Arbitration and ADR in a Sri Lankan context

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Published on Thursday, 14 March 2013 12:25

 When will mankind be convinced of this, and agree to settle their differences by Arbitration  – Benjamin Franklin

Sri Lanka has a fascinating history in relation to Arbitration and other alternative dispute resolution mechanisms. Various phrases of the islands history find its chiefs and kings resorting to them to conclude conflicts between themselves as well as resolve disputes within their subjects. The Indian epic Ramayanam is the first record to mention a dispute resolved in Sri Lanka following ADR procedures. It tells the story of Ravanan (7300 or 5500 BC) a prince of Lanka who challenged his older brother Kubaran for the crown of the island. Their father is said to have resolved the dispute between the parties by advising Kubaran to give up Lanka to Ravanan. The former accepted his father decision and abided by it resulting in the first recorded ADR resolved dispute in Sri Lanka.

Mahavamsa the historical epic of Sri Lanka provides another example of ADR practiced in the island. It states that the Buddah was asked to resolve a dispute between two Nagas kings over the ownership of a Jewelled throne in Nagadeepam (Present day Jaffna). He concluding the difference by handing over the jewelled throne to a third party, the Naga King of Kelaniya. This decision was acceptable to both parties who decided to abide by it resulting in the first recorded arbitration in Sri Lanka.

Fast forward thousands of years, and we see great changes in the islet. Lanka today is Sri Lanka and Ravanan, his great temples, the Kingdom of the Nagas, the jewelled thorn are all no more. Time has flown, ancient tribes have died out, colonisation has happened, civil war has ensured and even a tsunami has occurred. Many things have changed but one thing has remained the same in both ancient and modern Lanka – that being the nature of its people to dispute, an aspect which still alive and well amongst its general populace.

In fact the problem of ‘disputing’ has thrived to such an extent the Sri Lanka’s legal system is unable to cope with it anymore. Our courts are over flowing with unresolved court cases which have been pending for years and years. On the 8th of January 2011 the present Justice Minister of Sri Lanka Rauf Hakeem raised concerns stating necessary steps needed to be taken to ease the backlog of cases. It is interesting as four years earlier in Feb 27 2007 the Justice Minister of that time Sarath Silva was faced a similar problem. He stated “At present there is a ten year backlog in the court of appeal” and decided to resolve that specific backlog problem by transferring all the appeals filed after first January 2001 for hearing and determination in the provincial high courts. But obviously this solution had limited success resulting as seen in the present state of affairs in the country. So what could we as a country do to get out of this legal dilemma – could ADR provide the answer? 

Dispute Resolution in Sri Lanka

Traditionally the Sri Lankan societes was based on feudal systems and had very well developed Personal laws that governed disputes resolution amongst its people. Traditional personal laws such as Kandian, Thesavalamai, Mukkuva were used by village counsels and rulers of specific jurisdictions to resolve disputes. They used a mediation and arbitration approach to dispute resolution with the decision being binding on the parties.

When the Dutch arrived in Sri Lanka they codified the existing personal laws in 1707 and gradually introduced litigation as a dispute resolution mechanism. The first three major courts of justice in Sri Lanka were introduced by the Dutch: one each in Colombo (west), Galle (south), and Jaffna (north). These courts judged the disputes following the personal laws and Dutch introduced Roman Dutch Law, gradually leaving behind the traditional arbitration and ADR procedures. Sri Lanka very soon started to rely on litigation a move which gradually spelt death to Sri Lanka’s ancient alternative dispute mechanisms and led the country into becoming a predominately litigation based system.

But 300 years later our economy and population has grown and our litigation based legal system is like in other countries all over the world is failing the test of time. Especially in the case of Sri Lanka the backlog of cases, the cost and time and emotional and mental trauma associated with litigation is forcing business and individuals to seek other ways of resolving their disputes.

In the 2011 budget, of the government of Sri Lanka allocated Rs.450 million for the Ministry of Justice to spend toward legal developments. The ministry of Justice set aside Rs. 150 million to be utilized for development activities such as the establishment of 65 court complexes in a bid to wipe out the delays persisting in the present system.

But the question this article shall investigate is given the limitations faced in this country present legal climate should more focus be given to the development of arbitration and other ADR methods within the dispute resolution system of Sri Lanka. Should going back to our roots be a wise choice? To explore this issue we shall first start by studying ADR and the benefits that could be derived by adopting a more encouraging attitude towards it in Sri Lanka.

Alternative dispute resolution - the future for Sri Lanka?

Alternative Dispute Resolution (ADR) is a collection of processes used for the purpose of resolving conflict or disputes in an informal and confidential manner. It presently includes arbitration mediation, negotiation, adjudication and conciliation. ADR provides alternatives to litigation and is generally voluntary. It enables the participating parties to develop mutually acceptable solutions that can meet their needs. Modern ADR with the exception of Mediation and negotiation uses a neutral third party to help the parties communicate, develop ideas and resolve the dispute.

Reasons why ADR is better than litigation includes it is faster, less costly, easier, has less formality involved, is less adversarial, encourages creativity, gives practical solutions and avoids the unpredictability involved in litigation. The ADR process usually results in improved communications between disputing parties and is better for ongoing relationships. Solutions tend to be durable or long lasting since they have the “buy in” of all parties involved, publicity is avoided and most importantly, the parties retain control of the outcome.

The most common form of ADR practiced around the world is arbitration and mediation. Arbitration is confidential dispute resolution process where the parties to a dispute refer it to one or more persons (the "arbitrators") who then give a binding solution for the dispute. Arbitrators are chosen by the parties and the location, the law and the manner in which the arbitration is conducted are also decided by the parties. The arbitration decisions are binding and thanks to the New York convention arbitrarily awards can be enforced in any country in the world making it easier to enforce than legal decisions.

Mediation in the other hand provides an opportunity to resolve disputes with an impartial middle man who helps identify and communicate the interests of the parties, identify mutual interests, and manage expectations. The mediator does not impose a decision for the parties, but assists the parties in reaching their own mutually acceptable resolution. It is especially useful in situations where communication has broken down or emotions are intense. Like arbitration mediation process is confidential and confidentiality of the information discussed during the mediation is protected by statute. But the mediation decision is not binding (unless parties sing a contract) which results in the enforcement of the decision uncertain.

But that said the use of Arbitration and Mediation has seen predominate success in jurisdictions which have given them a try. For example in the United States state of California 95 percent of all civil cases filed in court are resolved without going to trial. The parties try one the Alternative Dispute Resolution methods available and find solutions to their disputes. It is believed that party autonomy and the fact that ADR encourages a win - win situation is the reason for the high success and satisfaction ratings.

Hong Kong in the last decade has encourages pre trial mediation and seen a success rate of around 80% tallying with internationally cited norm. Majority of the people who mediate in Hong Kong don’t appeal the decision and also are said to feel more satisfied and happy with the decision reached which could directly explain the reason why mediation decisions have a high compliance rate.

The World Intellectual Property Organisation is another forum where alternative dispute resolution has seen great success. WIPO administers international IP registration systems and provides a repository of IP expertise to assist its members. Its arbitration and mediation centre has seen phenomenal success in salving IP related disputes using arbitration. Party autonomy, time, cost, decisions being binding on parties, possibility of enforcement in courts in case of noncompliance are all said to be contributed for the high success rate of WIPO dispute settlement.

In the United Kingdom disputes resolved using mediation has shown a high rate of success as parties are more likely to comply with the decision and are said to have more personal satisfied than when they resort to litigation.

In China ADR is not considered "alternative", but mainstream. Since ancient time the Chinese have been very ADR friendly as it is seen as a natural extension of Confucian ethics and thus has a long-standing position in Chinese tradition. Prof. Regina Abrami of Harvard Business School observed "

The people of Chengdu, similar to Chinese elsewhere, are leery of courts as a mechanism of dispute resolution. Instead, they often turned to teahouses where individuals of status could informally hear the cases of conflicting parties and make a judgment. The two parties then enjoyed 'settlement tea' to symbolize their agreement to the 'ruling.'"

China in the last decade also has put major emphasis on the development of arbitration seeing it as a door to participate in the world economy, promoting Chinese interests and long-term international relations.

The above mentioned examples show that the use of ADR has seen a high success in various settings be it countries, organizations or federal jurisdictions. Sri Lanka as we have already seen has had an ADR based dispute resolution system since prehistoric and pre colonization eras. Thought the percentage of success is not known we can hold that the system should have been quite successful for it to not replace by an alternative system till the arrival of the Dutch. So should Sri Lanka take a leaf from these revelations and go back to its roots of using ADR in a more predominate manner?

For as Judge Learned Hand 80 years ago rightly stated in the 1921 "The Deficiencies of Trials to Reach the Heart of the Matter," Address to the Association of the Bar of the City of New York,

"The price we pay for [unrestrained advocacy], the atmosphere of contention over trifles, the unwillingness to concede what ought to be conceded, and to proceed to the things which matter. Courts have fallen out of repute; many of you avoid them whenever you can, and rightly. About trial hangs a suspicion of trickery and a sense of result depending upon cajolery or worse. I wish I could say that it was all unmerited. After now some dozen years of experience, I must say that as a litigant I should dread a law suit beyond almost anything else short of sickness and death."

Written by Pavithra Ganesaratnam (LLB, LLM, Attorney at law - Sri Lanka)

(This article was published in the Sri Lankan news paper “The Daily News” on the 1 April 2011 and on the 8 April 2011 under the heading “Alternative Dispute Resolution - future of Sri Lanka?”)