and their affected communities in search of outcomes that may help promote the repair, reconciliation and the rebuilding of relationships.[vi]

Formal vs. Informal

There always exists a problem when it comes to differentiating these dispute resolution mechanisms and tagging them under the categories of formal or informal. People have different opinions on these practices and it seems to be a very subjective phenomenon. Though the words formal and informal have well-defined meanings attached to them, still it has been observed that people around the globe have categorized these practices according to their own understanding.

Quoting Minister for economic affairs of Bhutan, Lyonpo Khandu Wangchuk while introducing the Alternate Dispute resolution bill of 2011, he referred to alternate dispute resolution as an informal method of resolving disputes. He also said that “If we want to attract foreign entities to invest in Bhutan, it is important for the existence of a method of dispute resolution without having to go to courts.”[vii] ADR includes mediation, arbitration, negotiation, conciliation, expert determination, early neutral evaluation by a third person, dispute resolution boards etc. On the whole, it includes each of those methods which are alternatives for courtroom litigation.

Now, the problem with the Minister of Bhutan’s statement is that he is referring to each one of these methods as being informal. Does it mean that only Courts are the structures that make dispute resolution mechanisms as formal? Does not formal mean those institutions or methods that are officially recognized and organized? Does not the statement by Bhutan’s minister also convey that all other methods of dispute resolution other than courtroom litigation are informal methods?

According to an Indian Law Journal article titled “Conciliation-A precursor to arbitration,” both conciliation and mediation are informal methods of dispute resolution.[viii] Another article titled “Advantages and Disadvantages of Dispute Resolution Processes” said that negotiation and mediation are informal processes, whereas Arbitration was considered to be one where its formality compels proper behavior of parties.[ix]

Trial also was considered to be a formal method according to this article. Analyzing these two articles and Minister’s statement, it is quite evident that there is a difference of opinion. Imagine how much variance will be there if more of such articles are brought into the frame? Though for other processes it is quite clear, Arbitration has been categorized differently by different people. A clear-cut categorization has not been found in research of formal vs. informal dispute resolution methods.

Lately, arbitration has become the preferred mode of dispute resolution as far as India is concerned. It is a speedy, economic, convenient and procedurally simple process as compared to litigation. According to Poorvi Chothani, Managing Partner and Vidhi Agarwal, Partner, LawQuest, “the Government by bracing new updates on the dispute resolution are cooperating in the achievement of an accelerated, inexpensive, appropriate and useful justice system.”[x]

The sooner such updates are accepted, it will be better for the nation as a whole and justice seekers specifically. Not just this, the Hindu’s ‘Business Line’ dated May 27 reported that Arbitration is an emerging dispute resolution mechanism and India has been ranked in the top three seats for Arbitration of the world. India along with Singapore and England hold the top three positions according to a survey.[xi] 95% of Indian companies that were part of the survey were using arbitration in isolation or in combination with other dispute resolution mechanisms. The three most important factors that made arbitration most preferable in comparison to other dispute resolution mechanisms were speed, confidentiality, and flexibility, according to this survey.

Moreover, 91 percent of companies in India have dispute resolution policies and use arbitration than litigation for the resolution of future disputes. Furthermore, 82 percent of the Indian companies that have had arbitration experience indicated continuing the arbitration processes for resolution of future disputes as well, according to the research survey.

Why not litigation? There as some problems with which Indian court system is ailing presently and for the past few years. These problems are the reasons for such large shifts from the court system to arbitration by most of the Indian companies. To point out a few of these problems:

  1. Overburdened Judiciary: Judiciary is simply overburdened. It has to tackle with voluminous pending as well as fresh litigation arising every day. What adds largely to this problem is the hierarchy of courts and the appeal system that is too prevalent these days.
  2. The inadequacy of judiciary to meet the challenges of total population: Judge’s strength is inadequate throughout the country and is the biggest factor for the huge backlog of cases. Vacancies of judges are not filled on time by the High Courts and various state governments.
  3. State is the largest litigator: The Union and state governments are the single largest litigants in the country. They are abetted by the government-owned corporations, semi-government bodies, and other statutory organizations.
  4. Time taken in disposal of cases: Delay in legal system is one of the major flaws of India. According to an entry in the Guinness Book of World records, the most protracted law suit ever recorded was in India. A keeper of a temple, also known as a Mahant filed a suit in Pune in 1205 AD and it was decided in 1966 i.e. 761 years later.[xii]
  5. Adversarial character of administration of justice: The justice system is adversarial in character. The judge acts as a passive listener in this system, similar to an umpire in cricket and there is no active participation in unraveling the truth. The court battle is conducted according to the medieval rules of evidence.
  6. Pressure and de-moralizing of Trial Courts: It was observed by the Supreme Court in the case of KP Tiwari v. State of MP held that “….. The lower judicial officers mostly work under a charged atmosphere and are constantly under a psychological pressure with all the contestants and their lawyers almost breathing down their necks – more correctly up to their nostrils. They do not have the benefit of a detached atmosphere of the higher courts to think coolly and decide patiently. Every error, however, gross it may look, should not, therefore, be attributed to improper motive.”[xiii]
  7. Complex reasons for pendency: Rise in population, lack of responsiveness and transparency in administration, increase in access to information and institution of cases, multifarious litigation, radical changes in the pattern of litigation, inadequate strength of judges and judicial officers, etc.

These problems involved with litigation and the courtroom procedures have led to a serious shift from litigation to other resolution mechanisms. People prefer using other alternatives than spending 20-30 years of their lives in courtroom litigation. Still, we say that only lawsuit/litigation is a formal dispute resolution mechanism?

Lok-Adalats, also known as People’s court is another alternative dispute resolution system that is only available in India. It is an improved and organized method of resolving disputes as compared to the mediation practiced by village elders. It is an adversarial system wherein mock courts (known as Lok-Adalat) are held by the District Authority, State Authority, High Court Legal Services Committee, Supreme Court Legal Services Committee, or Taluk Legal Services Committee. These Adalats take place periodically and are usually presided over by social activists, retired judges, or other members of the legal profession. The Lok-Adalats deal with all Matrimonial Disputes, Civil Cases, Partition/Property Disputes, Land Disputes, Labour Disputes etc., and compoundable criminal Cases.

Is there a third category for the dispute resolution mechanisms?

Formal and Informal are the categories that are often heard of and resolution processes are generally distributed in these categories only. But, there are some practices that seem to be more informal than formal ones. In other words, if mediation and conciliation are considered to be informal methods of dispute resolution, then what about practices like Gunda Raaj, khap panchayats, etc. These methods are much worse and disrespectful to society than the informal ones. If this is the case, they should be given a third category of being ‘Highly Informal.’ Though it is a self-made category I think it is very important to do so keeping in mind the diversity of dispute resolution practices.

Practices like Gunda Raaj and Khap Panchayats sometimes end up doing things that are against the society and the acceptable standards. I mean what kind of justice it will be if it itself has followed the path of injustice to reach a conclusion in resolving the dispute. These practices are still exercised in many parts of the country and with complete knowledge of the government officials. In light of this, it is extremely important to have a third category of dispute resolution mechanisms to demarcate it from still better ones under the informal category. The ultimate result that each of these practices strives for is the resolution of disputes between two or more parties, the only difference is the path followed to reach the result.

Conclusion

As is evident from the above research, there has never been a clear categorization of dispute resolution practices. People have had different understandings of the terms formal and informal and have categorized such practices accordingly. This paper has tried to solve this confusion to the best of the author’s understanding, but this topic still needs intensive research to solve the puzzle completely.

This paper has, in the end, made a third category of dispute resolution mechanisms i.e. the ‘Highly Informal’ category. It is very important to have this third category because all the other mechanisms except the formal ones do not fall on the same lines. Putting practices like mediation that even judges refer to very often for matrimonial disputes these days and Gunda Raaj, a violent form of dispute resolution under the same heading is an insult to the justice system at large.

Formatted on 18th February 2019.

Reference

[i] http://www.ciarb.org/dispute-resolution/

[ii] http://www.nysdra.org/whatisdr/whatisdr.aspx

[iii] Henry S. Farber and Michelle J. White “A Comparison of Formal and Informal Dispute Resolution in Medical Malpractice”

[iv] New York State Dispute Resolution Association, Inc. “What is Dispute Resolution”

[v] Gail Bingham “What is Consensus‐Building and Why is It Important for Resource Management?”

[vi] http://www.restorativejustice.org/university-classroom/01introduction

[vii] http://www.bbs.bt/news/?p=14052

[viii] Isha Modi “Conciliation-A precursor to arbitration”

[ix] Blaney McMurtry LLP “Advantages and Disadvantages of Dispute Resolution Processes”

[x] Poorvi Chothani and Vidhi Agarwal “Dispute Resolution in India – An Update”

[xi] The Hindu “Business Line”

[xii]ManojMitra, Indian Express, July 26, 2001

[xiii]1994 Supp (1) SCC 540.

One Reply to “Formal and Informal Dispute Resolution”

  1. The job of mediator’s is help people communicate clearly and negotiate effectively. Mediators do not give legal advice, take sides, impose solutions or make decisions about resolutions. Mediation is private and voluntary practice. A research survey done by an organization shows that mediation frequently results in agreements that are voluntarily followed because they are created by the people directly involved.

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