How Is Arbitration Different from Conciliation?

In 2018, the NITI Aayog found that approximately 29 million cases were pending in the Indian Courts and about 324 years would be required to clear this backlog with the number of judges currently appointed for this job.

These numbers clearly showed the immense burden of the Indian judicial system and explains why the Courts take so much time before addressing their issues. As the litigation process is quite time taking and may turn out to be quite costly, it is not considered as the most viable option in some cases. Therefore, such cases can only be resolved through other Alternative Dispute Resolution (ADR) mechanisms. Two of these ADR methods are arbitration and conciliation.

These two methods aim to help disputing parties resolve their conflict without having to approach the Court and going through a lengthy litigation process. However, even though both of these methods aim to achieve the same goal, the actual processes are significantly different from each other.

Arbitration

Arbitration is a legal dispute resolution process where a neutral group of individuals, collectively referred to as ‘arbitration tribunal,’ is appointed under the provisions of the Arbitration and Conciliation Act, 1996. The main goal of this tribunal is to hear the arguments of the disputing parties and then make a decision – referred to as ‘arbitral award’.

• The decision made by the arbitral tribunal is binding on both parties, which means that they must adhere to it.
• There is no right to appeal in such cases, unless the unsatisfied party can prove that the award was induced by fraud and corruption against them.
• Arbitration is generally used to resolve civil disputes related to contractual obligations related to employment, construction and other similar commercial matters.

Note: Arbitration is used in civil matters and is not available in criminal cases. An arbitration clause must be present in the agreement between the disputing parties.

Conciliation

Conciliation, on the other hand, refers to a non-binding process, where a neutral individual – referred to as ‘conciliator’ – is appointed with the primary responsibility of helping the disputing parties come up with a mutually acceptable solution by enabling communication between them. Although the conciliator can offer some suggestions to such parties, they do pass a binding decision that would be applicable to the parties.

• Conciliation is generally used in cases involving some emotional issues, like matters related to family law or workplace conflicts, where there is potential to reach a solution through effective communication.
• It is the step used before going for arbitration or litigation to attempt to reach common ground without having to invest valuable time and money of all parties involved.

Note: Conciliation is a confidential, flexible and informal process that helps reach a mutually acceptable solution. In conciliation, the settlement mutually agreed upon by parties must be written down and duly signed by them. Once this is done, it becomes legally binding.

Both methods mentioned above have unique pros and cons. As such, the choice between them is only dependent on the specific circumstances of the dispute. While choosing between the two, parties must take the nature of their dispute, the result they expect and other requirements that they have.

Choosing between Arbitration and Conciliation

Conciliation is generally used in matters where disputing parties are willing to work towards finding a mutually acceptable decision and an official ruling may not be necessarily needed. On the other hand, arbitration is used in matters where an official ruling is mandatory to resolve the dispute, like breach of contract.

What are the Pros and Cons of Arbitration & Conciliation?

Arbitration

The biggest benefit of arbitration is that the process is fast, efficient and much less expensive compared to litigations. In addition, as the appointed arbitrator is a neutral individual with no personal interest in the matter, the decision made by them is solely based on the arguments and evidence presented during the proceedings.

• When it comes to the disadvantages of arbitration, a crucial point to note is that as arbitration is not mandatory in all states, there is a lack of ample arbitrators to hear all the due cases.
• Further, if any party is unsatisfied with the arbitral award due to unfair treatment by the arbitrator or due to some technicality like failing to timely submit evidence or present witnesses, they may take the case up in traditional courts. By doing so, they would ultimately defeat the purpose of arbitration and end up wasting not only their own but the Court’s valuable time as well.
• Besides, considering the arbitral award is binding in nature, it is not an option whether parties want to accept it or not.

Conciliation

Compared to arbitration, conciliation is a much less expensive resolution mechanism, where parties do not need to pay any legal fees. If the disputing parties reach a settlement, it would be a win-win for all parties involved, whereas the result of arbitration is likely to favor one party or the other.

It must be noted that the conciliation process does not guarantee a solution, as it entirely depends on the disputing parties whether they are willing to reach a settlement. If not, arbitration or litigation is the only viable option for them.

Key Differences Between Arbitration & Conciliation

Arbitration	Conciliation
In arbitration, disputing parties must appoint an arbitrator or arbitrators through mutual agreement to adjudicate the proceedings.	Conciliation is a dispute resolution mechanism where a conciliator is appointed to bring both parties to a common ground and settle the conflict between them.
Arbitrators, who adjudicate the proceedings, are appointed under Section 11 of the Arbitration & Conciliation Act, 1996.	Conciliators oversee conciliation proceedings and are appointed under Section 64 of the Arbitration & Conciliation Act, 1996.
The decision – known as arbitral award – is enforceable against the disputing parties.	The conciliator cannot enforce their personal decision on the parties.
Arbitrators are not allowed to have separate discussions with any party or suggest options for terms of settlement or negotiation between the disputing parties.	Conciliators are allowed to have direct discussions with parties or suggest option for terms of settlement or negotiation between the disputing parties.
Arbitration can be chosen for both the disputes at hand and for the ones you may encounter in the future.	Conciliation can only be used to resolve matters at hand and cannot be considered beforehand for any future dispute.
Arbitration can be chosen as the dispute resolution method if the parties have signed an agreement for the same beforehand.	Conciliation can be chosen as the dispute resolution process even if there is no prior agreement between the parties for the same.

Conclusion

Everyone, nowadays, wants to quickly resolve their disputes and move on with their work. However, considering the number of people looking to do so and the burden on Courts due to the huge number of pending cases, it is imperative to consider other methods that can help achieve a favorable outcome without having to go through the traditional litigation process. As such, arbitration and conciliation prove to be two excellent alternatives for dispute resolution and should be opted for whenever possible.