Beyond Arbitration: What Global Mediation Models Mean for India’s Construction Sector

The Promise and Peril

India’s construction sector, characterised by aspiring projects and chronic disputes, stands at a crossroads, having seen this from the global mediation model. The enactment of the Mediation Act 2023 presents an important legislative attempt to textually adopt the alternative dispute resolution (ADR), drawing on global best practices from the leading jurisdictions, including the UK and Singapore. It could have acted as a panacea for India’s construction dispute paradox, but it fails to consider the country’s unique institutional, cultural, and regulatory pathologies. Moreover, a critical examination of the Act reveals that this legal transplantation is fraught with complexities. This article argues that for mediation to work in India, replicating the rules from other countries is not enough. India needs to build its own system contextually that understands the procedural limitations, why people and companies so often choose to fight in court instead of talking it out.

Why Global Models Cannot Be Merely Replicated?

It goes without saying that the construction disputes in India are not merely technical or commercial in nature; they are deeply rooted in a specific governance context. As Gary Born opines that in developing economies, infrastructure disputes often involve the state as a dominant party, which introduces issues of public accountability, transparency, and political economy that are less pronounced in purely private international projects. The background text correctly identifies fear of audit and vigilance scrutiny as a key barrier for public officials. The current system creates a bad incentive. For government officials, dragging out a court case or arbitration, even though it’s expensive, creates a long, official record they can use to defend their decisions later. In contrast, if they solve a problem quickly through mediation or a settlement, it can look suspicious. People might think it was a secret deal or even corrupt. Thus, this fear of getting blamed is a much bigger problem in India, where the government builds most big projects. This specific worry isn’t as strong in places like the UK or Singapore, where projects are mostly run by private companies focused on speed and cutting costs, being an efficiency-driven market. In India, most major construction projects use standard international contract templates, mainly the FIDIC model. But government departments often change these contracts in a big way before using them. Their main change is to push all the project risks onto the contractor. This unfair setup starts causing challenges right from the beginning. Because the contract is so one-sided, the working relationship is built on distrust. Everyone is already expecting a fight. Mediation requires both sides to want to talk and compromise. Trying to fix such a deep-rooted, unfair starting point with just a neutral mediator is very difficult and unlikely to work easily.

What Global Models Teach Us

The background text cites valuable global examples, but their lessons require nuanced interpretation.

The UK Model

The UK has a strict rule from the Halsey case: if you unreasonably refuse to try mediation, the court can make you pay the other side’s legal costs, as this principle is quite powerful. But replicating this rule directly in India would be difficult. Indian courts are already overwhelmed with too many cases. To use this rule fairly, judges would have to spend a considerable amount of time in every case carefully deciding if someone’s refusal to mediate was “reasonable” or not. If judges apply the rule differently or without enough understanding, it won’t help settle disputes. Instead, it could create even more small legal fights about whether the rule was applied correctly. Additionally, there’s another big difference. The UK’s system works because it has many trained, expert mediators, especially for complex construction disputes. India does not yet have enough of these specialists. Without them, even a good rule is hard to make work in practice.

The Singapore Model

Singapore uses combined methods like “Med-Arb” (mediate first, then arbitrate) and “Arb-Med-Arb” (arbitrate, then mediate, then arbitrate again). These ideas seem smart because they aim for efficiency and are intellectually appealing. However, they have a major problem with fairness. If the same person acts as both the mediator (who helps parties settle) and later as the arbitrator (who makes a final, binding decision), it can create a conflict. That person might have learned private information during mediation that influences their final ruling. Hence, mixing these roles can make the process seem unfair unless both sides clearly understand and agree to it. This is a special concern for India, where losing parties in arbitration regularly go to court to challenge the award. Because of this habit of challenging awards, Indian courts would look very closely at these hybrid methods. If the rules aren’t extremely clear and agreed upon by everyone from the start, these models are likely to be rejected or cause even more legal fights.

The Mediation Act 2023: A Foundation, not a Solution

The new Mediation Act of 2023 is an important start, but for the construction industry, it has major shortcomings. For instance, the law is written for all types of disputes. Construction disputes are highly technical and require specialised knowledge, which this general law doesn’t provide for. Moreover, it doesn’t make mediation mandatory enough. The law encourages parties to try mediation before going to court, but for now, this step is optional. Other countries have much stricter rules that force parties to at least attempt mediation first. The most critical flaw is that the law does nothing to solve the “public official dilemma.” Government officers are afraid that if they settle a dispute through mediation, they might later be investigated for corruption or wasting public money. Unless the government also changes its internal financial rules, audit policies, and anti-corruption guidelines to protect officials who make good-faith settlements, this new Mediation Act might fail.

Beyond Transplantation

For India to truly learn from global models, it must implement them through a filter of local reality. It is important to create statutory and procedural safety nets, such as issuing binding policy directives and amending relevant financial regulations to provide a ‘safe harbour’ for officials engaging in mediation. In addition to this, it is important to develop specialist institutions, not just panels example, developing rosters of mediators with proven expertise in engineering, quantity surveying, and FIDIC contracts. Similarly, incentivising through contract and procurement reform is also needed. The key lesson from the world is simple: mediation only works when the entire system around it supports it. For India, this means the real job is not just to pass a new mediation law or derive another country’s rules. The real job is to build that supportive system. This means changing three big things at the same time. A. The audit culture: changing rules so government officials aren’t afraid of being punished for settling disputes fairly. B. Contract practices: Stopping the use of unfair, one-sided contracts that cause fights from the very beginning. C. Court Attitudes: Getting judges to consistently encourage and support the mediation process. Only by fixing all these parts together can mediation become the reliable tool India needs to actually build its roads, railways, and cities without endless legal battles.

Nehal Ahmad Nadwi

He is serving as an Assistant Professor of Law at Woxsen University, Hyderabad, India. He is also serving as a Coordinator of Mediation Cell at School of Law, Woxsen University, Hyderabad, India. He is an alumnus of National Law School of India University (NLSIU), Bangalore, India & Faculty of Law,… MORE