Difference between Arbitration and Conciliation

Primary difference between arbitration and conciliation is that arbitration is the process by which parties select an independent person, who renders a decision regarding the case. Conversely, conciliation attempts to make parties come to an agreement, about the problem at hand.

Industrial Disputes are always harmful to all stakeholders – employees, society, management, government, etc. resulting in loss of revenue, production, profit and much more. However, it is the employees who are worst affected by the industrial disputes, as the consequences would be a lockout which may lead to loss of wages and even jobs. Industries are the backbone of the economy, and if the strife may continue for long, the whole economy may collapse. So, the settlement of industrial disputes should be done as soon as possible.

Arbitration and Conciliation are two such methods of resolving industrial disputes out of the court. So, take a look at the article to understand the differences between arbitration and conciliation.[1]

What Is Arbitration?

In the terms of sub-section (1) (a), arbitration means “any arbitration whether or not administered by permanent arbitral institution”. Law encourages parties as far as possible, to settle their differences privately either by mutual concessions or by the mediation of a third person. When the parties agree to have their disputes decided with the mediation of a third person, but with all the formality of judicial adjudication, that maybe, speaking broadly, called arbitration. Arbitration, therefore, means the submission by two or more parties of their dispute to the judgment of a third person called the “arbitrator”, and who is to decide the controversy in a judicial manner.“Arbitration” is thus defined by Romil

The Supreme Court has passed the following observation on why arbitration should be preferred. “Arbitration is considered to be an important alternative dispute redressal process which is to be encouraged because of high pendency of cases in the courts and cost of litigation. Arbitration has to be looked up to with all earnestness so that the litigant has faith in the speedy process of resolving their disputes”.

What Is Conciliation?

Part 3 of the Arbitration & Conciliation Act deals with Conciliation. Conciliation means settling of disputes without litigation. Conciliation is the process by which discussion between parties is kept going through the participation of the conciliator. S.61 points out that the process of conciliation extends to disputes, whether contracted or not. But the disputes must arise out of the legal relationship. It means that the dispute must be such as to give one party the right to sue and the other party the liability to be sued. The Act of 1940 used the word difference but in the new Act in place of difference, the word dispute has been used. However, the word ‘Dispute’ has not been defined in the new Act of 1996. The word dispute under ordinary parameters implies an assertion of rights by one party and repudiation by another party. The word ‘difference’ has a wider meaning but the word 

‘dispute’ is more positive and the difference between the parties when assumed a definite and concrete form they became a dispute.

Arbitration v/s Conciliation

The main differences between arbitration and conciliation are:[2]

  1. Arbitration is primarily a method used to resolve disputes where both parties present their case to a neutral third party who reaches a decision and then enforces that decision. Conciliation, on the other hand, involves an independent third party assisting the parties involved in the dispute to arrive at a mutually agreeable outcome.
  2. The decision made by an arbitrator is enforceable similar to a judgement of a court. A conciliator, however, does not have the right to enforce its decisions.
  3. Arbitration is a formal process and can follow similar procedures to court proceedings where witnesses can be called and evidence can be presented to argue the parties’ respective cases. Conciliation is an informal process and normally involves a ‘round table’ discussion.
  4. Arbitrators are not permitted to discuss the issues directly with the parties or generate options for terms of settlement or negotiation. A conciliator is allowed to discuss issues in dispute, develop options and consider alternatives to help the parties achieve a mutually agreeable outcome.
  5. An arbitral award is final and binding and has the effect of terminating the arbitral proceedings whereas conciliation does not always ensure a mutually agreeable outcome will arise between the parties.

Can A Conciliator Act As An Arbitrator In The Subsequent Arbitration Proceedings?

The UNCITRAL Model Law and Rules on Arbitration and Conciliation is a cornerstone for arbitration tribunals worldwide. Almost 145 countries have till date ratified this convention and adopted it in their domestic arbitration law. Article 19 of the act clearly specifies that a conciliator shall not be an arbitrator in the same dispute for which he/she conciliated. Section 80 of Arbitration and Conciliation Act, 1996 is similar to this provision and based on it. It reads as under,

Role of conciliator in other proceedings: – Unless otherwise agreed by the parties: —-

(a) The conciliator shall not act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding in respect of a dispute that is the subject of the conciliation proceedings; 

(b) The conciliator shall not be presented by the parties as a witness in any arbitral or judicial proceedings. Thus, a conciliator as a general rule of international practice cannot act as an arbitrator. However, if the parties are willing and have agreed in writing that their conciliator can also be their arbitrator in the same dispute resolution, then this privilege cannot be denied. Now, the conciliator will be bound to follow the substantive and procedural law and give his award in accordance with the law. The Permanent Court of Arbitration in their annual law journal in 1994 (written by Fuller and Fuller) expressed the advantages of enabling a conciliator of the same dispute to act as an “Amicus Curiae” in the arbitration proceedings or appoint him/her as one of the arbitrators in the panel. This was said in view of the new ADR and more refined techniques being adopted such as “med-arb” or “negotiation award” to gain maximum out of these alternate processes. Professor Kirti Kannan terms this opinion as undue stretching of the teenage processes of ADR. However, no such provision has been so far made as the risk factor of losing neutrality in the proceedings cannot be ruled out. 

In the case of Alcove Industries Ltd. V. Oriental Structures Engineers Ltd.[3] the court explained that under section 12 the arbitrator must submit in writing at the outset, such facts which may give rise to justifiable doubts to his independence or impartiality. An arbitrator who has conciliated for Respondent 1 before cannot arbitrate, even in a separate dispute resolution where the same party is involved.

In the case of Welspun Corp. Ltd v. Micro and Small, Medium Enterprises Facilitation council, Punjab and Ors, [4]Justice Kannan held that the council appointed by the state to conciliate in the dispute, on the termination of the conciliation proceedings, shall have the power to act as an arbitrator if there is an arbitration clause, agreement or contract between the parties. Thus the council can arbitrate in the given dispute.

Therefore, the conciliator can act as an arbitrator in certain cases if the Arbitration clause doesn’t lay any bar. However, this is not be followed as a general rule and it must be ensured that neutrality of presiding conciliator and arbitrator is ensured.

Conclusion

The procedures and techniques discussed above are the most commonly used methods of ADR. However, there are countless various ADR methods, many of which modify or combine the above methods. With each type of ADR, the objective is to resolve the dispute by method of round table discussion . ADR is the most effective process which lessens the burden of courts. ADR promotes harmonious relationship among parties. The settlement of disputes through ADRs is so effective and globally accepted that courts have recognized some of them like mediation more often. This avoids procedure of litigation and the award for fair and impartial settlement of doubtful issues of an individual on legal and ethical basis which is based upon ground reality.

This is what distinguishes ADR methods from general litigation. There can be only one winning party after a court trial, while all parties can be treated as winner after conciliation, mediation or negotiation, as there is no conflict between them and they go through the settlement procedure.


[1] https://keydifferences.com/difference-between-arbitration-and-conciliation.html#:~:text=Arbitration%20is%20a%20dispute%20settlement,to%20arrive%20at%20negotiated%20settlement.

[2] https://dsslaw.com.au/differences-between-arbitration-conciliation/

[3] https://indiankanoon.org/doc/746307/

[4] https://indiankanoon.org/doc/37560269/

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