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Everything One Must Know About the Difference Between Arbitration and Conciliation

Arbitration is one of the oldest ways to settle a dispute besides going to court. We can trace the roots of arbitration back to the village panchayats in India, which have been around for a long time. People believed that the Panchas, when they met as a group as the Panchayat, was the voice of God, and their decisions had to be accepted and followed without question.

Alternative Dispute Resolution is a way to settle civil disputes without involving the court. These are ways to resolve disagreements on a large scale. Arbitration and conciliation are the methods by which people can resolve disputes without going through the regular court system. Both arbitration and conciliation are a form of ADR, but there is a difference between arbitration and conciliation.

The Arbitration and Conciliation Act of 1996

The increasing complexity of modern business transactions caused by the globalisation of the economy led to the preface of the Arbitration and Conciliation Act of 1996. It made it essential to have a way to quickly settle domestic and international business disputes so that trade and commerce could continue as usual.

It envisages the making of an arbitral procedure that is fair, efficient, and capable of meeting the needs of the globalised economy. It tried to bring together and change the laws about domestic and international commercial arbitrations to set the rules related to arbitration or conciliation.

Arbitration: meaning and features

The definition of “arbitration” in Section 2 (1) (a) of the Arbitration and Conciliation Act 1996 is merely an explanation that the Act covers both ad hoc and institutional arbitration.

Ad-hoc arbitration

The process that is either set out by the arbitral tribunal or, in the absence of a party agreement, by the parties themselves is ad-hoc arbitration. It is the arbitration that parties consented to and organised without the aid of any arbitral organisation.

Institutional arbitration

In institutional arbitration, the arbitration agreement may direct the parties to a specific institution in the case of a dispute or other disagreement between them, such as:

  • The Indian Council of Arbitration(ICA)
  • The International Chamber of Commerce(ICC)
  • The World Intellectual Property Organisation(WIPO)

Arbitration, in simple terms, is a way for parties to settle their disagreements as soon as possible without getting into any complicated rules and procedures of a civil court. It is a process which forwards the dispute to an impartial third party, who then makes a decision that usually needs to be followed by both sides.

Features of arbitration

  1. Arbitration is always on an agreement basis.
  2. Both disputed parties must agree to go to arbitration.
  3. The parties select arbitrators. Each party can select its arbitrator and choose a single arbitrator who will act as a referee.
  4. An arbitrator is a neutral person.
  5. The arbitral tribunal’s decision is final and easy to carry out. The parties must follow their judgment or award made by the arbitral tribunal.
  6. Arbitration is more flexible than going to court because there aren’t as many rules.

Conciliation: meaning and features

The Act does not explain the word “conciliation”. Conciliation is a private, voluntary, and confidential way to settle a dispute in which a third party helps the parties to agree on a mutual basis. Conciliation is a way to resolve a disagreement without going to court.

A conciliator is a neutral third party who helps the people in a disagreement find a solution for the parties to agree. People think conciliation is fundamentally different from litigation because it is not a court process.

Conciliation without any confusion is the most widely accepted form of non-court dispute resolution. It is mainly a non-judicial power against arbitration in court or non-court settings. In a few words, it is a way to settle disagreements without going to court or filing a lawsuit.

Features of conciliation

  1. The person who tries to make peace should be independent and fair.
  2. Fairness and justice should guide the conciliator who tries to unite the two sides.
  3. The conciliator and the parties must keep information about conciliation proceedings secret.
  4. Both sides should work with the conciliator in good faith.

Difference between arbitration and conciliation

The difference between arbitration and conciliation based on their meaning, enforceability, and many more are as follows:

Meaning:

Arbitration is a way to settle disputes by presenting their case to a neutral third party, who then makes a decision and ensures it gets followed.

Conciliation, on the other hand, is when a neutral third party helps the people involved in the dispute come to a solution that works for everyone.

Enforceability:

In the case of arbitration, both sides agree with the arbitrator’s decision. A decision made by an arbitrator can be enforced, just like a court’s decision.

On the other hand, it is not in the case of a conciliator to make his decision stick. A conciliator, on the other hand, can’t force people to do what it says.

Prior agreement:

For arbitration to happen, both sides must agree to it ahead of time which is called an “arbitration agreement,” and it must be in writing.

In contrast, there is no need to agree on anything before conciliation.

Disputes:

Parties can settle both current and future disagreements through arbitration.

At the same time, Parties can only use conciliation to solve existing problems.

Arbitrator and conciliator:

An arbitrator is a person in charge of the arbitration process.

A conciliator is a person decided by parties to help with the conciliation process.

Procedure:

Arbitration is a formal process that can look a lot like a court case. For example, the arbitrator can call witnesses and show evidence to argue each side’s case.

Conciliation is an informal process that usually occurs at a “round table.”

Mutual discussion or settlement:

Arbitrators aren’t allowed to talk directly with the parties about the issues or come up with possible ways to settle or negotiate.

A conciliator is allowed to discuss the problems, come up with options, and think of other ways to help the two sides agree.

Award:

An arbitral award is always final and binding and ends the arbitration proceedings.

In contrast, conciliation does not always lead to a solution.

Conclusion

Discussed above is the difference between arbitration and conciliation, which are the most frequent approaches for alternate dispute resolution. Each style of ADR aims to settle disputes via round table discussions as it reduces court workload most effectively and encourages party harmony.

Courts often use effective and universally recognised ADRs like arbitration and conciliation to resolve conflicts. It prevents litigation and the reward for fair and unbiased resolution of a person’s dubious concerns based on law and ethics.

These are the things that differentiate ADR from litigation. After a court trial, there can be only one winner; however, all parties may be winners after conciliation, mediation, or arbitration, since there is no disagreement, and they settle.

FAQs

Can a conciliator also act as an arbitrator?

As per the Arbitration and Conciliation Act, a conciliator can't be an arbitrator unless both sides agree otherwise.

After arbitration, can parties go to court?

When the arbitrator makes a decision, it's called an "award," and it has to be followed by the law. Parties can take their case to court to change the decision if the parties disagree.

Who pays for an arbitrator?

Section 31 says that unless the parties agree otherwise, the Arbitral Tribunal will decide how much an Arbitrator will cost.

Can the party withdraw from arbitration?

In arbitration, unlike in conciliation, neither side can leave independently.

About Author

I am Aanchal Dhuria. I have done LLB from the department of laws, Punjab University, and an LL.M from UILS, Panjab University, wherein I have learnt research and writing skills. I have also got several research papers published. After post-graduation, I have been preparing for the judiciary, and I believe I have a good hold on all subjects of the judiciary. Presently, I have got myself enrolled for Ph.D. at Panjab university Chandigarh.